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JENNIFER HAMM: Well, let's just dive right in. We'll
start with initiating arbitration. I wanted to ask you all, whether the
courts grant a petition to compel arbitration or the parties voluntarily
agree to arbitrate, what suggestions do you have for sufficiently managing
the process and getting it going? Mr. Younger, do you want to start?
ERIC YOUNGER: I think there's a
lot to be said for having the amount of pre-hearing work reflect the general
scope, perhaps financial size, of the arbitration and so forth. I served
with a colleague of a couple of our panelists four or five years ago Richard
Chernick, in a case - a three-arbitrator case, which is a good chance
to see other people's stuff. And Rich had a variety of formal orders and
required a formal conference and was really quite detailed as to a variety
of things. Whether other people at JAMS had picked up a lot of his documents,
whether they became some sort of standard practice or not, I don't know.
I was very impressed. I didn't see any copyright symbols; so I, of course,
stole all of his materials. But I would have found them probably too much
planning and preparation for the run-of-the-mill take the opposite extreme,
something that's really quick and dirty, uninsured motorist arbitration
or something like that. You wouldn't dream of doing it there. Your conference
would be longer than your arbitration. So I guess my only message is I
think you probably should set the level of formality and advanced documentation
and conferring, in some effort, try to make that consistent with the scope
and financial value of the matter.
GERALD PHILLIPS: I did a survey
some years ago, and it was printed in the Dispute Resolution Journal,
"Is Creeping Legalism Infecting Arbitration?" And the consensus was yes.
And then the question came well, what do we do about it? First, the first
thought was made by arbitrators, that it's the arbitrator's fault. They
are the ones who should take the blame for the creeping legalism in arbitration.
I'm a member of an organization called CCA, College of Commercial Arbitrators.
And they're coming out with a new book, a guide to best practices in arbitration.
And this was - this was started because of my article, "Is Creeping Legalism
Infecting Arbitration," and the then-President of the College of Commercial
Arbitrators thought that instead of following what I wrote, he said, "What
do we do about it?" And in the guide to best practices, we tried to outline
what should be done about it so that arbitration is not destroyed by the
length of arbitration.
NANCY J. WARREN: I agree with everything
that's been said here, but I find in any case, whether it's a $30,000
case or a case involving a lot more money than that, that preliminary
arbitration conference at the very beginning of the case is essential
just to get some basic understanding of the parties before the case begins.
I like to pin down what law governs the agreement. I like to take a look
at the clause that the parties are - at the arbitration, the clause that
they're using. I like to find out if they have any particular rules they're
following, whether they be the AAA rules or JAMS rules or if they're operating
under the California Arbitration Act. A lot of times in arbitration parties
will forget about a claim and a response. So I like to make sure that,
if there's a written claim, that we have - even if it's just a short statement
of what the case is about, or if they want to do something longer than
that, I like to give them that opportunity. And a lot of times the respondent
hasn't prepared or put in any kind of a response to the affirmative defenses
or perhaps any counterclaims. They haven't thought about that yet. So
I just like to go through some of those issues initially. Also, I think
it's important to find out what the parties want to do with regards to
things like discovery. Now, they may be limited by their clause as to
what they can do, but sometimes, even if their clause will limit the amount
of discovery they can engage in, the parties want to do something other
than what the clause says. As long as both parties agree, it's my opinion
that it's perfectly okay to allow other discovery or not allow discovery
that the clause says as long as everyone's agreeing. So I like to get
all of that memorialized in a - I suppose I got this from Richard Chernick
- scheduling order right at the outset of the case. Many of the matters
I do don't involve a tremendous amount of money, but a scheduling conference
can take 30 minutes, and preparing the order can take 30 minutes. I think
that hour of work upfront can often avoid a lot uncertainties later in
the process.
PHILLIPS: Nancy, I'd like to get
your view. First telephone conference call we had, both lawyers said they
needed nine months to prepare the case for the arbitration. I started
to say, "But this is arbitration." One of the other arbitrators said,
"Jerry, if this is what they want, this is what they get." But I came
back, and I think it's our duty as arbitrators to nicely, without coercion,
try to convince the parties in somewhat - some way to limit the discovery.
YOUNGER: I couldn't agree more.
I had a wonderful experience. I hope this is an illustrative war story.
In February of 1995, I'd been retired from Superior Court for about two
weeks, and I had an arbitration - first arbitration I'd ever been to,
to say nothing of conducted. And there was a law firm - there was one
from Cincinnati, a couple others from other parts of the country. And
they had an agreement - and it was a multi hundred thousand dollar matter.
They had an agreement that allowed no discovery except for exchange of
witness names. It was wonderful. It was like you must have felt sitting
listening to Lincoln and Douglas debating because it was just straight
advocacy. They had no idea what the witnesses were going to say, you know,
beyond their general preparation. And it was fascinating, and it was clear
and the arguments were interesting. It was just really kind of cool. I've
never had one since like that. It was just so neat. But ever since then,
I do everything I can, which is sometimes not a lot, to limit discovery
and stuff because I don't want it to look like litigation. I couldn't
agree more with your thesis, Jerry.
PHILLIPS: I had this case also where
one of the other arbitrators did a lot of international work, and he suggested
that all parties before they testify must give a written declaration of
what they want to do, what they're going to say. And we did that. Afterwards
I asked one of the lawyers what he thought of that. He said it will cost
us a fortune. It's much easier to prepare a witness and put him on the
stand rather than prepare a 64-page declaration. So we tried it, and I'm
not sure it's that good. But what do you gentlemen think - and lady?
TURNER: I must tell you, looking
at it from a judge's perspective, when I was a Superior Court judge, I
would ask the parties in a civil case where they waived a jury if they'd
be willing to agree to the use of declarations in lieu of direct testimony.
YOUNGER: Altogether?
TURNER: Right. And I had a case
with a ten-week estimate. It was a complex antitrust case. It was done
in six evenings in Superior Court, and in that scenario, it worked. But,
Jerry, I think you're saying there's going to be scenarios where all the
time spent on the declarations really ends up costing the parties more
and defeating the purpose of the arbitration case.
PHILLIPS: A lawyer recently, an
arbitrator recently said - a group of them agreed that they would rather
see the party tell their own story in their own words rather than submit
a declaration which is written by lawyers.
LAWRENCE WADDINGTON: One way to
look at it is look at the end of the case and what the grounds for appeal
are. They're very limited. And you start looking at the Demand for Arbitration,
and if you're looking at cause of action, if you're doing litigation or
if it's straight claims, look at the claims and the causes of action in
the light of what kind of appeal rights the parties have. They're very
limited, but the most common is the arbitrator exceeds their powers or
they won't continue a case or they refuse to hear it. Whatever those grounds
are, as long as you - and I emphasize Nancy's point that, as long as you
have a clear stake in what the claims are, you can start your award responding
to each one of the claims so you're not charged on appeal of not issuing
the award correctly or to the wrong cause of action or the wrong claim
or the wrong party, and also make sure that the parties in their legal
capacity are correct because sometimes people are being sued in their
individual capacity. Sometimes they're fiduciaries, sometimes they're
agents, joint venturers. Whatever their legal capacity is, that's the
way the award has to read, and if you come out awarding something against
something not in their legal capacity, you're already inviting an appellate
review.
WARREN: One thing I'd like to add
is, in terms of short circuit the hearing so it doesn't have to be as
long in terms of witness testimony, I did one the other day where we had
- there was probably ten witnesses on the witness list and they want to
get it done in a day. I said, "All right. We'll see how this goes." But
what we ended up doing, which I hadn't done before but worked pretty well,
is they would get to a witness, and the attorney would say, "All right.
This is what this witness is going to say," and they would do it in terms
of an offer of proof. And often the other attorney would say, "You know
what? I'll stipulate to that. We don't need this witness." So the witness
gets crossed off the list, or they would say, "There's only one point
there that I want to counter, and here's" - "if I brought my witness,
here's what they would say." And the other side stipulated to that, and
we went through the hearing very quickly. So that worked well.
HAMM: What other role can the arbitrator
play in making sure that the process is managed efficiently and that the
advocates sort of don't runaway with themselves and let it go too long.
PHILLIPS: On one case I tried something.
