*This article was originally published in Pennsylvania Family Lawyer, Volume 42, Issue No. 4
MYTH #1: Arbitration costs more than litigation.
REALITY: A poorly managed arbitration can cost more than litigation; however, the efficiencies and flexibility of the process offset the added fees for the arbitrator, making arbitration less costly than litigation. The process is streamlined. Arbitration is self-determinative in that the parties and their counsel determine the procedures and scope of the process. The agreement to arbitrate sets forth the scope of the arbitrator’s authority and the issues subject to arbitration, i.e., will the arbitration be limited to a determination of the value of a business or the net income available for support; or, will it encompass all the ancillary divorce issues, including alimony, equita- ble distribution, and counsel fees, costs and expenses?
Typically, the arbitrator starts the process with a preliminary arbitration conference to go over the issues, outstanding discovery and time necessary to prepare for the arbitration and present the case. The arbitrator then issues a directive addressing discovery, discovery due dates, exchange date of expert reports, deadlines for submission of pre-arbitration statements, date for a settlement conference, if opted, and the date for the arbitration hearing.
The arbitrator guides the proceedings to keep them moving, and promptly addresses interim disputes, such as non-compliance of discovery, equitable distribution advances, interim counsel fees, costs and expenses, disputes concerning possession or sale of real estate, etc. Counsel can raise these issues via email to the arbitrator, obviating the need for them to prepare and file formal petitions and answers. The arbitrator decides the issue in a matter of days, after a telephone or video conference with counsel and/or the parties. Time is not spent waiting for a hearing to be scheduled, waiting for the hearing to be rescheduled when continuances are requested by op- posing counsel, and then waiting to be called from among all of the cases on the judge’s calendar on the hearing day.
More efficiencies relate to the manner in which arbi- tration hearing is conducted. Counsel can agree upon the procedures at the outset, as part of the agreement to arbitrate. Will there be a court reporter? Will each party present their case-in-chief or will evidence be presented issue by issue? Will counsel conduct direct and cross- exam or will the arbitrator conduct the proceeding by posing questions to witnesses after their thorough review of pre-arbitration statements in advance? If the parties opt for the latter approach, the time necessary to hear the case is substantially reduced.
Finally, a decision will be in hand within 30 days of the arbitration hearing. With prompt closure comes a divorce decree, transfer of assets and the termination of the spousal benefits and support, not to mention the end, at least for the present time, of the costs of litigation. Parties will have the freedom to move forward with their lives and put the difficult transition phase behind them.
MYTH #2: Once arbitration starts, a case cannot be settled.
REALITY: The arbitration process comes with options and flexibility. Counsel may opt to have the arbitrator conduct a settlement conference before the arbitration hearing. In an arbitration setting, there are many more creative tools available than in a court setting. The arbitrator can offer solutions that enable the parties to negotiate an agreement and control the outcome. Another option is for the arbitrator to arbitrate an isolated issue — for example, the date of separation or the value of a business or piece of real estate — that will enable the parties to move past a logjam on the identity and value of the marital assets. The parties can then choose to have the arbitrator remain in the process by which the economic issues are resolved or can negotiate these issues independently. In either event, by choosing the arbitration forum, the parties will have achieved an expedient and cost-effective resolution.
MYTH #3: Arbitration decisions are always final and un-appealable.
REALITY: Traditionally, an arbitrator’s decision is final and binding with limited exceptions (e.g., for fraud or stepping outside the agreed-upon arbitration scope). Most who opt to arbitrate do so for the finality of arbitral decisions. However, the arbitration process is a contractual creation, and the process and scope are established in the agreement to arbitrate. Counsel can agree to non-binding arbitration, which is akin to an early neutral evaluation, where the neutral offers an opinion and unbiased feedback after evaluating the merits of the case. Early neutral evaluation can be used as an effective settlement tool or as a reality check on the strengths and weaknesses of each party’s case.
MYTH #4: Arbitration is available for big, high asset cases only.
REALITY: Arbitration is a creature of contract and counsel and clients can arbitrate limited issues, special relief issues, interim issues, or all issues in dispute, often with a quick turnaround that can help resolve other issues in the case. The issues subject to arbitration are defined by the scope of the agreement to arbitrate.
For example:
- The arbitrator can resolve a question of school choice, or a child’s participation in an extracurricular activity (subject to court review)
- The arbitrator can determine parties’ child support obligations, spousal support/APL and allocation of unreimbursed medical expense and activities (again subject to review of child support issues)
- The arbitrator can determine the date of separation, value of a business, disposition of a liquidated asset, net income available for support, percentage split of the assets or debts in the marital estate and amount/ term of alimony
- If the parties disagree on issues associated with the sale of real estate such as choosing the realtor, the listing price and whether to accept offers to purchase the property
MYTH #5: Arbitrations can only be conducted like a formal trial proceeding.
