WINNING IN ARBITRATION
2013 NCLC Consumer Law Seminar Marriott Crystal Gateway
Arlington, Virginia November 7, 2013
Presented by: John Cole Gayle, Jr. , and Elizabeth Ahern Wells
So what does a consumer
lawyer do?
• Adapt or die
• Get arbitrating or get out
1. FIGHT ARBITRATION OR NOT?
a. Cons of arbitration – No jury, possibly biased arbitrator, very little discovery, much harder to get significant punitive damages
Pros of arbitration – Much faster result, no “motions” practice to worry about from defendant; very little discovery so it’s difficult for defendant to prepare for your client and witnesses – scares them; rules of evidence relaxed – favors plaintiff since less witnesses, hearsay comes in, no appeal to worry about b. What organization is listed? Some agreement lists no one and the two sides have to agree. Gives great leverage in finding a local group, or arbitrator that may be fair.
c. What is your case about? Is it one that seeks significant damages like fraud of a UDAP claim thus you want an outraged jury; or is it more statutory – and might be technical enough that you really want a judge to decide?
d. Can client afford arbitration? – Some clauses make both sides split the costs. Others provide that the defendant will pay administrative fees up to a certain amount.
e. Is there a strong basis for avoiding arbitration? i. Is there a punitive damage or legal fee prohibition? See NCLC Consumer arbitration Manual - §§ 4.4.2.2; 4.4.2.4 – excellent
ii. Is the judge that will hear the Defendant’s Motion To Compel Arbitration pro-arbitration? (Many love any excuse to lighten their docket.) Thus making the fight quixotic? In Virginia most of these fights are.
2. READ ARBITRATION AGREEMENT CAREFULLY.
3. WHAT ORGANIZATION IS MANDATED?
a. Know the arbitrators that this organization will appoint. Find out about them from
colleagues or their bio, etc. - as best you can.
b. If it’s a national organization the arbitrators are usually not great. (AAA tends to never have judges, and a very limited number of
arbitrators who may have no experience in the area you are litigating about), but geographically dependent. Judicial Arbitration and Mediation Services (JAMS) is pretty good, and uses judges.
4. SUGGEST USING LOCAL ARBITRATION GROUP
a. It’s much less expensive than the national groups that have administrative staffs it they have pay for.
b. A Local arbitration organization, or judges that market themselves as arbitrators are usually much better - they are much less expensive, both sides can pick a judge you know will be neutral, and you avoid getting the unknown entity, probably a lawyer rather than a judge, that the national organization will use. c. I often do not know who opposing counsel is, so you can simply make the suggestion to the defendant, via the registered agent, or I simply file the Demand For Arbitration with the organization mandated in the agreement, and once I hear from defendant’s attorney, approach him or her about using a local retired judge as arbitrator.
d. National arbitration organizations’ rules for consumer arbitrations usually require the defendant to pay the initial administrative costs ($1.5K - $2K) , and limit consumer costs to about whatever they would have to pay if filing in court. So make sure you get counsel to agree that this will apply to your locally arbitrated case. Since the local group is small, they rarely have administrative costs in the first place. So you only pay the arbitrator’s hourly fee.
e. More often than not, defendant’s counsel agrees.
5. READ RULES OF ARBITRATION
ORGANIZATION!
The rules are very important and you need to know them since they are the “bible” to the arbitrator. (The AAA rules are confusing since you often have to refer to three
interdependent sets of rules or procedures .) If there is something you do not understand, or disagree with, or want to change in your case, you need to bring this up at the initial Pre trial conference w/ the arbitrator.
7. PREPARE INITIAL DISPUTE FORM AND DEMAND FOR ARBITRATION – See course materials
a. The initial Dispute form for AAA is self explanatory. See in course materials. (next slide)
b. The Demand For Arbitration is optional and is designed to give the defendant notice of what you are claim it did wrong. It can be very short or detailed. I like to file a Demand, that looks like a complaint we file in court. But, since you will not have a motion to dismiss claiming you do not have any evidentiary basis for your claim, you can be a little freer in what you allege.
What Then?
Assuming this is a consumer arbitration, AAA
will send a letter to the respondent asking it to provide it’s administrative fee the rules for the arbitration organization its arbitration clause requires the cosumer to use. The letter looks like… (Please note this letter was under the old fee schedule. This fees are not applicable now. Rules changed on March 1, 2013.)
8. INITIAL PRETRIAL CONFERENCE WITH ARBITRATOR a. Get all discovery and documentation you can before filing for arbitration to avoid having to engage in a lot of discovery.
b. At initial Pretrial conference with arbitrator, request little discovery if you can get away with it since do not want to give the defendant any docs you do not have to. Arbitrator will usually agree to a limited number of documents requests and interrogatories.
c. Confirm either party is permitted to bring a small recorder to the evidentiary hearing
d. I usually do not agree to depositions since I do not want to give defense counsel material to prepare his cross examination with. e. Arbitrator will issue a Scheduling Order You must abide by these deadlines
9. PRE-TRIAL BRIEF
d. Show passion, but with a judge or arbitrator that has done this often, logic and case law carries the day rather than great oratory. It’s no different than presenting a case in a non jury trial.
e. Consider bringing a tape recorder to the hearing in the event the arbitrator wants a post trial brief. You will then have the verbatim testimony to review and recite back to him.
