Legal Aidman Dispute Resolution
Jury trials are expensive, time consuming, stressful, and risky. Many litigants prefer Alternative Dispute Resolution (ADR). The principal forms of ADR are mediation and binding arbitration. ADR can take place in virtually any setting, utilizing virtually any procedure, provided everyone agrees. There are many companies that offer arbitration/mediation services for legal disputes, such as FINRA—www.finra.org. I serve on FINRA panels and am the principal of Legal Aidman Dispute Resolution (LADR). Feel free to reach out if you need help resolving a difficult situation. You can reach me at 610 642 7676 or evan@legalaidman.com.
Binding arbitration involves a summary trial of the dispute. The rules of evidence are relaxed to permit admission of evidence without the formalities required in jury trials. For example, medical reports are used to prove damages rather than medical testimony. Engineer and/or other expert reports are introduced into evidence in lieu of expert testimony. Photographs and other evidence are used without formal proof of authenticity. This all significantly reduces the length, stress and expense of litigation. An arbitration can take just a few hours whereas a jury trial will take at least a few days. At the end of the arbitration, the arbitrator(s) issues a binding ruling on liability and damages.
High-low arbitrations are a special kind of binding arbitration in which the parties agree to high-low parameters. These parameters set the upper and lower limits of the award. For example, in a 100/10 high-low arbitration, the most the plaintiff can receive is $100,000, regardless of the size of the award. The lowest possible award is $10,000, even if the arbitrator returned a $0 award. If the award is somewhere between $10,000 and $100,000, the plaintiff receives that amount.
An alternative high-low arbitration procedure requires the arbitrator to select either the high or low figure, with no in between. The plaintiff suggests a high figure, and the defendant submits a low figure. For example, a plaintiff might submit $100,000 as the appropriate award. The defendant might suggest $75,000. After hearing the evidence, the arbitrator chooses one or the other as the final award. This forces both sides to submit a number they can live with and is not too extreme, because if they are too far off, the arbitrator is likely to choose the other side’s figure.
Generally, the arbitrator is not advised of the high/low parameters so that they do not influence the deliberations. Arbitrators are well paid for their services and have a profit motive that neither side walk away unhappy. He or she wants further appointments to serve as a mediator or arbitrator. Arbitrators with a strong profit motivate may want to know the parameters and will almost inevitably award an amount roughly in the middle. This is okay if that middle figure is satisfactory to your client. You will never strike out with this kind of arbitrator, but you will not hit a home run either.
The parameters are an important issue for the parties to negotiate. If the parameters are relatively high, you may want the arbitrator to be aware of them as this may influence his or her thinking in your favor. But again, most arbitrators do not want to know the parameters and ask that they be submitted in a sealed envelope, opened only after the decision.
With binding arbitration, the arbitrator’s ruling ends the dispute. Unless there is gross misconduct by an arbitrator or litigant, essentially no appeal or post-trial motions are available from an unsatisfactory award. You would have to show serious wrongdoing to merit this relief. If, for example, the arbitrator had improper private talks with your adversary prior to ruling, this would justify an appeal or other post-trial relief. With jury trials, the grounds for reversal on appeal are much broader. Therefore, one of the most crucial elements of any binding arbitration is the identity of the arbitrators.
With a jury trial, the case is decided by “a jury of your peers.” You have some degree of control over the makeup of that jury through the voir dire process. With binding arbitrations, again, because there is no appeal, you must select the arbitrators very carefully. You must know all you can about the tendencies of any arbitrator you are considering. This kind of information is most readily available via trial lawyers’ listservs (discussion groups) and Internet search engines. Insurance companies typically propose a list of possible neutral arbitrators. You should suspect that there is a pre-existing relationship with anyone the insurance company proposes. This is not to say that all such arbitrators are biased. There are many arbitrators who are known to “call it straight” and make reasonable awards. You must find out who the fair arbitrators are, and who you must avoid. If not, that is a very big problem. Do your research. Find out everything you can about any proposed arbitrators or mediators, again via listservs and the Internet.
Binding arbitration typically involves three arbitrators, although the sides may agree to just one as a cost-saving measure. With three person arbitrations, each side picks an arbitrator, and those “partisan” arbitrators pick the “neutral” arbitrator. The “partisan” arbitrator, typically stay in touch with the attorneys that appointed him/her. It is not uncommon for the process of selecting the neutral to go on for weeks. Each side rightfully suspects that the neutrals proposed by the other side are not so impartial. Smart trial lawyers know who the truly neutral arbitrators. These are the ones that both sides trust to be fair.
In three person arbitrations, it is essential that you pick a partisan arbitrator with a lot of experience in personal injury litigation. This ensures that his or her opinion will carry great weight with the neutral. Your arbitrator must be able to exert influence with the neutral arbitrator. These arbitrations are often highly political battles. If the neutral’s primary allegiance is to the insurance company, you have a big problem. If the neutral and the arbitrator you selected have a positive relationship based on respectful dealings in prior cases, you stand a good chance of getting a favorable outcome. Obviously, the merit of the case is most important, but never underestimate the importance of political connections and profit motive.
The relationship between the neutral and the partisan arbitrators may be as important as any other single factor in the litigation. Even if your client’s case is flawless, if the neutral arbitrator has an incentive to please the insurance company and its arbitrator, you will not receive a generous result. You may submit disputes to binding arbitration no more than once or twice a year. The insurance company, on the other hand, pursues binding arbitration as a regular part of its business. Arbitrators motivated by the desire for more business from the insurance company MUST be avoided.
The cost of mediation and arbitration can be substantial. Typically the cost is split evenly by the parties. You should get an idea in advance what it will cost, and get your client’s approval. With binding arbitration, the cost may be a secondary concern since the dispute will end there and then and the savings in future court costs should more than offset the cost of arbitration. But with mediation, if the case is not resolved at its conclusion, you may have added a large expense to the litigation. This still may be worth it if the proceeding helped to narrow important issues and brought the parties closer to settlement. But watch out for sham mediations. This is the type of mediation where the insurance company is not genuinely interested in settlement. It is simply fishing for information about you, your client and the case. This is especially frustrating if you agreed to split the cost of the mediation. I sometimes ask for a commitment from the other lawyer, in advance, that they are truly interested in settlement.
