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Another Appeals Court Take on ‘Who Decides’: The Sixth Circuit Overturns Provider’s Ruling to Reject Arbitration

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By Mark Kantor

Last week, the Sixth Circuit U.S. Court of Appeals issued one of the rare rulings addressing the authority of an arbitral institution to make decisions. 

In the case, the appeals court considered the authority of an American Arbitration Association administrator to make what the court considered a “gateway” decision under the AAA’s Healthcare Policy Statement and rules rather than allowing that decision to be made by arbitrators. 

The 2-1 majority opinion ruled that only an arbitrator could make the decision, not the administrator.  That ruling has significant implications for the administrability of due process protocols and policy statements in patient healthcare, consumer and employment disputes.

In Ciccio, et al. v. SmileDirectClub LLC, No. 20-5833 (6th Cir. June 25, 2021) (available at https://bit.ly/2U8OqZ8), Senior Circuit Judge David W. McKeague authored the majority Sixth Circuit panel opinion overturning an AAA decision to apply the AAA’s policy against accepting a claim that “implicated various AAA policies that precluded arbitration unless the parties signed a post-dispute arbitration agreement or a court otherwise ordered arbitration.” 

The AAA’s Consumer Arbitration Rules, Healthcare Policy Statement and Healthcare Due Process Protocol bar the AAA from arbitrating a patient healthcare dispute unless either (1) all parties have agreed to submit the matter to arbitration after the dispute has arisen or(2) a court has ordered the disputing parties to arbitrate the matter.  The AAA Healthcare Policy Statement  describes this policy succinctly:

In 2003, the American Arbitration Association (“AAA”) announced that it would not administer healthcare arbitrations between individual patients and healthcare service providers that relate to medical services, such as negligence and medical malpractice disputes, unless all parties agreed to submit the matter to arbitration after the dispute arose. . . .  However, the AAA will administer disputes between patients and healthcare providers to the extent a court order directs such a dispute to arbitration where the parties’ agreement provides for the AAA’s rules or AAA administration.

The dispute in this case arose out of a false advertising claim brought by plaintiffs and former patients Dena Nigohosian, Dr. Joseph Ciccio, Dr. Arthur Kapit, and Dr. Vishu Raj, and joined by Dana Johnson and others, against SmileDirect, originally in federal court.  The U.S. District Court first held that an arbitration agreement in SmileDirect’s customer contract applied and ordered Nigohosian to arbitrate.  The other plaintiffs then voluntarily dismissed their court claims. 

The arbitration clause in question read:

AGREEMENT TO ARBITRATE – I hereby agree that any dispute regarding the products and services offered [b]y SmileDirectClub and/or affiliated dental professionals, including but not limited to medical malpractice disputes, will be determined by submission to arbitration and not [b]y lawsuit filed in any court, except claims within the jurisdiction of Small Claims Court . . . .   I agree that the arbitration shall be conducted by a single, neutral arbitrator selected by the parties and shall be resolved using the rules of the American Arbitration Association.

Johnson thereafter filed a class arbitration claim against SmileDirect with the AAA on behalf of consumer claimants who had been SmileDirect patients.

At that point, the AAA itself became involved in deciding whether the class arbitration should proceed in light of AAA policies and rules.  An AAA administrator advised the parties that that AAA’s Healthcare Due Process Protocol and Healthcare Policy Statement in the circumstances required healthcare providers and their consumers to sign post-dispute arbitration unless a court order has compelled arbitration, according to the Sixth Circuit opinion:

An AAA administrator informed the parties that AAA’s Healthcare Due Process Protocol and Healthcare Policy Statement applied, which require healthcare providers and their patients to sign an arbitration agreement after a dispute arises in certain cases unless a court order has compelled arbitration.  SmileDirect’s counsel asked the AAA administrator to reverse this decision but the AAA administrator maintained his “initial, administrative determination [that] the Protocol [and the Healthcare Policy Statement] appl[y].” . . . SmileDirect’s counsel objected again, noting that the district court had already compelled Nigohosian to arbitrate “whether the claims themselves are arbitrable” and argued that “AAA’s administrative decision to apply the Protocol [and the Healthcare Policy Statement] to these consumer claims is erroneous. ***

The AAA administrator “reaffirm[ed] [his] administrative determination” that the Healthcare Policy Statement applied to Johnson’s claims.  . . .  He concluded that arbitration could only proceed following a court order (seemingly like the court order already entered for Nigohosian) or a post-dispute arbitration agreement.

Johnson refused to sign a post-dispute agreement consenting to arbitration, while Nigohosian (who was bound by the earlier District Court order compelling arbitration) never initiated arbitration herself.  When claimants renewed their court proceedings in the U.S. District Court, however, “SmileDirect responded that they couldn’t rejoin the case because the Agreement required an arbitrator to decide the merits of any dispute, including any gateway issues about whether the dispute was arbitrable.” (Emphasis added.)

The district court, though, decided that SmileDirect and Johnson “got what they bargained for” because the dispute had been “resolved using the rules of the [AAA].”  Consequently, the court  determined that Johnson could renew the dispute before the judicial forum:

The district court interpreted the Agreement to fully incorporate Rule 1(d), the Consumer Due Process Protocol, and the Healthcare Policy Statement.  The court’s interpretation of these rules and policies next led it to conclude that Johnson had discharged his obligations under the Agreement and could “submit [his] dispute to the appropriate court for resolution.” . . .  Under the district court’s reasoning, Rule 1(d) incorporates the Consumer Due Process Protocol, which in turn states that AAA has subject-specific policies (incorporating the Healthcare Due Process Protocol and Healthcare Policy Statement by implication), and the Healthcare Policy Statement requires a post-dispute arbitration agreement or a court order.  Therefore, the court held that “the AAA process to which the parties mutually agreed ha[d] been completed in Johnson’s case.”

With respect to Nigohosian, however, the Court decided that she was bound by the existing Court order compelling arbitration.  The District Court therefore stayed her claims, pending arbitration.

SmileDirect thereafter appealed the decision regarding Johnson to the Sixth Circuit Court of Appeals. 

The Court of Appeals did not resolve the substantive arbitrability issue.  Rather, Judge McKeague held on behalf of a majority of a divided appellate panel that “The text of the [parties’ arbitration agreement] confirms that the parties didn’t intend to allow an administrator to short-circuit arbitration by refusing to appoint an arbitrator to answer this initial gateway question.  Accordingly, we don’t have anything further to say on the matter until and unless a party asks us to review an arbitrator’s decision under 9 U.S.C. § 10.”

To reach this result, the appellate panel started with basic principles in U.S. arbitration jurisprudence that “[w]hether the parties have agreed to arbitrate or whether their agreement covers a particular controversy” are gateway arbitrability questions.”  The parties may decide to send these gateway issues to an arbitrator rather than a court, but only upon a showing of “clear and unmistakable” evidence that the parties did indeed intend to delegate those issues to an arbitrator under the ruling in the U.S. Supreme Court’s First Options v. Kaplan, 514 U.S. 938 (1995). 

In the Sixth Circuit, like almost all other federal circuit courts, the incorporation of AAA rules authorizing the arbitrator to decide on the scope or validity of the arbitration agreement or the arbitrability of a claim satisfies the First Options standard. 

Thus far, the Court of Appeal’s reasoning paralleled the U.S. District Court’s reasoning on gateway arbitration questions.  But, stated the McKeague opinion, “What remains is the related question of whether the parties intended to allow an AAA administrator to apply the Healthcare Policy Statement before sending any gateway-arbitrability questions to the arbitrator,” explaining that

The Agreement dictates that “any dispute . . . will be determined by submission to arbitration,” not by litigation, and “that the arbitration shall be conducted by a single, neutral arbitrator selected by the parties.” The parties never got that far here because an AAA administrator “ma[d]e[] an initial, administrative determination [that] the [Healthcare Policy Statement] applie[d].”

The appeals court read the arbitration agreement between the parties to show that they intended to send gateway questions of arbitrability “exclusively” to an arbitrator, not to an AAA administrator.  Senior Circuit Judge McKeague expressed confusion as to the basis relied upon by the AAA administrator to take this decision rather than referring the question to an arbitral panel:

It is unclear what the administrator was doing.  There are two ways to view his decision.  Perhaps the administrator independently interpreted the Agreement and read it to incorporate the Healthcare Policy Statement, which led the administrator to conclude that the parties did not intend to arbitrate the instant dispute without a post-dispute agreement or court order.  Or perhaps the administrator was simply applying AAA’s Healthcare Policy Statement because he concluded that this case concerns healthcare and the AAA follows this policy no matter what a particular agreement says or what particular parties intended.

“Either way,” wrote Judge McKeague, “the end result was contrary to the text of the Agreement and the FAA.” Arbitrators and arbitral administrators “are distinct.”  Under AAA instruments, he wrote, administrators do not decide the merits of a dispute. 

The opinion notes, “The arbitrator decides the merits of a dispute.  And if an administrator could preempt a final merits ruling by an arbitrator, the administrator would effectively run afoul of the provision that administrators ‘cannot overrule or change an arbitrator’s decisions or rulings.’”  It continues later:

Under AAA’s rules, an arbitrator and an administrator are distinct.  “The [a]dministrator’s role is to manage the administrative aspects of the arbitration, such as the appointment of the arbitrator.  . . .  [T]he [a]dministrator does not decide the merits of a case or make any rulings on issues such as what documents must be shared with each side.” . . .  Unsurprisingly, the administrator helps disputes get to an arbitrator and doesn’t make merits rulings.  On the other hand, “[a]rbitrators are neutral and independent decision makers who . . . make the final, binding decision on the dispute.  . . .  The [a]rbitrator makes all the procedural decisions on a case not made by the administrator.” ….  The arbitrator decides the merits of a dispute.  And if an administrator could preempt a final merits ruling by an arbitrator, the administrator would effectively run afoul of the provision that administrators “cannot overrule or change an arbitrator’s decisions or rulings.”

Therefore, concluded the Sixth Circuit, “the arbitrability of Johnson’s claim, thus should’ve gone to an arbitrator for a ‘final, binding decision.’”

The appellate court also considered whether the issue of compliance with the AAA’s post-dispute agreement requirement for consumer healthcare arbitrations is a “procedural decision” delegated to an AAA administrator rather than an arbitral panel.  The appeals panel stated, “We don’t see how it could be.” 

In so deciding, the appellate judges reminded the parties that contract interpretation is a legal question.  Procedural decisions, stated the Court of Appeals, are more like administrative aspects of the arbitration such as appointment of arbitrators, location of hearings and fees:

The procedural decisions AAA administrators make, in turn, are more akin to “administrative aspects of the arbitration, such as the appointment of the arbitrator, . . . preliminary decisions about where hearings might take place, and . . . handl[ing] the fees.” ***  So it generally wouldn’t make sense to require clear intent to delegate arbitrability questions to an arbitrator but then allow either arbitrators or administrators to decide that legal question. [Citation and footnote omitted.]

The appellate court distinguished in this regard a Fourth Circuit decision upholding resolution by AAA administrators of a dispute as to how many arbitrators would be appointed, Dockser v. Schwartzberg, 433 F.3d 421 (4th Cir. 2006). 

Not only were the clauses in the two disputes different, said the Sixth Circuit majority, but the issue in that latter case was procedural.  “Dockser dealt with ‘what kind of arbitration proceeding the parties agreed to,’ whereas here the relevant question is arbitrability—what the Agreement itself means.”

If, instead of interpreting the parties’ arbitration agreement, the AAA was applying its own “sound policy,” then according to Judge McKeague that conduct too would contravene applicable law.  Nor did the arbitration agreement grant the AAA administrator the authority to make this policy choice for the parties. The majority opinion states:

Although the AAA may choose for itself which claims it will arbitrate, it is not at liberty to “impose its own view of sound policy” regarding when or how parties should be allowed to arbitrate independent of the parties’ own choices in their contract.

