Domestic Arbitration
Stages of Domestic Arbitration and Arbitrator’s Role
1.
Inception of Arbitration
Filing and Initiation:
Description: The process begins when a claimant files a Demand for Arbitration (or Statement of Claim with FINRA) with the administering organization (AAA, JAMS, FINRA). This document typically includes the parties involved, the arbitration agreement, a statement of the dispute, the relief sought, and the amount in controversy. The appropriate filing fee is also submitted.
Arbitrators’ Role: At this initial stage, arbitrators are not yet involved. The administrative staff of the chosen organization reviews the filing for compliance with its rules and initiates the case administration process.
Arbitrators’ Role: Still no direct arbitrator involvement. Administrative staff manages the exchange of initial pleadings.
Arbitrator Selection and Appointment
List Selection/Direct Appointment/Panel Selection:
Description: The administering organization provides the parties with a list of potential arbitrators from its roster, along with their biographies and disclosure statements (detailing any potential conflicts of interest). Parties rank their preferences or strike unacceptable names. In some cases, the arbitration agreement may specify a direct appointment method (e.g., each side appoints one, and those two appoint a third). FINRA has a specific list selection system (Neutral List Selection System – NLSS) where parties rank arbitrators, and a system-generated list is provided.
Arbitrators’ Role: Potential arbitrators provide comprehensive disclosures to the administering organization, which are then shared with the parties. They must confirm their availability and impartiality. Once appointed, they review the initial pleadings to gain a preliminary understanding of the dispute and confirm no new conflicts have arisen.
2.
Preliminary Conference/Case Management Conference
Scheduling and Pre-Hearing Conference:
Description: This is a crucial early meeting (often by teleconference) between the arbitrator(s) and the parties’ representatives. It’s designed to establish a procedural roadmap for the arbitration.
Arbitrators’ Role:
Agenda Setting: Discuss the scope of the dispute, identify key issues, and clarify any ambiguities in the pleadings.
Scheduling: Establish a realistic schedule for the entire arbitration process, including deadlines for document production, witness lists, expert reports, motion practice, and the hearing date(s) and location.
Discovery Decisions: Determine the scope and methods of information exchange, which is generally more streamlined and limited than in litigation. This includes:
Document Exchange: Ordering the production of relevant documents. Arbitrators will often address electronically stored information (ESI) protocols.
Depositions: Generally limited and granted only upon a showing of good cause or if demonstrably necessary for a fair and efficient process (e.g., for key non-party witnesses, or if a party cannot attend the hearing). FINRA, for instance, typically limits depositions to extraordinary circumstances.
Interrogatories/Requests for Admission: May be permitted but often limited to specific, targeted questions to narrow issues.
Pre-Hearing Orders: Issue a comprehensive order summarizing all agreements and rulings from the conference, setting forth the procedural rules and schedule. This order becomes the binding framework for the arbitration.
Dispute Resolution Alternatives: Often inquire whether parties have explored or wish to explore mediation or other settlement avenues.
Confidentiality/Privilege: Address any concerns regarding confidentiality of information or claims of privilege.
Information Exchange and Motion Practice
3.
Discovery/Information Exchange:
Description: Parties exchange documents, witness information, and other relevant evidence as agreed upon or ordered by the arbitrator(s).
Arbitrators’ Role:
Oversight: Monitor and manage the discovery process to ensure compliance with the schedule and agreed-upon scope.
Dispute Resolution: Rule on discovery disputes, such as objections to document requests, privilege assertions, or requests to compel production. They often encourage parties to resolve disputes among themselves first.
FINRA Specific: FINRA has a “Discovery Guide” with presumptively discoverable documents, which arbitrators use as a baseline, but they retain discretion to order or limit discovery.
Motion Practice:
Description: While generally less extensive than in court, parties may file various motions.
Arbitrators’ Role:
Jurisdiction/Arbitrability: Rule on motions challenging the arbitrator’s jurisdiction or the arbitrability of certain claims. This is a fundamental power of arbitrators.