Jim Groton of Atlanta Georgia once told me about this, and I've used it,
and it's very effective. I put two experts on the stand at the same time,
and the plaintiff will ask his witness, the expert, some questions, just
a few. And then it moves over to the defense counsel to ask questions,
and then I may the arbitrator may ask a few questions. Then the next question
is for the other side. That worked extremely, extremely well.
YOUNGER: That's fascinating.
PHILLIPS: It gets to the truth of
the matter much quicker. In that case, I had a little difficulty because
one witness came from Brooklyn and the other came from India. And the
Indian was not going to get into confrontation with the other expert.
It worked perfectly when I had two witnesses from Brooklyn. They went
at it, and they basically agreed with one another.
YOUNGER: That's very interesting.
DOCUMENTS AND
DISCOVERY
WADDINGTON: I think you need to set up motion guidelines and discovery
guidelines if you're going to allow the parties to do that, to tell them when it
is that the discovery cutoff occurs just like in litigation, when your motions
have to be filed, when the briefs have to be filed. I have had considerable
trouble getting coordination on that because they want until the last minute to
file a motion. So I have made it a practice to use those cutoff dates. And that
comes in a modified scheduling order that I prepared. That way there's no
misunderstanding as to when things are due.
WARREN: And the other thing I think that needs to happen is getting the
parties to exchange information early on. It doesn't have to be through any
formal means. In the JAMS rule, there's an exchange of information, which I
think is actually the name of the rule, where you actually exchange documents
that you think are relevant, witnesses that you expect to call, even if it is
early on in the process, including experts, what you think their expert's going
to say and get that exchanged in an early - early in the process and have a date
by which that initial exchange should occur. And then in the JAMS rules, there's
a continuing obligation for the parties to continue to exchange that information
as the time goes forward. But I think getting that initial date down is
important to get the parties -
PHILLIPS: What do you gentlemen and lady think about the chess clock?
Have it worked out with the counsel that they will only have certain witnesses
on a certain amount of time or that they will finish their case within a day or
two days and you basically time how long they're going to be on the
stand?
YOUNGER: I haven't had a
phenomenal problem in arbitrations with things running long. I'm certainly not
saying never. You may not be charging enough if they take too long. I certainly
had that problem - I'm not 100 percent facetious about that. I certainly had
that problem occasionally at the courthouse. That's fairly rare now to me. What
do you think?
PHILLIPS: I agree with
you basically. I'm very careful about putting
-
YOUNGER: I guess I think it's rare
enough that I haven't felt a need to regulate
it.
PHILLIPS: One that was on the panel
is now judge of the Court of Appeal, Richard Mosk.
WADDINGTON: I don't think there's a
preparation of a joint exhibit book. When you have two parties and each with
their own numbers and letters, it getts confusing, and the vast majority of
arbitrations are documentary rich, and they both have most of the documents. It
makes it much easier to just pick up one
notebook.
PHILLIPS: On one case I had
seven file cabinets - documents. They were all numbered, and I thought, "My God.
Am I going to go all through these?" So at the end of the case I asked counsel
point out those exhibits that you really rely on, and I'll pay more attention to
those. That worked out very effectively.
WADDINGTON: Both of them.
YOUNGER: Have you ever had a major document heavy case where 5 percent of
the documents were of any particular significance? I mean, to me it's usually
not that high.
WARREN:
Exactly.
YOUNGER: If there are 200
documents, there might be about 6 of some consequence.
PHILLIPS: They feel that they have to
tell how the case - how the business relation went on, and they met on certain
days. There's a memo they put that in. A letter, they put it in. I agree often
they're not necessary.
DISCOVERY
DISPUTES
WARREN: One of the other areas I think the arbitrator can make a
difference in streamlining the process is on discovery disputes. They may get
into a dispute about, you know, "Well, they didn't give me these documents, and
I think they're important to my case." And what I always do is make sure that
the parties know that, if you run into any dispute, don't waste a lot of time
writing letters back and forth or preparing any major briefs for me. Simply call
my case manager, let her know there's a dispute, and if either of you wants to
write me a short letter to outline it, that's fine. Or if you don't, that's fine
too. We'll have a conference call, I'll hear the different sides, and I'll rule,
and we'll move forward. And that way the parties aren't engaged in a lot of time
and expense and -
PHILLIPS: I agree
with that. I tell counsel, "Don't make a motion. First confer, and then write me
a letter." If I feel it's important enough to have full papers on it, I will
order that. But very often it's not necessary.
YOUNGER: I typically require that they meet and confer in person. I do a
fair amount of discovery reference work, and I require it in that context too. I
think the so-called meet and confer letter may be one of the legislature's
biggest mistakes since statehood. They're awful and certainly never accomplish
anything as far as I can see.
TEMPORARY RESTRAINING
ORDERS
HAMM: So what about TRO's? Can arbitrators issue
them?
WADDINGTON: That's a good
question. Well, there is a provision in the - and, Paul, have you written on
this? Do you have any opinions on that?
TURNER: Well, if that's a remedy, that is one that would meet the test of
Advanced Micro Devices, Inc., vs. Intel in 9Cal.4th, then under those
circumstances, yes, a judge could issue a temporary a judge or arbitrator could
issue a temporary restraining order. But if it is something that is forbidden by
the arbitration agreement, that's another matter. Also you have scenarios where
it may very well be - the issue is one, for example, under the Unfair Practices
Act, Section 12, 17-1200 or 17-500, and under those circumstances, the
arbitrator would not have the authority to issue any sort of injunctive release
because the injunctive release must take into account the public interest.
YOUNGER: I've never been asked I don't
think.
PHILLIPS: I granted one
temporary injunction, and I said to the parties - the counsel, "This is very
technical. I want your help to draft it." And I sort of almost mediated the
injunction, and I said, "You guys are so close to one another on this. Why don't
we make this into a permanent injunction? Would you agree?" "Oh, yes," they both
agreed. The only thing that one side asked for and the other side agreed that in
the injunction would be a provision that, before somebody could hold anybody in
contempt, they would have to come to me for determination, and they agreed to
that.
WADDINGTON: How do you enforce
that in case of an alleged violation?
TURNER: I think that's a tough area of law. It's very unclear about how
to enforce an equitable order entered by an arbitrator. It's uncertain, and
we'll see what happens in the next couple decades here in
California.
PHILLIPS: I want to be here
to hear that.
YOUNGER: That's
interesting. To use Jerry's example, if you had that provision and you showed up
- let's say you wanted an OSC regarding contempt from the court and were met
with a signed written contract saying you can't do that until you see Phillips,
do you see there's a question about enforceability of
that?
TURNER: I think that, if the
arbitration agreement allows the arbitrator to issue an injunctive release,
doesn't prohibit it, and otherwise meets the Micro Devices, Inc., standard, I
think you would go into court to enforce the award, the determination of the
arbitrator; get a court order; and then, if that court order is violated, then
proceed with contempt.
WARREN: But you
need a court order first. You can't just go on the arbitrator's injunctive
-
TURNER: That's why I want to find out
what happens in the next two decades in California
courts.
PHILLIPS: But if the attorneys
agree that's a procedure they want, isn't that
enforceable?
TURNER: I would think -
thinking of it just tentatively and thinking out loud without prejudging how
courts are going to rule, it would seem to me that, in order to enforce using
the contempt - using a contempt as a mechanism of force, as a remedy, one would
have to get a court of law to enforce the arbitrator's award and then once it's
violated have the individual held in contempt.
YOUNGER: But he was talking about just
the opposite I think. He was talking - at least as I understood your initial
point was it was a preclusion of 12 contempt.
TURNER: Well, if there's something in the contract that says - forbids,
for example, an arbitrator exercising equitable powers or an arbitrator
exercising equitable powers or an arbitrator exercising the power to enter an
injunction, then clearly that would be - that would be an unenforceable order
because it would be beyond the power of the arbitrator because it would be a -
under those circumstances where the agreement expressly prohibits a particular
remedy and it's down to the power of the arbitrator, both under the United
States Arbitration Act, if this were in Federal Court, or in the California
courts or State Courts it would be beyond the power of the arbitrator and would
be an unenforceable order and shouldn't be confirmed by a judge, I would think.
