As in most states, Massachusetts law allows parties to choose arbitration, rather than trial in the court system, to reach final resolution of their disputes. Parties agree on an impartial arbitrator with training and experience in the specific area of law involved in the dispute.
The arbitrator conducts a hearing in which parties present witnesses, documents, and evidence in support of their case. The arbitrator then renders a decision which is final and legally binding.
What to Expect Before the Hearing:
DISCOVERY. Perhaps the most significant difference between arbitration and court proceedings is the limited discovery available in arbitrations. Indeed one of the advantages of the arbitration process is avoidance of the costs and time delays involved in open ended pretrial discovery, particularly in cases where an overzealous counsel is of the “leave no stone unturned” philosophy. Insurers and businesses are seeking ways to reduce litigation costs, scrutinizing proposed discovery tools of their counsel to assure that each step yields corresponding gains for them in either fostering a more favorable settlement or resulting in a trial advantage. What becomes important for ADR therefore is to provide a process that meets these legitimate concerns of the participants for discovery. So the question arises, how much discovery should be allowed in arbitration and what steps should participants consider to assure they have enough opportunity for discovery.
As a starting point, it is best to understand that little to no discovery is generally permitted once the parties submit a case to arbitration. Under the Massachusetts Uniform Arbitration Act (MUAA) an arbitrator has the authority to order document production and depositions of witnesses “who are unavailable for the hearing or cannot be subpoenaed”. The arbitrator has wide discretion in this regard and the Courts have repeatedly declined to become involved in disputes over whether or not an arbitrator exceeded his authority in permitting or prohibiting discovery. Therefore, the issue of the extent of discovery permitted is left entirely to the determination of the arbitrator.
The diligent party therefore is well advised to either complete all necessary discovery before submitting a case to arbitration or to reach a written agreement with the opponent as to the discovery that will be permitted before submitting a case to arbitration. Even the right of an insurer to a “statement under oath” of an insured or one seeking recovery under the terms of an automobile insurance policy is not guaranteed to be allowed by certain arbitrators.
Many organizations providing ADR services have arbitration rules which will allow the arbitrator, in the event the parties are unable to agree on prehearing discovery, to decide such matters and make discovery orders if requested by the parties. The written arbitration agreement should be carefully reviewed as to provisions relating to discovery.
INITIATION OF ARBITRATION. When a case is deemed submitted to arbitration differs among ADR providers. The arbitration rules should be closely examined in this regard. Some ADR providers deem that an arbitration is initiated by receipt of written submission forms signed by the parties. In cases where parties are bound by an arbitration clause in an ongoing contract, arbitration may be deemed initiated by serving a demand on the opposing party. It is important for the user to determine and be sure that the opponent has bound himself to arbitration however, since occasions arise when parties wish to opt out of arbitration at the last minute, and if a binding arbitration agreement is not properly signed, or already in place, the opposing party may have little recourse.
SELECTION OF ARBITRATORS, DISCLOSURE OF CONFLICTS OF INTEREST. The utmost care should be given to the selection of the arbitrator. The arbitrator is the decisive element in any arbitration. His or her ability, experience, and fairness are at the foundation of the arbitration process.
The most common method of arbitrator selection is from a panel offered by the ADR provider. The user should request biographical materials concerning each arbitrator available for selection. Inquire of co-workers, associates or references provided by the arbitrator as to the arbitrator’s qualifications. If the parties cannot agree on an arbitrator, the arbitration rules of the provider often provide an alternative selection process. For example, the parties may be requested to number the proposed panelist(s) by order of preference and the ADR organization may administratively appoint the arbitrator most highly sought by both parties. If the parties cannot agree on an arbitrator, the Massachusetts Uniform Arbitration Act permits court appointment of an arbitrator upon request to the court.
Once selected, the arbitrator should disclose in writing to the parties any circumstances that would suggest a lack of impartiality, conflict of interest, or require disqualification. If, after full disclosure, a party fails to object to an arbitrator, the objection is generally deemed waived, and subsequent challenge to an arbitration award on these grounds will likely fail.
WRITTEN BRIEFS. Briefs may be submitted to the arbitrator both prior to and, at times, after the arbitration hearing. If the user wishes to submit a brief after the hearing, the arbitrator and the opposing party should be informed, since the arbitrator may hold his decision pending receipt of briefs, or allow the opponent a certain amount of time to file their brief. The arbitration rules should be carefully reviewed in this regard.
ADMISSIBILITY OF DOCUMENTARY EVIDENCE. Many ADR providers have arbitration rules that require a party who wishes to present documents at a hearing to produce them to the other side within a certain number of days in advance of the hearing, (i.e., 10 or 20 days). These arbitration rules should be carefully reviewed and complied with. Examples of documents that often are admissible in this fashion are medical reports, medical bills, experts reports, and affidavits of witnesses. If these documents are not produced in advance according to these rules, the arbitrator may prohibit their introduction, particularly if failure to produce them has prejudiced the other side in their ability to prepare for the hearing.
What to Expect at the Arbitration Hearing:
CONDUCT OF THE HEARING. All arbitrators do not all conduct the arbitration hearing in a similar manner. The arbitration rules should be carefully reviewed in this regard. If these rules are vague as to how the hearing will be conducted, as many are, the user should request further information from the ADR provider on the process to be used in advance of the hearing.
Arbitrations resemble trials. Usually they take place in a large private conference room. Parties can be represented by counsel or can represent themselves. Insurance claims representatives can appear on behalf of their insureds at the arbitration hearing, or they can have defense counsel appear, often depending on the value and legal complexity of the case.
