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Tom Stipanowich Writes on Arbitration for the Daily JournalTom

Tom Stipanowich, professor of law, William H. Webster Chair in Dispute Resolution, and academic director of the Straus Institute for Dispute Resolution, published an op-ed on the changing mentality toward arbitration in the Daily Journal on June 23.

Examining current arbitration methods, Stipanowich suggests changes in the approach of arbitrators and propagates the soon to be available Protocols for Expeditious, Cost-Effective Commercial Arbitration as a useful tool for arbitrators.

Stipanowich, who has taught at Pepperdine since 2006, is an international dispute resolution scholar. He was co-author, with Ian Macneil and Richard Speidel, of the five-volume treatise Federal Arbitration Law: Agreements, Awards & Remedies Under the Federal Arbitration Act, cited by the Supreme Court and many other federal and state courts. He is the author of much-cited publications on arbitration and dispute resolution, and has twice won the CPR Institute's First Prize for Professional Articles (1987 and 2009). He received the D'Alemberte/Raven Award, the ABA Dispute Resolution Section's highest honor, in 2008 for his many contributions to the field.

Read the full article below.

Is Arbitration the “New Litigation?” The Choice is Yours

By Thomas Stipanowich

"Because of expense and delay, both civil bench trials and civil jury trials are disappearing." So says a task force co-sponsored by-of all groups-the American College of Trial Lawyers. Since litigation can be very costly and time-consuming, the group notes that parties nearly always settle or stop suing before trial. While the great majority of disputes have always been resolved out of court, today even many parties with strong claims may be daunted by costs and delays.

The primary culprit is American-style discovery, which accounts for as much as 90 percent of litigation costs-leading some to conclude that our "look-under-every-rock" system is simply unworkable. The problem has metastasized with e-discovery, producing what the Trial Lawyers' task force dubbed "a nightmare and a morass." This has led to a call for critical changes in the landscape of American litigation, including an end to the "one size fits all" approach of federal and state procedural rules. The bottom line: it's critical to fit the process to the problem.

Fitting the process to the problem, and avoiding the perceived pitfalls of litigation, is what leads many business users to submit disputes to binding arbitration. One would expect the current dissatisfaction with the "one size fits all" model of court trial to provide fertile ground for the growth of arbitration.

Advocates point out that arbitration awards are likely to prove much more "final" than court judgments, tending to substantially reduce post-hearing process time and costs. Through written agreement, businesses that choose arbitration have the opportunity to implement a process that proves vastly superior to litigation in many cases; parties are able to choose their decision maker(s) (including subject matter experts), procedures and venue. Parties may also identify what issues will be arbitrated, help set the timetable, and take steps to ensure the confidentiality of proceedings and of documents disclosed.

As such, arbitration may be an appealing alternative to litigation regardless of the relative cost and length. If, as frequently happens, business users regard speed, efficiency and economy as important goals in dispute resolution, there are steps that can be taken to tailor a process to serve those goals. The same ends are sometimes achieved through the excellent management skills of arbitrators and/or the cooperative efforts of counsel.

It is, therefore, surprising to often hear corporate counsel complain loudly about arbitration. Among their grievances, the cost and length of arbitration top the list. Failed expectations for a cost-effective, expeditious process undermine arbitration's vaunted advantages and turn off many business users. As one West Coast in-house lawyer with a major company recently reported,

"We really sell arbitration to our business clients [as a superior alternative to litigation]. Now they are accusing us of false advertising.... Literally all of the top general counsels from the largest corporations in the Bay Area were uniform in their frustration with arbitration and many have said...they're not agreeing to it anymore."

A similar calculus may lay behind the 2007 decision of the American Institute of Architects to delete from its widely used model construction industry contracts the long-standing provision calling for binding arbitration of disputes.

Recently, a national Summit on the Future of Business-to-Business Arbitration in Washington D.C. brought together nearly 200 corporate counsel, lawyers, arbitrators and arbitration providers for a "town meeting" on the gap between expectations and experiences in commercial arbitration. They concluded that the blame for lengthy, costly arbitration must be shared by everyone involved.

Overly expensive, lengthy arbitration begins with businesses that incorporate arbitration clauses in their contracts. Drafters of commercial contracts may be unable or unwilling to take advantage of the choices inherent in arbitration. Without discussion or reflection, they include a boilerplate arbitration clause-frequently an omnibus, all-purpose scheme that leaves parties and arbitrators with considerable "wiggle room." When disputes arise, they "turn the keys over" to legal advocates who bring a "litigation mentality" to arbitration. Insisting on full-blown discovery, these lawyers reflexively file motions and raise objections, increasing costs and dragging out the process. Arbitrators may be reluctant to "ride herd" on such behavior, limit discovery, rule on those motions that hold promise for getting key elements of the case resolved, or act decisively on scheduling.

