Commercial arbitration - Spotlight on the preliminary hearing

Issue January/February 2017 By Jonathan W. Fitch

The preliminary hearing presents the first and best opportunity for the parties, their counsel and the arbitrator to design a process for the arbitration that will effectively meet the needs of the parties. I have had quite a diverse range of experiences with preliminary hearings, both as counsel and as arbitrator. The best of them have involved creative efforts to make use of the flexibility of arbitration in order to achieve the objective of a speedy, fair and just process. Here are some suggestions for getting the most out of the critical preliminary hearing.

Prepare an agenda and stipulations with opposing counsel. Arbitrators and arbitral institutions commonly circulate checklists for the preliminary hearing, for instance, Section P-1 of the AAA Commercial Arbitration Rules and Rule 16 of JAMS Comprehensive Arbitration Rules and Procedures. Counsel should confer on the items set forth on such lists and prepare stipulations as to all uncontested matters, such as which arbitration rules, procedural law and substantive law governs. Use the process to identify areas of disagreement and special matters that should be brought to the attention of the arbitrator at the preliminary hearing. Finally, counsel should try to agree on a proposed schedule for all events up to and including the merits hearing. Get the joint filing to the arbitrator as soon as possible, although it will surely be appreciated if it is received any time before the preliminary hearing.

Have your client attend the preliminary hearing. The parties, who are the stakeholders in the arbitration, usually do not participate in the preliminary hearing. This is a lost opportunity. The preliminary hearing gives parties the chance to hear arguments, comments and questions directly from opposing counsel and the arbitrator. It is likely to give them a better understanding of the personalities involved, the true issues in dispute, the potential range of costs and benefits of pursuing the arbitration through to an award, the prospects for settlement and what an acceptable settlement might involve.

Request that the preliminary hearing be conducted in-person. Preliminary hearings are most commonly held in a conference call. Conference calls are an efficient method of communication; they minimize the participants' time commitments and they are relatively easy to schedule. But a great deal may be gained when all of the participants in an arbitration meet together, face to face, at the outset of the process. Such meetings may facilitate an informal, though in-depth, exchange to enable the participants to learn about the personalities of all concerned, the background of the dispute, the parties' respective positions on the merits, and their vital interests in a resolution. A face-to-face meeting may facilitate an early discussion regarding mediation or settlement. Moreover, it is likely that the parties, and perhaps counsel, have not had any prior dealings with the arbitrator. I suggest that counsel should seize upon the opportunity to make a persuasive first impression of her client's case - in person.

Focus on advocacy and educating the arbitrator. The arbitrator will have read the papers but will still be new to the facts and may not know what law is applicable. Be prepared to give a very short, clear and persuasive précis of your case. Include counsel presentations as an agenda item in the joint filing.

Consider bifurcation of the proceedings. It is often beneficial, particularly in complex disputes with multiple theories of liability and large potential damages, to structure the arbitration in liability and damages phases. The questions of liability may involve discrete areas of limited discovery and a focused merits hearing. A determination of liability will often eliminate grave uncertainties and facilitate a mediation or settlement on damages. If counsel believes that bifurcation is appropriate, seek agreement with opposing counsel before the preliminary hearing. If agreement cannot be reached, alert the arbitrator to your client's interest in discussing bifurcation at the preliminary hearing. In a complex case, the arbitrator may wish to set a briefing schedule for a motion to bifurcate as the first order of business.

Reserve a realistic number of days for the merits hearing and empower the arbitrator to manage for completion in the allotted time. One of the great comparative advantages of arbitration is the ability to secure a firm date for the merits hearing at the preliminary conference. Counsel should be able to reach an agreement in advance of the preliminary hearing regarding a realistic number of days for the merits hearing and also have a mutual understanding about how firm those number of days should be. If counsel shares an expectation that the arbitration should be completed in a certain number of days, barring unexpected developments, that expectation should be communicated to the arbitrator with the request that the proceedings be managed accordingly.

Plan for peace. A very large percentage of cases settle, as every experienced lawyer has learned first-hand. Mediation of the claims in arbitration should be on the table in early discussions with opposing counsel and at the preliminary hearing. It is important to identify the impediments, if any, to immediate mediation and the avoidance of the expenses of arbitration. If a party believes that more information is required before it would be possible to conduct a successful mediation, the parties should explore exchanging that information on an expedited basis. The parties should explore whether it would be more advantageous to stay the arbitration pending the conclusion of the mediation or to proceed with both arbitration and mediation on parallel tracks.

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