Useful Arbitration Information
Arbitration is an alternative to resolving disputes in court. The arbitration process allows the parties to select an individual or several individuals with a specialized expertise in the subject matter of the dispute to listen to the evidence and render a binding decision. In residential construction arbitration, there is usually one arbitrator. In more complex cases, the parties may request more than one arbitrator, and a panel of arbitrators is appointed. Usually, an arbitration panel consists of three members, called a tripartite panel, one of which is designated as the chairperson of the panel or chief arbitrator. In civil litigation a judge is randomly assigned to hear a particular case and may not have the necessary substantive or technical expertise to appreciate fully the intricacies of legal counsel’s arguments or have a comprehensive knowledge of the construction matters in dispute. Also, the large volume of court caseloads sometimes results in substantial delays in processing individual cases. Many judges are mandating mediation and/or arbitration prior to the beginning of actual court proceedings with the expectation that the case will be settled and the court litigation process will be avoided.
The most basic difference between arbitration and mediation is that arbitration involves a decision by the intervening third party (neutral) after an evidentiary hearing where the arbitrator is typically a passive participant whose role is to determine right or wrong and the mediator by contrast, is generally an active participant who attempts to move the parties to reconciliation and agreement, regardless of who is right or wrong. At the end of a mediation, the parties write up their own settlement agreement with the assistance of the mediator and at the end of a binding arbitration, the arbitrator, usually within 30 days, makes an award to the prevailing party. Both the mediation settlement agreement and the arbitration award are legal documents and are enforceable in a court of law.
In binding arbitration, the parties agree to abide by the decision of the arbitrator. In non-binding arbitration, the parties do not agree to be bound by the arbitrator’s decision and they use the arbitration process in order to obtain an advisory opinion. In non-binding arbitration, the parties may nevertheless abide by an arbitrator’s decision in order to end the dispute without resorting to what would probably be a lengthy and costly litigation. If a party to the arbitration agreement files a lawsuit, the other party who wants to have the dispute arbitrated may request the court to suspend the lawsuit and compel the other party to arbitrate. The courts favor arbitration, and the courts will usually enforce the parties’ agreement to arbitrate. The court usually “stays” or “suspends” the proceedings in court pending the outcome of the arbitration, and may impose a time period during which the arbitration must be concluded.
In civil litigation, the court adjudication process and the procedures are highly structured and institutionalized, typified by detailed rules and numerous compliance mechanisms. Rules of evidence enhance the reliability of proof of claims and defenses. In disputes not requiring these types of stringent procedures, mediation and arbitration offer certain measurable advantages. Arbitration, while having some of the evidential and procedural regularity of court adjudication, is conducted in a less formal and less rigorous setting, thereby enhancing the potential for a more expeditious resolution.
Arbitration proceedings generally begin with a pre-hearing or preliminary conference with the arbitrator that is attended by both parties along with their legal council to review the items in dispute and the ground rules and procedures that will be followed during the arbitration process. After that conference, all communication with the arbitrator must be made jointly by both parties and private conversations between the parties and the arbitrator are generally not allowed and are commonly called “ex parte” conversations which may be a cause of action to vacate the arbitrator’s award.
The attorneys usually make opening statements and closing arguments where they frame the facts in argumentative terms in order to present the facts in a light most favorable to their clients. These arguments, during the hearing, may be supported by actual testimony or by the documents submitted as hearing exhibits. If necessary, subpoenas can be issued by the attorneys or by the arbitrator to insure that pertinent and relevant information is brought to light during the hearing process. At the end of the arbitration process, which is quite involved, the arbitrator will make an award to the prevailing party. The arbitrator may announce his/her decision at the end of the arbitration session or he/she may take up to 30 days to issue the award. The arbitrator is not obligated to explain the award and may decide to only issue the award without explanation. That award is generally not subject to appeal unless the arbitrator failed to follow certain rules or procedures that are required by law. The main reason that arbitration awards are vacated is the arbitrator not disclosing a relationship that he/she had with one of the involved parties, their councilor, their councilor’s firm, one of the witnesses, etc. It is not uncommon for an arbitrator to withdraw from a case if during the arbitration process he/she is made aware of a fact that would make him/her not to be a neutral arbitrator. Many states have adopted some form of the “Uniform Arbitration Act” and are also bound by the rules and procedures of the “Federal Arbitration Act” which must be followed by the arbitrator.