Dispositive Motions: Decide on dispositive motions (e.g., motions to dismiss, summary judgment motions). The standard for granting these in arbitration can be higher than in court, as arbitrators often prefer to hear all evidence, but they will consider them if they believe it can fairly and efficiently resolve issues or the entire case without a full evidentiary hearing. FINRA arbitrators are generally reluctant to grant motions to dismiss before the conclusion of a claimant’s case-in-chief, except in limited circumstances.
Procedural Motions: Rule on motions related to procedure, such as requests for extensions of time, amendments to pleadings, or motions t o compel compliance with prior orders. They will set briefing schedules for motions and may hear oral arguments if deemed necessary.
4.
The Hearing
Pre-Hearing Submissions:
Description: Prior to the hearing, parties typically submit pre-hearing briefs, witness lists, exhibit lists, and often copies of exhibits to the arbitrator(s) and opposing counsel.
Arbitrators’ Role: Review these submissions carefully to prepare for the hearing, understand the parties’ key arguments, identify the critical issues, and become familiar with the evidence. This preparation is crucial for efficient hearing management.
Hearing:
Description: The formal presentation of evidence, witness testimony, and arguments by the parties. Hearings are generally less formal than court trials but are structured.
Arbitrators’ Role:
Conducting the Hearing: Preside over the proceedings, maintain order, and ensure a fair opportunity for both sides to present their case.
Evidentiary Rulings: Rule on the admissibility of evidence and objections raised by counsel. Arbitrators have broader discretion regarding evidence than judges in court and generally admit evidence that is “relevant and material” to the dispute.
Witness Examination: Oversee direct and cross-examination of factual and expert witnesses. Arbitrators may also ask clarifying questions of witnesses.
Time Management: Actively manage the hearing schedule and time allocated to each party to ensure efficiency.
FINRA Specific: FINRA often requires “site visits” for certain types of disputes, especially related to real estate.
5.
Deliberation and Award
Post-Hearing Submissions:
Description: Depending on the arbitrator’s order, parties may submit post-hearing briefs or closing statements, summarizing their arguments and referencing evidence presented.
Arbitrators’ Role: Review and consider all evidence, testimony, and legal arguments presented during the hearing and in any post-hearing submissions.
Deliberation:
Description: The arbitrator(s) privately review all the evidence, apply the relevant law (or principles of fairness/equity if the arbitration agreement allows), and make findings of fact and conclusions of law to reach a final decision. In a panel, this involves discussion and consensus-building.
Arbitrators’ Role:
Fact-Finding: Assess witness credibility, weigh the persuasiveness of evidence, and determine what facts have been proven.
Legal Analysis: Apply the governing law to the established facts.
Decision-Making: Determine liability on each claim and counterclaim, and calculate damages or fashion other appropriate remedies (e.g., specific performance, injunctive relief, declaratory relief).
6.
Writing the Award
Description: The arbitrator(s) draft the formal written award, which is the final and binding decision. The level of detail required in an award (e.g., a “reasoned award” providing a brief statement of the reasons, or a “standard award” which may just state the outcome) depends on the parties’ agreement or the administering organization’s rules. FINRA awards generally require more detail, including a summary of issues, relief requested, and relief awarded.
Arbitrators’ Role:
Formulating the Decision: Clearly state the outcome for each claim, including monetary awards, interest, and any other relief granted or denied.
Articulating Reasons (if required): For reasoned awards, succinctly state the essential findings of fact and conclusions of law that led to the decision.
Damages Calculation: Precisely detail any calculations for damages.
Finality and Enforceability: Ensure the award is complete, unambiguous, and meets the legal requirements for a valid and enforceable arbitration award under the Federal Arbitration Act (FAA) or relevant state law.
Signing and Filing: The arbitrator(s) sign the award, which is then submitted to the administering organization for transmittal to the parties.
Throughout all these stages, the arbitrators act as neutral adjudicators, actively managing the process to ensure fairness, efficiency, and adherence to the agreed-upon rules and schedule.