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It is commonly believed that companies put arbitration and class waiver provisions in contracts to deter or suppress consumer claims. Sometimes this intent is obvious, such as when the provision forbids an arbitrator from awarding a certain type of relief, shortens the statute of limitations, or prevents claims from being brought on a class-wide basis. But sometimes the intent is more subtle: banks and other large corporations simply don’t think consumers will bother to file claims in arbitration, or that if they do, they won’t be able to find a lawyer willing to represent them.

We need to change the way we think; we need to understand that arbitration is not a place where consumer cases must die. While it is true that arbitration may not be preferable or even practical in certain cases, there are many other times that arbitration can lead to excellent results for the consumer.

This article summarizes some of the topics discussed in the digital version of NCLC’s Consumer Arbitration Agreements Chapter 8a—an all new chapter covering how to conduct an individual arbitration, including selecting an arbitrator, conducting discovery, preliminary hearings and motions, evidentiary issues, the hearing, and confirming the award.

1. Opening a Dialogue About Arbitration

Consumer attorneys are often not aware of the existence of an arbitration agreement until the defendant files a motion to compel arbitration. While one’s initial instinct may be to fight a motion to compel, it may be better for both sides to have an open discussion about whether there is a valid arbitration agreement. If it is clear the arbitration provision is valid, consumer attorneys are often better off trying to negotiate with opposing counsel as to how to proceed in arbitration with the goal of leveling the playing field instead of fighting a motion to compel arbitration that will likely be granted anyway.

It also may be best to have the court retain jurisdiction by staying any pending litigation until the conclusion of the arbitration proceeding, rather than dismissing the case outright. You might even ask the court to schedule status conferences. That way, if a defendant does not pay its share of arbitration fees or otherwise refuses to participate in the arbitration, these actions can be reported to the court. A judge might even order the defendant to pay the fees immediately or might rule that the defendant has waived arbitration and hear the case instead in court.

2. Start the Arbitration Case with a One-Page Compelling Narrative

Some arbitrators prefer that the demand for arbitration be a compelling, short narrative (such as one page) rather than a formalistic legal complaint. You can also attach a legal-style complaint to your demand, but the one-page narrative may be more helpful to a busy arbitrator that just wants to acclimate themselves to the case quickly. Most arbitration forums do not have a formal pleading requirement. A short, compelling statement (story of what happened) is something an arbitrator may constantly refer to during the proceeding, and is much more easily navigated than a long, formal complaint. This easy and quick to read one-page narrative can shape an arbitrator’s first impression of the case.

Some arbitrators have also suggested numbering items in the narrative so that the defendant’s disputes can be narrowed to specific items that can then be addressed. Many arbitrators stress efficiency and may not favor long opening demands.

3. Just Like in Court, Who Presides Over the Case May Affect the Outcome

Just like in court, the arbitrator that presides over the case is very important. While one arbitrator might award punitive damages, another arbitrator might award a consumer nothing. An arbitrator’s mistakes of fact and law are not enough to overturn an award. Given the arbitrator’s discretion, your case can often be won or lost when selecting an arbitrator.

Arbitration forums encourage the parties to select an arbitrator, and if the parties cannot decide there is usually some type of selection or appointment process depending on the forum. It is helpful to investigate the background of the arbitrator. Use internet searches. Read opinions of former judges on the arbitration panel. Check out the clients of the arbitrator’s present or former law firm. Read articles written by the arbitrator. More on selecting an arbitrator is found at NCLC’s Consumer Arbitration Agreements § 8a.2.

4. Arbitration Costs

For AAA and JAMS consumer arbitrations, the consumer pays an initial filing fee of $200 or $250 and the defendant pays the rest. Many defendants insert arbitration agreements into their standard form contracts with only the thought of avoiding class actions and punitive damages. Defendants don’t always consider the arbitration costs and attorneys fees when evaluating risk. For small consumer cases worth $5,000 or $10,000, it may make more sense for the parties to try to resolve the matter on their own without the need for private arbitration.

Unfortunately, some defendants have been known to default in paying the arbitration forum. This is where it is helpful for the court to have retained jurisdiction. When a defendant fails to pay, you can go to court and request that the defendant be ordered to pay or request a finding that the defendant’s failure to pay constitutes a waiver of arbitration.

