The Many Benefits of Reasoned Awards - Chapter 3 - 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.
Originally from The Reasoned Arbitration Award in the United States: Its Promise, Problems, Preparation and Preservation
Chapters One–Three: What reasoned awards should provide, today’s varying rule requirements, and the benefits of reasons. The first three chapters illustrate why reasons matter. [...]
Chapter Three, which describes the benefits of reasoned awards, is for readers who want to know why a party might want a reasoned award rather than a standard award. It is primarily for lawyers and their clients. It explores the many benefits parties and arbitration receive when awards explain the outcome, including a better understanding of what happened and the added pressure that giving reasons puts on arbitrators to make sure they think their decisions through carefully. The chapter can help lawyers and their clients decide whether they want a reasoned award at either of the two critical times: (1) at initial contract formation, when they can insert a pre-dispute arbitration clause in the contract; or (2) when a dispute arises in the middle of contract performance, and parties who did not initially agree to arbitrate may agree to do so for the particular dispute.
fron Chapter Three, The Many Benefits of Reasoned Awards
From some perspectives, the benefits of reasoned awards as well as their suspected costs (the latter the topic of Chapters Six through Eight) ought to be irrelevant. When a reviewing court is asked to determine whether an award is reasoned, it is none of the court’s business whether it believes the parties were foolish in asking for reasons. If one holds a realpolitik view, reasons don’t matter anyway because they are mere rationalizations and don’t change outcomes.
The parties have a right to the form of award they want regardless of the benefits or soundness of their decision. Similarly, if arbitrators are operating under rules like the domestic and international commercial rules of CPR and JAMS; the various AAA rules that do favor reasoned awards; ICDR’s international rules; and rules of international organizations like the LCIA, UNCITRAL, and the ICC, all of which make reasoned awards their default award, it is hardly for the arbitrators to refuse to provide reasons.
There are other situations, however, in which an understanding of what can be gained from a reasoned award is vitally important. Parties can use guidance in deciding what form of award they should write into their agreement. When under rules that make a reasoned award optional, they should know why they might or might not want to exercise the option. And if they find themselves drawn into a dispute without an agreement, they should be versed in the benefits that might accrue from entering a post-dispute agreement that requires a reasoned award.
Under today’s AAA commercial rules and some of its other rules, AAA arbitrators retain discretionary power to vary the default standard award and select a reasoned award if only one side requests them or in the arbitrators’ discretion, even if neither side has a preference. It is important for AAA arbitrators to consider fully the benefits reasoned awards may confer on the parties before they make discretionary decisions about award form.
It still is not uncommon for arbitrators to claim that the likely motive for a party’s asking for a reasoned award is that it is positioning itself for a later vacatur try, even though the case has not yet gone to hearing. This chapter identifies much stronger reasons to ask for a reasoned award than post-hearing positioning. Much of the older arbitration case law in the United States is imbued with a preference for silent awards, but there are many reasons why parties can benefit from awards in which the arbitrators explain what they did.
( Chapter 3 recommends reading Chapter 1 for the facts surrounding the first Tully award,and the text accompanying notes 69-79.)