REALITY: Arbitration offers flexibility in the process by which issues are resolved. Counsel will agree with the arbitrator as to the manner of the proceeding at the outset. The arbitrator can act like the judge presiding over a trial where each lawyer presents their case and strict rules of evidence are followed, or counsel may prefer a less formal proceeding in which the arbitrator conducts limited questioning of the parties and witnesses following their thorough review of counsel’s pre-arbitration statements and analysis of the disputes (also known as the “Mike Fingerman method”). The key to a successful arbitration is allowing each party to have a full opportunity to present their case. The arbitrator should therefore allow the parties an opportunity to supplement information elicited by the arbitrator and also to cross-examine the opposing party and their witnesses. In the absence of an agreement by the parties, the arbitrator has some discretion as to procedure but should follow the substantive law of the jurisdiction to ensure fairness and predictability of the outcome.
MYTH #6: Neutrals can be inexperienced, and don’t have to follow the law.
REALITY: Arbitration is self-determinative in that the parties have the option to select a neutral with a specific skill set and expertise that would enable more accurate and efficient decision making. The standards to be applied by the arbitrator can also be expressly defined in the agreement to arbitrate. For example, the agreement may require the arbitrator to apply the practices of the county where the action is pending and to provide reasoned decisions. By way of illustration: the parties may agree that if costs of sale on real estate are applied in the county where the case lies, the arbitrator will apply such costs.
MYTH #7: There is no guarantee of confidentiality in arbitral proceedings.
REALITY: One of the key benefits of arbitration is the confidentiality of the proceedings. The hearing is conducted in private and not in open court. Parties and their counsel will often choose arbitration over court adjudication to avoid sharing their “dirty laundry” with the public. The agreement to arbitrate can explicitly provide that the arbitration proceeding and the award are confidential, and that the parties shall jointly request that when the arbitration award is filed with the court for confirmation/incorporation in the divorce decree, it will be filed under seal. The request would be subject to approval by the court. The parties can also request that the experts sign a confidentiality agreement for matters prior to the initiation of the arbitration process itself (e.g. the exchange/review of discovery) for a belt and suspenders approach.
MYTH #8: The arbitrator does not have the power to issue and enforce interim relief discovery or to direct other interim relief.
REALITY: The parties can confer on the arbitrator the powers to make interim awards, including discovery, and to issue directives that will avoid the need for them to go to court on interim issues. The arbitrator has the power to issue these awards and to enforce them with sanctions in the arbitration process, including drawing a negative inference and awarding counsel fees or other sanctions as a result of a party’s failure to produce discovery. The only actual limitation on the powers that the parties can confer to the arbitrator is the ability to hold an individual or entity in contempt; a party seeking such contempt would have to seek such relief in court, as they would with a court order.
MYTH #9: Alternative Dispute Resolution is just an “Alternative.”
REALITY: With backlogs in the court systems, alternatives to court adjudication are more prevalent and even in some areas becoming the norm. Change is happening and there is an opportunity for lawyers to grow their practice offerings by becoming an ADR provider. Be sure to have the resources and training necessary to perform your role capably and competently. Although not “re- quired,” appropriate training is an essential credential and will offer valuable forms and practice and procedure tips.
After serving as family court masters, Shelly Grossman and Carolyn Zack were trained by the Academy of Matrimonial Lawyers, have been regularly acting as arbitrators and are now taking their “show on the road.” They recently trained a group of 45 family lawyers from the D.C., Virginia, and Maryland area with a four-hour webinar on family law arbitration that received positive reviews. They plan to offer more training and information sessions this spring. If you are interested, contact Shelly or Carolyn directly.
Rochelle (Shelly) B. Grossman has devoted her career exclusively to family law, since 1991 having spent the first 15 years of her career as an advocate and most recent 15 as a Family Court Master in Chester County, Pennsylvania. She founded the Family Arbitration and Mediation Center, which she has recently merged with the law firm of Potts, Shoemaker & Grossman, LLC where she leads the firm’s alternative dispute resolution department. 610-840-2626 shelly@pottsshoemaker.com
Carolyn Moran Zack is a partner at Momjian Anderer, LLC where she practices family law, and also acts as an arbitrator, mediator and parenting coordinator. She serves as co-chair of the UFLAA Committee of the PBA Family Law Section and as co- chair of the ADR Committee of the Philadelphia Bar Association. 67-546-3712 czack@momjiananderer.com
*This article was originally published in Pennsylvania Family Lawyer, Volume 42, Issue No. 4