Making Arbitration More Cost-EffectivePosted: August 3, 2012
In theory, arbitration is supposed to be a less expensive, expeditious alternative to a traditional lawsuit. Discovery in arbitration is generally limited to document production, arbitrators have the power to streamline hearings so that they move along more quickly than a trial, etc.
The reality is quite different. The arbitration process itself has become increasingly expensive and time-consuming. Arbitrators are expensive, they are reluctant to streamline hearings for fear of having an award vacated because they excluded relevant evidence, scheduling dates that are convenient for the arbitrators, counsel, the respective parties, witnesses, etc. is difficult. Moreover–and this is the main point of this post–the post-arbitration process of confirming or vacating an award takes way, way, way too long.
In theory, the post -arbitration process should move quickly. Under Connecticut law, as in most states and under the Federal Arbitration Act, motions to vacate the award must be filed promptly after the arbitration award issues, usually within 30 days. And the law, at least on its face, directs judges to resolve motions to vacate and confirm quickly. In practice, however, getting an arbitration award confirmed can take many months, if not years.
Why? Because savvy lawyers know how to exploit the system and “run out the clock.” They file a timely motion to vacate, but then ask for additional time to file a memorandum of law in support of the motion. And even if the trial court acts promptly and confirms an award, current law allows the aggrieved party to appeal the judgment confirming the award, just like any other trial court judgment. And nothing in the law requires the appellate court system to expedite such appeals. Because they are treated like any other appeal, they take just as long to resolve.
I have several proposals to address the problem of post-arbitration delays. Proposal #1: A party who is unhappy with an arbitration award should get only one appeal as of right, to the trial court. If the trial court confirms the award–and that is what happens in the overwhelming majority of cases given the extraordinary deference to which awards are entitled–the unhappy party should not have an absolute right to appeal to the Appellate Court. Instead, the party should be required to file a petition for permission to appeal. At least two judges on the Appellate Court (out of a three-judge panel) would have to vote in favor of granting the petition for the appeal to proceed.
This is not a novel idea. Connecticut law has long limited parties who are unhappy with the decision of a local planning and zoning board to a single appeal as of right to the trial court. Further appeals are within the discretion of the Appellate Court. General Statutes section 8-8(o) provides: “There shall be no right to further review except to the Appellate Court by certification for review, on the vote of two judges of the Appellate Court so to certify and under such other rules as the judges of the Appellate Court establish. The procedure on appeal to the Appellate Court shall, except as otherwise provided herein, be in accordance with the procedures provided by rule or law for the appeal of judgments rendered by the Superior Court unless modified by rule of the judges of the Appellate Court.”
I would consider modifying the zoning appeal rule slightly–to allow an appeal as of right if the trial court vacates the arbitration award. My review of the case-law suggests that trial court judgments vacating an award are frequently reversed on appeal, thus justifying differential treatment of judgments that vacate, and those that confirm, awards.
Proposal #2: Allow for the recovery of attorneys’ fees and/or substantial interest from a party who seeks unsuccessfully to vacate an award. This proposal comes in strong and moderate alternatives. The “strong” alternative would impose the fee shifting/interest obligation at the very first stage of post-arbitration proceedings, that is, the motion to vacate filed in the trial court. The “moderate” alternative would give a party aggrieved by an award the right to file a motion to vacate in the trial court, but would only impose the fee shifting/interest obligation if the party appeals the trial court’s judgment confirming the award. And, again, I would not impose the fee shifting/interest obligation on a party who wants to appeal a trial court judgment vacating an award.
In sum, the post-arbitration process of confirming an award takes too long. Given the extraordinary deference to which arbitration awards are entitled under the law, the lengthy appellate process simply increases the time and cost associated with reaching the usually inevitable conclusion: judicial confirmation of the award. The proposals described above would reduce the time and cost of the confirmation process.
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Update. A reader comments:
The proposal is for statutory change, but fee-shifting in appeals from refusals to vacate might usefully become part of arbitration clauses in contracts. The unfortunate issue arises of how to enforce such a provision. A new arbitration? A follow-up arbitration on “remand”? There might be a jurisdictional issue if the parties try to empower the court to award fees in statutory proceedings where the statute doesn’t provide for them.