HUNTER EMERICK & RANDY SUTTON SAALFELD GRIGGSPC ARBITRATION PROCEDURES 1

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1 HUNTER EMERICK & RANDY SUTTON SAALFELD GRIGGSPC ARBITRATION PROCEDURES 1 Arbitration rules, rather than the Oregon Rules of Civil Procedure, determine how private arbitration proceedings are conducted. These rules are adopted by private organizations and are not reviewed by the courts or legislatures before adoption. The arbitrator has the authority to set procedures using the relevant rules, invite trial briefs, issue subpoenas, administer oaths, examine the disputed property, decide evidentiary disputes, decide the facts, and render a binding award. In some cases, the rules may require, or the parties may decide, to have the dispute heard by a panel of arbitrators. Rules and procedures are more relaxed and less formal in arbitration than in the courtroom. For example, motions are not generally allowed, and Oregon s rules of evidence are not strictly adhered to. For example, hearsay evidence, which is generally objectionable in court, is usually admissible in arbitration. Documents are also much easier to admit in arbitration. The hearing is relaxed compared to a court proceeding. The sequence of events is very similar to a court trial. The complainant goes first, calling its witnesses and offering other evidence. The respondent then presents its case. Each side may cross-examine the other side s witnesses. Arbitrators may also ask questions of witnesses -- a role judges are reluctant to take. The arbitrator may, at the conclusion of the hearing, ask for an oral or written summary of the parties cases. Once the summaries are made, the case is under submission to the arbitrator(s), who will prepare a written decision and submit it to the lawyers. A document called an award is then prepared. This is the arbitrator s final and binding decision, which is similar to the judgment of a court. 1 Court-annexed arbitration is controlled by Oregon Uniform Trial Court Rule (2). The conduct of the arbitration proceedings is similar to private arbitration. However, unlike private arbitration, the decision can be reviewed in a court of law. Court-annexed arbitration is required in most lawsuits where there is less than $50,000 in dispute. 1

2 After an award is made, the arbitrator has the power to rule on objections to the cost bill and attorney fees submitted by the prevailing party. The arbitrator s determination on attorneys fees and costs can be made part of the award. COMMENCEMENT OF ARBITRATION There are two primary types of arbitration. Court-annexed is required in certain lawsuits. Private arbitration is by agreement of the parties, either before or after the dispute arises: BINDING COURT ANNEXED ARBITRATION In Oregon state court cases, where only money damages are in dispute, and the damages do not exceed $50,000, the parties must arbitrate their dispute before it will be considered in a court of law. This type of arbitration is commenced by filing the lawsuit in the state courts. The clerk of the court will review the case to determine whether it should be referred to arbitration. If the case is within the arbitration guidelines, it will be referred to the county arbitration commission. The commission will provide a list of names of potential arbitrators to the parties. The arbitrators are usually lawyers from the county in which the case was filed. The parties can agree on the selection of a particular arbitrator. If the parties cannot agree, then they select arbitrators by process of elimination. Each of the parties may separately remove two names from the list, without cause. The remaining candidates are then ranked separately by the parties in order of preference. The arbitration commissioner then reviews each party s submissions and selects the one arbitrator who was not eliminated by either party and received the highest combined ranking by the parties. Once the arbitrator is selected and signs the arbitrator s oath, he or she becomes responsible for the case. Because arbitration of these types of cases is required by state statutes, the arbitration decision is not binding on the parties. Otherwise, the mandatory arbitration of disputes would impinge upon a person s right to a jury trial. In mandatory, non-binding arbitration, either or both of the parties may request a trial de novo (Latin for anew, ) if they are not satisfied with the arbitrator s decision. The party requesting a trial de novo must receive a more favorable decision following trial than it did through arbitration. If the party requesting trial de novo does not improve its position, the costs of the arbitration, the court filing fee, and additional fees and costs, will likely be awarded against it. 2

