Arbitration Law, Practice, and Procedure
Clients who are or will likely be involved in arbitration proceedings should hire an attorney that is not only familiar with handling the merits, but also in dealing effectively with the questions of arbitration-law practice and procedure and arbitration-related litigation that will likely arise. If the lawyer or lawyers handling the merits phases of the arbitration are not well versed in arbitration law, practice and procedure, or do not have the time to deal with the arbitration-law side of the case effectively, then clients should consider retaining arbitration-law co-counsel to do so.
Philip J. Loree Jr. has extensive experience and expertise representing clients in industry and commercial arbitration; handling arbitration-related litigation arising out of industry, commercial, business contract, employment, and trust arbitrations; advising clients on arbitration-law-related questions; and drafting arbitration agreements. He is also a noted commentator on arbitration-law matters and has written and spoken extensively on arbitration and arbitration law. (See Philip J. Loree Jr.’s CV, here.)
In addition to handling the merits phases of arbitration proceedings (part of the B-2-B Litigation and Arbitration practice here), The Loree Law Firm offers representation to clients in matters involving state and federal arbitration law, including the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Whether the matter arises out of reinsurance or maritime arbitration; labor arbitration under section 301 of the Labor Management Relations Act; commercial or business-contract arbitration; employment arbitration; consumer arbitration; arbitration involving trusts; international arbitration governed by International Chamber of Commerce or other international rules; arbitration under the auspices of the American Arbitration Association, JAMS or other providers; or ad hoc arbitration, The Loree Law Firm can help you:
- Ensure that your arbitration is conducted in a manner designed to preserve your rights under applicable arbitration law without alienating the arbitrators or otherwise unreasonably interfering with your ability to achieve a favorable outcome on the merits;
- Avoid costly, arbitration-related litigation that is unlikely to further your objectives; and
- Handle arbitration-related trial court and appellate litigation in a time- efficient, cost-effective and professional manner designed to achieve as beneficial an outcome as is reasonably possible in the circumstances.
Even if we do not handle the merits of your arbitration, we are available in appropriate cases to act as co-counsel in arbitration proceedings by advising on arbitration-law strategy issues, and handling the arbitration-related litigation and appeals, while another lawyer or firm handles the merits. This approach frees up merits counsel from having to deal with time-consuming and complex arbitration-related questions and litigation.
And if you are not currently involved in arbitration, but wish to take advantage of the benefits arbitration can offer, Philip J. Loree Jr. can help you draft effective arbitration clauses that are designed to meet your dispute resolution needs and requirements, and assist you in developing an effective dispute resolution strategy.
Contact Philip J. Loree Jr. (PJL1@LoreeLawFirm.com, (516) 941-6094 (mobile), or (516) 627-1720) to discuss any questions you may have and to take advantage of The Loree Law Firm’s Initial Strategy Discussion Offer, which is discussed in the About The Loree Law Firm page, here.
You can also help keep yourself informed about arbitration-law-related matters, as well as the legal rules and principles that may bear on the merits of your case, by reading The Arbitration Law Forum (formerly the Loree Reinsurance and Arbitration Law Forum), which features hundreds of articles about arbitration-law or arbitration-related issues and cases.
And you can see and hear Philip J. Loree Jr. speak about various arbitration-law-related issues in a series of video-taped interviews conducted in 2020 by the International Institute for Conflict Prevention and Resolution (CPR). To access those videos, click HERE.
Small Business Arbitration Challenges
Arbitration can be a very effective way of resolving a wide range of disputes arising out of many legal and commercial relationships. It can benefit the parties if they make informed decisions about agreeing to it, craft their agreement accordingly, invest ample time and resources into the dispute-resolution process, proactively manage it, and make reasonable strategic and tactical decisions aimed at maximizing the odds of a beneficial outcome. It can benefit the courts and the general public by shifting to the private sector dispute-resolution costs that the public-sector (funded by taxpayers) would otherwise bear.
But as discussed in the “About The Loree Law Firm” page, arbitration presents very serious challenges to small businesses, businesspersons, and professionals who have agreed, or allegedly agreed, to arbitrate disputes with their business counterparts or others. These clients need affordable counsel with extensive arbitration and arbitration-related skill and experience, and an ability to litigate and arbitrate effectively against businesses represented by medium and large firms. The Loree Law Firm serves these needs.
The challenges arbitration presents include: (a) substantial arbitration fees; (b) fee shifting; (c) the pitting of repeat players against outsiders; (d) arbitration’s sometimes unfulfilled promises; (e) differences between arbitration and litigation; and (e) challenges inherent in the nature of arbitration law and arbitration-related litigation. (See About The Loree Law Firm.)
If you or your business have agreed to arbitrate disputes arising out of or relating to a contract or other legal relationship, and a dispute over a significant sum of money or a high-value right or obligation arises, then you need to ensure that you are maximizing your chances of success in the arbitration and managing your dispute resolution costs.
