Introduction: The Preliminary Hearing Is Not the Trial—but it Can Shape the Arbitration
Your business has answered the arbitration demand, participated in selecting the arbitrator, and now the American Arbitration Association (“AAA”) says the arbitrator wants to hold a preliminary hearing. What is that hearing, what will likely happen, and how should the business prepare?
The short answer is that the preliminary hearing ordinarily is not a trial on the merits. It is a case-management conference at which the arbitrator and the parties establish how the arbitration will proceed. But calling it a scheduling conference understates its importance. Decisions made there can determine how much discovery will occur, whether dispositive motions may be made, when the evidentiary hearing will take place, how and when witnesses and exhibits will be presented, and, ultimately, how much time and money the arbitration will consume.
This article picks up where our recent small-business articles on responding to an AAA arbitration demand and selecting an arbitrator from an AAA list left off. It assumes an ordinary business-to-business arbitration governed by the regular AAA Commercial Arbitration Rules and Mediation Procedures (the “AAA Commercial Rules”)—incorporated by reference by the terms of the contract—rather than the Expedited Procedures or the Procedures for Large, Complex Commercial Disputes. The parties’ contract may also modify the Rules, so counsel should always start with the arbitration agreement, reading it together with the contract’s incorporation of the Rules.
What Is an AAA Preliminary Hearing?
AAA Commercial Rule R-22 says that, depending on the size and complexity of the arbitration, the arbitrator should schedule a preliminary hearing “as soon as practicable” after appointment. AAA Commercial Rules R-22(a). The parties and their representatives should be invited and the conference may be in person, by videoconference or phone. AAA Commercial Rule R-22(a).
The purpose is practical. Rule R-22(b) directs the arbitrator and the parties to “be prepared to discuss and establish a procedure for the conduct of the arbitration that is appropriate to achieve a fair, efficient, and economical resolution of the dispute.” AAA Commercial Rules R-22(b). Preliminary Hearing Procedures P-1 and P-2 of the AAA Commercial Rules address the issues to be considered at the preliminary hearing. See AAA Commercial Rule R-22(b); AAA Commercial Rules, Preliminary Hearing Procedures P-1–P-2.
Preliminary Hearing Procedure P-1(a) makes the same point about fairness, efficiency, and economics. P-1(b) urges that “[c]are must be taken to avoid importing procedures from court systems, as such procedures may not be appropriate to the conduct of arbitrations as an alternative form of dispute resolution that is designed to be simpler, less expensive and more expeditious.” Preliminary Hearing Procedures P-1(a) & (b).
Arbitration flexibility can be a major advantage, but only if the business and its counsel use it intelligently and not treat it as what some have referred to as “arbigation.” In the author’s experience, attorneys and businesses that have been involved in specialized, industry arbitration (such as reinsurance, maritime, FINRA, and others) tend to understand this better than persons who have more experience handling court litigation. Be that as it may, a well-conducted preliminary hearing can and should promote arbitration flexibility and informality.
