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Alternative Dispute Resolution
Santa Clara University School of Law
Spitko, E. Gary

Alternative Dispute Resolution Outline Spring 2009, Professor Gary E. Spitko keyed to the Spring 2009 text:
A.      Why have arbitration?
a.       Control
b.      Being able to take people to decide the case that are likely familiar w/your type of dispute
c.       Speed: faster/cheaper if arbitration is done correctly
1.       Limited discovery
(a)    Drawbacks—may be disadvantage not to have more discovery
(b)   Drawback: if you lose, that is it; not appealable
(c)    Minimal discovery are increasingly avail in arb but, arbitrators have discretion to control the timing/nature of discovery
(d)   Broad litigation style discovery is usu avoided
(e)   Some arb organizations req a record of the proceedings, tape recorded is ok usu
2.       Lmtd judicial review
(a)    An arb = adjudicatory trial
·         Arbitration = more informal than ct but
·         Still constitute reasoned presentations of proof by the disputants to the decisionmaker (a single or multiple arbitrator(s)).
·         So, arbitration is sort of like a trial: at the arb hearing, the disputants make presentations of their proof to the arbitrators who must resolve the relevant issues
(b)   Arb awards = final
·         No true appeal fr arbitral award
·         Instead, the ability to “set aside” an arb result is so severly lmtd that it would be incorrect to label it an “appeal”
·         the whole pt of arb is that the merits of the disputes will not be reviewed in the cts
·         finality is what gives arb the advantage over litigation***(p.431) for, parties have preference of final decision instead of appellate ct second-guess
(c)    under existing arb statutes/rules, parties unhappy w/the results of arb may attempt to have the result modified or vacated on narrow grounds
·         clear fraud by the arb can be a reason for vacating an award
·         inconsistency w/public policy is another ground for having the award vacated
·         arbitration clause itself may state that appellate arb panel for review or, award can be reviewed for errors of law by the cts, as ok
·         otherwise, not an easy road to get the final arb award reviewed
3.       Rules of evidence don’t apply: but, this could make it more $$ cause maybe arbitrator may hear stuff the cts won’t
(a)    You may then want to have a clause in the arb agreement saying the rules of evidence apply
(b)   Informal procedural rules
·         Arb = informal/flexible
·         Few procedural rules to curb their discretion in administering hearing
·         Formal pleading rules do not apply
(c)    Parties free to craft their own rules (p.430) and, can agree to part features of litigation procedure if they desire but,
(d)   Rarely opt for extra formalities to save on time/$$
4.       Cost
d.      Arbitrators are not req to apply the law (substantive law)*
1.       Often, the arb decide the case based upon what is “fair”
(a)    The arbitrators “split the baby” so to speak
(b)   You can have an appellate review of the arb finding of fact/interpretation of the law
2.       Subordination of substantive law (p.430)
(a)    Arb are NOT bound by precedent
·         Nature of arb amts to signatories to written K agreeing to opt out of a legal system characterized by substantive rules
·         Cts permit arb to disregard strict rules of law/evidence and, to decide according to their sense of equity
·         Arb crafts award based upon the facts presented at arb hearing—usu in equity
·         Award may reflect compromise and, neither party may prevail in the end and,
·         Maybe no one is “happy”
3.       But, arb are free to apply the rules/law if they want
(a)    But, arb rarely provide finding of fact or written explanations for their awards (p.431)
(b)   arbitration privatizes substantive law
e.      no jury
1.       does the arbitrator have some special, relevant expertise?
(a)    No legal mandate that he does;
(b)   Not prerequisite for the job of arbitrator
(c)    But, is the jury stocked full of “experts”?
