Once again, Charles Forer, in his alternative dispute resolution articles for The Legal , has highlighted a significant issue that presents yet another crucial decision for counsel advising a client about an agreement to arbitrate a dispute.
In his August article, Forer posed the problem faced by an attorney whose client had lost in arbitration. The arbitrator had not only ruled adversely but had issued a reasoned opinion explaining why the client’s earlier motion for summary judgment involving a waiver-of-liability issue had been denied. Even more damaging to the client, however, was that the arbitrator’s harmful opinion had been disseminated generally among other attorneys whose clients were disputing the same legal issue with this client. Now, the attorney and client were fearful that armed with the arbitrator’s legal opinion, adversaries would no longer be dissuaded from bringing claims because the arbitrator’s opinion was “available to anyone who surfed the Internet, [and] was a roadmap to their success on the legal issue of waiver of liability.”
Forer points out that the attorney had disserved his client because, “in failing to impose limits on how much information could be disclosed outside the arbitration hearing, the provision opened the door for anyone to … publicize and post on the Internet the arbitration award, any arbitrator opinions and anything else about the dispute.” He also proposes additional language that would mandate the maintenance of confidentiality with regard to any arbitrator decisions or opinions.
Before reaching this stage, however, it would appear that the attorney should have initially considered why and whether a written opinion by the arbitrator should be required or even permitted.
Reference to the rules of some of the ADR providers reflects no consistency in this regard. Thus, the Commercial Arbitration Rules of the American Arbitration Association, or AAA, provide at R-42, that while the award of the arbitrator[s] shall be in writing:
“The arbitrator need not render a reasoned award unless the parties request such an award be in writing prior to the appointment of the arbitrator or unless the arbitrator determines that a reasoned award is appropriate.”
Similarly, the Pa. Uniform Arbitration Act (as well as its predecessors), at 42 PS Section 7310, contains no direction with respect to the preparation of reasoned opinions and merely provides that there must be a written signed and served award. Court opinions under these acts have long recognized that there is nothing in the Arbitration Act or court decisions that requires arbitrators to state the reasons upon which an award is based; the cases even state that it is advisable to make only a general award that is somewhat analogous to a verdict of a jury.
Conversely, the Labor Rules of Arbitration of the AAA provide that the award of the labor arbitrator [Rule 34] “shall provide written reasons for the award unless the parties agree otherwise.”
Similarly, the arbitration rules of the Center for Public Resources, or CPR, also provide at Rule 15.2 that: “All awards shall be in writing and shall state the reasoning on which the award rests unless the parties agree otherwise.”
In short, in the AAA Commercial Rules and the Uniform Arbitration Act, there is a presumption that a reasoned opinion will not be issued unless the parties so require, whereas the CPR and AAA Labor Arbitration Rules provide the opposite presumption, i.e., that such a reasoned opinion will be issued by the arbitrator unless the parties agree that one should not be prepared.
What is common in virtually all of the provisions contained in these rules and cases, as well as those from many other jurisdictions and organizations, however, is that the practice with respect to the preparation of a reasoned opinion is not binding upon the parties.
In agreeing to submit their clients to arbitration generally, attorneys recognize that an essential element in their lawyering is to structure an arbitration procedure that meets the needs and abilities of their clients. For example, attorneys must always consider whether the rules of evidence should apply or whether the testimony of expert witnesses may be based on written reports without providing the opposing party the right to cross-examination.
So too, in preparing an agreement to arbitrate, notwithstanding the statutory or rule presumption with respect to the preparation of reasoned opinions, (either for or against), attention should always be given to whether such a reasoned opinion should be expressly required, expressly forbidden or issued at the discretion of the arbitrator.
There are, of course, different bases upon which a party might make a decision in this regard. In certain circumstances, a party may be confident about its legal position in a type of dispute which it contests regularly. Moreover, the arbitrator to be selected may be highly regarded. In that situation, a party may welcome the reasoned opinion of the arbitrator, which is not to be kept confidential, so that it may be employed in future litigation where the same legal issue will be presented. Additionally, particularly in a complex case, where the party wants to be sure that the arbitrator analyzes the facts and law in the case very carefully, requiring that the arbitrator provide a reasoned opinion may provide a comfort level that the arbitrator has, in fact, focused on the issues presented because there is a recognition that there will be a need to justify the ultimate ruling in writing.
Conversely, a party that is confident of a favorable decision may prefer that no written reasoned opinion be issued because it wants to assure that there will be finality and closure with the issuance of the arbitrator’s award. There are, after all, few issues upon which an appeal from the arbitrator’s award may be based. These would generally present themselves either because the decision of the arbitrator may have involved determinations beyond the scope of the arbitrator’s authority, because the right to a fair hearing was denied or because the award reflects a manifest disregard of the law. (A recent decision of the U.S. Supreme Court has, in fact, questioned the continuing viability of this last ground for appeal.) If there is no written opinion, a court will be highly unlikely to consider or believe itself empowered to reverse the decision of an arbitrator if there is any conceivable basis, however tenuous, upon which the decision was made. A party unhappy with the decision of an arbitrator, however, may find more grist for the appellate mill if the allegedly faulty reasoning or overreaching of the arbitrator becomes known through the written opinion.
Finally, a party that wants the adversarial process to end, win or lose, will never want a written opinion to be issued.
From time to time, I, as well as many other arbitrators, have been confronted with requests for a reasoned opinion. When the arbitration agreement provides for such, the arbitrator will, of course, comply. If after the appointment of the arbitrator and the conclusion of the hearing, the parties advise that they desire such an opinion, even if it was not initially required by the arbitration agreement, the arbitrator generally will acquiesce in this request.
Occasionally, however, after issuing an award in a case where the arbitration agreement or rules did not require an opinion, the losing party will request or insist on an opinion over the objection of the prevailing party. In such circumstances, faced with the absence of any requirement for an opinion in the agreement itself, and recognizing the competing reasons in support of or in opposition to such, an arbitrator will generally not feel obliged (or sometimes even permitted) to issue a reasoned opinion.
Thus, the attorney should view seriously the advice given by Forer as to how the arbitrator’s reasoned opinion may be kept confidential. Before reaching that stage, however, attention must given by the attorney to the preliminary question of whether the arbitrator should be empowered, required or forbidden to issue such an opinion. •