But that challenge is not identical to the challenge you would face had you not agreed to arbitrate the dispute. Had you not agreed to arbitrate, a court would decide the dispute. In court you have expansive discovery and other procedural rights, and the court must follow the rules of law, including the applicable laws of evidence. A court’s final decision on the merits is subject to appeal, sometimes even to more than one level of appeal.
Arbitration is different.
Differences Between Arbitration and Litigation and the Challenges they Present
Limited Judicial Review of Arbitration Awards
An arbitration award, unlike a court decision, is not subject to rigorous judicial review. An arbitration award can be vacated, modified, or corrected only on limited grounds and short and strict time limits apply. Court are not permitted to vacate awards simply because arbitrators fail to apply the rules of law and evidence strictly, provide expansive discovery, or grant extensive procedural protections (other than what courts call a “fundamentally fair hearing”). Courts cannot overturn awards for errors of law or fact.
Arbitration can be More Expensive than Litigation
While arbitration is often touted as being a less-expensive alternative to litigation, that does not always turn out to be the case. In court proceedings there is typically an initial filing fee, but that is ordinarily a matter of a few hundred dollars. By contrast, in administered arbitration, arbitration providers often charge administrative fees that far exceed those associated with judicial filing fees. In addition, there are arbitration fees that are payable to the arbitrators, and these can be quite substantial.
Sometimes respondents in arbitration cases will refuse to pay, which can result in arbitration-enforcement litigation concerning the ability and obligation to pay, and may result in the petitioner having to front the other side’s arbitration fees until the conclusion of the arbitration, at which point the arbitrator may make them part of a final award. And sometimes the substantial costs associated with arbitration can discourage claimants from pursuing their claims or force them to abandon their claims before they are decided.
Another reason that arbitration can turn out to be a far more expensive proposition than litigation concerns fee shifting. In litigation, Courts typically follow the so-called “American Rule,” under which each side bears its own legal fees, unless the other party is guilty of bad faith conduct in the litigation. But under many arbitration-provider rules, and many arbitration agreements, the arbitrators are deemed to have the authority to allocate legal and arbitration fees as they see fit, even if it means forcing a party who arbitrated in good faith to pay some or all of the other’s legal and arbitration fees.
Differences Between Arbitration and Litigation Increase Dispute Resolution Risk
The differences between litigation and arbitration substantially raise the stakes for parties in arbitration who do not prevail on the merits after a hearing. Unless they have legitimate grounds to vacate, modify, or correct the award, the losing party is stuck with it, and the winning party will succeed in confirming it, that is, obtaining in court a judgment on the award.
These differences also tend to favor parties who might have a questionable case, but are nonetheless able to convince the arbitrator to make an award in their favor even though, all else equal, a court would almost certainly have ruled against them at the trial court and appellate levels.
The differences between arbitral and judicial dispute resolution greatly increases dispute resolution risk for businesses, businesspersons, and professionals confronted with the prospect of arbitration. If you are facing arbitration, then you should act proactively to protect your legal interests. And that is even more so if you face an adversary who has the financial resources to hire a large or medium-sized firm that has some meaningful experience and expertise in arbitration.
If you have agreed to arbitrate a dispute, you must be sure that your interests are protected by counsel who is not only proficient in handling like disputes but doing so in arbitration.
Protecting Your Interests by Challenging Arbitrability
If there is a legitimate question about whether you are required to arbitrate the dispute, and your chances of prevailing are greater in litigation than in arbitration, then you may need to protect your interests by challenging the arbitrability of the dispute—that is, whether the parties agreed to arbitrate, whether the dispute falls within the scope of arbitration agreement, or whether the arbitration agreement is valid and enforceable. Depending on the circumstances, challenging arbitrability may also require a challenge to whether you or your business clearly and unmistakably agreed to arbitrate arbitrability.
Challenging arbitrability usually involves and requires arbitration-related litigation, although in cases where parties have clearly and unmistakably submitted arbitrability questions to arbitration, the challenge to the arbitrability of the merits of the dispute will ordinarily need to be made to the arbitrator.
If it turns out that you must arbitrate the dispute despite your challenge to arbitrability, you should be prepared to assess whether an appeal of any adverse judicial decision on arbitrability is warranted, and if so, when that appeal must be brought. The assistance of skilled and experienced arbitration law counsel can be invaluable in determining whether such an appeal is warranted, and in increasing your chances of success if you do opt for an appeal.