***

We also see nothing in the Agreement that gives the administrator the right to make this policy choice for the parties.  To be sure, the Agreement incorporates the AAA rules, which perhaps could be read to include the AAA’s due process review under Consumer Rule 1(d).  And Consumer Rule 53 says that “[t]he arbitrator shall interpret and apply these Rules as they relate to the arbitrator’s powers and duties” but that “[a]ll other Rules shall be interpreted and applied by the AAA.” . . .  But Consumer Rules 1(d) and 53 must be read together with the Agreement and the other rules to ascertain the parties’ intent.  . . .  When an arbitration agreement and its incorporated rules seem to conflict, our job is to find the “best way to harmonize” them. [Emphasis is the court’s.]

“We won’t,” stated the appellate majority, “interpret this agreement to arbitrate to permit Johnson to avoid arbitration.”

Moreover, the appeals panel pointed out that its decision to require an arbitrator to decide the gateway question, rather than an administrator, was not inconsistent with AAA policy.  The court’s resulting order would satisfy the AAA Healthcare Policy alternative that the AAA will arbitrate consumer healthcare disputes if so directed by a court order. The opinion notes:

The Healthcare Policy Statement also does not stand in the way of such an appointment.  It makes clear that “the AAA will administer disputes between patients and healthcare providers” either when the parties enter into a post-dispute agreement or when “a court order directs such a dispute to arbitration where the parties’ agreement provides for the AAA’s rules or AAA administration.” . . . Our decision will lead to such a court order—seemingly clearing the administrative path.  Here, to give effect to both the parties’ agreement that “the arbitration shall be conducted by a single, neutral arbitrator” and that the arbitration “shall be resolved using the rules of the American Arbitration Association,” we can’t read the AAA rules to preclude decision by an arbitrator.

.The Sixth Circuit opinion also drew attention to the fact that the approach taken by the majority will result in a different, narrower judicial review standard by the federal courts–review for vacatur of an arbitral decision rather than de novo review:

The district court effectively reviewed the Agreement de novo.  In doing that, the district court relied on a court’s interpretation of the same set of AAA rules and policies to hold that the AAA rules effectively nullified an arbitration agreement.  . . . But by agreeing, clearly and unmistakably, to send the arbitrability question to the arbitrator, the parties here bargained for the narrow 9 U.S.C. § 10 review, not de novo review.  . . .

This is where the Agreement’s requirement that the dispute would not be determined by litigation comes in.  The district court determined the contract-interpretation question, so the dispute was determined by litigation contrary to the intent of the parties.  But once an arbitrator interprets the Agreement, any judicial review under 9 U.S.C. § 10 wouldn’t be review of the arbitrability question de novo but under the limited grounds identified (for fraud, corruption, etc.).  Because the parties bargained for an arbitrator to interpret the Agreement and for the courts to have a very limited role, it wouldn’t make sense to allow an administrator’s preemptive contract interpretation to be a portal to de novo judicial review.   

Circuit Judge Eric L. Clay dissented, noting “I agree with the majority’s statement at the onset of its opinion that “this case is about whether the Agreement incorporates the Healthcare Policy Statement,” even though it then proceeds to repudiate the Healthcare Policy Statement.”  The parties, Circuit Judge Clay reasoned, “made their decision to abide by the rules when they signed the contract incorporating rules that included the Healthcare Policy Statement.” He added:

Turning to the plain language of the agreement, the threshold question of what the agreement incorporated is readily apparent: [disputes] shall be resolved using the rules of the American Arbitration Association.  . . .  As part of the AAA rules, the AAA maintains consumer protocols that ensure a fair process in healthcare disputes.  The Healthcare Policy Statement’s incorporation into the agreement was clear to anyone who read the AAA’s rules.  The parties made their decision to abide by the rules when they signed the contract incorporating rules that included the Healthcare Policy Statement, but in my colleagues’ view, those rules may simply be disregarded if they interfere with requiring the parties to proceed with the arbitration.

***

Here, the AAA determined that proceeding to arbitration would violate their due process rules without its mandatory post-dispute agreement.  When the parties agreed that the dispute “shall be resolved using the rules of the AAA,” they were aware that those rules called for an administrator to render the AAA’s initial determination regarding the requirements of the organization’s own rules before proceeding to arbitration.  That was not an unusual decision, nor a decision out of lockstep with the rules of the AAA.  Quite the contrary, that decision followed the process by which the AAA typically administers all of its arbitrations.  That provides the “clear and unmistakable” evidence that the parties intended to have these gateway issues decided in accordance with the AAA’s procedures and policies.

The majority opinion addressed Circuit Judge Clay’s dissent in footnotes 3 and 4.  Notably, in footnote 4 the Court of Appeals stated, “we interpret the words of this Agreement in conjunction with AAA’s rules without deference to AAA’s ‘typical’ practice.” The footnotes state:

3The dissent agrees that AAA’s rules specifically assign arbitrability questions to the arbitrator while reserving AAA’s “administrative duties” for the administrator as detailed in the arbitration agreement and the AAA’s rules themselves.  . . .  Where we differ is whether the AAA rules include an initial arbitrability decision among these “administrative duties.”  The dissent points to no rule granting the administrator such authority, but instead locates the authority in the general requirement that “the AAA will administer the arbitration.” . . .  Our decision to follow the AAA’s rule granting such authority to an arbitrator doesn’t mean that the parties “contract[ed] the AAA’s administrator out of the process,” but instead means the parties intended the administrator to have the role the AAA’s rules mandate: “to manage the administrative aspects of the arbitration, such as the appointment of the arbitrator, preliminary decisions about where hearings might take place, and handling the fees associated with the arbitration.”

4The dissent suggests that requiring an administrator to determine arbitrability “was not an unusual decision” but is rather “the process by which the AAA typically administers all of its arbitrations”—a fact that “any party doing their due diligence would have seen.” . . .   But we interpret the words of this Agreement in conjunction with AAA’s rules without deference to AAA’s “typical” practice.  The Agreement or the AAA Rules could grant the administrator that authority, but in this case they do not.

Judge Clay volleyed back at the majority by arguing in his own footnote 1 that “The majority claims that we agree that the AAA’s rules assign arbitrability to the arbitrator, and ‘administrative duties’ to the administrator, but that is not the case.  To the contrary, the AAA’s rules do not clearly delineate these roles as the majority alleges.  Instead, as stated in the rule cited above, the AAA has the final decision on who administers cases under its rules.”

* * *

Whether one agrees with Senior Circuit Judge McKeague’s opinion on behalf of the majority or with Circuit Judge Clay’s dissent, this ruling has significant implications for many disputes in the U.S. involving healthcare, consumer and employment matters. 

The AAA has adopted due process protocols for those areas, as well as making policy statements regarding how the AAA will handle applications for arbitration in many areas.  The reasoning by the Ciccio majority could vitiate the authority of an AAA administrator to apply those instruments to decline to accept cases that do not comply with those protocols and policy statements. 

Instead, application of those instruments would be allocated to an arbitral panel, resulting in significant delay and expense while the panel is constituted and briefed before a decision on the applicability of due process protocols and policies crystallizes.

Given the dissent, it is worth wondering whether this case is headed toward en banc review by the Sixth Circuit Court of Appeals or will be the subject of a certiorari petition to the U.S. Supreme Court.

* * *

Mark Kantor is a member of CPR-DR’s Panels of Distinguished Neutrals.  Until he retired from Milbank, Tweed, Hadley & McCloy, he was a partner in the firm’s Corporate and Project Finance Groups.  He currently serves as an arbitrator and mediator.  He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor).  He also is Editor-in-Chief of the online journal Transnational Dispute Management.  He is a frequent contributor to CPR Speaks, and this post originally was circulated to a private list serv and adapted with the author’s permission. 

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Highlights from Harvard Law PoN’s ‘Negotiation and Leadership’ Program (Updated July 23, 2021)

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By Mylene Chan

The Harvard Law School Program on Negotiation offers a Negotiation and Leadership program several times throughout the year. Last month, faculty consisting of six Harvard University professors–Guhan Subramanian, James Sebenius, Daniel Shapiro, Debbie Goldstein, Robert Wilkinson, and Brian Mandell–taught the program. About 70 professionals and executives from around the world attended.

The program provided training in Interest-Based Bargaining, which was developed by Roger Fisher and William Ury in the 1980s through the Harvard Negotiation Project. The classic popular guide to this Harvard model of “win-win” negotiation and a value-creating mindset is “Getting to Yes: Negotiating Agreement Without Giving In,”by Roger Fisher, William Ury, and Bruce Patton (Penguin Books 2011).

In this approach, parties negotiate based on their interests and not their positions, as in traditional bargaining. Parties shift their view of the opposition from adversaries to collaborators, and by doing so, they can then explore the deeper interests underlying their positions to identify potential trade-offs and win-win opportunities.

The Interest-Based Bargaining model can apply in any cultural setting because the core negotiation principles are universal despite variations in communication and presentation styles.

The May 2021 session took place over the course of six half days. Each day, a different teacher presented a new topic and assigned a negotiation exercise adapted from real-life Harvard case studies to practice implementing the concept. After each negotiation exercise, the faculty tabulated the results for a plenary debrief. 

Guhan Subramaniam opened the interactive sessions by introducing the fundamentals of value claiming, also known as single-issue negotiation. Successful value claiming starts with mastering the use of anchors and strategic concessions, while identifying the zone of possible agreement and shaping the counterpart’s perception of it.

Subramanian explained that one must ensure that the negotiating counterpart perceives the process of negotiation as fair, but at the same time, one must deploy concessions at an appropriate rate and scope. Being aware of the influence of the midpoint rule–predicting the final deal price as the midpoint of the first semi-reasonable offer and counteroffer–will make anchors and concessions more effective.

Negotiators can also leverage social proof–the tendency to look at how others behave when making choices–to add pressure on counterparts to conform to articulated norms.

Moving from claiming value, James Sebenius introduced how to create value in multiple-issue negotiations.  Sebenius emphasized that parties must overcome the zero-sum mentality to expand the negotiation pie. Another paramount lesson, he explained, involves understanding the power of probing for information on each side’s underlying interests and valuations. This would lead to discovery of uncommon grounds that negotiators could leverage to strengthen cooperation.  

Sebenius continued by explaining that negotiators should seek strategic moves that offer high value at low cost so both sides are better off.  To maximize value creation, negotiators can also employ multiple equivalent and simultaneous offers.

An unusual technique that Sebenius outlined as a way to overcome sufficiency bias–believing that parties have already done everything to strike the best deal–is to engage in post-settlement settlements. These are settlements in which parties negotiate better and novel terms that were not considered during the initial deal-making process.

Meanwhile, the existing deal remains unaltered unless both deem the post-settlement terms superior to the agreement just signed. Post-settlement settlements capitalize on the trust and goodwill generated during the negotiation to increase joint value creation.

Dan Shapiro presented negotiation from a psychological standpoint through discussing five core concerns of emotions and relationships. Each of the core concerns (appreciation, autonomy, affiliation, status, and rule) serve as a lens to understand and as a lever to improve negotiation.

Shapiro explained that, for example, if a negotiator and the opposing side appreciate one another, the negotiator is more likely to reach a wise agreement. Being appreciated, the opponent will feel more at ease and become more cooperative. Shapiro laid out details of this framework in Beyond Reason: Using Emotions as You Negotiate, which he co-wrote  with Roger Fisher (Penguin Books 2005).

Debbie Goldstein exhorted negotiators not to underestimate the importance of emotions in driving negotiation outcomes. Emotions affect thinking and perceptions of what is happening, shift reservation values, and narrow zones of possible arrangements. The critical lesson is to develop one’s capacity to be a neutral observer of the negotiation so that one can analyze interactive interdependencies, adapt, and deploy appropriate strategies to further the negotiation.

Goldstein and the instructors emphasized listening skills.  If one feels stuck with counterproductive behaviors in negotiation, developing a listening stance to check the understanding of the counterpart’s intentions would help.

Robert Wilkinson built on the concepts covered to bring in more complex organizational challenges. Complex negotiations contain unfamiliar interacting and interconnected elements that challenge negotiators’ abilities to satisfy their interests. Veteran negotiators often wrestle with commonly encountered obstacles such as cultural differences, leadership/organizational problems, spoilers, and radical changes in circumstances.  To make progress in complex negotiations, Wilkinson suggested many techniques–such as generating a sequencing strategy with convincing objectives–to build a winning coalition conducive to reaching a fruitful resolution.