Another option, though far less attractive, would be for the claimant to advance the defendant’s arbitration costs and seek reimbursement in the final arbitration award.

For more on arbitration forum fees and costs, see NCLC’s Consumer Arbitration Agreements § 8a.3. For a discussion about a defendant’s failure to pay fees, see NCLC’s Consumer Arbitration Agreements § 8a.4.

5. Preparation and Conduct in the Preliminary Hearing Is Critical!

Experienced arbitration practitioners know the critical importance of the preliminary hearing. Unlike a jury or bench trial where different judges handle different aspects of a case, a preliminary hearing in arbitration is before the fact-finder and decider. From the very first hearing through every conference, email, and phone call with the arbitrator, the consumer’s attorney should act as if they were speaking to a jury. The arbitrator’s first impression of a consumer and the consumer’s attorney is at the preliminary hearing, so this impression may be the most important.

Be prepared at the hearing to discuss all aspects of the case—scheduling, discovery requests and why the discovery is needed, the number of days needed for trial, and anything else that might come up or that the consumer wants to raise. This is also a good time to emphasize a case’s merits and anything that might shape an award that is not immediately apparent to the arbitrator. To some extent, this is the consumer’s opening statement before a jury. Being prepared not only enhances an arbitrator’s impression of the attorney, but the preliminary hearing is also an ideal time to raise many important issues as to the conduct of the arbitration.

Some attorneys request that an arbitrator provide a written report or order following the preliminary hearing. In rarer occasions, it may be necessary to have a court reporter to help minimize later disputes as to what was discussed and decided. For more detail concerning the preliminary hearing, see NCLC’s Consumer Arbitration Agreements § 8a.5.

6. How to Get the Discovery You Need

Discovery in arbitration may be more limited than in a court proceeding. A lot depends on the type of claims, the jurisdiction, and the arbitrator. Some courts have held litigants are entitled to whatever discovery that is reasonably necessary to vindicate their statutory claims, while others are far more restrictive. Either way, courts interpreting the Federal Arbitration Act have held that an arbitrator has a duty to make sure documents in the possession of one party are exchanged with the other party. And a failure to discharge that duty may be grounds to vacate the arbitration award.

It is usually helpful to explain to the arbitrator why each deposition or document request is necessary for the arbitrator to decide the case fairly. A court can vacate an arbitrator’s award if the arbitrator fails to hear pertinent and material evidence, including necessary witnesses. As a result, arbitrators may be wary of shutting off information important to a litigant’s case. As a helpful guide, you may want to show the arbitrator what discovery is usually found necessary in a consumer case in court. Added complexity in a case should lead to increased discovery.

Defendants will often try to minimize a case’s importance, arguing that the case does not deserve the discovery sought. Consumer attorneys should be prepared to explain why the discovery is necessary—the arbitrator must write a final award that can withstand scrutiny, as well as determine the amount at stake in the arbitration.

In lieu of certain discovery, a consumer attorney might obtain the defendant’s stipulation to certain facts. Arbitrators like to keep the train moving, and are not happy if a defendant does not stipulate to facts that the defendant knows are true.

While some arbitrators see the inherent need for interrogatories, other arbitrators may prefer that written discovery focus on documents. The rules regarding testimony of third parties are intricate. But an arbitrator does have the power to summon a third party to appear and give testimony before the arbitrator. In light of such, many individuals agree to a deposition instead of testimony at a hearing.

For more detail concerning setting the scope of the consumer’s discovery, see NCLC’s Consumer Arbitration Agreements § 8a.6.

7. Dispositive Motions and Discovery Hearings Are More Informal than Court

Depending on one’s point of view, a favorable aspect of arbitration may be how dispositive motions are handled. Many arbitrators will require that a party seek leave to file a dispositive motion. Dispositive motions are disfavored and aren’t granted as often in arbitration as they are in court.

On the other hand, any delay in providing necessary discovery may be quickly and aggressively handled by the arbitrator. Discovery issues will often be handled by letter briefs with a conference call before the arbitrator to promptly resolve any issues.

See NCLC’s Consumer Arbitration Agreements § 8a.7 for a discussion of initial disclosures, discovery motions, dispositive motions, and motions in limine to exclude evidence.

