Arbitration

Posted: August 25th, 2021

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Arbitration

Arbitration refers to a process of resolving disputes. It uses an approach requiring a neutral party to provide a solution through a binding decision. There are various arbitration laws, and every country has its own. For example, the Federal Arbitration Act applies to arbitration agreements.On many occasions, Parties involved prefer using the procedural law of the location of arbitration. The California Arbitration Act applies to domestic arbitration governed by California laws. When the parties chose arbitration, they opt to resolve the dispute privately rather than submitting it to court. Parties involved in arbitration should put into consideration the advantages and disadvantages of the arbitral institution before choosing what is suitable for the contract. The main objective of this paper is to discuss the preliminary hearing of arbitration and its purpose, the circumstance under which the government act in support of arbitration, and arbitration awards.When drafting an arbitration, there is a need to understand the parties involved depending on the kind of dispute they want to present to binding arbitration. Arbitration clause drafting has rules such as; the arbitration agreement must be in the form of writing; the parties in the transaction are required to arbitrate disputes that they have agreed to present to arbitrate. Awareness of the arbitration procedure and its legal underpinnings is very crucial. Arbitration agreement parties have the freedom to define their process. Drafting a comprehensive arbitration helps to solve a dispute fairly, efficiently, economically, and proportionally to the satisfaction of the parties involved.

A. Illustrated Below Is A True/False Table

Question	True	False
A.1. Both the FAA and CAA set forth a list of relationship disclosures that arbitrators must provide to the parties in advance of their appointment is confirmed.	True
A.2.  One way a party can avoid arbitration is by challenging the validity of the contract containing the arbitration clause as void or voidable because the contract was induced by fraud or lacks consideration	True
A.3.  The doctrine of functus officio is a common law rule of finality concerning arbitration awards	True
A.4. As a general rule, the FAA does not prohibit the parties from selecting state arbitration law to govern the procedural aspects of their arbitration.	True
A.5.  Similar to litigation in the courts, the arbitrator will conduct a settlement conference two to four weeks before the start of the evidentiary hearing to help the parties avoid the time and expense associated with an evidentiary hearing.		False
A.6 A petition for vacatur filed 120 days after service of the award will be denied as untimely even if the appeal has merit.		False
A.7. Once an arbitration award is issued, it automatically has the same force and effect as a court judgment for purposes of enforcement.	True
A.8.  Because there are two prongs to the unconscionability defense – procedural and substantive – this defense generally is not available for negotiated / business-to-business contracts		False
A.9.  An arbitrator’s broad discretion concerning hos he/she manages the evidentiary hearing is restricted by (a) the parties’ arbitration agreement, (b) the governing rules, (c) the governing arbitration act, and (d) fairness.	True
A.10. The United States Supreme Court has the power to invalidate a state law that requires arbitration agreements to meet special requirements before they are recognized and enforced by the state courts.	True
A.11.  In arbitration, if the responding (defending) party to mediation does not file an answering statement within 15 days of notice of the claimant’s demand, the responding party will be deemed to have admitted liability as to all claims asserted in the demand		False
A.12. The most common ground on which the courts grant vacatur of arbitration awards is the finding that the arbitrator exceeded his / her power because he/she (a) decided a matter not submitted, (b) granted relief not available in arbitration or per the parties’ contract, or (c) failed to determine a matter provided.		False
A.13.  If a court vacates an arbitration award, it is the same thing as a reversal of a court judgment – meaning that the matter returns to the arbitrator or panel who conducted the first arbitration to lead a new evidentiary proceeding	True
A.14.  Whether a court grants or denies a motion to compel arbitration, the losing party in both scenarios has a right to immediate appellate review	True
A.15. Under the CAA, the court has the discretion to deny a motion to compel arbitration and, instead, order a stay of the arbitration pending the outcome of the court litigation in circumstances where (a) there is a pending action involving the same transaction and events, and (b) there are third parties who are not subject to arbitration of the dispute.	True
A.16. Because the CAA is a chapter in the Code of Civil Procedure, arbitrations governed by the CAA provide the parties with the same, broad rights to pre-hearing discovery that they would otherwise enjoy if the matter were being prosecuted in state court.	True
.17.  On the eve of the start of the evidentiary hearing, one party requests a continuance because it has engaged new counsel and that counsel says he/she needs more time. If the arbitrator denies the continuance request, any award he/she later issues will be subject to vacatur if that party loses, even if there is otherwise no problem or unfairness with how the evidentiary hearing was conducted or the disputed matters were determined.		False
A.18. Arbitration is a relatively new dispute resolution process that was first introduced at the federal level – as an alternative to court litigation for civil disputes – through the enactment of the Federal Arbitration Act in the 1920s.	True
A.19. As a matter of both federal and California arbitration law, if an arbitration award violates a well-defined public policy, such an award is subject to vacatur as a matter of common law (i.e., case decision).	True
A.20.  A challenge to arbitrary raises the question of whether a claim is within the scope of disputes the parties agreed to submit to binding arbitration for resolution and is an issue that is generally determined by the courts unless the parties’ agreement provides for the arbitrator to decide on such matters.	True