3 VOLUNTARY BINDING ARBITRATION Voluntary, binding arbitration may be commenced in one of two ways: Pre-Dispute Agreement: Parties structuring a business relationship may provide in their agreement that any future dispute arising out of or relating to that relationship must be arbitrated. Typically, such a provision designates an arbitration service such as the American Arbitration Association, the Arbitration Service of Portland as the administrator of the arbitration. The designated service is responsible for assisting in the commencement of the arbitration and the selection of arbitrators. Any party may commence arbitration, if a dispute arises within the scope of the agreement, by submitting a claim form and request to arbitrate with the appropriate fees to the arbitration service and mailing a copy of the filing documents to the other party. The claim form is less formal and specific than a complaint in state court, and service on the other party is much easier. Once the arbitration service receives the fee and claim form, it opens a file and begins the process of arbitrator selection. That process is similar to that followed in court-annexed arbitration. Post-dispute Submission: Even if the parties have not agreed to submit their dispute to arbitration before a disagreement arises, they may agree to submit their dispute to final and binding arbitration after the dispute occurs. If the parties agree, they may even remove their dispute from the state courts and submit it to arbitration. Most services refer to the parties agreement to submit an existing dispute to arbitration as a submission agreement. Once the parties have signed the submission agreement, it is presented to the designated arbitration service, together with the service s fee, and the arbitration is then conducted in much the same way as are the other types of arbitration. 3

4 FORCING PARTIES TO ARBITRATE Refusal to Participate in Arbitration: Occasionally, parties that have signed a pre-dispute arbitration agreement will refuse to participate in the arbitration. The rules of the arbitration services usually provide that the arbitrator may proceed to arbitrate the case and make a ruling, even if one party refuses to participate. In such a circumstance the arbitrator may still require the participating party to put on their case. The arbitrator may not automatically rule in favor of the participating party, just because the other party is not participating in the procedure. Lawsuit Filed Despite Arbitration Agreement: In some cases, the pre-dispute arbitration agreement is overlooked or ignored, when one party files a lawsuit to enforce rights instead. If the dispute is within the scope of the pre-dispute arbitration agreement, Oregon law allows the other party to force the arbitration of the dispute. To move the case to arbitration, the party will file a motion to abate in the court proceeding, seeking an order that the state court suit be abated while the parties conduct a private arbitration of their dispute. DISCOVERY Discovery is the process of gathering information about the case. While discovery is the most time consuming and expensive phase of the case, it is also the most important. Discovery is critical for several reasons. First, it allows the lawyer to learn all of the facts about the case. While the lawyer knows the clients side of the story, the lawyer also must determine what the other party will say during the arbitration. Second, discovery allows the lawyer to gather information that supports/hurts the claims and defenses of the parties. Not only does the lawyer need to know where the clients case is strong, the lawyer also needs to know where it is weak, so that the lawyer can be thoroughly prepared. Third, through discovery, important documents and witnesses can be revealed that otherwise might remain undiscovered. Finally, discovery requires the opponents and their witnesses to make statements on the record concerning critical facts. If they change their testimony at the arbitration, their credibility can be called into question. 4

5 There are several tools used in discovery. The most common tool is a request for production. The request for production requires the parties involved in the case to produce all documents or other tangible evidence that is relevant to the case or could reasonably lead to the discovery of relevant evidence. The request for production can only be directed to the parties named in the case and can only request information in the parties possession or control. To obtain documents in the possession of third parties, lawyers use a subpoena duces tecum (Latin for bring the documents with you. ) It may also be important to gather testimony before the arbitration. To gather testimony, depositions are conducted. A deposition is a question and answer session held on-the-record. A court reporter will be present to take down every word that the witness and the questioning attorney say. A written transcript of the deposition can later be prepared, and the testimony can be used to impeach the credibility of the witness. As a general rule, only the depositions of those witnesses who are adverse to the client will be taken. Likewise, opposing counsel will probably take our client s deposition and the depositions of any witness that support our client. There are other discovery tools we may use. For example, a request for admissions may be used in an appropriate case. A request for admissions requires the opposing side admit or deny statements of fact, and may speed up the arbitration by identifying the issues in which the parties disagree. If the case involves real property, we may view the property with opposing counsel and the arbitrator, so that everyone is familiar with the unique features of the property. Some information is not discoverable. For example, communications between the client and the lawyer are usually protected by the attorney-client privilege. Any work done in anticipation of litigation may be protected by the work-product privilege. If the case will involve the testimony of expert witnesses, the parties do not need to disclose the identity of their expert until the day of the arbitration. Every arbitration is conducted under a set of arbitration rules. These may be set out in a statute or agreed upon by the parties. The arbitration rules describe the procedure for conducting discovery. In general, discovery in an arbitration is about the same as discovery in a court proceeding. 5