WADDINGTON: Well, there is a couple of
problems with it. 1288 of the CCP does allow for a temporary restraining order,
but I don't think of TRO's or injunctions as equitable. I think of them as
provisional remedies. So if you look at it as a remedy rather than an equitable
doctrine, would that analysis still apply? And the second issue I have is, if
you're going to ask for a temporary restraining order from the arbitrator, you
have to use a conventional litigation standard in order to issue that temporary
restraining order, you know, the three-part conventional way in which courts
look at the immediacy and the merits and so forth. Does the arbitrator have to
use that standard? And, if so, does it have to be in writing? Can the arbitrator
simply say, "I think you should have a TRO," and then rewrite the order? My
thought would be that it would be better ab initio if somebody wants an
injunction. Incidentally, the test in 1288 is not the same as the ordinary
injunctive order. It's only if the temporary restraining order would affect the
merits of the controversy. So it's a different test.
(A brief discussion was held off the
record.)
WADDINGTON: But I think the
lawyers can certainly try. I would prefer simply recessing the arbitration and
going to the Superior Court and asking for the Superior Court to issue the order
and then have the Superior Court enforce it if there was non-compliance. Then
the next question is who does that? The arbitrator or the court? So Paul is
right. We'll know in a couple of decades.
YOUNGER: Wouldn't the court say it lacks jurisdiction
though?
WADDINGTON: No. There's a
provision that you can get a TRO.
YOUNGER: I confess lack of knowledge of
that.
PHILLIPS: Isn't this one
criticism of arbitration becoming so legalistic and so costly that people are
starting to not use it?
VIDEO CONFERENCING
WADDINGTON: Later. We're coming to that. Has anybody used video
conferencing, by the way, to do an
arbitration?
YOUNGER: In
arbitration?
WADDINGTON:
Yeah.
PHILLIPS: I've used
one.
WARREN: I did it in a mediation;
I've never done it in an arbitration.
WADDINGTON: I thought you did one in an arbitration in Tennessee or
something like that.
WARREN: No. I did
a mediation, but I didn't do an arbitration.
PHILLIPS: I had an arbitration where we had the people from Italy on the
television screen and short cross-examination, "Yes, I owe the $3
million."
YOUNGER: Then it was a wide
screen for the gestures and stuff?
WARREN: I was involved in drafting some rules that never got off the
ground to do - what were we calling it? E-Commerce Disputes or E-Disputes,
having actually a whole set of rules that would govern an arbitration where the
parties would never convene in the same place. The arbitrators would be in one
place and the parties would be in another. I think there's very good reason that
never got off the ground.
There's always the
danger, when you have video conferencing, because you don't know what kind of
coaching is going on. You don't know what's really happening in that room. As
the arbitrator, you use a little bit of control. Of course that happens when
people testify over the phone as well. And a fair amount of that does go on in
arbitration. But I'm always a little uneasy because I don't know what they're
looking at. I don't know who's
PHILLIPS: One problem I found in the conferencing in another case is
language. Somebody came from Italy. He did not speak English, he wanted the
lawyers said they wanted an expert. Each side wanted an expert, and I said maybe
I as the arbitrator may want my own expert.
DEALING WITH
DELAYS
WADDINGTON: What about the party during the course of the arbitration
that engages in ongoing delays and refuses to participate or engages in what
could be characterized as obstruction as to dilatory tactics? How did you handle
that?
YOUNGER: Did you mean during the
hearing or in the lead out?
WADDINGTON:
No. During the - once we got into arbitration - it could be either way, but
during the arbitration, there's plenty of opportunity for dilatoriness prior to
the arbitration. We might talk about that first. What do you do if you sense
that one party is dragging its feet?
YOUNGER: I have a standard thing that I tell them in our initial
conference, which by the way is more often than not telephonic. I go through a
whole bunch of preferences. Some things are rules; some are leanings. I always
said in an arbitration that, if you want to agree that I will only listen to
witnesses under 5'8" with green eyes, I guess you can do that if there's no
public policy involved. But here's what I'm going to do if you can't agree. And
one of the things I tell them is "You can take the boy out of fast track, but
you can't take fast track out of the boy, and I assumed you checked me out a
little before you selected me, and I will move your case along. I agree that
it's your forum and that you have a lot to say about that. So I won't try to
move you along like I did in court, but neither will I let you go forever
because arbitration according to the law and I think common sense is supposed to
be a speedy and simplified remedy and I believe in that. And when you signed up
for me, you got somebody who read it.
WADDINGTON: What if that doesn't happen? Do you think you have the power
to issue sanctions?
YOUNGER: Well, I
set deadlines and - if they ignore them?
WADDINGTON: Well, if they have all kinds of excuses, their grandmother is
sick in Hawaii. Or just in general can you sanction people for non-compliance
with your rules?
YOUNGER: I usually
handle that informally, personally. I usually tell them, "This isn't a jury
trial. There's one person on the entire planet earth that matters to you in this
case. Don't push your luck, fans." It doesn't come up. It's not a big
problem.
SANCTIONS
WARREN: I don't know what the answer is with regard to does an arbitrator
absent agreement have the power to sanction the parties, but I think that's
another reason for the importance of having arbitration rules to follow when you
are doing an arbitration. The rules that we typically follow have a provision
that the arbitrator does have the power to sanction the parties. And as long as
the parties have signed on to the rules and the rule to sanction the party is in
there, then I think the arbitrator does have the power. I've never personally
done it, but there's always that threat. I also think, if you do the scheduling
order right up front and you have the dates in there, the parties don't do their
discovery or don't do what they're supposed to do by those dates, you can
enforce those dates absent, of course, a reasonable request for continuance that
you ignore and then becomes a ground for vacatur later. They have the dates,
they do it, the arbitration date comes up, they need to show up and if they
don't you can go ahead and have the hearing in my view.
YOUNGER: I've had very little trouble
with this. It's not a big problem.
WADDINGTON: I don't know that I've had trouble either, but I know some
people have. Jerry, do you?
PHILLIPS:
Not really. And they know as an arbitrator -
WADDINGTON: You hold all the aces.
PHILLIPS: That, and they will ask me for attorneys
fees.
YOUNGER: I'll tell you where it
comes up once in awhile. They say, you've got to exchange, let's say a witness
list by date X, and it doesn't get done. They're on the phone and Joe Dokes is
saying that Bill Smith can't call certain witnesses because he didn't reveal the
names by such and such a date. I'll ask him and if he's got a really good
excuse, I'll say, "You'd better get it in the next couple of days." And if he
doesn't have a good excuse - I might have a couple times excluded a witness or
two, not very much. And usually the reason they haven't done it is because it's
not that big a deal after all. But when you say sanction, I guess that's a
sanction, but that's about - I don't think I've ever issued monetary sanctions
in arbitration in 11 years.
WARREN:
What I'll typically do, if they've left a witness off or the other side is
surprised by evidence, is if the other side wants an opportunity to have a
little bit of extra time to review the evidence or do something - but they never
do because they want the arbitration to go forward, but I always like to give
them that opportunity. I don't like to exclude evidence even if the parties
haven't complied with all the rules because it's one of the grounds of vacatur,
and I think it's important that the facts get
in.
PHILLIPS: Although, I've heard
arbitrators say they're too fearful of the exclusion of evidence so they let
everything in, but do you know of any case where a party has been sanctioned by
a court in some fashion for not -
YOUNGER: No.
WADDINGTON: Paul,
do you have any appeals on that issue at all?
TURNER: None.
YOUNGER: It's
pretty hard to get it vacated. It's happened to me once in 11 years, and it was
reversed on appeal. So I'm a lot more concerned about the freeway going home
than I am about that.
TURNER: I think
there are more efforts made now to vacate awards, and the California Supreme
Court and the California Courts of Appeal have given parties avenues of attack
upon arbitration awards. And that's part of bringing litigation into the
arbitral process is that there are now concerted efforts to get out from
underneath the arbitration awards. And there's a lot of ways parties can go at
an award.
GETTING AROUND AN ARBITRATION
ORDER
WADDINGTON: How do you feel, Paul, about letting lawyers use mandate as a
way of getting around an order that grants arbitration?