Protecting Your Interests if You Do not Prevail in Arbitration
In the event you do not prevail in the arbitration, you need to be prepared to assess whether you have legitimate grounds for challenging the award, and if so, whether to challenge it in court, and to prosecute or defend any appeals arising out of the challenge. Such challenges are difficult, and the odds of success are rarely high, but the assistance of skilled and experienced arbitration counsel can increase those chances. And if that person is also involved in the handling of the merits of the arbitration, then he or she can also help ensure that the arbitration record is properly preserved for such a challenge, thereby preventing forfeiture of arguments that might support vacatur.
Arbitration Law: Limited Relief, Arcane Rules, and Traps for the Unwary
The differences between arbitration and litigation are not the only reasons why the stakes are high for businesses, businesspeople, and professionals who are required, or may be required, to arbitrate an important dispute. The nature of arbitration law itself poses other challenges with which businesses must grapple.
Arbitration is supposed to provide a speedy and cost-effective alternative to litigation, but, as we have already seen, that does not always turn out to be the case. There are various reasons for this, but one is that arbitration-law—the body of federal and state law designed to enforce arbitration agreements and awards, and otherwise regulate arbitration—can is nuanced and complex and is often unsettled. It may also raise complex contract law, and vertical (state versus federal or domestic federal versus federal treaty) and horizontal (state versus state, state versus foreign or federal versus foreign) choice-of-law issues. It has an unfortunate tendency to breed arbitration-related litigation that must be dealt with along with the arbitration proceeding, sometimes at the same time.
Arbitration law authorizes courts to provide only limited relief to parties who claim to be the victims of arbitration-agreement violations, whether committed by arbitrators or adverse parties.
To make matters worse, judges occasionally interpret and apply arbitration law in a way that makes it all the more difficult to obtain relief, even when granting that relief would, in all likelihood, promote arbitration as an attractive alternative to litigation.
For example, courts will sometimes confirm arbitration awards even though the facts reveal that the arbitrators violated the parties’ arbitration agreement by exceeding their powers; being guilty of fraud, corruption, or evident partiality; or committing prejudicial procedural misconduct. Sometimes courts are, consciously or unconsciously, reluctant to recognize improprieties, perhaps because the public might perceive the outcome—a vacated arbitration award and an arbitration do over—as disfavoring arbitration. And that is so even though vacatur would likely promote arbitration by enforcing the parties’ arbitration agreement and protecting reasonable expectations of fundamental fairness.
The same kind of scenario may play out in a pre-arbitration dispute about compelling arbitration and staying litigation pending arbitration. Believing in good faith that they are promoting arbitration, and perhaps desiring an outcome that appears to favor arbitration—such as one that compels arbitration and stays litigation pending arbitration—Courts sometimes determine persons have consented to arbitration in circumstances where a comprehensive examination of the facts and applicable law may indicate otherwise.
Arbitration law doctrines, rules, and procedures remain somewhat arcane even though arbitration disputes and arbitration-related litigation are common. Consequently, outcomes and rationales are often counterintuitive, unless the lawyer has thorough knowledge of and experience with arbitration law.
Even apart from that, arbitration law’s procedural rules are fraught with traps for the wary, which are, among other things, designed to encourage early forfeiture of defenses that might otherwise be raised in arbitration-related litigation. Most, if not all, of these rules nevertheless serve purposes which at least arguably promote arbitration as a viable alternative to litigation. If your attorney does not know the rules well or does not follow them, then your interests may be in jeopardy.
Protecting your Interests in Arbitration and Arbitration-Related Litigation By Hiring Knowledgeable and Experienced Arbitration and Arbitration Law Counsel
How can you best protect your interests in the seemingly informal, but sometimes covertly hostile, arbitration environment? First, you must make sure that you are represented by an attorney who has abundant knowledge of and experience in arbitration law and in representing parties in arbitrations and in arbitration-related litigation.
This can make an enormous difference. Philip J. Loree Jr. has encountered situations where another lawyer did not, for example, detect or adequately preserve for judicial review issues that may otherwise have provided a basis for vacating an adverse award. Consequently, these parties lost the race before it even started, and ended up being saddled with arbitration awards that, in a more perfect world, they may have been able to vacate. Situations like this are far less likely to occur if experienced arbitration counsel is involved from the beginning.
If you are already represented by an attorney in your arbitration, but find yourself facing challenging arbitration enforcement litigation, or the prospect of such litigation, then your interests are best suited by hiring a skilled and experienced attorney who regularly handles such litigation. Depending on the circumstances, your own needs, and other considerations, you may wish to retain a new lawyer to handle the arbitration-related litigation, while continuing to retain your current lawyer for purposes of handling the merits of the underlying arbitration (but making sure the arbitration enforcement litigation attorney is consulted at each step along the way to help preserve and enhance the record for future arbitration-related litigation).
You should work closely with that attorney, advising him or her of all matters pertinent to your claims and defenses, including customs, practice, usage, and other matters that may be peculiar to your business or industry. Always be an active part of your case and work only with attorneys who allow and encourage you to do that.