Wilkinson expanded in an email to the author. “When you enter into more complex negotiations, the way in which you manage the process matters far more,” Wilkinson noted, adding, “People often don’t realize the influence they can exert in a negotiation simply by thinking through their process choices. I always encourage people to ask themselves ‘Who am I privileging in this process?’ ‘Who am I excluding?'” Wilkinson’s latest thoughts on negotiation can be found in a recent paper and a podcast available at https://bit.ly/2Uwhgn1 and https://bit.ly/2WcWedx.

Brian Mandell concluded the program by integrating concepts from the previous sessions and offering tactical advice to participants on their real-life negotiation dilemmas. In response to a question regarding how to manage a repeated liar in negotiation, Mandell suggested employing tactical retorts to guide the opponent into revealing the truths, asking questions such as “ Help me understand . . .”; “Walk me through your logic and thinking . . .”; “How do you come to that conclusion?” and “What do you think of that scene?”

Dan Shapiro, who is founder and director of the Harvard International Negotiation Program, commented in an email: “We negotiate all the time–but rarely as well as we could. So PON offers frameworks and tools to help participants hone their negotiation skills. I present a potent method to help negotiators leverage the power of emotions to build authentic relationships, promote information exchange, and achieve value-optimizing outcomes. We’ve applied the model successfully to business and political conflicts around the world, and I love exploring the framework with the exec ed participants, who bring substantial perspectives to our conversations, making for an edifying learning experience!”

The ideas covered in the program are creative and practical. The faculty helped the participants think through habits and behaviors that may not be helpful and how to get unstuck in the moment. Participants left the program with four to five sentences written in small print on a notecard with the essential takeaways from the program. Brian Mandell asked the participants to memorize this aphorism: “Negotiation is the art of letting other people have it your way.”   

***

The author, an LLM candidate, at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.

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Highlights from the June Session of the Harvard Law School Program on Negotiation ‘Mediating Disputes’ Training

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By Mylene Chan

The Harvard Law School Program on Negotiation conducted a June 7-11 program called Mediating Disputes. This is a recurring course that the program has offered to executives for many years.

About 50 professionals from around the world, including judges, lawyers, business executives, and nonprofit managers attended the sessions taught by Robert Mnookin, Samuel Williston Professor of Law at Harvard Law School, Gary Friedman, of Mill Valley, Calif.’s Mediation Law Offices, and Sausalito, Calif., mediator Dana Curtis.

Mediating Disputes provides training in the non-caucus “Mediation through Understanding” model of mediation that Mnookin, Friedman, and, along with Friedman, co-founder of the Center for Understanding in Conflict, Jack Himmelstein, of New Rochelle, N.Y., have developed and promoted as teachers and practitioners for more than 20 years at the Center of Mediation in Law and the Harvard Negotiation Research Project.

The Understanding Model is a transparent approach in which conflicts are resolved through deepened understanding. This approach eschews the risks of coercion and manipulation potentially present in some other mediation models. 

A distinguishing feature is that all parties work together in a mediation with everyone present. There are no separate meetings and no shuttle diplomacy where the mediator alone has information from both sides. This arrangement eliminates the opportunity for mediators to manipulate information asymmetry. Apart from resolving that ethical dilemma, working together fosters more extensive mutual understanding between the disputants.

The model starts from the foundational belief that disputants should not caucus when conflicts arise and that, in fact, embracing conflicts is often the best opportunity to create value. By staying together throughout the mediation, even when emotions are high, the disputants are forced to vet their underlying interests, allowing the true issues to surface and bring about more nuanced appreciation of each party’s perspective and interest.

Another distinctive characteristic of the Understanding Model is the emphasis on placing ultimate responsibility for whether and how the conflict is resolved on the disputants, not the mediator. It is the parties, rather than the professionals, who ultimately have the best knowledge of what underlies their disputes. Although the intensity of the conflict can obscure their views, the parties hold the key to reaching a resolution of their dispute that best serves them.  When the parties take the lead in resolving the conflict, coercion and manipulation can be eliminated from a mediation, according to the course. 

Mnookin, Friedman, and Curtis presented together during the five-day course. The faculty members engaged the participants in two full mediation stimulations–a personal dispute and a complex business dispute–using the Understanding Model. Each day was dedicated to one of the model’s phases, including contracting, defining the problem and dealing with conflict, understanding law and interests, generating options, and exploring interests and packages.

The faculty demonstrated how each phase should be conducted.  They sent the participants to breakout rooms to roleplay, with guidance and critique, followed by debriefing.  After the day concluded, the three faculty members held office hours for follow-up questions.

The attendees participated in about four hours of simulated mediations using the Understanding Model so they could understand its impact and effect cognitively and viscerally.  

On the final day, the faculty showed a mediation training video produced by the International Institute for Conflict Prevention & Resolution, the host of CPR Speaks, illustrating the caucus model to compare and contrast the different styles. See “Resolution Through Mediation: Solving a Complex International Business Problem” (updated version on YouTube at https://www.youtube.com/watch?v=xTbj-eHwX-w and available from CPR at https://bit.ly/3cFEkW5).

* * *

Reflecting on the processes reviewed in the Program on Negotiation training sessions, Prof. Robert Mnookin noted, “Many lawyer-mediators primarily rely on separate meetings or caucusing for understandable reasons:

(1) it is more comfortable for them because it avoids their having to deal with heated conflict between the parties;

(2) they believe they will be told things in secret that will allow them to create alternatives that facilitate resolution. Besides, many lawyers (who typically select the mediator) prefer it because it gives them more client control.”

“But in my view,” Mnookin continued, “there is far too much reliance on caucusing. The Understanding Model puts the focus on the parties themselves and provides a much greater opportunity for them to take responsibility for helping shape a resolution that may provide a foundation for repairing a damaged relationship.”

Faculty member and Understanding Model developer Gary Friedman noted in an email,  “The model is premised on the idea that the power of understanding is an underutilized power as opposed to the power of coercion, and has the ability to help people find agreements that are more responsive to what’s personally important to them. Understanding in the form of agreements about how the mediation proceeds as well as the ultimate result give the parties control not just over the outcome, but provides them with participation in designing the process as well.”

Faculty member Dana Curtis, like Robert Mnookin, also had misgivings about relying on caucuses in mediation. She stated, “Unfortunately, the caucus model has eclipsed the Understanding Model, especially in recent years. I believe this has occurred for two reasons. Lawyers prize their role as legal adversaries and protectors at the expense of their role as collaborators and problem-solvers. And mediators, especially retired judges and lawyers brought up on settlement conferences, have not acquired the skills and understandings to enable them to offer parties and lawyers an alternative that can lead to a satisfying and meaningful process and, hopefully, resolution, rather than simply a ‘deal.’”

Concluded Curtis: “We would like to change that!”

Details of the Understanding Model can be found at the links above, and in Beyond Winning: Negotiating to Create Value in Deals and Disputes by Robert H. Mnookin, with Scott R. Peppet and Andrew S. Tulumello (Harvard University/Belknap Press 2004).  A mediation training video illustrating the Understanding Model titled Saving the Last Dance: Mediation Through Understanding, with Robert Mnookin and Jack Himmelstein as narrators and Gary Friedman as mediator, is available at the Harvard Program on Negotiation website at https://bit.ly/35hbdEE.  

And for more on recent views of mediation joint sessions and caucusing, see “Decline of Dialogue? Galton, Love & Weiss on Joint Sessions, Caucuses, and the State of Mediation,” CPR Speaks (June 2) (available at https://bit.ly/3daRBGe).

* * *

The author, an LLM candidate, at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.

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#CPRAM21: Committing to More Diversity in ADR

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If you missed the 2021 CPR Annual Meeting in January—the first free public meeting held online in the organization’s 40-year history—the videos are being posted on CPR’s YouTube Channel. While additional videos will be posted for CPR members only, the first, linked here on CPR Speaks, is open access and features the keynoters, CNN Anchor and Chief Political Correspondent Dana Bash and General James Mattis, who is former U.S. Defense Secretary. Click the Subscribe button at YouTube for alerts and for more CPR content. For information on full access and joining CPR, please visit CPR’s Membership webpage here.

By Amy Foust

The CPR 2021 Annual Meeting’s final panel presentation encouraged participants to take action for a more equitable alternative dispute resolution community, and focused on CPR’s Diversity Commitment. 

The Jan. 29 third-day panel was hosted and moderated by CPR’s Anna M. Hershenberg, who is Vice President of Programs and Public Policy, as well as CPR’s Corporate Counsel.

The discussion, “Time To Move The Needle! CPR’s Diversity Commitment and Model Clause–and How to Track for Accountability,” included panelists

  • Hannah Sholl, Senior Counsel, Global Litigation & Competition at Visa Inc.;
  • Brenda Carr, Chief Diversity & Inclusion Officer at Arnold & Porter Kaye Scholer in Washington, D.C.;
  • Tim Hopkins, a senior consultant at McKinley Advisors, also in Washington; and
  • Linda Klein, a partner in the Atlanta office of Baker, Donelson, Bearman, Caldwell & Berkowitz.

The panel offered insights, simple practice changes, neutral selection templates, and diversity tracking tools for promoting diverse ADR panels.

Moderator Hershenberg kicked off the presentation with a poll of attendees, which asked, “What is the number one reason holding you back from selecting a diverse arbitrator or mediator for your matters?” The most popular answer, with 26% of the audience, was “I’m too nervous to select a neutral I don’t know or who my colleagues haven’t recommended.”

Hershenberg also reviewed the requirements under the CPR Diversity Commitment, including recruiting and hiring diverse neutrals.  She noted early Commitment adopters, including  Baker Donelson, ConocoPhillips Co., KPMG LLP, Shell Group, and Visa, among many others.  (Companies and law firms may sign the commitment on CPR’s website at www.cpradr.org/about/diversity-commitment.) Hannah Sholl discussed Visa’s process of managing diversity in light of adopting and signing the commitment.

These efforts, of course, raise the question of why practitioners don’t know more diverse neutrals.  Linda Klein, acknowledging research into affinity bias, said that in ADR, “the parties choose their judges, the arbitrators, and most people are comfortable with people who come from similar backgrounds.” 

Klein recommended applying the Mansfield Rule, which suggests ensuring that any slate of candidates includes at least 30% candidates who self-identify as diverse in some way. See, e.g., Homer C. La Rue, “A Call—and a Blueprint—for Change,” Dispute Resolution Magazine (Feb. 17 (available at http://bit.ly/2ZZ3zvJ).

The panel agreed that an easy way to identify diverse candidates is to request a slate from an institution like CPR, which strives to include diverse candidates.  Klein suggested that it is appropriate to complain if an institution provides a slate that is not diverse, and to request a substitute slate that includes a significant number of diverse candidates. 

The panel agreed that it might be helpful to reach beyond customary contacts to seek input on a neutral, but noted that inclusion on a provider institution panel alone is an indication that the proposed neutral has been vetted.

The audience and the panel repeatedly noted a variety of resources available to identify and research diverse candidates in addition to CPR Dispute Resolution, including the National Bar Association, the Metropolitan Black Bar Association, the African Arbitration Association, the American Bar Association, JAMS, Arbitral Women, the American Arbitration Association, and REAL-Racial Equality for Arbitration Lawyers.  The panel also provided extensive advice for potential neutrals on entering the field and for current neutrals on increasing their exposure and, ultimately, appointments.

Tim Hopkins and others noted that it can be helpful to sign the CPR Diversity Commitment or a comparable business pledge, and then checking to see if other parties to the dispute have signed similar diversity or corporate pledges.  It might be easier to convince other stakeholders to enlist an unfamiliar neutral if they have made a commitment to advance diversity–especially a specific commitment to advance diversity in ADR.

A simple, practical tip the panel provided was adding diverse neutrals clauses to organizations’ standard contract templates, so that there is a default to require specifically a diverse slate. There also was consensus that those clauses rarely generate mark-ups or controversy, and putting them in a template makes it that much more likely they will be added to a draft agreement. CPR provides a model clause that calls for at least one member of a tripartite panel to be diverse. (See link above.)