TURNER: Well, the issue is simple. Was
there an agreement to arbitrate? If there was, then we certainly are going to
deny the petition. If there was no agreement to arbitrate and there's been an
order compelling arbitration, we'll take steps, hopefully, in every case where
it's appropriate to allow the party to litigate the matter in court. But we
don't get that very - we don't get that many of them to be candid with you. And,
generally - and I'm only speaking as a judge who reviews matters or justice who
reviews matters outside of Los Angeles Superior Court. Los Angeles Superior
Courts invariably get it right.
YOUNGER: It's tricky for a trial judge to the extent I can remember. Back
before World War I when I was doing this - where it's tricky, Paul, is where
there's a signature and maybe a capacity question. It's Joe Dokes and Joe Dokes,
Inc., that is being sued and Joe signed that thing and maybe Joe Dokes signed
somewhere else on a different line or he didn't sign it twice or something like
that, that's kind of where it comes up. To be honest, sometimes you're not
really sure just how that should go.
TURNER: I think any good trial judge is going to have some question about
it, he's going to actually require live testimony, and the trial judge has the
authority to do that. The Rosenthal vs. Great Western Bank case explains that in
some detail. And if there's some question about who's telling the truth and
who's not telling the truth or who's confused, which is often the case, the best
course of action for a trial judge is to bring in the parties who have some
testimony to offer on who signed the agreement and when and make a decision. And
if there's conflicting facts, I can assure you that on appeal the factual
findings of the trial judge are going to be upheld.
PHILLIPS: After finding of the
arbitrator?
TURNER: No. If the trial
judge is deciding whether there was an agreement to arbitrate, which is what
trial judges are supposed to do, if there is evidence - say the question is did
the defendant sign the agreement or not? If that's the issue, then if the
defendant comes in and says, "I didn't sign it," the plaintiff says, "The
defendant did sign it," and then the trial judge says, "I believe the
plaintiff," invariably on appeal, the decision of the trial court will be
upheld.
IS ADR TAKING OVER?
WADDINGTON: Let's talk a little bit about what Jerry raised on litigation
language and the perception that jury trials are vanishing and that arbitration
is taking their place. That seems to be the trend, and now there are rumors that
arbitration is being cut back a little bit either because of the court or
because they prefer mediation instead of arbitration. The initial world of
arbitration was commercial when the Supreme Court of United States and
California both added employment and consumer arbitration and now franchise
arbitrations which are universally, unilaterally imposed. They're non-negotiated
and frequently with a party who has disproportionate economic power. The
legislature has made some attempt to rectify that by giving consumers some
advantage. The California Supreme Court has been very active in reviewing
employment cases, and I see now that the employers are beginning to redraft
their employment agreements for more equitable distribution of power between
themselves and the plaintiffs, but I sense that there is still a number of
lawyers who are drafting agreements that will give some extra effort to the
employer rather than the employee.
TURNER: I don't think jury trials are gone at all. There's no question
there's fewer cases filed in the Superior Court. When I came to the when I came
to the court of appeal in 1989, there were roughly 1.7 million cases - civil
cases filed, and that
includes every type of
civil cases in California.
YOUNGER:
That's state-wide?
TURNER: That
includes state-wide, small claims, cases that are going to be court trials,
cases that are going to be jury trials. The 2005 statistical report of the
Judicial Council indicates that roughly 1.5 million civil cases, again, the same
type of cases, were filed in 2005. There's always going to be plenty of jury
trials. Why is there a difference between the 1989 and 2005 report? I think
arbitration is one of the big factors. It is now included in numerable consumer
agreements. It is an attractive - even in terms of post-dispute scenarios, it is
an attractive option for many, many parties in both the commercial area but also
in the more traditional tort areas. There's excellent arbitrators who are
available. The cases can be resolved quickly and with greater promptness. So
there's a lot of things that move people even in the post dispute environment to
seek out arbitration, but still there's a lot of litigation out there.
YOUNGER: You know there's a funny
irony. We all read from time to time of op-ed pieces, editorial pieces that talk
about the evils of arbitration versus your inherent right to a jury trial. So
sometimes they're pretty offensive, to be honest, because they all presuppose
that all arbitrators are on the take from whoever the author doesn't seem to
like very much. And the funny thing is there are areas in which I think
arbitration fairly unquestionably can work better for plaintiffs.
The easy example is medical malpractice. You
don't run into a lot of lawyers who don't say that, if they're plaintiff - of
course you're not going to get the big hit that you might get from a jury, but
in terms of the batting average, I think most plaintiff lawyers who do medical
malpractice will say their odds of winning are better in arbitration than they
are in a jury trial because doctors still seem to enjoy this mystical power over
juries. And I certainly strenuously avoid keeping any kind of statistics. Having
said that, I'll bet anyone in the room 20 bucks that I've given more plaintiffs
awards than they would have gotten from the same number of juries since I've
been an arbitrator. But some of my best friends are doctors to quote the old
phrase, but I don't worship them.
TURNER: If I can add one other thing, another factor that plays into this
decrease in the caseload is the availability of mediation, and I think another
factor is the extraordinary cost of litigation.
PHILLIPS: Absolutely.
YOUNGER:
Absolutely.
TURNER: And I think also
mixed in there is the integration of the legal community. When I was a new
lawyer, virtually everybody was a white male. We had excised - when we had that
de facto segregation, we excised 60 percent of the intellectual horsepower of
this country from being lawyers, and I think lawyers and judges now are more
competent than when I was a new lawyer because of that. We've brought people in
who once were excluded from the practice of law.
PHILLIPS: In the motion picture
industry in the 1950's we had one - I was counsel to the United Artist
Corporation, and we had one arbitration, and when I told the president of the
cmpany it was an arbitration, he was astounded. "How did we get into
arbitration?" Today most of the motion picture companies put into their contract
arbitration. One important reason is to prevent a runaway jury. But when I
practiced - and I always told the clients, you should want an arbitration
provision in the agreement because you can't - you don't have the money to fight
the corporation with its counsel, but that is not as great in arbitration.
TURNER: You know, I've talked to a
number of plaintiff lawyers about this, and I think that the mature view that I
get from very, very successful plaintiff lawyers is that they want the
opportunity to arbitrate, but they would prefer that it be a decision they could
make after discussing the matter with the client rather than having the client
hand them their employment contract and find out that they're consigned
arbitration. But that's just their preference, and that preference, insofar as
it runs up against the United States Arbitration Act, is just out of
preference.
PHILLIPS: I think in
contract adhesion and employment agreement and consumer agreements, they are
very different with respect to a jury or not than a commercial
business-to-business litigation.
TURNER: There's no question, when the United States Arbitration Act was
enacted, all they were talking about were commercial disputes. If you look at
the committee reports back in 1919, that was the issue, commercial disputes. But
now it's changed, and I think that's one factor in the midst of a whole series
of other factors that have led to the reduced use of the court system.
PROTECTING THE
PLAINTIFF
WARREN: And I think as arbitrators, those of us asked to conduct
arbitrations in consumer matters where there was a contract of adhesion that we
need to tread very, very carefully and make sure that the rights of the claimant
and the plaintiff are protected. I know there's a lot of organizations that have
drafted minimum standards to make sure that there are protections there. I
prefer to do cases where, even though there may have been a contract requiring
arbitration, that the parties are also on board at the time we do it to do the
arbitration. And I've been lucky, and I've not had to do a consumer arbitration
where the consumer has come kicking and screaming. They've always signed a
stipulation or at least in some way indicated that they're on board with the
arbitration, and I think in terms of protections in the consumer area, one of
the things that's happening some what, although you can't write in the right to
appeal or have an appellate review of the process, there are some agreements
that are suggesting that, if one or the other party isn't happy with the
arbitration award, that they can have a second arbitrator look at it and have
their right to review in that way. And sometimes even the same standards that an
appellate court would use, the second arbitrator must
use.
YOUNGER: Doesn't one of your forms
at JAMS have a provision for an appeal?
WARREN: We have an optional appeal process, but I just actually got an
arbitration clause the other day - I thought I brought it with me, but I didn't.
Yeah, I did. Here it is - where the actual clause from the employer writes in,
"An arbitrator" - blah, blah, blah, "either party can request within ten days" -
you got that?
YOUNGER: Can you spell
that for her.
WARREN: "That after the
issuance of the award, shall be subject to affirmation, reversal, or
modification following review of the record and arguments of the parties by a
second arbitrator who shall, as far as practical, proceed according to the law
and procedures applicable to appellate review by the California Court of Appeal
of a civil judgment following the court
trial."