8. The Pre-Hearing Arbitration Brief: Help the Arbitrator Help You

What to put in a trial or arbitration brief varies from counsel to counsel. However, in arbitration you should keep in mind the person reading the brief is the fact finder ultimately deciding the case. The arbitration brief is the resource the arbitrator will look back to when a question arises about claims, facts, evidence, etc. See also NCLC’s Consumer Arbitration Agreements § 8a.7.6.

9. How to Use Relaxed Evidentiary Standards to Your Advantage

Arbitrators vary in how closely they follow federal or state rules of evidence, but in general, arbitrators are not interested in strictly complying with rules of evidence. However, arbitrators should allow everything in that is pertinent, material, and allows for a fair hearing. An arbitrator’s ruling can be overturned if evidence is excluded, and it is rarely overturned because an arbitrator allowed too much evidence in. Pertinent and material hearsay is typically allowed.

Authenticating documents with witness testimony will often be far looser than in court. Some arbitrators prefer that everything goes in unless there is a specific objection to a document, with the objector having to explain why it should be excluded. Again, an arbitrator’s award can be overturned for excluding documents, but it will unlikely be disturbed for including them.

All relevant witnesses should be allowed. If a witness is far away, video conferencing is commonly used. There is often less argument over the admissibility of expert testimony. Some forums’ rules specify that affidavits will be allowed, even if there is no opportunity for cross examination. In general, an arbitrator’s main concern is to move things along. For pattern and practice evidence, it is usually best to keep the testimony brief.

Some arbitrators make it clear they dislike objections to evidentiary submissions and witness statements. They want to move along and they will likely overrule most objections. Be careful not to annoy the arbitrator by being overly legalistic.

See NCLC’s Consumer Arbitration Agreements § 8a.8 for discussion of evidentiary standards, witnesses, arbitrator questioning of witnesses, remote and video testimony at trial, documentary submissions, use of affidavits in the proceeding, use of arbitration awards in another proceeding, objections in the hearing, rebuttal and completing the presentation, and arbitration on written submissions only.

10. The All Important Post-Hearing Brief

Instead of a closing statement, some arbitrators prefer post-hearing briefs. Again, you are arguing to an arbitrator now, not a jury. It is best to cite case law and evidentiary support (exhibits, testimony, etc.) when making an argument. Remember, you are not in court, so your brief need not be constrained to facts entered into evidence. More on the post-hearing brief is found at NCLC’s Consumer Arbitration Agreements § 8a.9.

11. Damage Awards Are Rarely Reduced or Overturned

Where an arbitrator does award damages, a judge or appellate court is unlikely to reduce or overturn them. Review of an arbitration award is extremely limited. Since arbitration is a private matter, due process is not implicated. Supreme Court due process limits on punitive damages do not apply. And while we all know obtaining exemplary damages is difficult in consumer cases, arbitration does not make it any more so. With the right facts and circumstances, and an in-depth understanding of arbitration, consumers can achieve impressive results. Punitive damage awards in arbitration are discussed at NCLC’s Consumer Arbitration Agreements § 8a.10.

12. Don’t Forget to Convert the Arbitration Award into a Court Judgment

An arbitration award is not a binding court judgment. The proper way to make an arbitration award a binding court judgment is to bring an action in court to confirm the award. There will be few grounds for a defendant to contest confirmation and typically it will be easily granted. Then the consumer can enforce the award with post-judgment remedies such as garnishment and seizure of bank accounts and property. See NCLC’s Consumer Arbitration Agreements § 8a.11.

Author Name: 
Ronald Wilcox
About Author: 

Ronald Wilcox has been a consumer protection attorney since 1995, with an office in San Jose, CA. Ron is a graduate of Gerry Spence’s Trial Lawyers College, and has tried consumer protection cases in federal and state court, as well as JAMS and AAA. He serves on the Board of Directors for the National Association of Consumer Advocates, and is also a member of the Consumer Attorney’s of California, the Consumer Attorney’s Association of Los Angeles, and the National Association of Consumer Bankruptcy Attorneys. He has presented webinars and spoken at national conferences on consumer law and arbitration. He was awarded Santa Clara University’s Community Law Center’s Community Service Award. Ron is a co-author of Chapter 8a, Conducting Individual Arbitrations, in the National Consumer Law Center’s Consumer Arbitration Agreements.

Date Created: 
Monday, December 9, 2019
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