THE NEUTRAL’S NOTEPAD: Writing an Award that Withstands the Scrutiny of the Parties and the Courts

THE NEUTRAL’S NOTEPAD: Writing an Award that Withstands the Scrutiny of the Parties and the Courts

Eaton_TimBy J. Timothy Eaton

The end game in arbitrations is the final award. In most business-to-business commercial arbitrations, the final award is a reasoned explanation of the facts and law, and the relief being awarded. Since most arbitration awards are confidential, the audience for the written award is the parties and if subject to a review, the courts. What should be considered in writing an award that will withstand their scrutiny?

The first consideration is the title of the award. How the award is labeled is important and has consequences. If it is titled an “Interim Award,” its duration should be no longer than the arbitration itself and it should be entitled to reconsideration at any time before the final award is entered.

If it is a “Partial Final Award” – such as a finding as to liability only – it generally would not be subject to a reconsideration and may be appealable to the courts unless the tribunal indicates otherwise. The tribunal should make its intention clear as to whether it intends for the award to be judicially reviewable at that stage or not.

If it is a “Final Award,” the assumption is the tribunal has completed its task and the award is subject to enforcement or judicial review. The tribunal’s authority is over at that point.

Once the award has been labeled properly, the next step in preparing the award is to identify the parties and their status. This may seem obvious, but the issues and the relief may depend upon which party is raising a claim or defense. With the frequency of counterclaims, characterizing who is bringing the claim and the relief sought becomes an important point in the analysis.

Most arbitrators then like to proceed with a factual and procedural background to set the framework for the issues and analysis. This certainly makes sense, but first it may be helpful to consider the issues that you are going to be resolving. The issues really control the findings and facts which are necessary to recite in the award. What facts are material to the issues will become more evident once you have articulated the issues being decided.

Most arbitrators then set forth the procedural history by identifying what has occurred prior to the hearing. This section is really more for reviewing courts than for the parties because the parties know what has transpired. But is important for someone new to the arbitration to understand that the parties had an ample opportunity to engage in discovery, make their arguments, submit their exhibits and have their witnesses heard and examined. Some of the grounds for vacatur are based upon whether the parties had a fair and meaningful opportunity to present their case, so spelling out in detail how the arbitration progressed lends credence to the award.

Then the crux of the award follows with the statement of the issues that the parties are raising and how they are decided. It is critical that a party understands that the tribunal understood what issues they were raising. The tribunal may not agree with a party’s position on a given issue, but both for the purposes of confidence in the award and its possible reviewability, every material issue that was raised should be identified and ruled upon. A “sweeper” clause that issues not identified were fully considered (a clause I have used myself at times) is not generally satisfactory to the parties or to reviewing courts. The tribunal’s ruling on the merits of the issue is really secondary to the fact that the issues were properly identified.

Next is the analysis of the material issues and the reasoning behind the conclusions reached. Each conclusion should be supported by a logical interpretation of the facts and law. References to case law are not always necessary but if there are statutes or authorities on given issues that the parties have relied upon, some reference to them in the award will at least signal that they were considered.

Most tribunals are both very measured in their analysis of the issues and not unduly critical of a party’s position. Arguments made by the parties are generally made in good faith and, even if you disagree with them, they should be treated with the same measure of good faith.

Last but not least, the award should specify the relief being afforded. It is a good practice to have the parties in the prehearing briefs state specifically the relief they are seeking in the claims or counterclaims. Sometimes an earlier filed claim is not clear as to what relief the party is seeking, and the relief sought may change as the discovery in the arbitration unfolds. So a delineation in the prehearing brief of the issues and the relief sought is very helpful to the tribunal.

After considering the specific relief requested, it is a good idea to review the arbitration agreement again to determine whether it has any limits on what relief can be given. Limits on punitive damages in particular are frequently included in the arbitration agreement. Other limitations may include a bar on consequential damages or attorneys fees.

Finally, do a gut check on what final relief should be ordered. Is it warranted by the facts in the law? Are you compromising the award because you do not agree with the law? Is it what the parties expect? Before you pull the trigger, you want to make sure your aim is on what the arbitration agreement contemplates and more importantly, requires.

In conclusion, each step in writing the award from the title to the relief must be carefully considered. The result is sometimes not as important as the process achieving it. Make sure the award informs parties and the courts as to how you arrived at it.

Tim Eaton is a Fellow of the College of Commercial Arbitrators and a member of the CPR Panel of Distinguished Neutral Arbitrators in Chicago. He is a member of the National Academy of Distinguished Neutrals and a member of the American Arbitration Association’s Roster of Commercial Arbitrators. He has lectured and written on arbitration topics. He is a litigation partner at the law firm of Taft, Stettinius & Hollister.

THE NEUTRAL’S NOTEPAD: Consider Expanded Use of Written Witness Statements

With this post, The CPR Institute introduces a new “CPR Speaks” series feature in which members of our esteemed panel of neutrals will periodically contribute their thoughts on developments and best practices in dispute resolution.

THE NEUTRAL’S NOTEPAD: U.S. Advocates and Arbitrators Should Consider an Expanded Use of Written Witness Statements in U.S. Domestic Arbitration

BenderRay-41309-06By Raymond G. Bender

One technique for creating efficiencies in arbitration is submitting the direct testimony of fact witnesses in writing rather than orally.  Written witness statements provide detailed testimony a witness would offer (including references to relevant documents) if questioned live.  The written testimony is signed by the witness, its truth and accuracy is sworn to or affirmed, and the statements are exchanged in advance of the hearing.  Each witness providing a written statement appears at the hearing for cross-examination by opposing counsel and questioning by the tribunal.

