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Meltdown in the Courts: Is Arbitration the Answer?

by Christine Page

Distinguished neutrals Hon. Joe Hilberman (Ret.), Deborah Rothman and Deborah Saxe presented a highly informative program on October 2 at the Century City office of ADR Services on the many benefits of arbitration, particularly in light of the new world order in California civil courts as a result of severe budget cuts. Of particular interest was a novel "dual track” suggestion whereby litigants could "maintain their place in line” at the courthouse but submit discrete disputes to a private arbitrator, who could manage as much or as little of the case as the parties choose.

The drastic measures taken over the past three years due to extraordinary budget cuts, resulting in the closure of eight courthouses and reduction of over 750 staff positions in Los Angeles County alone, are now having a dramatic effect on the speed, efficiency, and cost of civil litigation. Even before the budget cuts, the case management process in LASC courtrooms – except for designated complex cases – was perfunctory. Today, judges have virtually no time to help counsel coordinate discovery or influence the timing of substantive motions or settlement discussions. The consolidation of personal injury, collections, and other less-complex cases in a few satellite courthouse locations has left the main courthouses to handle significantly increased caseloads of high stakes, motion-intense litigation. If the old maxim "justice delayed is justice denied” holds true, this is an excellent time for litigants to consider whether arbitration might be the better alternative for their clients.

In stark contrast to the situation in courts across California, arbitrators can devote as much time to case management as is needed at the outset of a case and at critical points along the way. Ms. Rothman, who arbitrates through AAA, explained that "a seasoned arbitrator helps to create the blueprint for a successful resolution, whether it be in arbitration or in litigation.” In addition to relative speed and efficiency, AAA arbitrator Deborah Saxe explained that arbitration offers decision makers with subject matter expertise, scheduling flexibility, and the opportunity for a well-managed process utilizing whatever provider rules, or combination of rules, the parties choose.

The flexibility of arbitration also allows counsel to access the arbitrator on an as-needed, when-needed basis. Judge Hilberman, who arbitrates through ADR Services, relishes the opportunity to resolve small discovery disputes over the telephone and in real time. Because the arbitration rules of virtually all providers do not allow wholesale discovery, arbitrators can take a more active role in helping counsel identify and prioritize critical depositions. Ms. Saxe, who specializes in employment disputes, pointed out that even when discovery rights are guaranteed under Armendariz, arbitrators can provide great value by overseeing a discovery plan that focuses on the key issues in the dispute.

For litigants who are not operating under a pre-dispute arbitration clause, the court crisis should at least prompt consideration whether to voluntarily submit a matter to arbitration after a claim is asserted. Counsel have the opportunity in this context to customize the arbitration rules to fit the dispute. As Ms. Rothman pointed out, counsel can also creatively assign to arbitration discrete issues in a pending civil action in order to get a ruling on time-sensitive discovery or substantive motions or, in more complex cases, obtain case management services from a neutral who possesses both case management and subject matter expertise. Litigants can remove the roadblocks to settlement—whether they be questions of fact or of law—by agreeing to submit a particular issue for a binding determination, followed by settlement discussions. If they fail, the parties still have their day in court.

Unlike the reference process which has statutory limitations and is also suffering delays due to the gate keeping responsibilities of the court, Ms. Rothman contends that the parties can set the terms and timing of their delegation to an arbitrator by simply submitting a stipulation vesting limited authority in the arbitrator, and a proposed order. While a new concept, the idea of contracting for "concierge services” that can lighten the courts’ caseloads and provide greater efficiency is a compelling one.

Besides being an eminently flexible process, the informality of arbitration encourages congeniality among counsel, less wasteful posturing, and more focused cross-examination. Ms. Saxe observes that litigants realize that they do not have to make tiresome objections or browbeat opposing witnesses and can trust the arbitrator to give evidence the weight it deserves. Judge Hilberman cautioned, however, that some counsel can become too informal and relayed an extremely amusing story about an attorney who delivered a closing argument while spitting tobacco into a paper cup!

Of course, arbitration has its tradeoffs. In return for speed and efficiency, parties give up their right to a jury trial and most grounds for appeal. Judge Hilberman added that some counsel and parties continue to fear that arbitrators will "split the baby” or favor a repeat client. Ms. Rothman, however, referenced two statistical studies by AAA in 2001 and 2007 which disprove the myth that arbitrators routinely compromise the merits by dividing monetary awards down the middle. As for favoring a repeat client, Judge Hilberman emphasized that neutrality is an arbitrator’s greatest value and they must make the tough decisions regardless of whether counsel or parties recommend them for the next dispute or place them on a "no hire” list circulated within a firm or other online group.

Another concern with arbitration is the tendency of counsel to insert into the process many of the trappings of litigation so that it is no longer fast or comparatively inexpensive. To combat this trend, the College of Commercial Arbitrators issued in 2010 written "Protocols for Expeditious, Cost-Effective Commercial Arbitration.” Ms. Rothman, a Co-Associate Editor of the publication, explained that representatives of business, counsel, arbitrators and arbitration provider institutions joined together to evaluate the role of each stakeholder in preventing arbitration from becoming "too much like litigation.” The Protocols set forth pragmatic guidelines for keeping the process expeditious and cost-effective. A key component is the role of the arbitrator in actively managing and shaping the arbitration process through comprehensive case management orders, streamlined discovery, supervised pre-hearing activities, and ready availability to counsel. These very attributes are precisely what judges are largely no longer able to provide under current budgetary constraints, and what well-trained arbitrators can do to add enormous value to counsel and parties.

In conclusion, the current court gridlock should cause litigators to reweigh the pros and cons of arbitration versus court and to explore the possibility of post-dispute agreements to send all or a portion of a dispute to arbitration.

Christine Page is Chair of WLALA’s ADR Section and an attorney, mediator, and arbitrator at Page Dispute Resolution.

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