(d)   So, maybe the jury is not a better alternative…with the control allowed in arbitration, the parties can choose an experienced arbitrator w/special skills/knowl about their prob and, maybe this is better than a jur? (p.432)
B.      Reading notes: p.429-432, The Essential Characteristics of Arbitration (ch.9)
a.       Numerous types/subspecies of arb
1.       Arb of employment grievances = popular feature of collective bargaining agreements
2.       Part of negligent torts
3.       Used to resolve intentional claims of alleged discrim, patent/hospital disputes, dr/patient disputes
b.      Most arb occurs via settled contracts
c.       How arb works in different fields
d.      Arb has ability to incorp the precise dispute resolution char desired by the parties
e.      Commercial arb held uner the Rules of the Amer Arb Assoc differ fr grievance arb held pursuant to collective bargaining agreements—but, certain char are common to most arb
1.       The commonalities of the “typical” arb K act as model of arb that most attnys use
f.        Privacy
1.       Arb hearings take place entirely in private, removed fr public eye
(a)    For many, this is the single most imp feature of arb
·         Sellers of allegedly defective products
·         Banks
·         Securities brokers
·         Suppliers of medical services
·         Disney
(b)   In addition to the private location of the arb hearing, the results are also private
·         Published opines = rare in arb
·         Only in a few, special arb do the arbitrators produce written decisions (labor arb, international commercial arb, maritime arb)
·         Often, the result ends silently, w/cryptic written award that is not disclosed to the public
Federal Arbitration Act: passed in 1925 (p.448 and, appendix A)
A.      Makes predispute agreements to arbitrate valid and enforceable
B.      Created local auth to stay suits pending completion of arbitration
C.      Goal: to make the resolution of commercial disputes more efficient
a.       Supported by trade/industrial associations
b.      Who used “experts” fr w/in their respective fields to help resolve disputes
c.       Terms of FAA have broad application to all K to arb involving interstate commerce,
d.      There is no indication in the leg history that Congress envisioned the FAA could apply under a specific line of commerce (eg, the entire brokerage or securities industry…)
The Federal Arbitration Act
Title 9, US Code, Section 1-14, was first enacted February 12, 1925 (43 Stat. 883), codified July 30, 1947 (61 Stat. 669), and amended September 3, 1954 (68 Stat. 1233). Chapter 2 was added July 31, 1970 (84 Stat. 692), two new Sections were passed by the Congress in October of 1988 and renumbered on December 1, 1990 (PLS 669 and 702); Chapter 3 was added on August 15, 1990 (PL 101-369); and Section 10 was amended on November 15.
Chapter 1. General Provisions
Section 1. “Maritime transactions” and “commerce” defined; exceptions to operation of title
“Maritime transaction”, as herein defined, means charter parties, bills of lading of water carriers, agreements relating to wharfage, supplies furnished vessels or repairs to vessels, collisions, or any other matters in foreign commerce which, if the subject of controversy, would be embraced within admiralty jurisdiction; “commerce”, as herein defined, means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation, but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.
Section 2. Validity, irrevocability, and enforcement of agreements to arbitrate
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
Section 3. Stay of proceedings where issue therein referable to arbitration
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
Section 4. Failure to arbitrate under agreement; petition to United States court having jurisdiction for order to compel arbitration; notice and service thereof; hearing and determination
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days’ notice in writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided by the Federal Rules of Civil Procedure. The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall b

n refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.
Ø        Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
Ø        Where an award is vacated and the time within which the agreement required the award to be made has not expired the court may, in its discretion, direct a rehearing by the arbitrators.
v       The United States district court for the district wherein an award was made that was issued pursuant to section 590 of title 5 may make an order vacating the award upon the application of a person, other than a party to the arbitration, who is adversely affected or aggrieved by the award, if the use of arbitration or the award is clearly inconsistent with the factors set forth in section 582 of title 5.
Section 11. Same; modification or correction; grounds; order
In either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration —
a. Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.
b. Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.
c. Where the award is imperfect in matter of form not affecting the merits of the controversy.
The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties.
Section 12. Notice of motions to vacate or modify; service; stay of proceedings
Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered. If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court. For the purposes of the motion any judge who might make an order to stay the proceedings in an action brought in the same court may make an order, to be served with the notice of motion, staying the proceedings of the adverse party to enforce the award.
Section 13. Papers filed with order on motions; judgment; docketing; force and effect; enforcement
The party moving for an order confirming, modifying, or correcting an award shall, at the time such order is filed with the clerk for the entry of judgment thereon, also file the following papers with the clerk:
a. The agreement; the selection or appointment, if any, of an additional arbitrator or umpire; and each written extension of the time, if any, within which to make the award.
b. The award.
c. Each notice, affidavit, or other paper used upon an application to confirm, modify, or correct the award, and a copy of each order of the court upon such an application.
The judgment shall be docketed as if it was rendered in an action.
The judgment so entered shall have the same force and effect, in all respects, as, and be subject to all the provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered.
Section 14. Contracts not affected
This title shall not apply to contracts made prior to January 1, 1926.
Section 15. Inapplicability of the Act of State doctrine
Enforcement of arbitral agreements, confirmation of arbitral awards, and execution upon judgments based on orders confirming such awards shall not be refused on the basis of the Act of State doctrine.
Section 16. Appeals