B. Short Answer

B.1.      Identify and Discuss Three Ways in Which the Courts Act in A Supportive or Supervisory Fashion to Arbitration

The presence of court-ordered interim measures supporting arbitration is crucial. Court intervention in proceedings of arbitration is allowed only to the extent permitted by the Arbitration Act. When the matter is urgent, and there is no time for an appointment of the tribunal, the court mostly intervene by granting interim relief through the following ways;

• Courts enforce arbitration agreements the same way they would do to other contracts by ordering parties to the arbitration.
• The Court Oversees the process of integrity through its power of vacating arbitration awards that are a result of errors that occurred during the process.
• Court enforces arbitration awards in confirming an award as a judgment of the court, with attendant enforcement through its power.

B. 2: Similarity And Distinction Between Arbitration And Mediation

a) Similarity

The similarity between arbitration and mediation is that they are bothalternative ways of solving conflicts other than the process that is used by courts. Unlike other litigation proceedings, mediation and arbitration are voluntary, that is, individual parties have to agree to resolve their issues outside the court, and have a neutral party choice sitting with them at the table.

b) Distinction

Mediation and arbitration differ in the process used to resolve conflicts. Meditation entails a non-binding process which is carried out by one mediator. Hence, with honesty and fairness, the mediator manages the communication process between the parties. The primary role of the mediator is to clarify the problem in dispute and find out the underlying concerns without taking sides. On the other hand, arbitration consists of a binding process where a third party is a decision-maker.  After hearing the presented cases by parties, the arbitrator plays the role of a judge by making final decisions and may end taking sides depending on evidence provided by both sides.

B3. Severability Doctrine And Its Application In Arbitration

Severability doctrine is a confounding doctrine found in the jurisprudence of federal arbitration. According to the doctrine, challenging the validity of an agreement does not translate into a challenge to the entire arbitration agreement’s validity. It means that conflict concerning the contract, including the fraud alleged, goes to the arbitrator for decision making. Courts are entitled to enforce arbitration clauses in contracts, even if the entire agreement is not valid. Confidentiality is a significant concern when the contract subject matter is naturally sensitive. In this case, the provision of privacy and including it in the pre-dispute arbitration agreement is a must. Disproportional cost and burden of producing information stored electronically may force the arbitrator not to accept the request. Also, arbitrators may need the requesting parties to be accountable for the cost associated with the discovery.

B4. What Is An “End-Run” Strategy? When Is It Used, And By Whom? Describe At Least Two Examples Of An “End-Run” Strategy

An “end run strategy” is a strategy that seeks to exploit segments that are neglected by directly refraining from the competition. Naturally, it is a confrontational strategy used by businesses to avoid disputes with stakeholders. For instance, a global company dealing with soft drinks can choose to shift to areas unoccupied by its competitors. Another example is that the company can decide to put their prices lower than those of its competitors.