Other easy, low-cost tips, according to the panel, included praising diverse neutrals, so that their skills are recognized; confronting bias when it arises (e.g., statements like “Are you sure she can handle a $100 million case?”); including diverse neutrals in recommendations to rating services and providers; and, especially with travel restrictions in view of Covid-19 reducing the cost of attendance at virtual hearings, providing exposure by including diverse attorneys in ADR activities so that they are developing the required skills.

Attendee comments presaged the importance of measuring progress, and the panel agreed with the audience comments. Linda Klein proposed setting up a table of neutral qualifications before preparing a candidates’ list to facilitate an impartial selection process.

Brenda Carr presented a spreadsheet for tracking not only the panelists’ individual talents, but also the composition of the slates for those panels, and which candidates were selected.  Carr explained that tracking progress also helps to identify roadblocks—it allows advocates and parties to “have the conversations if you’re presenting a particular arbitrator as a possibility and you notice that the client is constantly turning them down. Maybe you want to follow up and have a conversation about why this person isn’t someone that you are ultimately selecting.” 

Looking at the tracking programs presented by the law firm representatives, Visa in-house counsel Hannah Sholl said that seeing this kind of work, presented in this way, “speaks a lot, and perhaps even more sometimes than … filling in the boxes and the ABA Diversity Commitment  [see https://bit.ly/3sGQ3tc]. You know . . . the firm [that] is tracking this cares about it, . . . is going through a process . . . and they have had a commitment.”

Overall, the panel agreed that the important thing was to start: Whether by signing a diversity commitment or tracking ADR diversity in just one department or working group, that first step is important.

* * *

The author is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

[END]

#CPRAM21: Too Much or Not Enough? The Arbitrator Disclosure Issue, Analyzed

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If you missed the 2021 CPR Annual Meeting in January—the first free public meeting held online in the organization’s 40-year history—the videos are being posted on CPR’s YouTube Channel. While additional videos will be posted for CPR members only, the first, linked here on CPR Speaks, is open access and features the keynoters, CNN Anchor and Chief Political Correspondent Dana Bash and General James Mattis, who is former U.S. Defense Secretary. Click the Subscribe button at YouTube for alerts and for more CPR content. For information on full access and joining CPR, please visit CPR’s Membership webpage here.

By Antranik Chekemian

Here are notes on the Jan. 28 closing panel of the second day of CPR’s 2021 Annual Meeting. Moderator Deborah Greenspan, a Washington, D.C. Blank Rome partner focusing on mass torts and complex disputes, served as moderator for the Ethics session.

She introduced the panel, starting with Dana Welch, an arbitrator for nearly 20 years who is based in Berkeley, Calif. Welch focuses on complex commercial and employment matters. She is a fellow of the Chartered Institute of Arbitrators  and the College of Commercial Arbitrators, where she is an executive committee member. Before she became an arbitrator, she was the general counsel of a San Francisco-based investment bank, and a Ropes and Gray partner.

The second panelist was David Pryce, the managing partner of Fenchurch Law Ltd. in London, which is the first U.K. law firm to focus exclusively on representing policyholders in insurance disputes. His practice focuses primarily on construction industry risks. Wherever possible, said Greenspan, Pryce tries to approach disputes in a way that maintains or ideally strengthens the commercial relationships between those involved

The third panelist was Adolfo Jimenez, a partner in the Miami office of Holland and Knight.  He is a litigation attorney focusing on international disputes. He heads the firm’s International Disputes team, and he is chair of the Miami International Arbitration Society.

Greenspan opened by discussing the ethical challenges faced in arbitration, focusing on disclosure, in a session that provided Ethics continuing legal education to qualifying attendees. The panel’s first topic was the issue of repeat players, where an arbitrator is repeatedly selected or appointed by a particular entity or a law firm.

Pryce started off the conversation by presenting a recent U.K. Supreme Court case, Halliburton v. Chubb. He described the case’s background for the online audience.

Halliburton Co. had provided services for Transocean Ltd., the owner of Deepwater Horizon, the Gulf of Mexico oil rig that exploded in 2010.  Halliburton faced various claims along with oil company BP and Transocean. They were all part of the same proceedings. Halliburton settled those claims against it for about $1.1 billion.

Halliburton made a claim under the general liability policy it had with insurer Chubb. Chubb refused to pay the claim on the basis that Halliburton had entered into settlements that were unreasonable. A dispute ensued and the general liability policy provided for an ad hoc London arbitration with three arbitrators, one arbitrator to be chosen by each of the parties and a third arbitrator chosen by the party-appointed arbitrators.

If the arbitrators couldn’t agree, the third arbitrator was to be appointed by the High Court in London. In front of the High Court, each of the parties put forward several candidates. After a contested hearing, the High Court chose Chubb nominee Kenneth Rokison QC, an arbitrator in Reigate, U.K. Rokison was “a regular arbitrator in uniform arbitrations,” explained Pryce, “and Halliburton’s perception . . . was that he was someone that is generally appointed by insurers rather than policyholders.”

Prior to him being appointed, Rokison disclosed relevant points to the proceedings. Rokison said that he previously acted as an arbitrator in several other arbitrations including Chubb. He acted as a party-appointed arbitrator by Chubb and he was currently acting as an arbitrator in relation to references that included Chubb.

The High Court didn’t regard any of those appointments as being an impediment to his appointment in the Halliburton-Chubb dispute and they didn’t call into question Rokison’s impartiality.

Three months after his first appointment in 2015, Rokison accepted a further appointment by Chubb to act as an arbitrator in relation to a claim against it by Transocean, which as the overall owner of Deepwater Horizon was also facing similar claims to the ones that Halliburton had been facing. The dispute between Chubb and Transocean also related to the reasonableness of settlements which Chubb refused to pay on a similar basis for the reasons it refused to pay Halliburton.

Rokison disclosed his involvement in the Halliburton arbitration to Transocean, but he did not disclose to Halliburton that he accepted the Transocean appointment.

The following year, Rokison accepted another appointment in relation to an arbitration between Transocean and different insurers, and that was not disclosed either.


After finding out about the second and third appointments, Halliburton wrote to Rokison and raised concerns about these appointments.

Rokison responded that it had not even occurred to him that he was under any obligation to disclose the second and third appointments to Halliburton. Halliburton called for him to resign, raising concerns about his impartiality with regard to Chubb.

It’s apparent that Halliburton was just as concerned, explained David Pryce, and perhaps even more concerned, about a second issue–that Chubb would potentially gain a tactical advantage as a result of being able to find out what Rokison’s views were on certain issues, because they would be making submissions in the second arbitration which will be relevant to the decision that Rokison was facing in deciding the Halliburton arbitration.

A High Court claim was issued by Halliburton seeking Rokison’s removal under U.K. Arbitration Act Section 24, dealing with situations where circumstances exist for a justifiable doubt about the arbitrator’s impartiality.

The High Court and the Court of Appeal both dismissed Halliburton’s application, so it went to the Supreme Court.

The Supreme Court made the following key observations in reaching the decision:

  • First, the obligation of an arbitrator to act fairly and impartially is a core principle of arbitration, and under English law, the duty of impartiality applies just as much to party-appointed arbitrators, sole arbitrators, and presiding arbitrators. Presiding arbitrators like Rokison in Halliburton v. Chubb aren’t required to be any more impartial than party-appointed arbitrators–“Everyone is required to be impartial,” explained Pryce.
  • Second, the Supreme Court confirmed that the test under English law to establish whether an arbitrator had a real possibility of biases is an objective test. “When the fair-minded informed observer is looking at that, they should take into account various considerations including the factual matrix of the case , . . the role of the arbitrator in the case, and expectations regarding what an objective observer may take into account,” said Pryce. In that regard, market practices are relevant, but in some areas, overlapping appointments may be more likely to give rise to an appearance of bias than others.
  • Finally, in relation to the arbitrator’s duty of disclosure, the Supreme Court held the disclosures are not a question of best practices and that disclosures can only be made if the parties that confidentiality obligations are owed give their consent.

The key takeaway from this case is that “disclosure is not an option,” said Pryce, because disclosure doesn’t trump confidentiality.

“The unfair advantage is not the same thing as a lack of impartiality,” Pryce said, adding, “There is just no remedy for unfair advantage.” Even though repeat business might suggest bias in some cases, it is going to depend on market practice.

He further added that in some areas like treaty reinsurance, overlapping appointments are commonplace and parties are not concerned as there are repeat users “all the time.”

Pryce added that it is much more challenging when where there is a one-off user in a dispute with a repeated user. “From the perspective of someone who was a policyholder such as Halliburton,” said Pryce, “a one-time user in this situation, against an insurer who’s going to be a repeat user, the Supreme Court decision for me feels a little bit tougher.”

Panelist Dana Welch said, “I’m not sure a U.S court would have reached the same decision.  . . . We take it for granted in the United States that you have to disclose every business relationship that comes to mind.”

She then shared that California’s Judicial Council has enacted a rule that requires that the arbitrators not only have to disclose looking backward, but they have a duty to disclose looking forward. Arbitrators are required to disclose at the time of appointment whether they are willing to take future business from either a party who is appearing in that case or a law firm that is appearing in that case.

If the arbitrator discloses that they can take future business, they can be disqualified at that point if someone objects. Once the arbitrator accepts the possibility of future business, and then proceeds in the future to take that business, they must provide notice to the previous parties and the law firm that they have done so. At that point, the parties have no right to disqualify the arbitrator.

Panelist Adolfo Jimenez also shared that from an ethical perspective, repeat business in arbitration presents two problems that also were identified in the Halliburton case.

“You can have a situation where you’re going to have one party that’s better informed and an arbitrator that’s hearing evidence that is related to two separate cases,” said Jimenez, “but they are related cases that may influence their view while a set of attorneys who aren’t parties to that other proceeding is ignorant of all . . . that evidence, all that information.”

Second, Jimenez noted, is the risk of inappropriate communications. “Simply because you can does not mean that you should,” said Jimenez, noting that there can be as a result of such contacts an erosion of trust in the process, with one of the parties believing that they’re being affected.

Dana Welch also emphasized that the arbitrators should be careful in order to preserve the integrity of the process in the face of repeat business. She said:

There is a financial incentive if you get repeat business.  And for each one of us who serves as a neutral, every time we get repeat business, we really need to think long and hard about whether we can truly serve as a neutral in a proceeding with a law firm that appoints us a lot or a party that appoints us a lot.  . . . What Adolfo said is right: There’s a difference between ‘can’ and ‘should,’ and it’s an extremely important difference in order to preserve the integrity of the process.

After a participant asked about the future of London-based insurance arbitration in light of the Halliburton decision, David Pryce responded that a single decision shouldn’t call into question the city’s role in insurance arbitration.  He said that when there is a situation with a “one-off” buyer of arbitration services and a repeat user of arbitration services, the court should be extra careful not to go for the appointment of someone who is used frequently by repeat buyers.

“It was an unfortunate choice by the High Court,” said Pryce, adding that if that sort of choice is repeated again and again, “it looks like the deck is being stacked against policyholders,” and that would be a problem for insurance arbitration in London. But he added that as a policyholders’ representative, he did not think the deck is usually stacked against his clients.

[For even more on Halliburton, see the latest issue of Alternatives to the High Cost of Litigation: Adam Samuel, “Multiple Appointments, Multiple Biases: The U.K. Supreme Court Does Arbitrator Disclosure,” 39 Alternatives 19 (February 2021) (available directly at https://doi.org/10.1002/alt.21880).

* * *

Moderator Deborah Greenspan then invited panelists to discuss the expectations parties have about the status of a party-appointed arbitrator.

Panelist Adolfo Jimenez started off the conversation by saying that the duty of impartiality permeates throughout the entire U.K. and U.S. legal systems, and that most arbitral institutions require that arbitrators be neutral.

Jimenez also noted, however, that there sometimes are justifications for repeat businesses–for example, specialized arbitration proceedings such as those at the London Maritime Society of Arbitrators, where parties prefer arbitrators that are particularly qualified. When there is a limited number of qualified individuals, repeat business is an option, said Jimenez.

