Tough Calls in Arbitration

On December 6, 2022,  Kyle-Beth Hilfer spoke on a panel for the New York State Bar Association discussing “Tough Calls and Recovery Issues in Arbitration.” Below are some of the issues that Ms. Hilfer considered on this panel.

AAA’s New Rule 45(b)

The AAA Commercial Arbitration Rules now provide the arbitrator with authority to issue orders preserving confidentiality of the arbitration process. In combination with new rule R-24, 45(b) gives the arbitrator discretion to order confidentiality not only of documents but also of the whole proceeding. Such an order could apply not only to the parties and the arbitrator (who is already ethically bound to confidentiality), but also to counsel for the parties. Previously, there was nothing to bind the attorneys to confidentiality and they may have discussed the case with the press to try to enhance positions in settlement discussions or for other strategic reasons. If only one party is requesting confidentiality, the arbitrator will have to explore the issue with the parties and decide whether to issue the order. Ms. Hilfer noted that for intellectual property cases that may cover trade secrets and other proprietary information, this new rule is an important tool. Prudent transactional counsel might also consider building confidentiality of proceedings into the arbitration clause of the contract. That would then be the default setting for any future arbitration.

AAA’s New Rule 52

The AAA Commercial Arbitration Rules now provide the arbitrator with authority to interpret an award as opposed to the previous rule that primarily focused on clerical or calculation errors.The new rule still does not permit any re-determination of the merits. Some arbitrators feel that all the new rule does is make it easier to fix obvious mistakes. On the other hand, Ms. Hilfer argued that given the extended latitude in the new rule, there was room to clarify anything that confused the parties in the award. At the same time, the savvy arbitrator must consider whether a request for interpretation comes mutually from the parties as well as the substance of the request. There may be a fine line between interpretation and re-determination. In addition, Rule 52b also allows the arbitrator to set a different schedule for requests made under Rule 52a. The arbitrator will have to consider whether there is good cause for establishing a different schedule from the default.

Setting the Arbitration Schedule

Generally, arbitrators use the first preliminary hearing to establish a schedule for the proceedings, up to and including hearing dates. Ms. Hilfer concurred that litigation counsel should ideally meet and confer ahead of that preliminary hearing and have some idea of discovery scope, potential motions, witness availability, and possible number of and calendar days for hearings. Counsel should also review the P-2 checklist in the AAA Commercial Rules as well as any guidance the arbitrator sends to them ahead of the preliminary hearing. At the same time, Ms. Hilfer noted that litigation counsel should expect to explain any requests, even if joint requests, to the arbitrator. Any proposed schedule should be consistent with the arbitration setting rather than court-based litigation. The parties contracted for arbitration and the efficiency that implies, while balancing the complexity and potential value of any given case. Counsel should therefore be prepared to show that their clients are fully informed as to any proposals.

Non-Party Subpoenas

Many arbitrators do not want to sign a document issuing an unenforceable subpoena for non-parties, particularly non-parties who are out of state. Ms. Hilfer noted that counsel should always be prepared to explain why they need any subpoenas and the scope of any proposed subpoenas. Such explanations are particularly true with regard to non-party subpoenas. Certainly, the use of virtual technology such as Zoom or Teams makes it more palatable to order testimony from out of state witnesses. Nonetheless, if the subpoena is for a non-party, it is difficult to count on that subpoena being enforceable. Parties should be prepared to explain the arbitrator’s authority to issue such a subpoena and how it would be enforced. Ms. Hilfer noted that a subpoena might include language stating that the order is subject to a court of competent and relevant jurisdiction being willing to enforce it.

Arbitrators and best practices may vary depending on style and philosophy. You can read more about the best practices Ms. Hilfer advocates here. Ms. Hilfer is available to serve as an experienced arbitrator or mediator in your dispute. You can read more about her dispute resolution practice here.