CAA Conference October 5, 2015
The 2015 Canadian Arbitration Association’s Annual Conference was held at the CAA Head Office in Toronto on Monday, October 5, 2015. The conference featured a discussion of six hypothetical situations that raise practical and ethical issues arbitrators may encounter. Attendees were entitled to 1 hour 20 minutes Professionalism Content and up to 2 hours 10 minutes Substantive Content for Law Society of Upper Canada (“LSUC”) Continuing Professional Development purposes. The situations and discussions are outlined below.
1. You have been appointed as arbitrator for a dispute pursuant to the CAA Expedited Arbitration Rules. Counsel for the plaintiff submits an arbitration agreement signed by the defendant, which clearly states that any disputes between the parties shall be resolved by binding arbitration pursuant to the CAA Expedited Arbitration Rules. Nevertheless, counsel for the defendant refuses to agree that the Rules will give his client a fair and reasonable opportunity to present his case and to respond to the case presented by the plaintiff. Counsel for the defendant refuses to submit a Response to the Notice to Arbitrate; instead, he produces a Statement of Claim that he has filed in court. He maintains that the arbitration is a waste of everyone’s time and money. The plaintiff is willing to pay the full cost of the arbitration, but counsel for the defendant says he will only participate in the proceedings as an observer in order to protect his client.
What should you do?
The Expedited Rules were created for the purpose of allowing people to resolve disputes without all of the “due process” in the sense we learned it in law school, and instead with a rights-based, quick and inexpensive process. The Rules were created so that people entering into agreements could bind themselves to this process. In choosing these Rules, parties must balance the benefit of the certainty of the Rules with the possibility of a decision that would be different from the one they would have received in a full arbitration.
One participant suggested that he would have a brief discussion with the plaintiff to see if that party would be willing to expand the hearing. If the plaintiff were unwilling to do so, then the defendant would be stuck with the Rules. Another participant stated that the arbitrator’s job here is to proceed according to the Rules. If the defendant wants to appeal or seek some other remedy in the courts, that doesn’t concern the arbitrator. Other participants agreed with the view that the defendant’s court action should not impact the arbitrator.
2. By the parties’ agreement, you have been appointed as arbitrator in a dispute under the CAA Expedited Arbitration Rules. Both parties sign Terms of Appointment and agree to adhere to the Rules. At the preliminary conference call, counsel jointly request a hearing date outside of the two-month period mandated by the Rules. You agree to this alteration of the Rules due to scheduling difficulties between counsel. During the call, counsel for the plaintiff requests the ability to submit five cases upon which she intends to rely at the hearing, instead of the three cases mandated by the Rules. You agree. Also during the call, counsel for the defendant requests permission to submit a 25-page written memorandum setting out his client’s position. This is five pages over the limit provided in the Rules.
What should you do?
One attendee suggested that you should make no exceptions and accommodate no special requests. All of these little changes to the process can add up and increase the time spent by the arbitrator. If the parties want to make exceptions, that will bring them outside of the Expedited Rules and the arbitration will no longer be a fixed fee arbitration. There will be additional fees.
What should you do if, instead of requesting your permission, counsel for the defendant simply submits a 25-page written memorandum with an accompanying cover letter? The cover letter acknowledges that the memorandum is longer than contemplated in the Rules, but states that the additional information is essential to the defendant’s case.
One participant suggested reading only the first 20 pages of the submission. Another participant suggested forewarning the parties of the consequences of non-compliance with the Rules. He would then feel comfortable reading only the first 20 pages. Another participant suggested notifying the defendant that the Rules require you to stop reading after 20 pages, and to give the defendant the opportunity to deliver an amended submission within a short period of time so as to not disturb the timetable for the arbitration.
3. Under the CAA Rules, you have been appointed as sole arbitrator of a dispute between the two owners of a consulting business. A disagreement between the owners arose over a year ago, and they are now barely speaking to each other. They are having trouble operating the business as a result. They have decided that one owner must buy the other out, but they cannot agree on the terms of the sale, or who will buy their interest in the business and who will sell their interest. They refuse to mediate their dispute. During the arbitration hearing, you learn that the owners regularly engage in illegal conduct and that the consulting business is used primarily for the purpose of laundering money.
What should you do?
Assume that you’ve spent many hours on this matter already, and the hearing is nearly done. Can you then say, because of the legality of the business, that you cannot arbitrate the dispute?
One participant mentioned the “smell test”: what would happen if your involvement in this arbitration becomes public at a later time? Also, would it matter if it were a different crime?