A second justification is to allow for party autonomy.

He further noted that the Code of Ethics for Arbitrators in Commercial Disputes adopted by CPR Dispute Resolution has the assumption that the arbitrators will be neutral. Even in jurisdictions which allow for repeat business, he noted, neutrality is still expected and required.

Panelist Dana Welch also noted an important reality in arbitration. She said, “When a party chooses an arbitrator, even if it’s a sole arbitrator and not a party-appointed arbitrator, all parties hope that the arbitrator is going to rule on their behalf. Therefore, they are looking for somebody who is going to see things from their point of view.”

She further noted that CPR Dispute Resolution rules provide a process for challenging a party-appointed arbitrator if either side believes that a party appointed arbitrator is not neutral. Reading from CPR Administered Arbitration Rule 7.5, she said: “Any arbitrator may be challenged if circumstances exist or arise that give rise to justifiable doubt regarding that arbitrator’s independence or impartiality.  . . .” She praised the rule and its challenge process for when neutrality isn’t observed.

Greenspan then asked the panelists about the ideal steps parties should take when selecting arbitrators.

Welch said she is a strong advocate of both parties interviewing the arbitrators to understand their management style or their approach to the issues.

Jimenez added that one should be allowed to communicate with an arbitrator to make sure that the arbitrator is comfortable with the cases’ technical issues but should not get into discussing the substance or facts of the case, noting that a red line exists in between.

* * *

Moderator Greenspan then asked the panelists on how to deal with the reality that people from different backgrounds and different jurisdictions have different expectations when it comes to ethical challenges.

Jimenez agreed that different jurisdictions have different norms. He suggested that practitioners can look to journal articles and general expectations of limits that are employed for international disputes. He pointed out that “what may be improper or incorrect in one place is going to be perfectly acceptable [elsewhere]–that’s a real challenge when you’re dealing with a cross-border dispute.”

Greenspan then discussed how parties can enhance trust when implicit or explicit biases exist. When arbitrators are appointed by a party, Welch responded, “it would be the height of denial, to say that there isn’t some impetus that you feel or allegiance that you feel to that party. You really have to struggle against that and understand that you’re a neutral in all senses.”

Welch added that arbitrators need to be conscious of the kind of bias that arises when a party picks them just like they need to be conscious of the kind of bias that can arise when they have repeat businesses.

* * *

The next topic of the panel was about disclosures.

Welch first expressed that the level of disclosure is an interesting question in this age “where everything is known about everybody,” and so much information is out already on social networks. The question, she asked, is “How much is there an obligation for us to disclose versus a party to investigate?”

She then presented two cases.

In the first case, an arbitrator ruled against a claimant, and the respondent was a law firm. Afterward, the claimant did an Internet search and revealed a 10-year-old resume of the arbitrator with a recommendation from a partner from the respondent’s firm.  An appellate court decided this was enough to vacate the award.

Welch concluded, “What it shows is that the courts will look at the arbitrator for disclosure rather than . . . say to the parties to investigate that.”

The second case she presented was decided just a month ago, she said. An arbitrator rendered an award against the claimant. The claimant then found on the Internet that the arbitrator was a founding member of GLAAD, an organization supporting gay rights. The claimant then argued that because he was active in the Catholic Church, and because the arbitrator is active in social justice causes like gay and lesbian rights, the arbitrator had an inherent bias against the claimant.

The Court of Appeals rejected this claim, Welch reported, as it could not find any relationship between the claimant’s allegation and facts of the case.  She noted that “even California” has limits on challenging impartiality. Welch concluded:

What you need to draw from these cases is that the main obligation of disclosure is on the arbitrator, not on the parties. You need to disclose everything that comes to mind. If it comes to mind, you should be disclosing it, but you don’t need to disclose who you voted for president, or what you are active in unless there is a specific issue in that case before you.

Fenchurch’s David Pryce said that “there is a dividing line between . . . bias, something that gives the appearance of bias and what is simply just having better knowledge.” Having better knowledge on its own, he said, doesn’t give rise to either risk of or appearance of bias.

He further reflected on Halliburton v. Chubb. The disclosures, which relate to the same party in another “really high-stakes arbitration . . . about sums over a billion dollars” and issues that are almost exactly the same in both arbitrations, “aren’t insignificant things.”

But, said Pryce, “if we get to a situation where arbitrators feel they need to disclose lots of insignificant things, then I think everyone’s time is just going to be wasted unnecessarily.”

* * *

Greenspan presented the ethics panel’s final topic: “If you’re a mediator in a case and then you are later asked [in a case that doesn’t settle] to be an arbitrator, or if you are an arbitrator and then you’re asked to mediate the case,” how should such a situation be approached?

David Pryce said the moves are uncommon in the United Kingdom.  He added that huge challenges for the med-arb, mixed-mode ADR setup exist, because in mediation, parties are hoping to take advantage of the ability to share things with a mediator that they wouldn’t share with their opponent–and certainly not with the person that needs to make a decision about their case where the neutral is acting as an arbitrator.

The next question was about a situation where somebody had assisted an entity with developing its internal resolution guidelines or contractual terms to use to resolve disputes, and then also became the arbitrator or the mediator in a dispute which is affected by those guidelines.  The question was whether this would constitute a problem.

Dana Welch noted that such a situation raises fewer ethical issues as the person only designed the process, as opposed to being involved in a dispute, and that the person does not know confidential information about the dispute—he or she just comes in understanding the process. Welch says that courts have backed such arbitrators but the focus must be on extensive consents after disclosure.

* * *

The author, a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern.

[END]

Let’s Schein Again!

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The International Institute for Conflict Prevention and Resolution presents a CPR Speaks blog discussion of the 1/25/2021 U.S. Supreme Court per curiam decision dismissing Henry Schein Inc. v. Archer and White Sales Inc., No. 19-963, and a same-day order declining to hear Piersing v. Domino’s Pizza Franchising LLC, No. 20-695. Alternatives to the High Cost of Litigation Editor Russ Bleemer hosts Prof. Angela Downes, University of North Texas-Dallas College of Law, and arbitrator-advocates contributors Richard Faulkner, also of Dallas, and Philip J. Loree Jr. in New York.

By Russ Bleemer

The panel returns to CPR Speaks and YouTube to analyze the Monday Henry Schein dismissal–a one-line decision–just a month after the Court heard oral arguments on the issue of how a contract carve-out removing injunctions from arbitration affects the delegation of the entire matter to arbitration.

In fact, the Dec. 8, 2020, Henry Schein oral argument repeatedly turned to an issue in the rejected Piersing case on the effectiveness of the incorporation by reference of arbitration rules in designating an arbitration tribunal to decide whether a case is arbitrated, rather than a court deciding whether the matter is to be arbitrated. A cross-petition by Archer and White asking for review of the incorporation by reference of the arbitration contract’s American Arbitration Association rules was declined by the Supreme Court the same day it agreed to hear the carve-out issue last June.

Our panel discussed these issues after the oral argument on this blog.  See “Schein II: Argument in Review,” CPR Speaks (Dec. 9) (available at http://bit.ly/2VXfyIa) (in which the panelists also discuss their work on an amicus brief in the case, a subject that arose in this post’s video).

You can see today’s per curiam decision on the Supreme Court’s website here.

Monday’s Henry Schein dismissal ends a long period of Supreme Court litigation in the case that also included a 2019 U.S. Supreme Court decision. For now, the case returns to the Fifth Circuit for proceedings on whether the parties properly intended to arbitrate the case.

Details on the Supreme Court’s Monday cert denial in Piersing v. Domino’s Pizza Franchising LLC, No. 20-695, are available on CPR Speaks here.

For more analysis on the Henry Schein dismissal, see Ronald Mann, “Justices dismiss arbitrability dispute,” Scotusblog (Jan. 25, 2021) (available at http://bit.ly/2Yh9U4O), in which the Columbia University professor and Scotusblog analyst concludes that

it seems likely that the justices ultimately decided that they couldn’t sensibly say anything about this matter without addressing the question of whether the contract called for arbitration of the gateway question. Because they had declined to call for briefs on that question, it did not make sense to address it here. A logical course of action, then, was to dismiss the matter from the docket, providing a rare victory for a party opposing arbitration.

* * *

The author edits Alternatives for the CPR Institute.

How Litigants View the ADR Options in Courts

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By Alice Albl

At the Sept. 17 online CPR Institute Mediation Committee meeting, University of California, Davis, School of Law School Prof. Donna Shestowsky presented her research about the role courts play in encouraging alternative dispute resolution over a trial.

The study revealed that litigants seem to be unaware of ADR options when going to court, although knowing about some of these options—specifically, mediation–improve litigants’ opinions of the court itself.

This lack of awareness stayed relatively consistent among demographics, even among those with legal representation.  

“Repeat player” litigants were less likely than first timers to report uncertainty or confusion whether ADR options were available.

Shestowsky’s research observed the experiences of more than 350 litigants spread among the court systems of three different states.

The first system, in California, allowed litigants to choose between a trial, or opting into mediation or arbitration.

The second system, in Utah, assigned mediation as the default option but allowed litigants to convert their cases into an arbitration or trial.

The third system, in Oregon, statutorily required nonbinding arbitration for cases involving amounts in controversy less than $50,000. Litigants could opt-out by filing a “Motion for Exemption from Arbitration,” or by agreeing with their opposition to enter mediation.

All three court systems posted information online about available ADR programs and kept a list of approved neutrals on file. None required attorneys to educate their clients about the available ADR options.

Litigants in the study took a survey before and after their journey through the courts. The questions sought to gauge litigants’ awareness about relevant court-sponsored ADR programs, whether legal representation affected their awareness, and how awareness of court-sponsored ADR affected litigants’ opinions of the court offering the options.

The data Shestowsky reaped from these surveys revealed some unexpected findings. While roughly half of the litigants were unsure whether mediation and arbitration were available to them, another 20% wrongly stated these options were unavailable.

Without knowledge of the court systems’ sponsorship for mediation or arbitration, litigants most often considered negotiation as a means for dispute resolution, even before the prospect of a trial.  

While about a third of litigants considered mediation, knowing that the method was a court-sponsored option generally improved their opinion of the sponsoring court system.

Arbitration was only considered by about one quarter of the litigants, and knowledge of court sponsorship did little to affect litigants’ opinions of sponsoring courts. Shestowsky attributed this to the possibility that litigants had low opinions of arbitration as an option for their court-filed cases, which aligned with findings from her past research.

Having a lawyer did not make litigants more aware of ADR options, even when those options were offered, or even mandated, by the court system.

Shestowsky pointed out this universally low awareness rate of ADR options as an issue to address among courts, especially given how awareness seemed to improve court favorability.

One possible solution would be rules that require attorneys to properly educate clients about ADR options before engaging the courts, which could be enforced using penalty fees or an affidavit.

Shestowsky also suggested that courts implement “direct education.” This could involve bolstered advertisement of ADR options, a dedicated ADR helpdesk, and periodic information sessions. The professor, who serves as UC Davis School of Law’s Director of the Lawyering Skills Education Program, even envisioned an artificial intelligence-powered digital aide that could recommend options based on litigants’ specific needs.

While Shestowsky cautioned that her research focusing on three court systems may not perfectly reflect the general state of ADR awareness, the consistency of data among the diverse systems could point to a greater trend. To gauge this, the professor recommended that courts across the nation buck the trend of measuring success for ADR programs by their usage rates, and first look to their awareness rates by surveying those who do not use their ADR programs.

* * *

Donna Shestowsky previously discussed her research at “New Research Sheds Light on How Litigants Evaluate the Characteristics of Legal Procedures,” 34 Alternatives 145 (November 2016) (available at https://bit.ly/2ScA71w), which adapted and updated material from Donna Shestowsky, “How Litigants Evaluate the Characteristics of Legal Procedures: A Multi-Court Empirical Study,” 49 U.C. Davis L. Rev. 3 (2016) (available at http://ssrn.com/abstract=2729893).

* * *

The author, a CPR Institute Fall 2020 intern, is a second-year student at Brooklyn Law School in New York.