YOUNGER: Fascinating. I've
never seen that.
PHILLIPS: But that
makes arbitration much more costly, once again, if you have to have a transcript
of the proceeding.
WARREN: But, again,
it's a procedure that the parties are drafting, the parties are agreeing, and
the parties are building some safeguards. And especially when you have a
contract of adhesion, I think the more protection that you give to the party
being forced into the arbitration the better. So you have to weigh that against
TURNER: Wouldn't you agree though
that, in the adhesive contract environment, that building in a second level of
review would increase the power of the party who imposed the arbitration clause
upon the consumer?
WARREN: It could to
the extent the consumer prevails at the initial arbitration, and then there's an
appellate or the second arbitrator process, and then they
lose.
COST VS.
EFFICIENCY
TURNER: I know in the labor management context, labor generally doesn't
want to have an appellate procedure available because management is the one who
will exercise what is perceived to be the superior economic power and pursue
that remedy. So I think someone representing the consumer needs to think long
and hard about whether you want to have that second option. Where somebody who
has more money than your client and for the lawyer has more resources than the
lawyer is willing to or wants to front, I think they have to think that out.
WARREN: I agree with you. One of the
things that could be a deterrent is the fact that, in these consumer cases, it's
the respondent or defendant who's paying the cost of the arbitration. So to the
extent there's an appeal, they're paying the cost.
YOUNGER: I have found over the years
an interesting thing. I wind up being involved in drafting arbitration clauses
quite a bit because you'll get a mediation, and they'll say, "We've got a
horseback agreement. We're going to do a longer agreement." And maybe there's
confidentiality, and then there's enforcement and finalization issues. And early
in my career I thought, "Gee, if you want to put in an arbitral feature and you
want to throw me in as an arbitrator" - a couple surprising things happened.
Number one, a ton of people throw in an
arbitration when there's a problem feature. Number two, I don't think I've had
one of them who didn't put me in as the arbitrator. So I wind up helping him
write the thing a lot. And I tell him, "Again, you can agree to whatever you
doggone well want to including" - we've even discussed the subject of appellate
rights a couple times. But I said, "If you're asking my advice, you've got a
long haul on this. You've got it pretty much settled." So quick and dirty is
what I'm going to do. You give me maximum discretion, and this is going to be
fast, it's going to be a couple phone calls, it's going to be how soon can you
folks get together, and they almost always go for that. Quick and dirty I'll
give you 90 percent want that.
PHILLIPS: I made a study some years ago in the motion picture industry
what the industry thought of Muncharge (phonetic) in an Intel case. And I asked
them after those cases came down, does that affect you as to whether you want
mediation or arbitration? And the most important thing that I found out is that
they want finality and quick finality.
YOUNGER: Absolutely. Totally agree.
TURNER: I was just going to say something. I think if you're corporate
counsel and you're charged by your clients with drafting an arbitration
agreement - I think for a business, arbitration is a less costly, more
expeditious method of dispute resolution. The cleaner the arbitration clause, in
most cases it would seem that that would fit into the business model of a
client. It's not in the client's interest to have an arbitration clause which is
so tricky that you're going to get forced into litigation, possibly even in
front of the California Supreme Court. And I think it means sitting down with
the CEO or the deciders in the company and saying, "What's our business model?
Do we want our executives sitting in depositions all day? Do we want the risk of
a very dicey arbitration clause getting us dragged into court where we may
litigate to death the question of whether to arbitrate, lose, and find ourselves
in a jury trial?" And I think that's very, very important. And the cleaner the
arbitration clause, I think generally the more that serves the client's
interest. The minute you start throwing these things in about appeals, efforts
to try and perhaps shift some of the risk over to the other side, well, I think
that I think most corporate counsel would agree that's risky business, and I
think corporate counsel for companies who are dedicated to succeeding, to
increasing productivity, are looking for economical ways to avoid going to
court. A lawyer I know once said, "I'm not a very goody lawyer except for one
respect. I keep my clients out of court." And he does that by drafting solid
arbitration agreements and promptly arbitrating the disputes. I think that's a
definition of an excellent lawyer.
EDUCATING ON
ARBITRATION
PHILLIPS: I'm doing a study now, and I'm shocked with the results that
business men do not understand mediation/arbitration, and the business schools -
maybe Harvard is an exception, but the business schools do not teach ADR as a
way of resolving disputes. They talk about negotiation and a little bit of
negotiation about mediation, but they don't in business schools. I went to
business school. I went to Tuck School at Dartmouth College. Business schools do
not teach ADR to resolve disputes.
TURNER: I think one of the problems is - I'm 58. Lawyers my age generally
don't have a very good handle on the total scope of law of arbitration, and
that's because when I went to law school, I had a labor law class where we
talked about Labor Management Relations Act Arbitration for three or four days,
and that was it. And as a result, lawyers who are my age, I think, don't have
the same level of sophistication as perhaps newer lawyers where this is
something that's taught more in law school now than back in
-
PHILLIPS: I teach at Pepperdine Law
School, and there's a whole organization at the Pepperdine Law School, the
Strauss Institute, where all they teach is
ADR.
TURNER: That's the reason younger
lawyers probably are going to be a little more in tune - on some of these legal
issues, are going to be more in tune with the legal realities than people my
age.
YOUNGER: Jerry, I think if you
put out a questionnaire and just asked open-ended question of 100 lawyers chosen
at random, "What are mediation and arbitration?" I think you'd get about 65
percent right, wouldn't you?
TURNER: It
wouldn't be real impressive. To give an example, in terms of enforcing the right
to arbitrate and now what issues are arbitrable, the United States Arbitration
Act has enormous impact. I rarely see that issue briefed despite the fact that,
if you're going to debate the issue, you're going to have a case where you're
going to fight whether there's a duty to arbitrate, if it is a case which arises
interstate commerce - or not arises, but affects interstate commerce, under
those circumstances, that case must be arbitrated. And I don't see lawyers
litigating that because I don't believe that we have a level of sophistication
we have in all sorts of other areas of the law. I hear cases in Los Angeles, and
we get the best lawyers in the country that appear in front of us, but because
when we went to law school we didn't learn about it, we don't litigate with the
same level of precision and effectiveness that you see in other areas of the
law.
WADDINGTON: Well, one of the areas
that - one of the reasons maybe that lawyers don't pick up on arbitration as
much as possible is because the language in the appellate courts constantly
refer to litigation terms. I mean you start out with collateral estoppel and res
judicata and petitions and motions and remedies, using the conditions precedent,
consolidation, severance, illegal contracts, illusory contracts. All the
opinions use litigation language to resolve what should be a non-litigation
product so that lawyers who read on an occasional basis of a case as to whether
or not their petition for arbitration is a void contract or avoidable contract
with the U.S. Supreme Court - as a matter of fact you wrote about recently -
doesn't that deter - yes, you did. I may not know about injunctions, but I know
about your opinions. They use that language in analyzing arbitration when
arbitration is really an informal, non-legal
format.
PHILLIPS: It should be, Larry,
but is it?
YOUNGER: It should be, but
I'm not sure I understand your point. Aren't you really talking about appellate
opinions about Superior Court determinations and motion to compel or vacate? I
mean, the Court of Appeal doesn't once in five years get into the merits of the
arbitration itself.
WADDINGTON: I'm
not talking about that. I'm talking the way in which arbitrations either
challenged at the time there's a petition to compel arbitration or when there's
an award issued.
YOUNGER: But that is
litigation when it's in Superior Court.
WADDINGTON: Well, the point is that it permeates the opinions, and I
think it has a sense of deterring people from understanding the difference
between arbitration and litigation. If you read the New York Appellate Division,
their average arbitration decision is three paragraphs, and not one word is in
Latin or any other legal term. It's just, "Well, they testified to this. They
testified to that. Looks okay to me."
YOUNGER: What's that doing in the appellate division? You lost me. I
don't understand.
WADDINGTON: Well,
that's their Court of Appeal.
YOUNGER:
I understand that, but why is there an arbitration decision in front of the
court? How does that -
WADDINGTON: It's
an award.
PHILLIPS: I think move to
vacate.
