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May 11, 2020

Stroock Commentary

By: Shira A. Scheindlin

New York’s state and federal courts have worked hard in these unprecedented times to provide essential services.  This means that criminal cases and civil cases involving health and safety have been considered “essential” and are being heard through remote or virtual means.  But matters considered “nonessential” have been put on hold.  When the courts reopen, there will be a large backlog of civil matters.  With the best of intentions, it is apparent that civil trials will not go forward for many months, particularly if there has been a jury demand.  Some have predicted that there will be no civil juries in New York until 2021.

In most cases, such a significant delay is bad for everyone.  Businesses need certainty.  Does a new product infringe a patent?  Does a product infringe a trademark? Will an insurance company need to continue to place a large reserve on an outstanding claim?  Does a company need to continue to disclose a potential liability on public filings?   Will an employee be reinstated or can her position be filled?  Many more questions like these could be asked.  The point is that while delay is sometimes welcome to avoid the unwelcome news that monies are owed, in many business disputes what is most needed is a determination and closure.

If the courts cannot resolve commercial disputes due to the priority that must be accorded to matters involving danger to the community – including criminal matters, domestic violence, and health and safety issues – then the parties to commercial disputes might wish to consider other options for dispute resolution.

One option, of course, is to negotiate directly in an attempt to settle the lawsuit.  When this fails, mediation with the help of an experienced neutral is the next step.  But at the end of the day, if neither direct or facilitated negotiations work, the parties in commercial disputes should consider designing their own dispute resolution process by consenting to arbitration.

Arbitration does not have to be agreed to in advance of a dispute.  Many parties bring their dispute to court, only to decide after years of high cost litigation, and long waits for a trial date, that they should leave court and agree to a confidential and expeditious arbitration.  Arbitration can be a very flexible process.  The parties can design whatever process they wish.  They do not have to be subject to the rules of any particular provider of dispute resolution services.  Parties can choose to retain a sole arbitrator or can choose a panel of three arbitrators.  They can determine the selection process and they can agree on the required qualifications of the arbitrator.  They can agree on whether discovery will be permitted, whether there will be live testimony or written submissions, whether there will be a post-hearing briefing, and even whether an appeal would go before an arbitral appellate panel.  In short, the parties have much more control over the process of resolving a dispute than they do in court.

Experienced arbitrators are ready to assist in designing a process that can be tailored to the needs of a particular dispute. Many arbitrators are affiliated with law firms and can provide the space needed for in-person arbitrations, or can host a virtual arbitration.

As a former federal judge, and now an experienced arbitrator, I have served several times as an arbitrator in cases where the parties designed their own process. In those matters the parties achieved a speedy and efficient resolution.  Some examples may be helpful.  In one arbitration the parties agreed that the arbitrators could only award one of two amounts.  They wanted nothing more than that number after a full week of hearings.  No reasoning, no long decision – just a low number or a high number.  That was their choice.  In another case, involving many millions of dollars, counsel agreed to a timed trial, with no direct examination of any witness – only cross-examination and re-direct.  The point is that the parties have the freedom to design a process that best fits their case.

I suggest to you that, given the realities of the current situation, arbitration is something all parties in commercial disputes should consider if they wish to resolve their dispute and return to the business of doing business.

The Hon. Shira A. Scheindlin, U.S.D.J. (Ret.)  is affiliated with AAA, CPR, FedArb and NAM. In addition to arbitration, she is available for mediations and to serve as a special master.

This Stroock publication offers general information and should not be taken or used as legal advice for specific situations, which depend on the evaluation of precise factual circumstances. Please note that Stroock does not undertake to update its publications after their publication date to reflect subsequent developments. This Stroock publication may contain attorney advertising. Prior results do not guarantee a similar outcome.