Dispositive Motions in Arbitration: Authority, Rules and Practical Tips

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head shot 1By Janice L. Sperow

As companies, parties, and their lawyers across the nation debate whether they may, or even should, resolve their disputes in court or arbitration, courts and arbitrators—both faced with pandemic-generated, unprecedented backlogs—seem more willing to entertain docket clearing motions.

For some practitioners, dispositive motion practice in arbitration presents a new challenge. Yet, dispositive motions have existed in arbitration almost as long as arbitration itself. Now, however, both parties have embraced them. Recently, arbitrators have witnessed an increase in requests for leave to file them as parties dealing with the economic fallout of the pandemic attempt to resolve disputes sooner, more efficiently, and more cost-effectively. As more practitioners turn to arbitration to resolve disputes, they increasingly look to dispositive motion practice to promptly adjudicate them.

Still, some arbitrators have questioned their authority to entertain dispositive motions. Others hesitate to dispose of the arbitration before it really starts when it may well be the claimant’s only course of redress. Still others, like the author, view dispositive motions as a potential opportunity to narrow and resolve issues fairly and efficiently for both parties. So where do arbitrators obtain the power to consider dispositive motions?

The Parties’ Contract

Like the arbitration itself, the authority often starts with the parties’ contract. The arbitrator can and will allow dispositive motions if the parties’ arbitration clause provides for them. Many litigants now specifically provide in their arbitration agreements that the arbitrator shall have the authority to resolve jurisdiction, arbitrability, and many other threshold or dispositive issues. Indeed, astute drafters will frame their arbitration clauses to include the right to bring a dispositive or threshold motion to avoid the arbitrator’s exercise of discretion. Arbitrators will typically enforce such clauses if both parties may reciprocally invoke them.

Practical Tip: Explicitly provide the arbitrator with the authority to entertain dispositive and threshold motions directly into the parties’ arbitration agreement rather than incorporating them indirectly by reference to court rules, civil procedure rules, or forum administration rules. Court, civil procedure, and forum rules might include other provisions, which the parties may consider less desirable and which they may not want to incorporate wholesale into their agreement. The parties should also determine if they want to have the automatic right to bring such motions or merely grant the arbitrator the authority to entertain them at her discretion or upon a specified showing. If the parties intend to provide contractually for the application of a specific arbitral forum’s rules, review that forum’s dispositive motion rule and determine if the parties wish to modify it in the contract. Most arbitral fora expressly allow the parties to modify in writing the application of any rule. Finally, provide for reciprocity to enhance the clause’s enforceability.

Post-Dispute Agreement

If the contract itself does not mention the authority to hear dispositive motions, the parties may always agree to them in a written stipulation or even orally after the dispute has arisen or after the arbitration has begun. Contentious litigants may yet find common ground and agree to resolution of a threshold issue upfront if it will save time and expense. They will also routinely agree post-dispute to motions to resolve choice of law, jurisdiction, contract formation, forum rule applicability, and other threshold issues which will govern the rest of the case moving forward.

Practical Tip: Reduce the post-dispute agreement to writing whether by stipulation or in the arbitrator’s order. Identify the specific scope of the agreement including the precise issues to be determined by motion, page limits, and a briefing schedule. Decide if, pending the motion’s resolution, discovery should be stayed, continued, or restricted to information necessary to adjudicate the motion. Agree upon an early deadline for the resolution of the motion to maximize its cost savings and efficiency. Also set a cutoff date by which all dispositive or threshold issues must be brought. Early resolution saves the most time and expense; a dispositive motion brought on the eve of arbitration merely disrupts the process and often adds to, rather than minimizes, the costs of arbitration. Finally, proffer a dispositive motion agreement in writing to opposing counsel even if he will not likely agree; then track the fees spent on that issue at hearing and seek to recover them if the arbitrator rules in your favor on that point. Even if your side loses on the ultimate merits of a claim, the arbitrator may offset the prevailing party’s fee award if the other side incurred unnecessary fees on an issue, which could have been summarily adjudicated.

The Arbitral Forum’s Rules

The arbitration rules applicable to the dispute will usually permit dispositive motion practice. For example, in 2011, the pioneering  International Institute for Conflict Prevention & Resolution (CPR) specifically allowed for dispositive motion practice in the arbitral forum when it issued its 2011 Guidelines. In 2013, the American Arbitration Association also championed the arbitrator’s authority to entertain dispositive motions when it amended its rules to explicitly permit the filing of dispositive motions. Likewise, CPR’s first edition of Administered Rules promulgated in 2013 expressly authorized dispositive motions. Now, most arbitration associations include a dispositive motion rule. For example, JAMS’ Comprehensive Rule 18 explicitly authorizes them. Only the Financial Industry Neutral Regulatory Authority (FINRA), which involves primarily customer complaints, generally prohibits them; but even FINRA allows them under a few exceptions. We will explore the AAA and CPR rules in more depth because they provide parties with the most specific and comprehensive guidance.

The AAA Dispositive Motion Rules

Notably, the AAA did not adopt a uniform dispositive motion rule. Instead, it wisely chose to tailor its rules to the type of arbitration. The AAA Commercial Rule 33 now provides: “[t]he arbitrator may allow the filing of and make rulings upon a dispositive motion only if the arbitrator determines that the moving party has shown that the motion is likely to succeed and dispose of or narrow the issues in the case.” Likewise, the AAA Consumer Rule 33 and Employment Rule 27 state: “[t]he arbitrator may allow the filing of a dispositive motion if the arbitrator determines that the moving party has shown substantial cause that the motion is likely to succeed and dispose of or narrow the issues in the case.” The AAA Construction Rule 34 provides: “[u]pon prior written application, the arbitrator may permit motions that dispose of all or part of a claim or narrow the issues in a case.”

Interestingly, the dispositive motion rule applicable to consumer and employment cases, which involve individuals arbitrating against companies, require a higher initial showing than the dispositive motion rule applicable to commercial cases, which involve two companies arbitrating against each other. The consumer and employment rules require the moving party to show “substantial cause” that the motion is likely to succeed while the commercial rule only requires the moving party to show that the motion is likely to succeed. “Substantial cause” suggests more ample, considerable, or abundant cause whereas “likely to succeed” evokes mere feasibility and reasonableness – a fair chance rather than a good chance.

Conversely, the construction rule does not require proof of a likelihood of success but merely a written application showing that the motion will “dispose of all or part of a claim or narrow the issues in a case.” Of course, the written application itself will be more persuasive if it demonstrates the motion’s likely success. Unlike the construction rule, the AAA employment, commercial, and consumer dispositive motion rules do not technically require a written application. However, most arbitrators require them, nonetheless. At a minimum, arbitrators will expect an email requesting leave, not just an oral request.

While the specific rules differ in some key respects, they also share some important commonalities. For example, all the AAA dispositive motion rules – and indeed many if not most arbitral fora rules – allow dispositive motion practice only at the arbitrator’s discretion. AAA Commercial Rule 33, Consumer Rule 33, and Employment Rule 27 (“arbitrator may allow”); Construction Rule 34 (“arbitrator may permit”). Unlike civil litigation, arbitration does not include an automatic right to file a dispositive motion. Parties must request leave to file a motion, which the arbitrator may grant or deny within her discretion.

The three rules all also require the moving party to make some initial showing to convince the arbitrator why she should exercise her discretion to permit the dispositive motion. AAA Commercial Rule 33 (“only if the arbitrator determines that the moving party has shown”); AAA Consumer Rule 33 and Employment Rule 27 (“if the arbitrator determines that the moving party has shown substantial cause”); AAA Construction Rule 34 (“upon prior written application”).

All three also require the moving party to show that the motion will “dispose of or narrow the issues in the case.” Hence, in addition to the required degree of success, the moving party must demonstrate that the motion, if granted, will eliminate an issue, or at least narrow the scope of the hearing. Basically, the AAA’s rules all require two different types of proof: merit and efficiency – some likelihood of success and some cost savings over a hearing on the issue or claim.

But the AAA’s rules all require only either disposition or narrowing of the issues, not both. Accordingly, if the motion will achieve some economies of scale, the arbitrator can and should properly entertain the motion even if it does not completely dispose of an issue.

Practical Tip: Practitioners who wish to use the rules to narrow, rather than dispose of, issues should still present adequate proof of efficiency. For example, the moving party may want to demonstrate that early resolution of the issue may eliminate the need for expert or other witnesses who would not otherwise testify, may reduce the number of exhibits, may limit the necessary scope of discovery, or may reduce hearing time in some other way or even encourage settlement. 

Arguably, the rules do not require the complete disposition of a claim. For example, Construction Rule 34 explicitly provides that the motion may dispose of all “or part” of a claim. While the AAA’s Commercial, Employment, and Consumer Rules do not contain the same express language, they likely also permit partial disposition of a claim because they all permit the motion if it would narrow an issue and an arbitrator will likely find that partial resolution of a claim will indeed narrow the issues in the case.

Practical Tip: As noted, the parties can choose to include the right to file motions in their arbitration clause or post-dispute agreement rather than leave it to the arbitrator’s discretion. They can also set the applicable standard that they want to govern the grant or denial of the motion if they do so in writing. If the rules apply as written, consider a two-step proffer to save costs: during the first step, the moving party shows the rule’s satisfaction in a short letter or email without a response from the opposing party during which time the case and discovery proceed; then, in the second step, if the arbitrator finds that the moving party has satisfied the applicable standard, the parties set a full briefing schedule and suspend all or some discovery pending the motion’s resolution. In whatever manner litigants decide to tackle dispositive motion practice in arbitration, plan ahead and raise the issue early in the initial case management conference to allow sufficient time to schedule the motion(s) well before the hearing date in order to maximize cost savings for all parties. Consider the desirability of two different deadlines: an early one for purely legal or threshold questions and a later one at the close of discovery, if appropriate, for remaining disputes.

CPR’s Dispositive Motion Rule

In 2013, ADR industry leader CPR also issued its rules to expressly provide for dispositive motion practice. Under Rule 12.6, a party may apply to file “a motion for early disposition of issues, including claims, counterclaims, defenses, and other legal and factual questions.” CPR 2019 Administered Arbitration Rules, Rule 12.6(a). Rule 12.6 then instructs the applicant to include the issues to be resolved, the basis for the motion, the relief requested, how early disposition would “advance efficient resolution of the overall dispute” and a proposed procedure for resolving the issues. Rule 12.6(b).

CPR’s standard for the granting of the application differs slightly from the AAA’s Rules. CPR requires the arbitrator to find “a reasonable likelihood that hearing the motion for early disposition may result in increased efficiency in resolving the overall dispute while not unduly delaying the rendering of a final award.” Rule 12.6(c). If the arbitrator finds the motion “appropriate,” she will then establish the governing procedure, which may involve “written submissions, witness testimony by affidavit or other written form, limited hearings, or in any other manner.” Rule 12.6(d).

While the CPR and AAA Rules may differ somewhat in terminology, they represent a fairly uniform standard at least in the commercial arbitration context. The AAA Commercial Rule 33 requires “likely” success whereas the CPR Rule 12.6(c) requires “reasonable” success. Yet, they essentially require the arbitrator to undertake the same analysis in evaluating the burden of proof since “likely” evokes a fair, reasonable chance of success, whereas the AAA Consumer Rule 33 and the AAA Employment Rule 27 with their “substantial cause” requirement demand a higher quantum of proof.

But the rules do differ slightly more when it comes to what the applicant must prove: under the AAA Rules, the arbitrator will determine if the applicant has shown that the motion will dispose of or narrow the issues whereas the CPR Rule requires the arbitrator to focus on the motion’s overall efficiency without added delay. The CPR Rule technically does not focus on the likely success of the motion itself but rather reasonable likelihood of gaining efficiencies if the arbitrator grants the motion. The difference is nuanced, however, and may ultimately result in the same outcome as motions which dispose of or narrow the issues will necessarily promote efficiency.

