Tom Crowley - Hawaii Mediator - Arbitrator - Attorney

Honolulu Hawaii Mediator - Arbitrator - Attorney




The Ritual of Resolution in Arbitration
by Thomas E. Crowley

· Before Beginning
· The Arbitrator’s Survival Kit
· Beginning the Arbitration
· Opening Statements
· Presentation of Evidence
· The Weight of the Evidence
· Closing Arguments
· Closing of the Hearing
· The Award
· The Powers of the Arbitrator
· 10 Guidelines for Arbitrators
· The Power of the People

Arbitration is a process in which an impartial third person listens to the opposing parties in a dispute and renders a decision for them. Arbitration is private, usually voluntary, and almost always binding.

One of the reasons arbitration enjoys increasing popularity today is its relative informality. It has far fewer rules than litigation, which regularly translates into quicker resolutions at a lower cost. Arbitration can strike a good balance between flexibility and formality. Arbitration doesn't "exult form over substance," but instead gives form to the substance of the dispute.

This is a critical point, because without some process, or ritual, or ceremony to follow, productive communication in disputes would come to a screeching halt. A fundamental truth about our human relationship to conflict is that emotions are the driving force and common denominator in all disputes. Staying focused on the "ritual of resolution" in arbitration can help the arbitrator avoid getting caught up in the contagious passions of the parties. The ritual itself has the power to transform the dispute from the fear and fury of accusations and arguments to a dignified focus on fair criteria and remedies.

Understanding the power of the ritual in arbitration is important. Knowing what the ritual actually is, and then following it, is essential. The description below is designed to help arbitrators become faithful celebrants of the ritual of resolution in arbitration.

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Before Beginning

Before an arbitration hearing begins, two important things need to get done. First, the Arbitrator must make a disclosure of any potential conflicts of interest.

If only two words could be used to describe the ethical considerations for arbitrators, they would appear paradoxical. The first word is "disclosure." An arbitrator should disclose any interest or relationship likely to affect impartiality or which might create an appearance of partiality and bias. Practically speaking, this means any contact the arbitrator has had with the parties, the witnesses, and the attorneys.

The second word looks like the antonym of the first: "confidential." Unless otherwise agreed by the parties, or required by applicable law, an arbitrator should keep confidential all matters relating to the arbitration proceedings and decision. If the arbitrator follows these two rules, he or she will be upholding the essential spirit of the disclosure law.

The second thing the arbitrator needs to do is to hold a prehearing conference with the parties or their attorneys. At the prehearing conference, the Arbitrator:

  1. Schedules the time, date and place of the arbitration hearings;
  2. Clarifies the issues submitted to the arbitration;
  3. Sets deadlines for the:
    a) Exchange of information;
    b) Identification of witnesses;
    c) Exchange of exhibits;
    d) Submission of arbitration memoranda

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(Don't Enter the Hearing Without It)

1. The written agreement to arbitrate.

This is how the parties ended up in front of the arbitrator in the first place. The agreement to arbitrate, whether by way of an arbitration clause in the parties' contract, or an agreement to submit the dispute to arbitration, is the document which gives the arbitrator the "jurisdiction" -- the power -- to make a binding award in the case. It should also state the precise issues submitted for arbitration.

2. The demand or claim, and the answer to the claim.

These are the positions of the parties concerning what happened and who's to blame.

3. The arbitration memo submitted by the parties, explaining:

  • A summary of the facts;
  • The issues submitted for arbitration;
  • The criteria which should be applied to the facts; and
  • The precise remedies sought.

4. H.R.S. Chapter 658A, "The Uniform Arbitration Act”

  • There are only 28 sections in Chapter 658A, and together they give a short course on everything an arbitrator needs to know about arbitration law in Hawaii.

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Beginning the Arbitration

Now that the arbitrator is prepared for the unexpected, he or she can enter the conference room designated for the arbitration and begin the hearing. Ceremony is especially important at this stage, because it is here that the arbitrator establishes the dignity of the proceedings and the pattern of fairness he or she will be adhering to throughout the process.

Announce the name of the case, using the formal names of the parties.

  • Announce the names of all present, both the parties and their attorneys.
  • Take the Arbitrator's Oath

I solemnly swear that I will faithfully and fairly hear and examine the matters in controversy between the parties, __________ and __________, and that I will make a just Award according to the best of my understanding.

  • Explain clearly the ritual which will be followed for the arbitration hearing and the award, such as the opening statements, the order of proof in the presentation of evidence, the final arguments, the closing of the hearing, and the making of the award.
  • Announce the receipt into the record of the agreement to arbitrate.
  • Request the parties or their attorneys to submit any joint stipulations of facts or documents which may be admitted into evidence.
  • Go over the exhibits each side is submitting.
  • Ask if the parties wish to bring up any other preliminary matters, such as changes of claims, or issues of arbitrability.

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Opening Statements

Invite the parties to make Opening Statements about the evidence they will produce, the remedies they seek, and why such remedies are fair and within the arbitrator's power to award.

  • The Claimant makes its Opening Statement first, followed by the Respondent.

Since this is the first chance for the parties to formally convey their points of view, the arbitrator wants to show he or she is listening carefully. When I serve as an arbitrator, I face and lean slightly toward the speaker, looking down only to take notes. This sends a strong message that I, as the arbitrator, respect what the parties are saying. Usually, that respect is reciprocated for the remainder of the arbitration.

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Presentation of Evidence

  • The Claimant presents its case first, followed by the Respondent.
  • The evidence comes into the record by way of witnesses and documents.
  • When a party calls a witness to testify, the arbitrator administers the following oath:

Do you solemnly swear that the evidence you are about to give in this arbitration will be the truth, the whole truth and nothing but the truth?