In response, National Summit participants supported the idea of shared solutions and called upon all "stakeholders" in arbitration to help address the problem. The resulting College of Commercial Arbitrators Protocols for Expeditious, Cost-Effective Commercial Arbitration-guidelines soon to be made public-will play a key role in changing the culture of commercial arbitration by speaking directly to business users, lawyers, arbitrators and providers of arbitration services. Some basic tenets to remember are:

Users: It's your process. For businesses that use arbitration and their legal counsel, the message is clear: the "the solution must begin with you." If speed and economy are your priorities, plan your arbitration procedure accordingly. Consider arbitration in the context of a comprehensive strategy for resolving conflict-including the possibility of a negotiated resolution. (For some, this may mean providing "stages" for negotiation and mediation. Keep in mind that mediators, if they can't help get a case settled, may be able to help parties tailor a more suitable process for arbitration). Eschew a "one size fits all" approach in favor of a more tailored process. Set an overall timetable-with a "fast-track" for some or all kinds of disputes. Give clear guidelines for the use and granting of motions.

Above all, curtail discovery by establishing meaningful standards that base information exchange on proof of relevance and materiality, or other scope limits. Reinforce these initial choices with others made after disputes arise. Choose outside counsel willing and able to act consistently with your priorities; pick arbitrators with the skill, courage and time to manage a case efficiently and expeditiously.

Service providers, give users more help. To institutions that provide arbitration rules, appoint arbitrators, and administer cases: business users depend on you to provide effective, reliable choices, including templates for speedy and less costly process. So, do it better! After years of over-reliance on a "one size fits all" approach to arbitration, you are putting a lot of effort into developing key tools for users, including expedited or streamlined rules, standards giving arbitrators meaningful authority to limit discovery, and guidelines for the handling of dispositive motions. However, you must go further and actively support these options by collecting and sharing information about their successful application by business users in different kinds of disputes.

"Success stories" are essential to overcoming the reluctance of many to try new approaches. You also need to improve the ability of arbitrators to effectively manage arbitration, with particular emphasis on the early stages, including discovery and motion practice. Finally, you should provide users better guidance regarding key process choices and offer avenues for complaints.

Outside counsel, align with your client. Litigators, change your tune. Help your business clients make the most of special opportunities by appropriate dispute resolution approaches, including arbitration. Begin by sitting down with your client, assessing the best means of managing the dispute in light of agreed-upon goals, and committing yourself to an appropriate strategy. Working with opposing counsel to help clients embrace the special opportunities afforded by arbitration-a choice-based process that affords many opportunities for efficiency, fine-tuning and out-of-the-box thinking. Take advantage of having sophisticated decision makers with pertinent experience rather than "blank slate" jurors.

Arbitrators, be more proactive and brave. Though likely to be more skilled than the arbitrators of a generation ago, you must modify your approach in light of today's complex challenges. It is not enough to know how to run arbitration hearings. In most cases, your key contributions will occur in the prehearing process, in actively-even aggressively-shaping the process, encouraging cooperation between parties, tailoring and urging forward information exchange, and zeroing in on motions that hold real hope for getting key elements of the case resolved.

In today's environment, the pre-hearing process is usually the longest and most expensive element of arbitration. Moreover, it is often the springboard to settlement of the case-obviating the need for hearings. It is no longer sufficient for arbitrators to postpone all decision making until the conclusion of a hearing on the merits - the circumstances demand a different approach, and the parties deserve better.

The Protocols for Expeditious, Cost-Effective Commercial Arbitration will soon be available online and in print. They are a clarion call for stakeholders in arbitration, beginning with business users, and they have already stimulated significant efforts by leading providers of arbitration services. Those who claim to desire speed and economy in arbitration now have their best opportunity ever to realize their expectations. It is time to put them to their proof.

Thomas Stipanowich is the William H. Webster Chair in Dispute Resolution, a professor of law at Pepperdine School of Law, and Academic Director of the Straus Institute for Dispute Resolution. He is Editor-in-Chief of the new Protocols for Expeditious, Cost-Effective Commercial Arbitration.

Published with permission from the Daily Journal.