The real difference between the AAA and CPR rules centers on the concept of delay. CPR specifically directs the arbitrator to consider the potential delay caused by adding a dispositive motion practice to the arbitration process, while the AAA rules do not mention delay to the final award as a specific consideration. Under the CPR Rule, an arbitrator may rightfully deny an application for leave to file a dispositive motion if it would unduly delay the rendering of the final award. Thus, under the CPR Rule, an arbitrator is much more likely to deny leave to file a dispositive motion the closer the parties get to the scheduled hearing. Indeed, CPR’s emphasis on “early” disposition of issues encourages the parties to use dispositive motions during the preliminary stages of the arbitration before or after limited discovery.

Practical Tip: As the applicant, counsel should consider raising issue identification and disposition, especially of legal questions, at the very first case management conference to forestall any delay argument. If the parties and the arbitrator calendar the motion from the outset of the case, the nonmoving party will be hard pressured to argue undue delay. To further minimize delay, allow discovery to proceed on the factual issues while the arbitrator considers the legal issues. Conversely, as the nonmoving party, counsel should insist on the discovery necessary to fully adjudicate the issues before any motion practice. Be prepared to identify with particularity the discovery needed on each issue for which the applicant seeks early disposition.  

CPR’s Dispositive Motion Guidelines

More than just a rule, CPR provides arbitrators and parties well-considered guidelines on the process. CPR issued formal “Guidelines on Early Disposition of Issues in Arbitration,” (“Guidelines”), which strike a fair balance between unmeritorious motions and issue winnowing. The Guidelines clarify that the parties may use dispositive motion practice to narrow and simplify the issues for hearing and not just to dispose of the entire case. They also encourage arbitrators to take an active role in promoting early issue identification and disposition. Guideline 1.1. They also warn the parties and the arbitrator to consider efficiency to the case overall. In other words, the arbitrator may properly deny leave to file a dispositive motion if, even if granted, it would not materially reduce the total time and cost involved in the arbitration. Guideline 2.4.

Court Approval & Inherent Authority

The Sixth Circuit recently relied upon AAA Rule 27 to uphold an arbitral tribunal’s summary judgment disposition in a AAA employment arbitration. McGee v. Armstrong No. 18-3886, October 29, 2019. McGee did not explicitly address Rule 27’s language. McGee merely cited R-27 and held “as such, the arbitrators did not exceed their power.” While the court based its decision upon Ohio’s state vacatur statute, the statute contains nearly identical grounds for vacatur as the FAA. Consequently, McGee teaches us that courts will not likely vacate a dispositive award by arbitrators under the FAA or state law as an excess of power if it satisfies the requirements of the applicable arbitration rules authorizing arbitrators to summarily dispose of matters. However, even before the AAA and the CPR adopted their dispositive motion rules, the courts routinely held that arbitrators had inherent authority to entertain dispositive motions. See, e.g., Schlessinger v. Rosenfeld, Meyer & Susman, 40 Cal. App. 4th 1096 (Cal. App. Ct. 1995).

Types of Dispositive Motions

Dispositive motions typically fall into three groups: (1) threshold or pre-discovery motions; (2) post-discovery summary adjudication motions; or (3) tactical motions. Threshold motions often raise procedural issues, such as venue, necessary parties, arbitrability, jurisdiction, applicable arbitral rules, scope of the arbitration, mootness, standing, res judicata, collateral estoppel, joinder, small claims election, or consolidation. But they can present substantive issues as well, such as contract formation, contract existence, contract validity, waiver, laches, plain meaning, estoppel, choice of law, failure to state a claim, right to punitive damages, right to attorneys’ fees, statute of limitations, tolling, statutory construction, statute applicability, consent, irrevocable consent, contract provision enforceability, liquidated damages availability, injunctive relief, defenses based upon contractual covenants, statutes of fraud, release, and more.

Substantive post-discovery motions are akin to partial or complete summary adjudication but can also include a motion to amend the claim based upon newly discovered facts, a failure to state a claim based upon undisputed facts, or even a motion on the pleadings.

Parties sometimes use tactical motions, not necessarily for their merits, but to educate the arbitrator early on about a key issue or to get a pre-mediation or pre-settlement “read” from the arbitrator on a key issue. They may seek to eliminate an expert or other witness by removing the issue from the arbitration’s scope. They may simply hope to delay the proceedings, raise the costs to the underfunded party, or disqualify counsel. Fortunately, CPR’s rule specifically considers any delay caused by the motion as an explicit factor in denying leave to seek a dispositive ruling. Some have even used AAA Commercial Rule 57 to defeat jurisdiction: they move to amend the claim, increasing the amount of damages, which in turn increases the AAA administrative fees, which defeats jurisdiction pending payment of the augmented fees.

Practical Tip: Regardless of the type of motion, all should result in a written award or order, which specifies the basis for the denial or grant of the motion. The movant should craft a well-written proposed order for the arbitrator as part of the motion but so should the opponent. Consider whether to request an opportunity for renewal after the completion of discovery or an aspect of discovery if the arbitrator denies the motion. The proposal should also identify the discovery completed up to the motion to circumvent an attack based on incomplete discovery or evidence. The opponent should identify the discovery still needed before the arbitrator can fairly resolve the issue. If the motion only partially disposes of the dispute, identify the remaining issues to be decided at the hearing.

Bottom line: As long as an arbitrator provides the parties a fair opportunity to present their cases, she can grant a dispositive motion without violating the right to a fundamentally fair hearing—the touchstone for whether or not a court will vacate an arbitral award. So, when you can, consider threshold and dispositive motion practice in arbitration as a way to cost-effectively narrow or resolve the arbitration.

The views expressed in this article are those of the author(s) and do not necessarily reflect the views of The CPR Institute.

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Janice Sperow is a full-time arbitrator, mediator, hearing officer, and prevention facilitator. She serves on the CPR’s mass claims, employment, commercial, banking, financial services, dispute prevention, mediation, flat fee mediation, and pro bono panels as well as the AAA’s commercial, large case, employment, technology, healthcare, consumer, pro se, and workplace investigation panels. Also serves as a neutral for the San Diego Superior Court (where she sits as a Judge Pro Tem), the Financial Industry Neutral Regulatory Authority, the National Arbitration FORUM, the World Intellectual Property Organization, the National Futures Association, the National Association of Arbitrators and Mediators, and the Better Business Bureau. Member, National Academy of Distinguished Neutrals. Serves as Hearing Officer for the Port of San Diego. Former President of the National Association of Women Lawyers and Vice-President of California Women Lawyers, Member, ABA Dispute Resolution and Business Law Sections. www.sperowadr.com.

The CPR European Advisory Board presents: “Meet CPR Distinguished Neutrals Based in Europe: Tsisana Shamlikashvili

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Tsisana Shamlikashvili

The CPR European Advisory Board (EAB) continues its series, “Meet CPR’s Distinguished Neutrals in Europe,” and today it presents its second Q&A, with Professor Tsisana Shamlikashvili, centering around the theme of “Mediation in the 21st Century.”

Tsisana is a Moscow based, international expert in ADR.  She focuses on mediation and was responsible for initiating and supporting the institutionalization of mediation in Russia, founding the Center for Mediation and Law in 2005.  Her mediation/neutral practice covers a wide range of cases from complicated cross-border commercial disputes to family conflicts, as well as intellectual property, workplace, financial, personal injury and medical malpractice disputes.  She is currently president of the National Organization of Mediators (NOM), academic chair of the Federal Institute of Mediation, founder of the Scientific and Methodological Center for Mediation and Law, Chair of the Subcommittee on ADR and Mediation in the Russian Association of Lawyers, founder, publisher and editor-in-chief of the magazine “Mediation and Law”, and head of the Mediation Master’s Program at MSUPE. [https://mediacia.com/en/founder/]

By Kathleen Fadden (consultant with AMGEN) and Vanessa Alarcon Duvanel (King & Spalding LLP) 

How did you get your start as a neutral?

It has been a lifelong journey towards mediation which perfectly synthesized my professional background and experience.  Understanding how imperfect traditional ways of addressing conflict are and how much harm we can avoid using mediation as a preventive approach made me start the journey.

Who is your dispute resolution hero/heroine?

I strongly believe that each person who finds enough courage to step into a dialogue with his/her opponent has to be supported and professionals who assist in these complex situations are heroes and heroines too.

What is the one piece of advice that you would want to give to the younger generation looking for a first appointment as neutral?

To be consistent and persistent, to stay humble and maintain curiosity.  Always be ready for the unexpected.  Be surprised about what won’t happen!

Were you ever the first in doing something?

Yes, indeed.  Development of mediation and its institutionalization in Russia was initiated by me, as was ADR implementation generally.

What makes your conflict resolution style unique?

Each mediator is unique and each mediation is unique.  My preference is to facilitate parties in their efforts to resolve the conflict, to find an exit out of dispute which will provide the parties with a mutually acceptable future.  This means possessing the ability to use different models of mediation in each case or even a blend of the models to achieve the best result.  The main thing is to follow the key principles of mediation as a modern tool to address the conflict and to develop conditions so that the parties in the conflict are empowered.

What has been the most difficult challenge you have faced as a neutral?

There are difficulties and dilemmas in almost every case.  Ethical dilemmas are often the most complicated to resolve.  For example, how should a mediator behave when he/she holds information crucial for settlement of the case but one party does not want to share the information with counterparts and does not wish the mediator to do so either or even have any direct discussion about the topic?

What is the most important mistake you see counsel make?

The biggest mistake counsel can make is to fail to give the represented party a real voice, view or opinion at the hearing.

If you could change one thing about commercial arbitration, what would it be?

It would probably be the introduction of a two to three hour compulsory informative session regarding mediation and the requirement to include a mediation clause in most contracts.

Now let’s turn to a specific topic: what is your approach to cybersecurity and data protection in international dispute resolution?

We have to be very attentive to potential vulnerabilities caused by the use of technology and indeed follow all data protection rules in every context, domestic and crossborder.

What do you see as the next “big thing” in global dispute prevention and resolution?

I think one of the next “big things” is the wider use of mediation.  Citizens, societies, corporations and states developing a real culture of dialogue to prevent conflict when disputes occur.  We should deploy all possible efforts to make that happen.  Thinking about new trends in dispute resolution, ODR deserves a mention.  It is necessary in a global digital world. Today there is an increasing demand for ODR in the court environment.  Hopefully, in time, the private sector in B2B / B2C transactions will understand the benefits of such tools not only in e-commerce and not just in the cross-border context. In recent weeks we’ve already witnessed a growing demand for ODR and mediation using tech platforms. Mediation will be one among other preventive tools in times of crisis for disrupted businesses.

For which types of conflicts would you recommend ADR?

In most cases, ADR and specifically mediation, offers parties more advantages and opportunities to resolve disputes with the best possible outcome because control is in the hands of the parties.  ADR can be used in commercial cases, IP cases, construction/development, insolvency, medical malpractice, personal injury etc.  There are very seldom cases when mediation cannot be used and of course, sometimes, it can be combined with other ADR modes.  For instance, recently there has been growing interest in hybrid procedures such as MED-ARB/ARB-MED.

In your view, what makes CPR unique?

CPR is one of the oldest organizations, established to change the dispute culture and promote ADR in business/economic environments as well as in society as a whole.  CPR is trying to approach and involve all stakeholders even if they have conflict of interests.  The CPR pledge for corporations and law firms was one of the key factors which increased awareness of ADR and spawned a demand for use of ADR.  Last, but not least, CPR has gathered the most experienced ADR professionals/neutrals.

Do you have any concluding remarks you would like to share?

The contemporary world needs dialogue and inclusion at all levels of society now more than ever in human history. In times of crisis and total threat to fundamental human rights, interference with private life, radical shifts within social life and familiar modes of communication, mediation can empower individuals, make their voices heard in a constructive way by others, especially by decision-makers.

The CPR European Advisory Board presents: “Meet CPR Distinguished Neutrals Based in Europe: Bernardo M. Cremades Sanz-Pastor”

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Bernardo M. Cremades Sanz-Pastor

The CPR European Advisory Board (EAB) is proud to introduce its new CPR Speaks blog series: “Meet CPR’s Distinguished Neutrals in Europe.”  CPR’s panel of neutrals contains many experienced and skilled Neutrals, acting as arbitrator and/or mediators in dispute resolution around the globe.  Through a Q&A, covering some of the main and hot topics discussed in the world of international disputes resolution, this new blog posts series offers you an insight into the views of some of Europe’s leaders in the field. 