  • The party calling the witness commences with direct examination, asking questions to show the witness is competent to testify and to keep the witness focused on the issues in dispute.
  • After direct examination is completed, the other parties may cross-examine to bring out other facts, correct mistakes, and discredit the witness.
  • After the completion of each party's case in chief, the arbitrator asks the other parties if they wish to present rebuttal evidence.

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The Weight of the Evidence

Chapter 658A of the Hawaii Revised Statutes provides:

...The authority conferred upon the arbitrator includes the power to ...determine the admissibility, relevance, materiality, and weight of any evidence.

In other words, the rules of evidence don’t apply. Although the rules of evidence can't be used to exclude otherwise relevant and material testimony and documents, they can be used to point out why certain evidence is unreliable. To make sound judgements about the weight of the evidence, the arbitrator should invite the parties to point out why certain evidence is unreliable.

For example, "hearsay evidence" is an out-of-court statement used in court to prove the truth of that statement. Since it's "out-of-court," it can't be cross-examined. Because cross-examination is an excellent tool for determining reliability, hearsay evidence usually should be given less weight than "in-court" statements.

The most critical aspect of the arbitration hearing for the arbitrator is when he or she is asked to rule on a motion or an objection. The arbitrator may use the "break-down method" (breaking down the issues by asking who, what, when, where and why) to understand the motion or objection made by the parties. This not only helps the arbitrator obtain important information, but also buys a little time to weigh the issues fairly.

Before final arguments, the Arbitrator should ask each party:

"Do you have any further proofs to offer or witnesses to be heard?"

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Closing Arguments

  • The arbitrator then invites each party, starting with the Claimant, to make a closing argument which summarizes the evidence, the precise remedies sought, the precise calculations used to arrive at any damages, and why the arbitrator should award or disallow such damages.
  • The Arbitrator may ask clarifying questions of both parties to ensure that he or she understands their respective positions on liability and damages.

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Closing of the Hearing

  • If the Arbitrator is satisfied that the record is complete, the Arbitrator then declares:
  • "I hereby declare this hearing closed."
  • The Arbitrator makes no comment or indication at this time regarding who will prevail, or what the Award will provide.

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The Award

The Arbitrator submits the Award within 14 days from the date of the closing of the arbitration hearing.

The Award can either be a short, simple statement or a "reasoned opinion." In either case, the Award must include:

  • The prevailing party;
  • Amount to be paid to the prevailing party;
  • Allocation of the administrative fees and the arbitrator's compensation; and
  • The final statement that the Award is in full settlement of all claims submitted to the arbitration.
  • The making of the Award ends the power of the arbitrator, unless the parties agree otherwise.

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The Powers of the Arbitrator

An arbitrator has a tremendous array of powers. Among them are the powers to: set the date and place of the hearing; postpone the hearing for good cause; order discovery before the hearing; decide summary judgment motions; subpoena documents to be produced at the hearing; compel witnesses to come to the arbitration hearing; to hear new or changed claims; weigh the evidence; conduct an on-site inspection; safeguard property that is the subject matter of the arbitration; and to award both money damages and specific performance.

Implicit in the above powers is the power to spend "other people's money," not only in the award, but in controlling the length of the hearing and the costs of the process. The arbitrator has to be especially careful to uphold one of the primary purposes for arbitration, which is to reduce the costs of fairly resolving disputes.

Choosing an arbitrator is the most important decision the parties will make. Of all the powers bestowed upon the arbitrator, the greatest is the power of the arbitrator to make mistakes. To encourage arbitration and discourage litigation, the Hawaii Supreme Court has held that the parties who arbitrate a dispute assume all the hazards of the arbitration process, including the risk that the arbitrator may make a mistake in the application of law and in the findings of fact. Board of Directors of the Association of Apartment Owners of Tropicana Manor v. Jeffers, 73 Haw. 201, 820 P.2d 503 (1992). Unless there's outright corruption and fraud, the award is binding and usually not appealable.

Accompanying these awesome powers, of course, are awesome responsibilities. The best test of an arbitrator is how he or she exercise the powers granted by the parties. As Abraham Lincoln said so well:
"Nearly all men can stand adversity. But if you want to test a man's character, give him power."

Each opportunity to exercise the awesome power as an arbitrator is nothing less than a test of character. The 10 Guidelines I use to pass the Abe Lincoln test are provided below:

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  1. Follow the Ritual of Resolution throughout the arbitration process.
  2. Use the "break-down method" (breaking down the issues by asking who, what, when, where and why) to understand the motions and objections made by the parties.
  3. Use Chapter 658A of the Hawaii Revised Statutes to rule on motions and objections.
  4. Don't abuse the arbitrator's power to make mistakes; determine the award according to the facts and the law.
  5. Don't abuse the arbitrator's power to spend other people's money; remember that a central purpose of arbitration is to save time and money.
  6. Ask for clarification if you don’t understand important positions/points of the parties.
  7. Avoid ex parte communications before, during and after the arbitration.
  8. Don't participate in settlement attempts.
  9. Don't indicate which way the wind is blowing.
  10. Give each side an equal turn to present evidence, make objections, and state positions.

The Power of the People

Balanced against all the powers of the arbitrator is the power of the people. The parties give the arbitrator the power to decide a central issue in their lives. They don't give this power to just anyone; they get to carefully choose their arbitrator. If arbitrators don't exercise their powers with responsibility -- if they don't pass Lincoln's test of character -- they may never get selected to arbitrate again.

By understanding and following this ritual of resolution in arbitration, each party can present its best case, which will, in turn, help the arbitrator arrive at a fair award.

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