Charles F. Forer, Charles F. Forer Alternative Resolution Services

ADR

Editor's note: This article describes a hypothetical situation.

"Arbitration is fast. It is efficient. And it is satisfying." That's what Bob tells all his clients. "Let an experienced arbitrator with a background in your industry decide your disputes!"

The current dispute proved Bob's point. It presented complex real estate issues. It made sense to have an experienced real estate lawyer be the arbitrator.

Plus, Bob's deposition performance was, well, "fantastic." He got the CEO of his client's adversary to admit the underlying contract was unenforceable. In view of this concession, there was no need for an arbitration hearing. Bob's client had a clear path to victory through a pre-hearing summary judgment motion.

Bob wasted no time in submitting his summary judgment motion, carefully labeling it a "dispositive motion" to conform to arbitration lingo. Not surprisingly, Bob's adversary's response was flimsy. It rested on points of law Bob easily could distinguish.

There was one odd part of the response, however. Realizing the weakness of his position, his adversary "threw in" (Bob's term) a procedural argument—that the arbitrator did not have the power even to consider the "dispositive" motion. Bob's response: this argument ignores the undeniable fact that the other side could not respond on the merits to the substance of Bob's argument. "The arbitrator," Bob asserted in his multi-syllabic style, "should not countenance such diversionary tactics, which serve only to undermine the promise of arbitration as an expeditious way to resolve disputes."

The arbitrator granted Bob's dispositive motion and entered an arbitration award in Bob's client's favor. Everything was working perfectly. At least so far.

Bob's adversary took the arbitration award to court and there sought to vacate the award. Bob had expected his adversary would fight tooth and nail. Bob had forewarned his client to expect the petition. A lot of money was at stake.

"Just playing out the clock," Bob told his client. In fact, Bob welcomed the petition. It gave him the chance to do something he always had wanted—to recover attorney fees in response to an adversary's frivolous vacatur petition.

Bob was not too upset when he did not recover the hoped-for attorney fees. But he was incensed when the court granted the vacatur petition and threw out the award, especially because the court relied on the procedural and "diversionary" tactic Bob had found so peculiar.

In tossing the arbitration award, the court said the arbitrator did not have the power to consider a dispositive motion because the procedural rules governing the arbitration said the arbitrator was supposed to hold a hearing where he or she must consider and determine the parties' contentions. The court's order was based on the Bob-drafted "rules" that summarized, in pithy, clumsy and incomplete fashion, the controlling arbitration procedures.

What an easily avoidable mistake for Bob to make. He could have incorporated American Arbitration Association Commercial Rule R-33, which states, "The arbitrator may allow the filing of and make rulings upon a dispositive motion only if the arbitrator determines that the moving party has shown that the motion is likely to succeed and dispose of or narrow the issues in the case."

Or he could have referred to JAMS Comprehensive Arbitration Rule 18, which likewise says, "The arbitrator may permit any party to file a motion for summary disposition of a particular claim or issue, either by agreement of all interested parties or at the request of one party, provided other interested parties have reasonable notice to respond to the request."

So one problem for Bob: his arbitration "rules" did not incorporate the rules of any arbitration provider. Too bad. Courts repeatedly have upheld an arbitrator's authority to grant a dispositive motion when the governing rules, even if incorporated, permit this procedure. Many courts have gone one step further and said an arbitrator always has the power to grant a dispositive motion except when the governing rules specifically prohibit him or her from doing so.

But Bob did not need to refer to or incorporate a provider's rules. His arbitration letter agreement could have specifically allowed for dispositive motions—or, at least, not prohibited them.

But who says the other side will buy into a dispositive-motion procedure? Some arbitration parties may decide they do not like dispositive motions. They may believe their chance of prevailing rests more on what some lawyers refer to as the "equities," rather than on black letter law. They may seek arbitration to avoid the summary judgment motion they otherwise would face in court.

So another problem for Bob: he missed the boat in drafting the arbitration letter agreement. Not because he did not include a dispositive-motion procedure. But because he failed to consider whether it made sense, in the first place and at the drafting stage, to allow for a dispositive-motion procedure.

What, then, are the lessons for Bob when he next drafts an arbitration agreement? It is not enough only to divine whether it will make sense for the client, months or years later, to seek a dispositive motion. The drafter also must consider at least two other things.

First, the drafter better make sure any incorporated rules provide the preferred procedure. Most providers specifically authorize arbitrators to make summary dispositions. But not all. Only Bob would incorporate a provider's rules on behalf of a client whose interests are at odds with the incorporated rules.

Second, a drafter who is not incorporating rules must determine what makes the most sense for the client and then draft accordingly. If the drafter does not want dispositive motions, he or she should say so—unambiguously. An arbitrator who considered a dispositive motion in the face of a plain and express ban on such motions would be acting outside the scope of the contractually delegated authority in the parties' agreement. A court then would be hard pressed to conclude there was a reasonable basis in the parties' agreement for the arbitrator to decide a dispositive motion.

Months and sometimes years before a dispute has arisen, the drafter of an arbitration agreement must consider whether it will be beneficial for his or her client to allow for summary dispositions. The drafter ill serves the client by leaving this issue up in the air, inviting protracted and expensive post-arbitration litigation. Not the best way of avoiding the delay and expense of litigation. And not the best way for Bob to have long-term clients.

Charles F. Forer of Charles F. Forer Alternative Dispute Resolution Services independently provides arbitration, mediation and all other neutral services. He is the current co-chair of the Philadelphia Bar Association's alternative dispute resolution committee. He is a former chair of the association's fee disputes committee. He is a frequent lecturer and writer on the use of ADR in a variety of settings. You can reach him at 610-999-5764 and c[email protected].