Bernardo M. Cremades Sanz-Pastor is the first Europe-based CPR Distinguished Neutral to have answered our Q&A. Enjoy the read and please feel free to reach out to the featured Distinguished Neutral or the authors of these posts for any questions.

By Kathleen Fadden (consultant with AMGEN) and Vanessa Alarcon Duvanel (King & Spalding LLP)

Bernardo Cremades is the founding partner of Spanish law firm B Cremades y Asociados based in Madrid.  He is without doubt a pioneer in the field of international arbitration and enjoys world-wide recognition.  His experience includes international commercial and investment arbitration.  He regularly acts as arbitrator in Spanish domestic and international disputes relating to commercial contracts and investment protection.  In addition, Bernardo regularly speaks at conferences on topics of international arbitration around the world.  As a commercial lawyer was involved in some of Spain’s most important M&A transactions.

Bernardo kindly agreed to grant us an interview for the CPR EAB blog series profiling CPR Neutrals in Europe.  His insights are a must read for anyone regardless of the level you find yourself in your career. We thank Bernardo Cremades for his honesty and the time he has dedicated to sharing his experience and insights.

  1. How did you get your start as a neutral?

When I was young, I lived a very quiet life dedicated exclusively to university teaching and research.  Despite my youth, the Court of Arbitration of the International Chamber of Commerce nominated me to preside over an arbitral tribunal in Vienna, in the proceeding known by its Parties NORSOLOR v. PABALK.  It was a commercial dispute regarding a purchase-sale and technical assistance contract between a Turkish and a French company.  As the arbitration was taking place in the city of Vienna, and no contractual provision gave the arbitral tribunal further powers, we had to arbitrate in law. The contract did not specify the applicable law, so the option of applying French or Turkish law was not possible as we would have reached diametrically different conclusions depending on which one was selected. This was not satisfactory. We thought the best solution would be to apply the general principles of law, invoking the Lex Mercatoria. Once the arbitration award was issued, one of the parties appealed for the annulment of the award before the Austrian courts, eventually reaching the Supreme Court. The argument in support of the annulment was that a tribunal, which was obliged to render a decision in accordance with the law, had used the general principles of law. In the challenging party’s opinion, this converted an arbitration in law into an equity decision. The Supreme Court understood that, in international law, the general principles are a source of law and, therefore, considered that our arbitration decision was correct. When one of the parties subsequently attempted to execute the award in Paris, the same problem arose: the argument was that our decision converting the arbitration into one in equity violated public order. It reached the Court of Cassation, which reiterated the doctrine admitted by the Austrian Supreme Court: the application of the Lex Mercatoria did not transform the arbitration; it remained de jure due to the legal nature of the general principles of International Law [Soc. Pabalk Ticaret Ltd Sirketi v. Soc. anon. Norsolor, Cour de Cassation (1re Ch. Civ.), 3 October 1984′, Journal of International Arbitration, (© Kluwer Law International; Kluwer Law International 1985, Volume 2 Issue 2) pp. 67 – 76]. Our decision sparked numerous doctrinal opinions and generated a lively debate. My quiet, academic life transformed into an active professional life dedicated to the world of arbitration.

  1. Who is your dispute resolution hero/heroine?

In an arbitration between the company FIAT and the Government of Spain in which the future of the SEAT car factory was discussed, I was fortunate to work with a co-arbitrator who would mark my arbitration conduct in the future. I am referring to Berthold Goldman, who can undoubtedly be considered the father of modern international arbitration. After the different hearings we held with the parties, the tribunal deliberated at length. Berthold Goldman defended with passion the claims of the FIAT company until the President tipped the balance in favour of my views. From that moment, Professor Goldman’s enthusiasm became an example of chivalry as he took me by the arm through one of the halls where we were deliberating and told me: “you have won, and you can rest assured that the arbitration award is going to be issued by unanimity.” This is an example that I have always remembered when faced with the temptation to issue a dissenting opinion.

  1. What is the one advice you want to give to the younger generation looking for a first appointment as neutral?

Join a team and learn the profession of arbitrator, acting as secretary to the tribunal, or as counsel under the direction of an experienced arbitrator. Time will make you an arbitration expert, able to consider flying solo.

  1. Were you ever the first in doing something?

 The award mentioned above in response to the first question where we invoked the Lex Mercatoria as the applicable law opened a wide discussion and generated controversial points, especially in the debate between arbitration experts of Anglo-Saxon and continental law.

In the ABBOTT vs. BAXTER dispute, under CPR administration, we based our decision on good faith when the applicable law was that of Ontario (USA) [Baxter Int’l Inc. v. Abbott Labs., 540 U.S. 963 (2003)]. This is what we understood from an international litigation on trademark law and the award was ratified by the US Supreme Court.

In the HESHAM TM AL WARRAQ arbitration against the Republic of Indonesia [Hesham T. M. Al Warraq v. Republic of Indonesia, UNCITRAL, Final Award, 15 December 2014], we used as a basis to accept jurisdiction, the ICO (Organization of Islamic Cooperation) Treaty, the second largest intergovernmental organization. Our decision set a precedent for numerous subsequent arbitrations.

In the world of investment arbitration, the LANCO case against the Argentine Republic opened the door to investment protection arbitration in cases where the arbitration agreement consisted of the public offer for submission to arbitration by the receiving State of the investment, and for the legitimate investor to initiate an arbitration proceeding for the alleged breach of the treaty by the receiver of the investment [Lanco International Inc. v. The Argentine Republic, ICSID Case No. ARB/97/6]. In this arbitration, different issues were raised that will later be the subject of numerous awards, such as the principle of attribution of responsibilities to the State regarding breaches of intra-State public entities.

The SALINI arbitration against the Kingdom of Morocco extended the concept of investment to administrative concessions [Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4]. Investment protection arbitration had been specially designed with a view to litigation derived from investments related to natural resources. After SALINI, the concept of investment protected by arbitration grew.

In the LUCCHETTI arbitration against the Republic of Peru [Empresas Lucchetti, S.A. and Lucchetti Peru, S.A. v. The Republic of Peru, ICSID Case No. ARB/03/4], arbitration protection was questioned when corruption was involved in making the investment, on the grounds that those whose hands are stained should not be subject to any international protection, including arbitration.

  1. What makes your conflict resolution style unique?

As in any profession, I believe that it is most important to be well educated and then to devote many hours to preparation. The arbitrator must read all the submitted documents carefully and be able to respond to the parties’ requests. There is nothing worse than storing the documentation and only dealing with it when the time comes for the hearing. Many arbitrations are unnecessarily lengthy because the arbitrators do not know the substance of the matter sufficiently well to make decisions as proceedings progress.

  1. What was the most difficult challenge you faced as a neutral?

The main challenge of the arbitrator today is to expedite the proceeding.  Today arbitration has ceased to be the artisanal activity it was many decades ago. We are facing a large arbitration industry.  To prevent that the proceedings be excessively long, the arbitrator must coordinate the agendas of the parties and their lawyers; respond promptly to excessively large document discovery requests; and try to minimize the duration of the hearings. The theatricality of certain “cross-examinations” should also be interrupted when deemed unnecessary and the abundance of witnesses and experts is sometimes unnecessary.

  1. What is the most important mistake you see counsel make?

In the written phase, counsel can write excessively long and repetitive documents, when they should perhaps concentrate their efforts more on writing an executive summary for ease of reading. In the oral phase, counsel often forgets that his or her main mission is to convince the arbitrators and not to be so aware of the transcript or the client present in the meeting room.

  1. If you could change one thing about commercial Arbitration, what would it be?

Every effort should be made to reduce the duration and the excessive costs (that can sometimes be scandalous) of arbitration proceedings.

  1. Some specific topics:

    a) What is your approach to cybersecurity and data protection in international dispute resolution?

 The requirements of cybersecurity and data protection in arbitration require both lawyers and arbitrators to strengthen the technological infrastructure of their firms. Before, during and after the arbitration there are security and protection rules that must be firmly maintained as arbitration frequently deals with very sensitive topics requiring strong guarantees.

b) Taking of evidence in arbitration: are you IBA Rules or Prague Rules? And why?

The IBA Rules emerged – and I can testify to this since I was part of the drafting team of the first version – as a result of a real need to unify criteria between common law and continental law jurists. It is rare to see an arbitration proceeding today without, at least, a reference to the IBA Rules, which have become a true customary international procedural law. In fact, there is much talk about the Prague Rules in conferences and colloquiums, but I have never seen them applied or invoked in arbitration proceedings. The authors of the Prague Rules wanted to draw attention to the excessive costs and duration of the arbitration proceedings and they can serve as a wake-up call in the daily life of our arbitrations or even be taken into account when modifying the IBA Rules in the future, giving greater space to criteria from civil law legal systems. The message of the Prague Rules is very interesting, but in practice its application should be questioned, simply by analysing the fourth paragraph of its first article when it states that “At all stages of the arbitration and in implementing the Prague Rules, the arbitral tribunal shall ensure fair and equal treatment of the parties and provide them with a reasonable opportunity to present their respective cases.”  If the aim with these rules was to avoid the due process paranoia, different articles of these rules, such as the aforementioned article, question their effectiveness – which is why arbitrators are reluctant to use them. It cannot be forgotten that the purpose of the IBA Rules was limited to the taking of evidence, while the title of the Prague Rules is “Rules on the Efficient Conduct of Proceedings in International Arbitration”.

  1. What do you see as the next “big thing” in global dispute prevention and resolution?

An important event in the world of dispute prevention and resolution is the emergence of third-party funding. Many arbitration proceedings are initiated today because the claimant and possibly the defendant have funding to undertake costly arbitration proceedings and subsequent court proceedings. Third-party financing is acquiring a very important dimension and is introducing the system of syndicated foreign currency loans to the financing of large litigations. Litigation has become a financial asset, and funders monetize their financing activity with the outsourcing of parts of the financing. Litigation and especially arbitration awards are bought and sold. A true secondary market has been created for the financial assets that arbitrations have become.

  1. For which types of conflicts would you recommend ADR?

I consider that ADR is recommendable for particularly personalized disputes. In terms of investment protection, it is unthinkable to reach agreements with sovereign states, which would undoubtedly be analysed in the country in question under the inquisitorial magnifying glass of corruption. I believe that disputes with consumers or those that occur in family businesses are very suitable for resolution through ADR. Equally, agreements between companies whose directors have full powers are good ADR candidates, since the positive result of a conciliation or mediation is only possible when those acting on behalf of the companies have sufficient decision-making capacity to reach a negotiated agreement. In construction disputes and, in general, disputes in which many awards are discussed, dispute boards are highly recommended. The periodic presence of the dispute board members from the beginning of the construction solves many problems that are not intelligible over time.

  1. In your view, what makes CPR unique?

Its speed. Arbitration administration centres have become excessively bureaucratic institutions, with internal policies regarding the appointment of arbitrators which are not always in the best interests of the parties to the dispute. Arbitration administration centres are service companies and as such they must compete with others; their speed of action is probably the most attractive asset to their clientele.

  1. Do you have an anecdote you would like to share? 

There is much talk about the clash of cultures in international arbitration and it is undoubtedly greatly exaggerated. I remember many years ago at the meetings of the former ICCA, the representative of China, the famous and much-loved Professor Tang, insisted that I should participate in arbitrations in China to learn the difference between how arbitration proceedings are run in different cultures. I was appointed arbitrator under CIETAC to resolve a dispute between a French car company and its distributor in China. Professor Tang presided over the tribunal and from the first day he tried to get the parties to reach agreements under his mediation. On the third day, after seeing that the President’s attempts to mediate between the parties were unsuccessful, both parties formally told us that if they had gone to CIETAC it was precisely for us to resolve their differences in arbitration, and could we please set aside the conciliation and mediation attempts – which we did. It was a good lesson for me that maybe the much talked-about cultural differences are not so true in practice. A good and experienced president of the tribunal should know when he or she can help the parties to reach an agreement and when the limits of arbitration prevent it.