TURNER: First of all, in order
to compel arbitration, there must be a written agreement to arbitrate, to submit
to arbitration. There has to be - that is the first step in any decision about
whether to compel arbitration or prevent arbitration, and that's a contractual
issue. Why is it in California lawyers often fight more over the issue of
whether to compel arbitration, which causes us then to use these in discussing
arbitration and the duty to arbitrate to use these contractual terms? The reason
that we do that is because in California lawyers will fight more, I think, over
the duty to arbitrate. Arbitration on the East Coast, as I understand it, is
much more engrained in their legal culture.
WADDINGTON: That's true.
TURNER:
Here in California it's not as engrained. They're different legal cultures.
California lawyers often act differently than New York lawyers, which is why I
live in California.
HAMM: What's the
variable that's different?
TURNER: It's
the culture of the East Coast and New York - I think it's fair to say, New York.
And part of their culture is they have this gigantic economic engine. And that's
where the pressure came for the United States Arbitration Act. It came from
lawyers on the East Coast; whereas, here there's cases where lawyers would
rather have the case in front of a judge and jury. It's a cultural thing.
YOUNGER: Well, there's no way to say
this awfully discretely, but historically, confidence of the business community
especially at the upper levels and the integrity and ability of the courts
particularly in some North Eastern states, which shall go nameless, was much
more of a problem than it is here. I can see where, if you had a case worth
300,000 or 400,000 bucks, selecting your arbitrator in conjunction with the
other side might be better than wondering whether you got the local party
chairman's best friend, and that's not that big a problem
here.
TURNER: Well, I'm a big supporter
of the East Coast Judiciary but excising
PHILLIPS: You're a California judge.
TURNER: But let me excise myself from the California Judiciary. It is
excellent. It is excellent because governors take seriously the obligation who
to select and to be judges and because we have strong rules that provide for
integrity and because it is basically a non-partisan judiciary. And I think
that's one reason why lawyers sometimes say I want this case - they go to the
client and say, "I want this case heard in a California courtroom with a
California judge with a California jury rather than have an arbitrator decide
it," and that's what I think is the difference in the opions. Lawyers will fight
over it here. There, part of the culture is "We'll let the arbitrator
decide."
YOUNGER: You just said that
better than I did. I think we're saying the same
thing.
WADDINGTON: I do too.
TURNER: I just want to indicate my
strong support for East Coast judges.
PHILLIPS: I was astounded recently. I made a study of whether lawyers do,
in fact, advise their clients about the existence, the availability of
mediation/arbitration. And my finding was that lawyers do not do it as often as
you would think, and therefore, I petition that the Revision Commission put in a
provision that lawyers must advise their clients about mediation/arbitration.
TURNER: I think that's a non-delegable
duty. I think a lawyer has got to say, "We have this other option out here. I
think this is the right thing to do or the wrong thing."
PHILLIPS:But they don't. Very often
they don't. I've lost my battle nine to zero.
WARREN: There's a program in Santa Barbara County. It's a unique program,
as far as I know, where for cases over 50,000 the judges get it but they can't
order mediation. But what they're doing is they're ordering every case over that
into a program where they meet with a neutral, and the neutral sits down with
them and their clients - and the clients have got to be present - and explain
what a mediation is, explain what an arbitration is, explain what a neutral
fact-finding endeavor is, prepare what it would cost to go through these
processes versus what it would cost to go through litigation, and then ask the
parties or lawyers if anybody wants to engage in one of these processes.
PHILLIPS: Although that's late in the
game.
WARREN: No. It's fairly early
on.
YOUNGER: But after the case is
filed.
WARREN: Oh, after the case is
filed. That's correct.
PHILLIPS: The
case must be filed.
YOUNGER: Jerry, at
about 1998 or '99 when I had left JAMS, I was an independent neutral, but I had
an office at a large law firm since deceased so I don't have to worry about
slandering them. But I was to go on behalf of the firm on a trip to China and
Japan talking about litigating Americans. We were well into setting that up, and
I presented an outline of what I was going to talk about, and it was very heavy
on saving money and resources and hassle. These are pretty big deals to Asian
executives anyway, staying out of the lime light and this kind of thing. And I
thought it was a pretty coherent outline, and this very senior guy in the firm -
indeed a member of the Bar in both Japan and here - took one look at that and I
mean talk about getting my ticket canceled in a hurry. They would have died than
have me talk about ways of avoiding lengthy and costly litigation. Boy, that
trip made the Invasion of Iraq look terribly successful compared to how fast
that fizzled because they - you know, large law firms don't want any part of -
TURNER: Well, I think good lawyers
want to protect the client. Protecting the client is the name of the game, and
lawyers who sacrifice their client's interest in the interest of - for their own
personal financial interest, need to step back and rethink who they are and why
they became a lawyer. I really believe that. I don't doubt for a fact that -
PHILLIPS: You said before that the
real problem to some extent is that the lawyers have not been educated about
mediation/arbitration and are not comfortable with that procedure. They're not
educated and they're not comfortable with that procedure.
YOUNGER: Mine was not an educational
problem. Mine was exactly what Paul's talking about. I couldn't agree more. I
was fairly shocked at the time. I guess I'm naive.
PUBLIC
OPINION
WADDINGTON: Part of that educational problem has to do with the press.
The Los Angeles Times recently ran an article highly critical of what they call
temporary judges, secrecy of the process, and justice for the rich and none for
the poor, which has been sort of the mantra of people who are opposed to
arbitration. And I think that, in terms of education in the business schools,
that's one way to go. I think there has to be somewhat education by arbitrators
themselves that, yes, it is private, but in the vast majority of cases, the
parties want it private. There is no reason in the world why two companies that
have disagreement over the goods and services of their particular organization
need to launder that in public when it doesn't affect public interest. I think
the California Supreme Court has tried to make that distinction with some
success. Where you have unlawful competition or unfair trade practices, maybe
that's not the kind of place that we should have an arbitration but where the
public, in general, as a general practice needs to be informed of that. What is
your perception of that? Is that so, or what should we do?
TURNER: Larry, could I just offer one
word of caution. If a case is going to be arbitrated in secret, that's fine. The
parties can agree to that. But if there's going to be post-award litigation
about the arbitration award or something that went on during the arbitral
proceedings, that is a matter that is going to be litigated largely in public.
Rule 243.1 requires that the papers be filed in public. And with some
routineness, I see cases where the parties have litigated in private and now
want to continue to fight it out in court. And courts are public institutions;
so parties who decide they're dissatisfied with the arbitrator's award after
having a perfectly legal, perfectly ethical, perfectly moral, confidential
arbitration should understand they may be required later to litigate, air their
dirty laundry in public. They may be required to do that.
PHILLIPS: That's a small number.
TURNER: I agree with you, but the
point is that clients need to know that. They need to know that, if they're
dissatisfied with an award that's been done appropriately in private, that when
they go to court, it can become a matter of public knowledge.
YOUNGER: The article to which Larry
spoke was in a column called the "Golden State" by a man named Michael Hiltzik
more or less on the 10th of March. Did you see my response that I wrote to him?
I wrote a pretty lengthy response. And he wrote back, and I will say his
response was courteous and comprehensive, but there were some things that he
simply did not understand. He was very critical of Steven Lax for not being
willing to discuss his reasoning in the Michael Jackson child custody matter
with him. And this man, while he's an articulate author and so forth and he did
respond politely to me, simply did not comprehend that the problem had nothing
to do with private judge/public courtroom, it had to do with the judge's refusal
to discuss pending litigation with him. And he thought that was a feature of
private judging. He simply didn't understand the issue, and that's just one
example. There were two or three other things in there. The unfortunate thing -
and sometimes the press sometimes has to worry about - is he sounded quite
sophisticated in the article and indeed in his response to me. He uses the
English language very well, but he didn't get it, as the phrase goes, in terms
of legal issues certainly including what Paul just said.
TURNER: I can't discuss that case
because it's a pending case, but let me say this: Any lawyer who believes
that a reporter has gotten something wrong needs to write a letter to the
reporter in a courteous way documenting what was wrong, whether they're talking
about the legal system, about a particular case. And I think arbitrators would
feel they're treated unfairly by a journalist. From the ethical limitations that
are available to them, explain to the journalist why they think the journalist
got it wrong.
