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Litigation: Part 2—20 things to consider when negotiating arbitration provisions

Use this checklist to identify weaknesses in your arbitration agreements

In our last column, we listed 10 things to consider when negotiating arbitration provisions, including such items as the location of the hearing, a time limit to get to the hearing, attorneys’ fees awards and class action waivers. Here, we list the next ten things to consider when negotiating arbitration provisions, including discovery, dispositive motions and appeal rights.

The Checklist (Part II)

  1. Time to select the arbitrator: Consider the requirement that within 10 calendar days after the arbitration demand is served on the respondent, the parties must jointly select an arbitrator. If the parties do not agree on an arbitrator within 10 calendar days, a party may petition the agency whose rules govern the arbitration to request a list of arbitrators and select one under the agency’s rules. While the selection of a well-qualified and fair arbitrator is one of the most important steps in the arbitration process, this process need not drag on longer than necessary.
  2. Prehearing conference: Consider requiring a prehearing conference to occur within 30 days of the selection of the arbitrator so the arbitrator can clarify the claims and defenses and can set a pre-hearing and hearing schedule. This is an opportunity to introduce the arbitrator to the case and establish a scheduling order that will move the matter efficiently.
  3. Disclosures: Consider requiring each party to voluntarily disclose the names and addresses of persons who have discoverable information (except for impeachment-only information) that the party may use to support its claims or defenses, a copy of the documents that the party may use to support its claims or defenses and a computation showing each element of damages. This helps prevent surprise and helps the parties more thoroughly evaluate their claims and defenses prior to the arbitration hearing.
  4. Interrogatories and requests for production of documents: Each party shall be allowed to serve written discovery requests on the other party not to exceed 20 interrogatories (including sub-parts), 20 requests for production of documents (including sub-parts) and 20 requests for admissions (including sub-parts).
  5. Depositions: Consider specifying the number of depositions or the total number of hours allotted for depositions. This tends to focus the parties on the most important depositions that they need to take.
  6. Expert witnesses: Consider an expert witness provision and require each testifying expert to provide a written report two months prior to the discovery deadline stating all opinions that he or she will express at the hearing, the basis and reasons for the opinion, the facts and data considered in forming the opinions, all exhibits that will be used to summarize or support the opinions and his or her resume. This allows the parties to thoroughly analyze the bases of the testifying experts’ reports and to depose the expert in order to fully prepare for cross-examination of such expert at the hearing.
  7. Dispositive motions: Specify whether motions to dismiss and motions for summary judgment are permitted, how many, the standard to be applied (federal or state, and which state), and a deadline by which to file the motion as well as a deadline by which a ruling from the arbitrator is to be issued on such motion.
  8. Rules of evidence: Specify whether the state or federal rules of evidence are to apply. Application of the rules of evidence helps achieve efficiency as it can eliminate hearsay and irrelevant testimony, which can lengthen the arbitration hearing.
  9. Award: Specify that the arbitrator must issue a written reasoned award within 20 days from the date the hearing is formally closed or as soon as is feasible. Consider specifying that the sole remedy will be actual damages and that no punitive damages are allowed.
  10. Appeal rights for manifest error of law (if Texas law applies to the contract): Consider including appeal rights based on manifest error of fact or law. This can give an aggrieved party a fighting chance to vacate an arbitration award issued as a result of an error of law. The standard to vacate an arbitration award under the Federal Arbitration Act is otherwise too daunting to overcome errors of law made by the arbitrator in issuing an award.

We hope that you have enjoyed our column and that you find this checklist helpful when you are confronted with arbitration provisions in certain contracts or if you are considering implementing or evaluating your company’s current arbitration practices. 

Contributing Author

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Alan Dabdoub

Alan Dabdoub represents corporate clients in business litigation, including business torts, class actions and employment disputes.  He has first chaired several trials and arbitrations in...

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Contributing Author

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Trey Cox

Trey Cox has been helping clients resolve complex business disputes for nearly 20 years, representing Fortune 500 corporations, entrepreneurs and leading firms in a wide...

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