Written witness statements can afford material advantages in arbitration.  For example, as lengthy oral testimony becomes unnecessary, written testimony can save days or even weeks (in a complex case).  Exchanging witness statements in advance also permits opposing counsel to prepare fully for cross-examination. In fact, exchanging witness testimony prior to hearing permits all of the participants in the hearing—counsel and arbitrators alike—to focus before hearing on the key issues in dispute, formulate pertinent questions for the witness, and conduct a more efficient and streamlined proceeding.  Moreover, witness statements can obviate or lessen the need for depositions since opposing counsel will have advanced notice of a witness’ direct testimony.  Finally, written statements can serve an important fact-finding function when depositions are disallowed or limited to key witnesses.

Why are written witness statements so common in international arbitration, but not as prevalent in U.S. domestic arbitration?  Some U.S. counsel and arbitrators may be unfamiliar with the technique, particularly if they serve exclusively in U.S. domestic proceedings where oral testimony is the norm.  Others may believe that drawbacks associated with witness statements outweigh the advantages.

For example, some may feel that lawyers draft witness statements and the testimony therefore is not as spontaneous or genuine as when a witness testifies live.  A witness also might rely too heavily on the lawyer and not review the testimony carefully or completely.

However, when preparing witnesses for oral testimony, attorneys also typically assist and invite them to rehearse their hearing presentations.  Attorneys have a duty to admonish witnesses concerning the truth and accuracy of their testimony—whether they testify orally or in writing—and to highlight the need to defend the testimony under cross-examination and arbitrator questioning.  Witnesses also sign and/or swear or attest to their written testimony, and such formalities signal that witness statements need to be truthful and accurate and not approached in a careless manner.

Another potential concern about written versus oral direct testimony is that the tribunal’s first exposure to the witness would be on cross-examination.  No lawyer wants arbitrators to observe a witness initially in a defensive posture under questioning by opposing counsel.

This concern can be addressed by permitting counsel offering the witness to conduct a brief direct examination (e.g., 15 to 30 minutes), depending on the nature and size of the testimony and the case.  This lets the tribunal hear from the witness in his or her own words.  Such abbreviated direct examination could include background information on the witness and/or a summary of key aspects of the witness’ written testimony.   This direct testimony should be relatively brief so as not to frustrate a fundamental purpose for using written witness statements, i.e., to achieve efficiency and cost-savings.

A final potential concern is that using written statements prevents arbitrators from evaluating a witness’ credibility on direct examination.

There normally are sufficient opportunities for a tribunal to assess witness credibility other than on direct examination—most critically during cross-examination, but also on re-direct, and during questioning by the tribunal as well.  Moreover, permitting an abbreviated direct exam before a witness is cross-examined, as discussed above, affords yet another window for arbitrators to assess witness credibility.

Granted, written witness statements may not be an optimal solution for every witness or in every case.  For example, where believability of a key witness or witnesses may influence the outcome in an arbitration, presenting the witness’ direct testimony live may be preferable to using a written witness statement.

Additionally, any decision to present the direct testimony of fact witnesses in written or oral form ultimately should reside with the parties and counsel. Arbitration still is a creature of party agreement, and arbitrators in U.S. domestic arbitration should never compel the use of one technique over the other.

However, here are some general practice tips that arbitrators might keep in mind, not only to help ensure that counsel consider the full range of their options, but to utilize written direct testimony, if they so choose, in an optimal way:

  • Arbitrators should encourage written witness statements where appropriate and highlight the benefits surrounding their use.  Including witness statements as an item on the preliminary hearing agenda, and having an open discussion of the pros and cons during the preliminary hearing itself, can expose the technique to counsel otherwise unfamiliar with it.
  • Arbitrators should condition the use of written direct testimony on the witness’s attendance at hearing for cross-examination and questioning by the tribunal (unless all parties and the tribunal agree to waive a witness’ appearance).  Cross-examination of witnesses generally is considered a fundamental right in the U.S. (and in other common law jurisdictions) and this right should be safeguarded when written witness statements are used.
  • Arbitrators should permit sponsoring counsel to question the witness briefly on direct examination (e.g., to summarize key points) so the witness can “warm to the seat” before being turned over for cross-examination.  This procedure lets the witness become comfortable in the arbitral setting and also allows the tribunal to observe witness credibility (albeit briefly) on direct examination.
  • U.S. arbitrators should review witness statements in preparation for the hearing, listen attentively during examination by counsel and, if appropriate, pose follow-up questions to the witness to clarify relevant facts, gain insight as to witness credibility, or achieve a better understanding of the case.

In conclusion, greater reflection and dialogue on written witness statements should give U.S. counsel and arbitrators an enhanced appreciation for their use in U.S. domestic arbitration. U.S. arbitration proceedings would surely benefit from this development.

Raymond Bender is a full-time commercial Arbitrator in domestic and international disputes.  He is a member of the CPR Panel of Distinguished Neutral Arbitrators for Washington, D.C., Technology, and Cross-Border Disputes; the American Arbitration Association’s Roster of Commercial Arbitrators for Washington, D.C., Technology, and Large, Complex Cases; the International Center for Dispute Resolution (ICDR) Panel of International Arbitrators; and the Silicon Valley Arbitration and Mediation Center’s List of the World’s Leading Technology Neutrals.  He also has served in International Chamber of Commerce (ICC) and ad hoc arbitrations.  Mr. Bender is an Adjunct Professor at the Washington College of Law, American University, Washington D.C., where he teaches Alternative Dispute Resolution Law, and serves on the Arbitration Faculty of the International Law Institute.