B5. What Is The “Litigization” Of Arbitration? Identify And Discuss At Least Three Ways In Which It Plays Out

“Litigization” of arbitration is a  phrase that is coined to elaborate litigation over process resulting in litigation over preferred procedural issues to a hearing and decision on the merits of thedispute. There are three ways in which it plays out. First, in a plaintiff case, here, litigization lawyers carry out an initial investigation of the incident to ascertain whether there is sufficient evidence that warrantsa lawsuit filling. Secondly, the litigation attorney takes the witness statement to investigate further facts leading to the dispute. Then third, in an attempt to resolve the conflict, the attorney in charge of litigation mostly engages in pre-litigation settlement discussion.

C. Short Essay

C1. Explain The Purpose/Value/ Underlying Objectives of The Preliminary Hearing In An Arbitration

 All arbitral proceeding requires a hearing. Hearings differ depending on the case complexity. The purpose of arbitration as an alternative dispute resolution form is to settle a dispute relatively in litigation without incurring any cost or wasting time to go to court. Besides, the hearing aims at accomplishing the following; setting dates for expert, witness list, and design; arranging dates for pre-hearing briefing. In determining the parties and deciding the elements that contribute towards achieving the goals, the arbitrator utilizes the preliminary hearing. The arbitrators persuade the parties to agree on discovery equal to conflict complexity. The starting point of the discussion entails disclosing documents and witnesses fully and timely. Arbitrators offer close supervision so as not to tolerate any gamesmanship. The objectives, steps of preparing the hearing process, and matters discussed during the preliminary hearing are contained in this section.

The main objectives of the preliminary hearing provide a plan for an evidentiary hearing that ensures administration of the whole process is economical, fair, and in proportion to the dispute. Another objective is issuing a scheduling order that governs and structures the course of the proceedings in the future. Arbitration hearing establishes deadlines through agreement for every identified pre-hearing task that requires completion. The other purpose of the conference panel is to ensure that there is no court intervention.

C2. Identify At Least 5 Or 6 Matters That Should Be Discussed At The Preliminary Hearing And Explain Why

Preparing a Preliminary hearing entails reviewing the arbitration using the following steps; Identifying the parties’ agreement and availability of clause that have affiliates and successors; the hearing site; finding out the law governing the arbitration agreement; rules and procedures applying to the arbitration. The matters discussed during a preliminary hearing are as follows parties’ involvement, the nature of the dispute, the requirements of the counterclaim, and parties’ agreement on the rule governing the arbitration as well as substantive law that governs the dispute. Most significant is that the above matters are discussed to minimize the number of pieces of evidence required.  Therefore, issues are not likely to be considered fit for a preliminary hearing if more oral evidence is needed.

Subsequently, preliminary hearing refers to court proceedings that take place after arraigning a person accused of committing a crime. To establish a preliminary hearing agenda and discuss arbitration rules, the chairperson holds a conference of three arbitrators. The defendant is charged after the arraignment and allowed to take a plea. The hearing should take place within a specified period. Also, an arrangement should be made to release the defendant in custody, awaiting a trial. In this case, bail settlement is crucial and should be good enough to motivate the defendant to come back to court at the specified date. The preliminary hearing is also scheduled to take place within a month of the arrest date in case the defendant remains in custody. Upon a dispute presentation, the judge listens to prosecutors’ arguments and then arguments from the attorney of the defendant, during which the prosecutors call upon the witness to testify and introduce available physical evidence for conviction, to justify the case.

On the other hand, the defense cross-examines the witness and questions other evidence against the defender. The argument, in this case, seeks to convince the judge that the case of the prosecutor is not strong enough. The judge, at this point, determines whether the evidence presented is enough to order the defendant to stand trial. Hence, the judge makes this decision depending on a probable cause.

Lastly, it is advisable to have in mind the drawbacks associated with the preliminary hearing. The process is costly, primarily due to evidence duplication. Further, a finding during the preliminary hearing may affect the dispute in question making the whole process pointless. There are possible outcomes of the preliminary hearing, which determines the next step the court process should take. For example, the defendant gets the order to proceed on trial on criminal charges. In this case, the judge minimizes the severity of the criminal charges and provides the defendant a chance to take a plea agreement. Besides, the court can dismiss a certain percentage of forcing the prosecutors to refile the charges.