TRIAL:
a. Prepare audio visuals and exhibits just as if in trial. Do not be a cheapskate just because its arbitration
b. Both Parties should put all unobjected to exhibits in a trial exhibit booklet.
c. Generally, eh rules of evidence do not apply. Heasay will be permitted, but may not carry as much weight as a witness. Arbitrators that are former judges will likely discount hearsay evidence more than non judge arbitrators, so adjust your evidence accordingly. Always best to get evidence in via a witness, rather than a source that would not come in if evidence rules were enforced. However, submit it anyway if you do not have the witnesses. Arbitrator will decide if he believes it based on the totality of evidence.
II. Overview of Practice
before American Arbitration
Association (“AAA”)
A. The Rules
AAA applies three sets of rules:
1. Consumer Due Process Protocol- Principles of the National Consumer Disputes Advisory Committee - supposedly the basis of the consumer rules
2. Commercial Arbitration Rules and Mediation Procedures. These contain Expedited Procedures applicable to consumer disputes. 3. Supplementary Procedures for
Consumer-Related Disputes-a consumer supplement to the Commercial Rules-(only for disputes over personal or household items or services)
Consumer Due Process Protocol , sort of like
a legislative history) stands for the proposition that consumers should be entitled to an efficient and inexpensive resolution of claims (whether that actually occurs is another thing).
Supplemental Procedures reflect this
doctrine . Thus discovery is limited in consumer cases in order to keep expenses down and achieve a quick resolution to the case.
Supplemental Consumer
Procedures Trump Commercial
Rules
With arbitrations using one arbitrator, if there
The Rules are drafted exceedingly simple and
at times vague.
In accordance with the belief that the
arbitrator is in control of the proceeding, things like motion practice and discovery are pretty much left to the arbitrator.
B. Initiating the Claim
1. General
This is the AAA website that has much of he information you need, but it is complicated. Persevere!)
www.adr.org/aaa/faces/services/fileacase AAA on-line forms are available on the AAA website, (if the site is working.)
C. Preparing the Claim
AAA uses a “Consumer Demand Form”
(revised in October 2011)- in AAA website, as shown previously
A copy of the arbitration agreement must be
attached, pus the $200 filing fee
Although AAA offers on-line filing, not
available to consumer filings.
Mail by Certified Mail Return Receipt
Requested to AAA and Respondent (at address of registered agent and prinicipal place of business).
3. Filing fees, Arbitrator
fees, and Expenses
a. Paid by the consumer
$200 for all consumer claims involving a binding arbitration clause is in a form contract , where most terms are
nonnegotiable. Rule C-8(i) of Supplementary Procedures in Consumer Related Disputes. There is no limit to the amount you can sue for. Rule C-7(c) Supplementary Procedures in Consumer Related Disputes. ($75K is no longer the limit)
Respondent’s Fees and Expenses
1) $1,500.00 filing fee to AAA due onceConsumer has met filing requirements. C-8(i)
2) $1,500 to arbitrator per day of arbitration hearing. Rule C-8 (ii). ½ due after Preliminary Hearing. (Cannot reallocate unless
consumer’s claim is either “patently frivolous” or filed for harassment purposes.) Rule C-8 (2nd ¶)
Thus Respondent is liable for
$2,250.00 before any hearing on
the merits, and, unless the claim is
frivolous or filed for harassment,
even if it wins will have to pay at
least $3000, plus any travel costs
and expenses of the arbitrator.
Attachments To AAA Dispute
Form
At paragraph 2, insert “see attached.” And attach a complaint that resembles a
pleading in a state or federal court (inserting appropriate references to claimant,
respondent etc.) ; or an outline of the facts and claims and the remedy your client seeks.
If not detailed enough arbitrator will likely ask
you for a more detailed statement of claims at the preliminary hearing.
AAA will inform the Dealer that if the
arbitration provision is not in accordance with the Consumer Protocol, AAA will not consider the claim unless the business consents in writing to not use the arbitration provision again.
D. Dealer Response
The respondent may answer the demand and may also file a counterclaim. The answer must be sent to the AAA within ten calendar days after the AAA acknowledges receipt of claimant's demand. The answer must:
be in writing,
be sent, in duplicate, to the AAA, be sent to the claimant at the same time.
If the respondent has a counterclaim, it must state the
nature of the counterclaim, the amount involved, and the remedy sought. There is no additional fee for this.
No answer required
If no answer is filed within the stated time,
the AAA will assume that the respondent denies the claim.
But they got to send $!
The respondent must also send the
appropriate administrative fees and deposits.
Payment is due ten calendar days after the
What if the respondent does
not send $?
The business must pay for all arbitrator
compensation deposits beyond those that are the responsibility of the consumer. These deposits are refunded if not used.