6 Because most information is discoverable, counsel for the parties typically exchange information in cooperation with one another. If a disagreement about discovery arises, the arbitrator(s) will evaluate the request and decide whether or not the information must be provided. In deciding whether the information must be provided, the arbitrator(s) will balance the benefits of discovery to the requesting party, against the burdens and expenses to the party who will produce the information. If the arbitrator orders that information must be provided, and a party refuses, the arbitrator may impose sanctions. Sanctions include an award of attorneys fees or dismissal of the case. When a discovery request is received from the opposing party, our office will notify you and work with you to obtain and provide all relevant, non-privileged information. Likewise, we will serve discovery requests on the opposing parties and conduct all case investigation necessary to become thoroughly prepared for the arbitration. POST-ARBITRATION AWARD Most written arbitration agreements provide that any award is final and binding, and, as a result, neither party can appeal. However, with regard to court mandated arbitration, there is a right to a new trial if either party does not like the decision. Occasionally, the parties will waive this right of appeal and agree that the decision is final and binding. If the parties do not limit the right to appeal or the right to a trial, then they face the possibility of an entirely new trial on the same facts and law. If they limit the right to appeal, then they risk having only limited grounds upon which to appeal. The losing party in an arbitration proceeding, where there is no right to appeal, may still file exceptions. If the arbitration is agreed to be final, it is highly improbable that any appeal of the decision would be successful. The following is an outline of how arbitration awards are handled assuming that the parties have agreed to limit appeal, and an outline of the limited basis for appeal. Once an arbitrator makes a decision, that decision, together with the arbitration agreement and appropriate filing fee, can be filed with the court clerk of the county selected to render the judgment. The party submitting the award must serve a copy of that award on the other parties, and must file proof of service. If no exceptions are filed to the arbitration award within 20 days 6

7 after service, then it becomes a final judgment. The prevailing party may then execute to collect the judgment. Within 20 days after being served, a party may file exceptions to the award for any of the following reasons: 1. The award was procured by corruption, fraud or undue means; 2. There was evident partiality or corruption on the part of the arbitrators, or any of them; 3. The arbitrators were guilty of misconduct in 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 were prejudiced; 4. The arbitrators exceed their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made; 5. There was evident material miscalculation of figures or an evident material mistake in the description of any person, thing or property referred to in the award; 6. The arbitrators awarded upon a matter not submitted to them, unless it was a matter not affecting the merits of the decision upon the matters submitted; or 7. The award was imperfect in matter of form not affecting the merits of the controversy. If the Circuit Court agrees with an exception, it will modify or vacate the arbitration award. Further, it may refer the case back to the arbitrator with proper instructions to correct the defect. If the arbitrator fails to follow the instructions, then the Circuit Court has jurisdiction to rule on the case. If no objection is filed, then the award shall be a judgment and have full force and effect of a judgment obtained in Circuit Court after a default. However, if an objection or exception is filed, and if the Circuit Court rules against the objecting party, then that party may appeal to the Oregon Court of Appeals. The right to except to or review an award, or to appeal from a judgment thereon, can not be contractually limited; nor can the parties agree to penalize any party for filing exceptions or for filing an appeal. However, if the arbitration agreement contains an attorney fee 7

8 clause, then the party filing the exceptions or appeal may be exposing itself of additional fees if it should not prevail. As a result, parties must seriously consider the consequences of filing an appeal or exceptions. CONCLUSION When considering whether to arbitrate a case, parties must seriously consider whether they wish to limit the right to appeal. The cost of pursuing the case a second time must be weighted against the risk that an arbitrator s decision can be reviewed only for very narrow reasons. If the arbitrator makes an innocent mistake, or does not particularly like you or your case, then you may not have the right to get the decision reviewed. 8