C2: Essay 2-Hypothetical

1. Does Functus Officio Apply To Bar The Franchisor From Seeking To Correct The Arbitrator’s Error?

Franchising is an ongoing relationship whereby a franchisor gives a franchisee a licensed privilege to carry out a business for a considerable monetary value. The franchisor and franchisee relationship exists on respect and trust. Sometimes unavoidable circumstances break this trust giving rise to disputes which require representation in Arbitration. A Franchise law ranges in complexity based on parties involved, just like any commercial litigation area. It is indispensable for the franchisors and franchisees to understand the key issues that surround the franchise litigation topic. This section aims to discuss the franchisee arbitration, franchisors options, and arbitrations award. 

In the event of an agreement dispute, a franchisee agreement calls for arbitration, which is an alternative method for dispute resolution to franchisee litigation. Franchisee arbitration is a known aspect of franchise law. For resolving issues of contract, there is a distinct and independent set of statutes that governs franchise from the State of California. First, the statute imposes the formation of contract requirements for franchise agreements with arbitration clauses. Failure of the arbitration clause to meet all of the provisions makes the statute to provide that it was not enforceable.Franchise litigation preparations begin long before action commencement. It starts with a considerable thought of the contractual terms that govern the procedure for resolving the dispute. An appointed arbitrator during the process listens to both parties concerning the litigation. The arbitrator acts as a judge and provides a binding legal decision. In maximizing the probability for success in a franchise dispute advancing to the point of litigation, parties take advantage of all the chances to craft fair adjudication conditions of the difference.

• What are the franchisor’s options? Does it go back to the arbitrator? To the district court? To the state court?

Franchising has many options that depend on franchise system conditions. Below is an explanation of these options;

Direct Franchising

In this option, the franchisee hasthe freedom to own a franchised business within a specific and limited geographic range.

Development Area

 Under this option, the franchisee is granted by the franchisor the right ofthe opening and operating several businesses in an expanded and unlimited geographic territory.

Master Franchising

In the master franchising option, the franchise has the right to own a much more meaningfulterritory.The franchisor plays the role of determining the best litigation forum. In many cases, franchisee’s best interests are not motives of the franchisors. Franchisees tend to feel that the franchisors are lying to them, and this leads to disputes that need solutions through arbitration.

Most franchisees and franchisors prefer to resolve the matter outside the court since they are not able to pay for a lengthy court case. With a vacant store that costs them money, the franchisors need a process that helps them to cut down costs. Arbitration allows the franchisee to quickly settle the matter outside the public eye if they feel that an agreement is not honored. The franchise –franchisor dispute resolution is less costly compared to traditional court.

The arbitration reward is that which the arbitrator grants in their decision. It can be financial where one party should pay the other one or non-financial like intending to end a business practice. Arbitration Act under section 32 offers forms and arbitral reward contents. The award should be in writing, and the arbitral tribunal should sign it. In the case of omissions in grants, the arbitrators must state the reason exclusions. The arbitral award must state the award date and juridical arbitration seat. Arbitrators are empowered by the Arbitration Act to correct arbitral awards. Parties on notifications to the other can ask the arbitral tribunals to rectify all errors in the prize within thirty days of receipt. As well,  a party has a chance to request the tribunal to include additional awards as to presented claims.

In conclusion, arbitration as an alternative dispute resolution method is less formal than litigation. The main objective of arbitration is to provide a fair and timely resolution of disputes with fewer costs. It results in a quick turnaround than cases taking place in courts. Arbitration is the best way of solving issues since the hearings are private and very confidential. Arbitrations turnaround times vary depending on dispute complexity, the number of parties and witnesses involved, and the arbitrators’ schedule. The process cost also differs due to the claim amount and hearing sessions that take place after a preliminary hearing of the arbitral tribunal and granting of arbitration awards. Once awards are given, they cannot be appealed, but in limited situations like an omission, an award challenge is allowed. Besides,  the resolution of arbitration cases may be different such that the arbitrators decide some cases, and other cases get solutions through mediation.