Arbitration beats the risk of state court any day. And sometimes federal court, too. I’m a huge fan of certain federal judges. But even in federal court, the process is just too much nonsense. Constant fighting over discovery. Assorted shenanigans. Arbitration can sometimes be better and more efficient. And you get to pick the arbitrators. That’s what this post is about. If you are representing your client in an arbitration proceeding, you need to demand the best possible arbitrators you can get.
We recently initiated an arbitration with the American Arbitration Association. The case was a dispute between members of an LLC. In a nutshell, one member alleges he was wrongfully pushed out of the LLC. The other members allege he breached a non-compete. The arbitration agreement (1) calls for a three arbitrator panel and (2) indicates that the parties would select and agree upon the arbitrators. Given the subject matter of the disputes, I requested arbitrators who had experience with LLC membership disputes, non-compete issues and – more broadly – complex commercial litigation. The AAA gave us a list of potential arbitrators. The list was trash. The vast majority of the potential arbitrators had no relevant experience whatsoever. Strangely, a number of the potential arbitrators were primarily construction lawyers.
The other side was willing to accept some of these people. But being the jerk that I am, I was not. So I wrote to the AAA case manager:
I have several very significant concerns. They are so significant that we may be taking formal action on them in the next few days. Simply put: We requested a list of arbitrators who had significant background in commercial litigation, shareholder disputes and/or non-compete matters. The AAA provided a list of neutrals who – by and large – did not possess such background. In fact, several of the neutrals proposed were construction lawyers. In my view, this was inexplicable.
That was just the beginning of this ordeal!. At some point, the case manager suggested that if we did not turn in our selection of arbitrations, then the AAA would just take the other side’s list and randomly assign us to arbitrators the other side had accepted. As one might expect, I was not ok with this and raised absolute hell. I laid out the language of the relevant arbitration agreement. I explained that arbitration was all about honoring the parties’ contract. And here, that contract provided that we had a right to select and agree upon arbitrators. I wasn’t selecting and agreeing upon anyone on the first list and I wanted a second list. If I didn’t like that second list, I would ask for a third list. And guess what happened? The AAA reassigned the case to a new case manager and got me a second list of potential arbitrators. Lo and behold, the second list contained several excellent arbitrators! I was willing to accept six of them.
I imagine that the other side – who were willing to take numerous arbitrators from the first list – weren’t nearly so selective. The end result: We got 3 of our top 6. I basically got the panel I wanted. The takeaways:
- Be Demanding: The arbitrator matters, just like the judge matters. But in arbitration, you get to pick. Demand exactly what you want. If the AAA gives you a bad list, demand another list. Keep going until you get who you want. You and/or your client are paying the bill for the AAA and the arbitrators. They work for you.
- Invest the Time: Invest time in researching potential arbitrators. So many lawyers view the arbitrator selection process as a quick, administrative task to complete. That’s dead wrong. An arbitrator’s background and track record will provide important insights into how they will approach issues and how they may ultimately rule. Take the selection process seriously and invest some time. Your clients will thank you for it later.
Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida. He focuses his practice on complex non-compete, trade secret and unfair competition claims. He has appeared in the Wall Street Journal, Inc. Magazine, Bloomberg, FundFire, PBS News Hour and more. His office can be reached at 954-332-2380.
