SHOULD I DITCH THE ARBITRATOR AND WAIVE THE JURY?

SHOULD I DITCH THE ARBITRATOR
AND WAIVE THE JURY?
Jonathan M. Hyman, Shareholder
jhyman@grayreed.com
713-986-7180
Gabe T. Vick, Associate
gvick@grayreed.com
713-986-7148
“TRIALS ARE TOO IMPORTANT
TO BE LEFT TO JURIES.”
Gene Hackman, Runaway Jury
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
Fact or Fiction?
1. Faster
2. Cost Efficient
3. Selecting the Decision Maker
4. Finality
5. Privacy
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
ANOTHER ADVANTAGE TO ARBITRATION CLAUSES
CLASS ACTION WAIVER
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
Fact or Fiction?
1. Faster
2. Cost Efficient
3. Selecting the Decision Maker
4. Finality
5. Privacy
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
FASTER
Arbitration
• Average time to
hearing is 7 months
Courts
• Federal Courts –
average time to trial
23.4 months
• Harris County –
average time to
bench trial 18.4
months
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
COST EFFICIENT
Limitations on depositions
Limitations on written discovery
Limited motion practice
Limits on the procedure of the hearing
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
SELECTING THE DECISION MAKER
Chose
Arbitrator
based
Chose
Arbitrator
on:based on:
• Expertise,
Competence
and
• Expertise,
Competence
Experience
and Experience
• Reputation
• Reputation
• Availability
• Availability
• Temperament
• Temperament
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
FINALITY – Very Limited Judicial Review
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
PRIVACY – Arbitration pleadings are not public record
CONVENTIONAL WISDOM ON WHY TO ARBITRATE
WHAT DO IN-HOUSE LAWYERS THINK?
Rand Institute for Civil
Justice
Majority in-house counsel believe
• Saves time and cost
• Avoids uncertainty of jury
• Allows choosing of arbitrator
• Confidentiality
Most experienced in-house attorneys do not
agree arbitration saves time and money
REALITIES OF ARBITRATION
Oxford Health, L.L.C. v. Sutter,
133 S.Ct. 2064 (2013)
“Convincing a court of an arbitrator’s error – even his
grave error – is not enough. So long as the arbitrator
was ‘arguably construing’ the contract – which this one
was – a court may not correct his mistake under §
10(a)(4). The potential for those mistakes is the
price of agreeing to arbitration.”
REALITIES OF ARBITRATION
Standard for Vacating Award Under FAA
1. where the award was procured by
corruption, fraud, or undue means;
REALITIES OF ARBITRATION
Standard for Vacating Award Under FAA
2. where there was evident partiality or
corruption in the arbitrators, or either of them;
REALITIES OF ARBITRATION
Standard for Vacating Award Under FAA
3. where the arbitrators were guilty of misconduct in
refusing to postpone the hearing, upon sufficient
cause shown, or in refusing to hear evidence
pertinent and material to the controversy; or of any
other misbehavior by which the rights of any party
have been prejudiced; or
REALITIES OF ARBITRATION
Standard for Vacating Award Under FAA
4. where the arbitrators exceeded their powers, or
so imperfectly executed them that a mutual, final,
and definite award upon the subject matter
submitted was not made.
“MANIFEST DISREGARD OF THE LAW”
1953
2008
MANIFEST DISREGARD
“the arbitrator knew of the relevant principle,
appreciated that this principle controlled the
outcome of the disputed issue, and
nonetheless willfully flouted the governing
law by refusing to apply it.”
Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 217 (2d Cir. 2002)
Hall Street Associates, L.L.C. v.
Mattel, Inc., 522 U.S. 576 (2008)
Manifest Disregard
of Law
THE FIFTH CIRCUIT
Manifest Disregard
of Law
Citigroup Global Mkts, Inc. v. Bacon, 562 F.3d 349, 354-55 (5th Cir. 2009)
GREG MARTIN AUCTIONS V. HERITAGE AUCTIONS
A case study of an arbitration gone bad
GREG MARTIN AUCTIONS V. HERITAGE AUCTIONS
A case study of an arbitration gone bad
GREG MARTIN AUCTIONS V. HERITAGE AUCTIONS
WHAT NOW?
Plaintiff's motion to vacate the final arbitration
award should be GRANTED, and defendant’s
motion to confirm the award should be DENIED,
the award should be VACATED, and the case
should be REMANDED for further proceedings.
RETHINKING “GOING ALL IN”
CONTRACTUAL JURY WAIVER
Under Texas law and in 48 out of 50 states
CONTRACTUAL JURY WAIVER
Bureau of Judicial Statistics states that
litigants have waived their right to jury in
favor of a bench trial in 80% of contract
cases in 2005.
CONTRACTUAL JURY WAIVER
Standards
1. Knowingly and voluntarily
2. Conspicuous
3. Burden shifts
SAMPLE JURY WAIVER
THE PARTIES EXPRESSLY AND
IRREVOCABLY WAIVE ANY RIGHT TO
TRIAL BY JURY FOR ANY CLAIM,
ACTION OR OTHER PORCEEDINGS
ARISING UNDER OR RELATING TO
THIS AGREEMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER, OR THE
RELATIONSHIP
BETWEEN
THE
PARTIES.
CONCLUSION
Rethinking the Conventional Wisdom of Arbitration
SHOULD I DITCH THE ARBITRATOR
AND WAIVE THE JURY?
Jonathan M. Hyman, Shareholder
jhyman@grayreed.com
713-986-7180
Gabe T. Vick, Associate
gvick@grayreed.com
713-986-7148