STIPULATIONS. The arbitrator often starts by making introductory remarks and explains the process he or she wishes to follow during the course of the hearing. Any stipulations that can be entered into by the parties should be made prior to the commencement of the hearing. For example, the defendant may wish to stipulate as to liability with the only issue submitted to the arbitrator being the extent of damages. Or, the parties may be able to stipulate as to offsets that are to be taken from a gross award, such as for Personal Injury Protection benefits received by the claimant in an automobile bodily injury claim being arbitrated.
OPENING STATEMENTS. Usually both parties or their counsel or representative are given an opportunity to make a brief opening statement outlining the evidence they expect to present at the hearing.
PRESENTING THE CASE. The claimant presents his or her case first. The arbitrator is empowered to administer oaths to all witnesses and the witnesses generally testify under the direct examination or questioning of their counsel or representative first. The opposing party or his counsel or representative will have the opportunity then to cross examine each witness. At times, the arbitrator may also question the witnesses.
During the course of the claimant’s case, all relevant documentary evidence may be submitted, such as, in personal injury cases, medical bills, medical records, lost wage information, and in certain instances, expert’s reports or affidavits. Expert witnesses, such as doctors or engineers, may testify in person at the arbitration. As stated above, the arbitration rules must be reviewed carefully concerning admissibility of testamentary and documentary evidence so as to comply with all notice requirements well in advance of the hearing.
After the claimant submits his case, the respondent has the opportunity to present witnesses and submit documents in support of his case. The claimant, or his counsel or representative, shall also have the right to cross examine any witness presented by the respondent.
EVIDENTIARY OBJECTIONS. The user should make any objections they deem warranted to evidence that their opponent seeks to admit. The arbitrator shall rule on each objection. Although the rules of evidence are generally more relaxed at an arbitration hearing, objections have value in that they may alert the arbitrator to possible deficiencies in the opponent’s evidence.
CLOSING STATEMENTS. After all of the evidence has been submitted by both parties, each party is generally allowed to make closing statements outlining their positions as to liability and damages, with the respondent going first and the claimant last.
FORM OF AWARD. Under the Massachusetts Uniform Arbitration Act, and under the terms of most written arbitration agreements, an arbitration award must be in writing and signed by the arbitrator(s). Some arbitration awards may be sparse and not contain detailed findings of fact or rulings of law, but simply state the result, such as the amount of damages to be paid by one party to the other, i.e., “The defendant shall pay the claimant the amount of $5,000.00”. Most arbitration awards however do contain the arbitrator’s reasoning in reaching their decision. The parties are nevertheless advised to clarify in advance with the arbitrator the type and form of award that they require and can be expected. Some disputes are such that the parties require such a reasoned award with specific findings. The parties should clarify in advance issues such as offsets from any award, i.e., for Personal Injury Protection benefits paid, findings of comparative negligence, etc., so that the written award that is rendered makes clear the precise net amounts that may be awarded, without need for further clarification.
PUNITIVE DAMAGES. Generally, punitive damages are not available under Massachusetts law unless authorized by a specific statute, however, an award of punitive damages by an arbitrator is not without precedent, though rare. Parties should clearly determine and ideally agree in the written agreement whether punitive damages are an element to be submitted to the arbitrator. Multiple damages under M.G.L. 93A and 176D can be awarded by arbitrators unless the parties agree to the contrary.
ATTORNEYS FEES. In most cases, an arbitrator may not award attorney’s fees unless authorized to do so by statute or by the parties arbitration agreement. Attorneys fees are expressly excluded from the relief available under the Massachusetts Uniform Arbitration Act, but, like punitive and multiple damages, these issues should ideally be discussed and agreed to by the parties in writing prior to submission to arbitration.
INTEREST. Pre-award interest is generally not available in arbitrations under Massachusetts law, unless the parties provide otherwise in their agreement. Interest is available, however, from the date of the award. Pre-judgment interest often plays a significant role in older cases submitted to litigation, since the Massachusetts statute presently calls for pre-judgment interest in tort cases of 12% from the date suit is initiated. Should such an older case be submitted to arbitration, the parties should clearly indicate in the written arbitration agreement whether the arbitrator is authorized to award interest.
MOTION TO VACATE OR REVIEW ARBITRATION AWARD. Challenges to arbitration awards are rare because the grounds for appeal are so narrow. The grounds for vacating an award under the Massachusetts Uniform Arbitration Act (MUAA) are limited to: 1.Corruption, fraud, or undue means, 2. Evident partiality of the arbitrators or misconduct prejudicing the rights of any party, 3. Arbitrators acted in excess of their power, 4. Arbitrators refused to postpone the hearing, upon good cause being shown, refused to hear evidence material to the controversy, or engaged in other misconduct at the hearing, which prejudiced the parties’ rights, and 5. The absence of a written arbitration agreement, as long as the party seeking to vacate the award did not participate in the arbitration hearing without raising an objection.
The most common but least successful ground for challenging an arbitration award is that the arbitrator erred with respect to the facts or the law. The Massachusetts Supreme Judicial Court has stated however that, “if an arbitrator has committed an error or law or fact in arriving at his decision, a court will not upset the finding unless there is fraud involved. Even a grossly erroneous decision is binding in the absence of fraud.”
ARBITRATOR IMMUNITY. Arbitrators enjoy the same immunity from civil liability as judges. This immunity extends to the organizations that administer the arbitrations. Arbitral immunity includes immunity from testifying about the reasons for the award or any other aspect of the arbitration.