HAMM: Generally
speaking, what can the neutral community do to educate lawyers in communities
and the press and the public in general about alternative dispute -
PHILLIPS: Let me cut you off
immediately, and that is I'm against the press, when a case is in court, talking
about the case itself and it goes on television and the jurors see that and
lawyers believe that they're helping their client - maybe they are - by going to
the press and having everything on television. I like the English system better
where, during a trial while the case is pending, the press are not allowed to
make comments about what's going on in court.
TURNER: And that's one of the benefits of arbitration. We're talking
about arbitration now. You can have proceedings be absolutely - particularly if
the parties want it and agree to it, no one will ever know what happened.
WADDINGTON: But I think the press is
concerned about disclosure. They want things disclosed. They don't like things
that are done in secret. And when something is done in secret, even with both
parties agreeing and enthusiastically so, there is a suggestion that somehow
this is maintaining some kind of a secret operation that should be disclosed to
the public, and this is a democratic society.
TURNER: I have never seen a reporter assert - we're talking now about
arbitration. That's all I'm talking about. I've never seen a reporter assert the
right to access to a private arbitration proceeding and - let me say this -
that's all I have to say about it.
YOUNGER: They don't necessarily understand, Paul, the distinction between
trial by private judge and trial by arbitration. Those are just all legalistic
words.
TURNER: The California Rules of
Court, which were adopted effective January 1, 2006, make it clear that private
judge proceedings after January 1, 2006, are to be open to the public.
PHILLIPS: What do you mean by "private
judge" as you used it?
WARREN:
Temporary judges.
TURNER: Yeah,
temporary judge. I'm sorry.
PHILLIPS:
Okay. That's not arbitration.
TURNER:
Absolutely.
PHILLIPS: Absolutely what?
WARREN: Absolutely not.
TURNER: Absolutely not. An arbitration
can be private if that's what the parties want.
YOUNGER: But the press doesn't
understand that.
WADDINGTON: And the
9th Circuit does not agree with that either. They do not think that
confidentiality is indispensable to arbitration.
TURNER: But once the case goes to
court, confidentiality is largely out the window.
WADDINGTON: I'm just talking about
arbitration.
PHILLIPS: Only if
appealed.
TURNER: If a case goes to
court - in other words, there's a challenge to the award, challenge to how the
arbitration proceeded, well then it's going to be public. By and large, unless
there's an overriding interest which would override the presume right of the
public to access what's in a court file.
YOUNGER: Because the award has to be filed as an exhibit to the petition.
So there it is.
TURNER: I think
generally what - I think most judges would say that, when something is in an
arbitration petition, even if the parties had agree it to be a secret, Rule
243.1 does not allow it.
WADDINGTON:
That's if there's a petition. Supposing there's a non-litigated case and they go
into it without any petition at all?
YOUNGER: What if there's a petition to vacate -
WARREN: And there's no enforcement of
the award, and there's no vacatur motion. That's the circumstance you're talking
about, I assume.
YOUNGER: The petition
to vacate has to attach to the award if I'm not mistaken.
WADDINGTON: Well, if there's no
litigation on file and the parties agree to go to arbitration and they have an
arbitration and there's an award and there's no explanation of the award, it
just, "You win $5,000," what's the press going to get out of that?
WARREN: Nothing. And I agree that the
parties should be able to keep that confidential as long as there's an agreement
between both sides that it should be kept confidential. Part of the problem
comes in, I think, in some of these consumer-type arbitrations where one side
wants it confidential and the other doesn't. I think those are different, but
when you have two parties that agree that they want to keep their arbitration
quiet and neither one of them filed a vacatur motion, or a motion to -
PHILLIPS: And it is confidential -
WARREN: - it should be confidential.
WADDINGTON: If there's a disagreement
as to the breach of the terms, then it becomes public; correct?
WARREN: If you're asking the court to
assist in any way, it's going to become public.
TURNER: Unless there's an overriding
public interest, and that's resolved under Rule 243.1. Then the matter is to be
heard in public. The papers that are filed in court and the proceedings in court
are presumptively open to the public, i.e., a journalist.
WADDINGTON: And you have written to
that effect.
TURNER: Yes, I have.
WRITING
AWARDS
HAMM: Let's move on to some of the practicalities of writing awards.
They're not required except in employment cases. Do you -
YOUNGER: I totally disagree with that,
by the way.
PHILLIPS: I do a lot of
work for IFTA, and they require a reason -
HAMM: Do you write awards in every case that you hear?
WARREN: I do unless there's a
settlement beforehand.
WADDINGTON: And
so do I, and I know Eric does.
PHILLIPS: The reason I do it is because many of my cases involve an
American company and a foreign country.
TURNER: I've never arbitrated a case, and the odds are I never will. But
I can tell you a good reason to write out your award is, because if it doesn't
look right, and it's not right, it's probably not right.
YOUNGER: I think it's a closed - I
know we have a fundamental disagreement and there are a few people on the planet
that have as much confidence in Judge Waddington's judgment and wisdom of the
laws. I have to disagree. I think 1283.4 is about as mandatory as it can be. It
says, "Shall be in writing and signed by the arbitrator concurring therein," "It
shall include a determination of the issues." I don't know how you get around
that, guys.
WARREN: I think there's a
difference between writing a reasoned award where you put all your reasons for
decision and a difference between what we call a bare-bones award where you
simply say, "Claimant wins $5,000."
YOUNGER: I'm very familiar with and have worked in three judge panels
with arbitrators who agree with you. I just don't think that's legal under the
California Arbitration Act absent a stipulation of the parties. I sometimes,
when I know the people are maybe in trouble with money or something, I say,
"Look, if you want me to just say who wins and how much" - "how much involved, I
will do that. I won't give you any statement of reasons." I don't think I've had
anyone agree to it.
WARREN: I haven't
either, but I always give them that choice because it's a matter too of
compensation. Do they want to pay me for 20, 30, 40 of reviewing the evidence or
writing an award, or do they want to do an hour's work?
YOUNGER: The answer with both of us
has only been, yes, I want to pay you. I've never had anyone do it, not once.
PHILLIPS: They all want it because
they want to know how you got there. The lawyers want to say to the client,
"This is his reasoning, and he may be right on this reasoning." I had a case -
APPEALS
WADDINGTON: How many of the cases that you get are critical of awards,
and if so, what is the most common complaint about an award on appeal?
TURNER: The most complaint on appeal
is that the arbitrator incorrectly decided the merits of the award. I'm being
totally candid about that. That's what the lawyers say. Shrewd lawyers though
will characterize it as a challenge to the power of the arbitrator, and we'll
say that the arbitrator did not have the power because of a violation of an
important statutory right. And the case that began this was the Board of
Education vs. Round Valley Teachers Association in 13Cal.4th. Round Valley
characterized their holding as one involving exceptional circumstance, but now
there are a number of cases from the courts of appeal including the O'Flaherty
and Belgium case.
PHILLIPS: Would you
like to spell that out.
TURNER: O,
apostrophe, F-l-a-h-e-r-t-y.
PHILLIPS:
I don't mean - what do you think of the case? Because a friend of mine awarded
it, and I'm not sure how I feel about it.
TURNER: I haven't - I was not on the case, and I was not on the case
because I was recused because I knew one of the parties. Also, the Jordan vs.
Department of Motor Vehicles case - in these and other cases, appellate courts
have set aside awards under "The rubric of the award violated an important
statutory right of one of the parties, and because it did, it was beyond the
power of the arbitrator to issue that award." There are also certain scenarios
where courts decide issues. For example, if the entire contract is alleged to be
unlawful under the Loving and Evans vs. Blick, B-l-i-c-k, case in 33Cal.2d, that
is a decision decided by the judge, not the arbitrator. Now, if the case is
subject to the United States Arbitration Act, well, it's clear under the Buckeye
Check Cashing case, that the issue of the illegality of the entire contract
would be decided by the arbitrator, not the court.
PHILLIPS: In arbitration, do you write
like a judge would write an opinion because what I do is findings of fact and
conclusions of law. And one reason I do that is that's more understandable to
foreign courts because the sentences are small, they recognize that, and they
can look at one sentence rather than a full paragraph.
