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Using arbitration agreements to manage arbitration cost and risk

Arbitration agreement strategies that may reduce some of the perceived risks and costs of arbitration

Arbitration has been under attack as too expensive, too cumbersome, too slow, too arbitrary and incurring too many of the costs of litigation but delivering few of the promised benefits of ADR. Below are strategies — many of which may be employed in the arbitration agreement itself — that may reduce some of the perceived risks and costs.

Many of these strategies require corporate counsel to be sensitive to issues perhaps more familiar to arbitration counsel, and to ask clients the necessary questions, including: What are the expected subject matters of disputes? Is the client a high-volume arbitration user? Does the client expect consumer arbitrations or sophisticated entity disputes? Will the disputes be with valued business partners? What arbitration locale makes the most sense? Are specialized technological or legal issues involved? Will there be multiple parties? Who will have access to the relevant facts and records? What are the amounts and types of damages likely to be claimed? Will disputes require expedited resolution?

Consider discovery limitations

One cannot be clairvoyant about exact discovery needs, but it is often possible to craft reasonable limitations on discovery. If not already contained in the arbitration agreement, there may be opportunities to craft tailored limitations during pre-arbitration conferences. Options include limiting the number and length of fact witness depositions, granting parties a certain number of choices of witnesses to depose, imposing “meet and confer” obligations to address e-discovery, or eliminating interrogatories. Completely eliminating depositions, though, may be unwise. Proceedings in which no depositions are taken may lack focus, relegate lawyers to basically deposing the witnesses on the stand during hearings, and often confuse arbitrators while de facto “discovery” is ongoing.

Contributing Author

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Josh M. Leavitt

Josh M. Leavitt, a principal at Much Shelist in Chicago and an elected Fellow of the American College of Construction Lawyers, may be reached at...

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