The Inefficiency Critique - Chapter 8 - The Reasoned Arbitration Award in the United States: Its Promise, Problems, Preparation and Preservation
John Burritt McArthur has been serving as an arbitrator since 1994. He has 23 years of experience as an arbitrator, 34 years as a trial lawyer in state and federal courts around the country, and is licensed to practice in Texas, California, and Alaska as well as in a variety of federal courts. He was a Partner at Susman Godfrey LLP, worked for Hosie McArthur LLP for several years, and today has a solo practice that combines arbitration practice with complex commercial trials. He has major litigation and arbitrator experience in five main areas: Energy, Oil and Gas, Electricity; Contract and Tort Business Disputes, including UCC Disputes; Antitrust; Investment Disputes, Fiduciary and Joint Venture Claims, Securities and Insurance. Mr. McArthur's broad work experience is equally suited to business and commercial arbitrations. He has represented plaintiffs and defendants in large, often highly technical commercial cases throughout his career. He has handled federal and state court cases, arbitrations, cases in MDL proceedings and class actions. His clients have ranged from some of the world's largest corporations, including Aetna and British Petroleum, to Alaska native corporations, States, individuals and small businesses. Mr. McArthur has been acknowledged for his litigation experience by his peers. He is currently chair of the LCA's International Institute on Natural Resources, Energy and Environmental Law. He has long held an "av" rating from Martindale-Hubbell. He is a member of the Million-Dollar and Multi-Million-Dollar Advocates Forum. He has published dozens of articles on legal issues, including on energy issues, arbitration, case management, various aspects of deregulation, and antitrust. He has also served as an expert in energy cases.
A statement of his arbitration philosophy can be found at http://www.johnmcarthurlaw.com/arbitration.htmz.
Chapter Eight addresses the other major criticism of reasoned awards – that they are too costly and take too long to write. It argues that, to the contrary, much of the work that goes into writing a reasoned award has to be done even when the arbitrators are writing a standard award. Arbitrators have many ways to craft a brief but reasoned award if that is what the parties want. They usually finish their work within relatively short deadlines, such as the 30-day deadline in the AAA’s general commercial rules; Chapter Eleven discusses how to write short awards when needed. More fundamentally, though, when parties ask for reasons, they are signaling that learning why they won or lost is more important to them than any incremental cost and delay.
from Chapter 8. The Inefficiency Critique
The vulnerability myth is the most persistent argument for issuing standard awards instead of reasoned awards or its companion reasoned form, findings and conclusions. But close behind is an inefficiency argument that three core, related, and overlapping virtues of arbitration – its ability to produce a quicker outcome than court proceedings, the lower cost of getting to decision, and the finality of awards – are jeopardized by awards with reasons. This resistance to reasons seems to derive as well from a general, visceral fear that every step toward “judicializing” arbitration erodes an informality that attracts parties to arbitration in the first place.
The idea that standard awards are needed to preserve arbitration’s essential efficiency features permeates the major treatises. They portray arbitrators’ giving explanations as at odds with the quick, low-cost process that arbitration should be. Here is the MacNeil treatise’s thoughts on this point:
The arbitrator’s freedom not to explain may be good or bad from the standpoint of a particular party in a specific case. It is, however, regarded as fundamental to the concept of efficient and economical dispute resolution and is an integral aspect of the strictly limited review accorded awards.
This analysis assumes that the arbitration system’s generic needs should take precedence over the parties’ needs and desires, even though arbitration supposedly derives great strength from being a creature of the parties’ design. The claim that reasons “may be good or bad” for the parties, but that decision-maker silence nonetheless is “fundamental” to “efficient and economical dispute resolution,” is a plea for writing standard awards.
The Domke treatise stresses the need to preserve speed and lower costs as part of an apparently general preference for standard awards:
The skyrocketing expenses involved in traditional litigation precluded access to the courts by a substantial number of people. . . .
Arbitration is, we are told, faster, cheaper, and probably fairer to all, . . . . . . .
The general view is that a detailed opinion written by a layman might expose the award to challenge in the courts, jeopardizing both the speed and finality of arbitration.