TURNER: I think any arbitrator ought
to ask themselves, "What's going to happen after I issue my award?" I remember
when I was a Superior Court judge, I had to decide the effect of an arbitration
award over the rights of 20 Kung Fu movies in Burma. And the arbitrator was from
Hong Kong, laid out, I believe, was his reasons very thoroughly, and as a
result, I was able to lurch uncontrollably into the truth and get it right.
That's another reason to give reasons because, if there's going to be collateral
estoppel, res judicata issues, enforceability issues, I think it's important to
state your reasons.
PHILLIPS: One
thing I do also besides stating the reasons, I recognize a difference in
culture. I had a case involving Korea, and I was afraid that I would really hurt
the guy who I was going to - who I decided the case for if I was arrogant in how
I wrote it and the court in Korea would be offended. So I never used the Korean
name. I only used corporate names. I complimented the Korean lawyers who did a
fine job, and as a result, the Korean court in findings of fact and conclusion
of law same way complimented me and said, I did what is right, and therefore,
the Korean court - the Korean company must abide by the American arbitration
award.
WADDINGTON: Well, we do have
the opportunity to correct our awards as long as you comply with the statutory
rules. If you read the cases on the distinction between correcting and amending,
it becomes rhetorically incoherent, but as long as you are simply following the
code as to why you are doing the correction, you can correct mistakes that you
think you've made. If there's just a matter of mis-description of the property
or the personalities, but you need to be careful if you're going to correct or
amend your award that you're not changing the substance of the agreement. I
don't see too many cases on corrected awards. Once you've done it, most people
are satisfied with the way it is. I used to and I still do use what I think I
shouldn't use, and that's litigation language in the award. I talk about the
causes of action, if it's litigation or the statement of claims, and the 9th
Circuit recently talked about "You'd better look at the submission that the
parties make because they're going to consider that also." Make sure you address
that - as we started out with, address those issues, and if you address those
issues and then wind up with a by a preponderance of the evidence - that's legal
language - or if there's an offset or cross-complaint use that legal language if
there are crosses of action. I think if you're careful, you're right. Most of
the appeals come up as the arbitrator made a mistake, and I don't think that's
not a ground for appeal. Sometimes using litigation language in a non-litigation
form is useful.
TURNER: I think most
people want to have a decision based on the law. They expect that, and when you
give the litigants, parties to an arbitration, a decision based on the law,
there is greater confidence on their part that justice has been done. Sure
there's language in a number of decisions that talk about how courts do not
review the merits of the award, how an arbitrator has equitable powers and the
like. But I think the parties want - in California they want California law
applied, and we use that litigation language. I personally believe it creates
greater confidence with the parties, the lawyers, and if there's a challenge
later on, I think it creates greater confidence that the arbitrator has acted
appropriately.
YOUNGER: There are
provisions in some trades and professions - architects and engineers and so
forth - where they have non-legal folk doing it. And I don't know much about how
all of that works, but I think, when somebody retains a retired Superior Court
judge to be an arbitrator, that that's a pretty strong implicit statement that
what Justice Turner just said is correct, and that is that they want maybe
simplified language so the parties can understand it. For example, Larry, I
would never be uncomfortable with mentioning burden of proof or preponderance of
the evidence in an award.
WARREN: And,
again, that's something you can check with the parties on at the initiation of
the arbitration and find out what their expectations are because arbitration is
always a product of what the parties have agreed to. I wanted to follow up on
one point you made about correcting the award as well. One of the things I
always try to do before I make my award final is to do an interim award and set
out everything and give them some time maybe to argue attorneys fees or there's
something else they have to argue. And that way, if I made a huge mistake before
that award becomes final, I have an opportunity to look at that and correct. I
know other arbitrators issue tentative awards sometimes to give the parties an
opportunity to kind of focus their closing arguments.
PHILLIPS: Do judges who arbitrate look
at what their job is differently? What I mean by that is, on the bench, you
follow the rule of law. But there's some writings that an arbitrator should be
fair, should be just. Is there a difference? Suppose you found that, if you
followed the law completely, it would be very unfair to one of the parties.
Would you -
YOUNGER: I haven't had
that come up. What I have had come up is a situation where I'm wobbling between
two positions on damages, and if I were a judge at the courthouse for a large
matter, I might hire an expert on my own or tell them to put on further evidence
or something in looking at the size of the case. I know they want it over with,
and I have on occasions split the difference on a dollar amount in damages,
saying the parties' presentations were about equally persuasive. They want an
end of the litigation. One side says it's 60; one side says it's 100, and I'm
comfortable that 80 is an appropriate amount. I think with that exception, I
pretty much -
LETTER OF THE
LAW
PHILLIPS: What about a statute of limitations? Suppose the plaintiff has
a full-on valid and fair complaint but he's two days after the statute
limitations. As a judge, you would apply the statute of limitations?
YOUNGER: I would in an arbitration.
WARREN: I would as well.
PHILLIPS: I would too. This story of
what you hear that an arbitration is supposed to be just, fair, the same rules
apply to the court and there's no difference. Is that what you're saying?
YOUNGER: I would never want to wander
over into saying, just because something follows the law, it can't be just and
fair.
HAMM: The idea is for both to
occur, right?
YOUNGER: Well,
informality and ignoring the substantive law of California are different to me.
WARREN: I think in general the public
expects arbitrators to follow the law.
PHILLIPS: I don't think they do because some of them are trying to put
into the arbitration provision about following the law.
WARREN: That's to give them a right
for appeal. That's what they're trying to do is say that the arbitrator can only
make an award in conformity with the laws of the jurisdiction. And that way, if
the arbitrator goes against the law, they might bring an argument that they've
exceeded their powers and might have a right to argue vacatur.
PHILLIPS: Well, I think some people go
to arbitration because they think it's going to be fairer than going to court.
TURNER: I would just add this: If
an arbitrator deliberately disregards something such as the statute of
limitations, that can be viewed by a Federal District Court judge or circuit or
Supreme Court of the United States as a willful failure to follow the law and
which evidences a manifest disregard of the law with the potentiality of being
set aside. Similarly, under the California Arbitration Act, a court may view
that as a violation of important statutory right that the lawsuit be filed by a
particular date. Now, that's one of the problems with the Board of Education vs.
Round Valley Teachers Association. It may give courts the ability to enforce -
it does give them the ability to enforce important statutory rights, and if you
do that, then you're back into litigation.
PHILLIPS: Why do some courts, not in California, use the word, "manifest
disregard of the law"? California does not use it.
YOUNGER: That's federal acts stuff.
TURNER: Well, that came from language
which was developed -
WADDINGTON: By
Paul Turner.
TURNER: No. By the United
States Supreme Court -
WADDINGTON:
CalApp.4th
TURNER: Well, I just
recognized it and said it doesn't apply in California. That's where it came
from.
YOUNGER: Thank goodness.
TURNER: But California Supreme Court
has made it clear there is a violation of an important statutory right, that
that might very well be a decision by an arbitrator which is beyond the
arbitrator's power. Now, the California Supreme Court also said in that decision
that this is an exceptional case. The point is, even though it was an
exceptional case, it provides an avenue of attack for lawyers on arbitration
awards. And it's something that can be done. Let me say another thing about
this. There are weapons to attack a judgment from a judge after a full jury
trial, and there are also weapons to attack an arbitration award. The weapons
that are available to attack a judgment, say after a jury trial, have
considerable more legality than the weapons which are available to attack an
arbitration award, which has to do with the desire to have, in part, the
finality of an award rather than opening it up to a broader attack as would be
the case in the case of a judge judgment.
YOUNGER: Now, let me make one comment on that, and it's the last thing I
will say. I will promise. When I first left the bench in the winter of '95 and
the first case I arbitrated I had to go for the first time from the other side
of the process about the power of an arbitrator versus what I had on the bench.
Heck, I'd send guys to state prison for 30 years. All of a sudden when you
looked at the power an arbitrator has in a civil case compared to a judge at the
courthouse, I thought, "Good grief. This is a pretty Big deal." And I think any
civilized, ethical person takes the responsibility pretty seriously because, if
you screw up, it ain't going to get fixed. It's a big deal, I think.
HAMM: And on that note, I think we
have to close for today. Thank you very much for coming and sharing your
thoughts.
(The proceedings adjourned.)
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