Although arbitration is a very effective means of dispute resolution, I personally recommend Med-Arb, which is discussed elsewhere on this website. It has the finality of an arbitration but affords the parties the opportunity to be more involved in the process, generally costs less than arbitration and can be conducted in a more timely manner
IMPORTANT LEGAL INFORMATION CONCERNING ARBITRATION
The following information excerpts are from the New Mexico Statutes, 1978, annotated, Chapter 44, Miscellaneous Civil Law Matters, Pamphlet 66, Article 7, Arbitration (also known as the New Mexico Uniform arbitration act) and must be followed during any arbitration proceedings in the State of New Mexico. If you are going to be involved in an arbitration proceeding, you should be aware of the basic provisions of the New Mexico Arbitration Statutes.
Initiation of arbitration – A person initiates an arbitration proceeding by giving notice in a record to the other parties to the agreement to arbitrate in the agreed manner between the parties or, in the absence of agreement, by certified or registered mail, return receipt requested and obtained, or by service authorized for the commencement of a civil action. The notice must describe the nature of he controversy and the remedy sought.
APPOINTMENT OF ARBITRATOR; SERVICE AS A NEUTRAL ARBITRATOR – If the parties to an agreement to arbitrate agree to a method for appointing an arbitrator, that method must be followed unless the method fails. If the parties have not agreed on a method, the agreed method fails or an arbitrator appointed fails or is unable to act and a successor has not been appointed, the court, on motion of a party to the arbitration proceeding, shall appoint the arbitrator. An arbitrator so appointed has all the powers of an arbitrator designated in the agreement to arbitrate or appointed pursuant to the agreed method.
An individual who has a known, direct and a material interest in the outcome of the arbitration proceeding or a known, existing and substantial relationship with a party may not serve as an arbitrator required by an agreement to be neutral.
DISCLOSURE BY ARBITRATOR – Before accepting appointment, an individual who is requested to serve as an arbitrator, after making a reasonable inquiry, shall disclose to all parties to the agreement to arbitrate and arbitration proceeding and to any other arbitrators any known facts that a reasonable person would consider likely to affect the impartiality of the arbitrator in the arbitration proceeding, including: a financial or personal interest in the outcome of the arbitration proceeding; an existing or past relationship with any of the parties to the agreement to arbitrate or the arbitration proceeding, their counsel or representatives, a witness or other arbitrators.
An arbitrator has a continuing obligation to disclose to all parties to the agreement to arbitrate and arbitration proceeding and to any other arbitrators any facts that the arbitrator learns after accepting appointment which a reasonable person would consider likely to affect the impartiality of the arbitrator.
ACTION BY MAJORITY – If there is more than one arbitrator, the powers of an arbitrator must be exercised by a majority of the arbitrators, but all of them shall conduct the hearing under section 16(c).
ARBITRATION PROCESS – An arbitrator may conduct an arbitration in such manner as the arbitrator considers appropriate for a fair and expeditious disposition of the proceeding. The authority conferred upon the arbitrator includes the power to hold conferences with the parties to the arbitration proceeding before the hearing and, among other matters, determine the admissibility, relevance, materiality and weight of any evidence.
An arbitrator may decide a request for summary disposition of a claim or particular issue if all interested parties agree or upon request of one party to the arbitration proceeding, if that party gives notice to all other parties to the proceeding and the other parties have a reasonable opportunity to respond.
If an arbitrator orders a hearing, the arbitrator shall set a time and place and give notice of said hearing not less than five days before the hearing begins. Upon request of a party to the arbitration proceeding and for good cause shown, or upon the arbitrator’s own initiative, the arbitrator may adjourn the hearing from time to time as necessary, but may not postpone the hearing to a time later than that fixed by the agreement to arbitrate for making the award unless the parties to the arbitration proceeding consent to a later date.
The arbitrator may hear and decide the controversy upon the evidence produced although a party who was duly notified of the arbitration proceeding did not appear.
WITNESSES; SUBPOENAS; DEPOSITIONS; DISCOVERY. – An arbitrator may issue a subpoena for the attendance of a witness and for the production of records and other evidence at any hearing and may administer oaths. A subpoena must be served in the manner for service of subpoenas in a civil action and, upon motion to the court by a party to the arbitration proceeding or the arbitrator, enforced in the manner for enforcement of subpoenas in a civil action.