One participant thought that he might become an accessory to this illegal activity if he were involved; he would withdraw and give back any fees paid (and earned) to date. Another participant mentioned a 1963 International Chamber of Commerce case involving the proceeds of money laundering. The arbitrator found that he had no jurisdiction and that the parties had forfeited the right to avail themselves of the machinery of justice. (For details, see the following article:http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=1151&context=auilr)
No consensus was reached as to whether or not you should resign.
What if you learn that the deposits you received from the parties were made with laundered money? What if the parties tell you that they are trying to figure out how to split money that is being illegally held offshore?
One participant suggested that he would consult a criminal lawyer. Another participant said that you may not be able to accept the fees, and/or must rid yourself of them.
Going beyond the issue of fees, do you have an obligation to report the lawyers on the case if they haven’t reported the criminal activity to the authorities? What other obligations do you have?
One participant asked, what if this was a legitimate business but the company has been evading taxes? What would be your obligations in that scenario?
The issues raised in this question are tricky and if you were to find yourself in such a situation, you would need to get advice. You could retain counsel and call Practice Advisory to find out what your obligations are to the Law Society.
4. You are the arbitrator in a CAA arbitration. The dispute pertains to the dissolution of a medical corporation, and both parties are represented by experienced counsel. The hearing is set to last for two weeks. On the first day of the hearing, the lawyer for the plaintiff is rude and verbally abusive towards the lawyer for the defendant. He openly questions the competence of the lawyer for the defendant, as well as his conduct in the arbitration to date. The lawyer for the defendant ignores the comments, and the comments continue through to the end of the day.
What should you do?
One participant said he would tell the lawyer for the plaintiff that the other lawyer’s competence is irrelevant, that this behaviour is unprofessional, and is not helping his client’s case. Another participant suggested that this approach might open you up to allegations of bias.
Another participant said he would either let the behaviour continue, or say something to both counsel in open session. A different participant said he would only say something if the attacks were causing delays in the process.
Yet another participant suggested reminding the parties that the Rules of Professional Responsibility require civility from lawyers. At what point is the breach of the Rules such that you must report this behaviour to the Law Society? There are different obligations if the arbitrator is not a lawyer; if the arbitrator is a lawyer, perhaps this is a time to call Practice Advisory.
5. You are the arbitrator in a contractual dispute between two companies. The arbitration has been going on for well over a year, and you have put a lot of time into the matter to resolve a number of procedural issues. The Terms of Appointment signed by the parties provides for the possibility of interim billing, and you decide that, at the one-year anniversary of the preliminary conference call, it is appropriate for you to issue an interim bill. Counsel for the plaintiff requests a conference call to discuss the progress of the case. During the call, at which both parties and their counsel are present, counsel for the plaintiff states that you have grossly overcharged them, and that you are a thief. You state that you have dockets to support the time you have spent to date, and that you would be happy to produce them. The lawyer says, “No person with any professional integrity would have the audacity to charge what you have charged us when essentially nothing has been accomplished. You are a thief and you should be ashamed of yourself.”
What should you do?
One participant said he would offer to have his accounts assessed by a third party. Another participant raised a concern with this approach because it puts you, the arbitrator, as a party in an adversarial proceeding with one of the parties in the arbitration. Then you must return to the role of the neutral decision maker when the arbitration continues.
One participant asked how he could proceed with the arbitration in an unbiased manner. If you ultimately found against the plaintiff, the plaintiff could argue that you were biased. Some attendees wondered whether you must resign at this point, while others suggested they would not resign.
Are the lawyer’s comments covered by the confidentiality clauses contained in the Terms of Appointment? Do you have the right to sue for slander?
If these parties end up taking their business elsewhere, you could have actual damages. One participant said he would sue for damages, an injunction, and an apology. He would leave the confidentiality issue for the other party to raise.
There is some law in the United States suggesting that defamation is not covered by confidentiality clauses in ADR processes.
One participant said that he would go to the Law Society asking for sanctions against the plaintiff’s lawyer.
Several participants said they would not charge for a portion of the fees in this scenario. One participant would reframe the plaintiff’s lawyer’s comments: “I’m hearing you say that I’ve been inefficient in working on this file and that a reasonable person would have spent far less time. What do you think would be reasonable?”
Ultimately, you must balance your concern for your reputation, your desire to continue the arbitration and to get paid, your desire to get paid for the work already done, and your concern for your reputation in the community.
6. Following a four-day arbitration hearing for which you are the sole arbitrator, you set out to write your reasons. While mulling over the case, it occurs to you that there is a very important question that has not been addressed by either party. It could make a big difference to your final decision on the case, but it unfortunately did not occur to you earlier.
What do you do?
One participant said he would seek clarification from the parties; another participant said he would decide the case without the information.
Another participant said that if you find a case that impacts your decision in a substantive way, you can ask counsel for submissions on that case. You shouldn’t render a decision on a basis that hasn’t been argued before you.