Comments to the American Arbitration Association on Reducing
the Cost of Arbitration
February 25, 2011
I have noticed that parties are increasingly adding clauses to the dispute resolution provisions of contracts that call for the application of the Federal Rules of Civil Procedure (or sometimes state rules) to govern discovery. I start my first conference with the parties by:
1. Asking that the principles for the parties be present in the conference.
2. Explaining that often well over half of the cost of an arbitration and the time delay can be from discovery.
3. Explaining that, in my experience, discovery has added very little in the way of critical/dispositive facts in resolving the contract disputes that I have arbitrated.
4. Telling the parties that although they incorporated a provision for discovery, they need not use discovery, particularly if the contract issues seem to be primarily questions of law. I then tell the parties if I believe the case is primarily a question of law. I explain that facts, of course, are important in applying the law--but that the pleadings reveal to me that the undisputed (or even disputed facts) necessary to resolution of the case seem to be well-understood by the parties.
5. If parties believe that their understanding of the contract is critical, and if the parol evidence rule applies--they should confine discovery to the time surrounding formation of the contract--that subsequent understandings are likely immaterial to resolution of the dispute.
6. If it appears that the attorneys still want broad discovery, I ask the attorneys to consult with their clients about the cost of discovery and to propose a narrow plan of discovery, in writing, to me after consultation with their clients. A subsequent conference takes place in which discovery is discussed, again with the principles on the call.
7. If the parties insist on having depositions, I will stage the depositions, giving each side one deposition to start. They then are asked to come back to me and to reveal a material fact that they discovered in the deposition that could have a significant bearing on resolution of the dispute. If the depositions didn't really reveal any facts material to the disposition of the case, then I tell them that and say that I don't intend to permit further depositions. This technique was taught to me by Judge Leavy, (now a Senior Judge on the 9th Circuit) when he was a Federal magistrate designated by the Presiding District Judge to handle a high-stakes case and I was counsel for a Federal agency.
8. If both sides want interrogatories and requests for admission, I similarly limit the use of those discovery vehicles, as well.
9. In one case, we arranged a site visit immediately after opening argument so that the parties could describe to the arbitrators the features of the site that they believed were significant to resolution of the case. This reduced the need for a lot of discovery to elicit facts that were obvious from the site visit. The same thing could, in most cases, be accomplished by photographs or videos.
I agree wholeheartedly that (like many judges) many arbitrators have needlessly surrendered their role in favor of "letting the lawyers try their case" in the same way that litigation takes place in the courts. The result is loss of faith in the arbitration system as a speedy and less costly way of resolving disputes. Most of us who have been lawyers for 30 years or more know of a time when cases (even those that went to trial) were tried much more expeditiously. Due process can be afforded by an experienced arbitrator without excessive discovery, pre-hearing motions and time delays.