If a party fails to pay its fees and share of the
administrative fee or the arbitrator compensation deposit, the other party may advance such funds. The arbitrator may assess these costs in the award.
If the dealer does not pay $
and you don’t then what?
AAA will not enter a default.
AAA will not administer case.
Dealer waives the right to compel arbitration. ☺
If you are going file a different complaint in
court, then make sure that the dealership was put on notice of the AAA proceeding. Get AAA to send a letter that it is closing , and you send this by certified mail to respondent so it cannot say it diod not know what had happened.
b. By Business
If claim under $10k, then business pays $775 plus a “case service fee” of $200 (total is $995).
If claim between $10k and $75k, $975
arbitration fee and “case service fee” of $300.
But that does not include the hourly fees of
the arbitrator!!!!!!
E. Appointment of the
Arbitrator
Rule C-4. Appointment of Arbitrator
Immediately after the filing of the submission or the answer, or after the deadline for filing the answer, the AAA will appoint an arbitrator. The parties will have seven calendar days from the time the AAA notifies them, to submit any factual objections to that arbitrator's service. Rule C-4
Typically, AAA will send a letter giving the bio of
the arbitrator.
Research the background of the arbitrator. You have ten days from notice of the appointment
to request a one day hearing in person rather than a documentary hearing if your claim is under $10K. If over $10K a one day oral hearing is assumed. Rule C-4 Supplementary Procedures for Consumer Disputes
If you think the arbitrator is biased object to AAA.
Hearings
Rule C-5. Proceedings on Documents ("Desk Arbitration")
Where no claims or counterclaims exceed
$10,000, the dispute shall be resolved by the submission of documents. Any party, however, may ask for a hearing. The arbitrator may also decide that a hearing is necessary.
You do not want a desk arbitration.
Preliminary Hearing
Conference
Usually scheduled within 10-20 days after
answer filed (or when business pays fees)
Coordinated directly by AAA case manager Usually about 45 minutes to an hour.
The Arbitrator will discuss:
1. scheduling of arbitration hearing;
2. discovery needs of parties;
3. witness and exhibit disclosure; and
4. “house-keeping” stuff.
Arbitrator (through AAA case manager) will
send a scheduling order after conference.
See Rule P-1 and 3 of Commercial
Arbitration Rules
Discovery - with the AAA
PRINCIPLE 13. Concumer Dur Process Protocal ACCESS TO INFORMATION -No party should ever
be denied the right to a fundamentally-fair process due to an inability to obtain information material to a dispute. Consumer ADR agreements which provide for binding arbitration should establish
procedures for arbitrator-supervised exchange of information prior to arbitration, bearing in mind the expedited nature of arbitration.
Discovery cont’d
REPORTER'S COMMENTS
It is understood that ADR sometimes represents a tradeoff between the concept of full discovery associated with court
Reporter’s Comments Cont’d
…The Committee supports the concept of
limiting the exchange of information as much as possible while ensuring that Consumers and Providers each have access to information that is legally obtainable and relevant to their case. In most cases, this means that pre-hearing information exchange will consist of an exchange of documents as directed by the arbitrator,
Reporter’s Comments cont’d
identification of witnesses and a summary of
their expected testimony. Arbitrators should have the authority to require additional discovery when necessary, such as requiring the deposition of witnesses unable to appear at the hearing in order to preserve their testimony. (emphasis added)
Reporter’s Comments Cont’d
Practical Suggestions by AAA
In many cases, issues relating to information
exchange may be addressed by the
arbitrator(s) at a preliminary conference. See, e.g., AAA Wireless Rules '' R-9, R-10.
ARBITRAL REMEDIES
PRINCIPLE 14. - ARBITRAL REMEDIES The arbitrator should be empowered to grant
whatever relief would be available in court under law or in equity. See AAA Consumer Due Process Protoc0l; Rule C-7 (c ) of
Supplementary Procedures for Consumer Related Disputes
The “Exchange” Rule
E-5. Exchange of Exhibits – Commercial
Arbitration Rules Expedited Procedures -to be used according -to Rule C-6 of Supplementary Procedures for Consumer Disputes.
At least two business days prior to the hearing, the parties shall exchange copies of all exhibits they intend to submit at the hearing. The arbitrator shall resolve disputes concerning the exchange of exhibits.
“Anything goes”
In practice, the Arbitrator will typically let the parties do at least limited discovery.
Be sure to address this at the preliminary hearing
If not addressed, some lawyers just take their
THEN WHAT…
The Reaction of Auto Dealers
to Arbitration
They don’t like it- it is expensive and the
informality is scary.
Their attorneys hate it- they can’t make money
wasting time filing dilatory motions and expensive.
They may not know who your witnesses are, the
are no depositions, an you have thje lixury of preparing everything about your case BEFORE you send in the demand. So you conceivably could ask for a hearing in a month, with no need of discovery.
How do the dealers and
their attorney’s react?
They cry like a baby
After the initial conference, the arbitrator sends the first invoice via AAA.
Usually the
“settlement” discussions begin in earnest after the initial conference.