In order to make the proceedings fair, expeditious and cost effective, upon request of a party to or a witness in an arbitration proceeding, an arbitrator may permit a deposition of any witness to be taken for use as evidence at the hearing, including a witness who cannot be subpoenaed for or is unable to attend a hearing. The arbitrator shall determine the conditions under which the deposition is taken.
An arbitrator may permit such discovery as the arbitrator decides is appropriate in the circumstances, taking into account the needs of the parties to the arbitration proceeding and other affected persons and the desirability of making the proceeding fair, expeditious and effective.
An arbitrator my issue a protective order to prevent the disclosure of privileged information, confidential information, trade secrets and other information protected from disclosure to the extent a court could if the controversy were the subject of a civil action in this state.
AWARD – An arbitrator shall make a record of an award. The record must be signed or otherwise authenticated by any arbitrator who concurs with the award. The arbitrator or the arbitration organization shall give notice of the award, including a copy of the award, to each party to the arbitration proceeding.
An award must be made within the time specified by the agreement to arbitrate or, if not specified therein, within the time ordered by the court. The court may extend or the parties to the arbitration proceeding may agree in a record to extend the time.
CHANGE OF AWARD BY ARBITRATOR – On motion to an arbitrator by a party to an arbitration proceeding, the arbitrator may modify or correct an award because the arbitrator has not made a final and definite award upon a claim submitted by the parties to the arbitration proceeding or to clarify the award. The motion must be made and notice given to all parties within twenty days after the *movant receives notice of the award. A party to the arbitration proceeding must give notice of any objection to the motion within ten (10) days after the receipt of the notice.
REMEDIES; FEES AND EXPENSES OF ARBITRATION PROCEEDING. – An arbitrator may award punitive damages or other exemplary relief if such an award is authorized by law in a civil action involving the same claim and the evidence produced at the hearing justifies the award under the legal standards otherwise applicable to the claim.
An arbitrator may award reasonable attorney’s fees and other reasonable expenses of arbitration if such an award is authorized by law in a civil action involving the same claim or by the agreement of the parties to the arbitration proceeding. An arbitrator may order such other remedies as the arbitrator considers just and appropriate under the circumstances of the arbitration proceeding. The fact that such a remedy could not or would not be granted by the court is not a ground for refusing to confirm an award under Section 23 [44-7A-23 NMSA 1978] or for vacating an award under Section 24 [44-7A-24 NMSA 1978].
An arbitrator’s expenses and fees, together with other expenses, must be paid as provided in the award.
VACATING AWARD – Upon motion to the court by a party to an arbitration proceeding, the court shall vacate an award made in the arbitration proceeding if the award was procured by corruption, fraud or other undue means; if there was evident partiality by an arbitrator appointed as a neutral arbitrator; if there was corruption by an arbitrator or if there was misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding; if an arbitrator refused to postpone the hearing upon showing sufficient cause for postponement, refused to consider evidence material to the controversy or otherwise conducted the hearing so as to prejudice substantially the rights of a party to the arbitration proceeding. The award may also be vacated in an arbitrator exceeded the arbitrator’s powers or if the arbitration was conducted without proper notice of the initiation of an arbitration so as to prejudice substantially the rights of a party to the arbitration proceeding.
MODIFICATION OR CORRECTION OF AWARD – Upon motion made within ninety (90) days after the movant receives notice of the award pursuant to Section 20 [44-7A-20 NMSA 1978] or within ninety (90) days after the movant receives notice of a modified or corrected award pursuant to Section 21 [44-7A-21NMSA 1978] the court shall modify or correct the award if there was an evident mathematical miscalculation or an evident mistake in the description of a person, thing or property referred to in the award or if the arbitrator has made an award on a claim not submitted to the arbitrator and the award may be corrected without affecting the merits of the decision upon the claims submitted or if the award is imperfect in a matter of form not affecting the merits of the decision on the claims submitted.
Again, I must remind you that the above is a general review of some of the arbitration statutes in effect in the State of New Mexico. Please review all of the applicable rules and regulations for an arbitration proceeding with your attorney.