Alternative Dispute Resolution: Providing greater predictability for better outcomes

Wednesday, April 18, 2018 - 13:29

An interview with Eric Tuchmann, Senior Vice President, General Counsel and Corporate Secretary of the American Arbitration Association.

CCBJ: Describe your role for us.

Eric Tuchmann: I’m senior vice president, general counsel and corporate secretary for the American Arbitration Association (AAA). While my general counsel and corporate secretary responsibilities all have an important connection to the dispute resolution services we provide, many aspects of running the AAA’s legal department are the same as other in-house counsel for organizations that handle litigation, contract negotiation, compliance, employment, intellectual property, and the wide variety of additional issues in-house counsel handle on a daily basis. I also oversee the AAA’s international division, the International Centre for Dispute Resolution (ICDR). As an alternative dispute resolution provider, a lot of issues come to my department's attention with regard to cases we’re administering – rule revisions that might be suggested or any other issue related to a service we’re providing. As corporate secretary, obviously I work with the board and our council in connection with their respective roles related to the governance of the Association.

Can you give us a sense of the size and scope of the work that the AAA does?

The American Arbitration Association is 92 years old. We are a not-for-profit public service organization, and we are devoted to helping parties resolve their disputes more efficiently and economically than they otherwise could. That’s our mission domestically as well as internationally, and it has been consistent throughout our existence.

We handle a very large caseload, both in terms of the number of cases we administer and the different types of cases that are filed with the AAA and ICDR. Last year in New York State, for example, it was in the hundreds of thousands of claims. We handle commercial, construction, employment, international, and labor disputes in addition to just about any other type of commercial dispute that can arise. The AAA also administers a very large volume of no-fault automobile conciliations and mediations on behalf of the New York Department of Financial Services.    

We have offices in most of the major cities throughout the United States and an office in Singapore. Asia's going to be a particularly important part of our initiatives going forward.

How do you hire and assign arbitrators and mediators?

Our role is to administer cases, but the AAA and ICDR aren’t the decision makers: We provide a forum, a set of rules, staff and oversight, and the application of rules that have been tested by the courts, but the merits of the cases themselves are decided by arbitrators who are members of our roster, or individuals selected by the parties outside our roster. The whole process is driven by party autonomy and the desire and ability of parties to choose their decision makers. 

In terms of our roster, individuals are included and selected based on their expertise and experience in their respective fields. We look for people with the type of background that the parties would want from someone who’s deciding their case. A deep level of expertise and leadership has usually been demonstrated. They are prominent in their fields, in terms of the visibility of their own work and perhaps publications and otherwise. Obviously, they’ve got to have the right judicial demeanor. They need to be able to manage a case.

We have a large number of former judges from both the state and federal level on our roster as well, and that’s not something that people have traditionally understood when they think about the AAA. We've done very well in ensuring that our roster represents a broad cross section of the types of people whom the parties would want to have.

The process for getting on our roster can be challenging. Sometimes we need to recruit people for a particular need or area, but for the most part, the number of people who want to be on the roster exceeds the number of people we can have, so we really are in a position to select those who are truly top of their field.

What are the key advantages to using arbitration?

Arbitration provides considerable latitude to corporate counsel to control and design the dispute resolution process with their trade or contract partners in terms of where, when and how the arbitration will take place.

One significant advantage is being able to choose your arbitrator or arbitrators. For some cases, it’s really critical to have a decision maker who will understand the underlying nature of the dispute. So if it is intellectual property, if it is something technical, if it involves construction, where customs and practice might be really important, you want arbitrators who can approach the dispute and step in as a decision maker with a lot of expertise about the relevant industry.

Another aspect that’s very attractive is that the parties can customize the process to the extent that they want an arbitration completed within a certain amount of time, they want a certain state’s law to apply, or they want to address limitations on discovery. They can pick where the arbitration hearings will take place, which can be in a different state than the applicable law. 

Furthermore, it offers speed. You can get to hearings more quickly, and you can plan out the entire arbitration process, usually at the outset of the case, including timelines for the completion of exchanges of information, when hearings are going to take place, and a briefing schedule, to the extent it is needed. Arbitration provides greater predictability.

Because you’re not engaged in years of litigation with very, very broad discovery and then the potential of appeals, in-house counsel are able to control the costs much more closely as well. When organizations are in a dispute, there are also significant costs that are incurred which are not necessarily monetary. In particular, executives’ time and energy are required to be spent on the dispute instead of the business of the organization.

Then, of course, awards are final. In terms of time and cost, that is quite an advantage because the parties, win or lose, can move on and aren’t required to invest in years or decades of post litigation and appeals as can occur with court litigation.

I will add, though, that given the larger claim amounts that are being submitted to arbitration, and the sort of bet-the-company issues that organizations are submitting, we do have a set of optional appellate procedures that can be incorporated into agreements. These are not default procedures – they’ve got to specifically be agreed to. In speaking with in-house counsel, we found that some wanted to utilize arbitration but had concerns about the final nature of arbitration awards and needed a review for certain cases. Those have been in place for a few years now. They are not frequently utilized, but we do know that they are being considered by some businesses that want the speed and cost advantages of arbitration, but need some level of appeal because of the magnitude and importance of cases that could be submitted to arbitration.

It’s been about two years since the changes to the Federal Rules of Civil Procedure, including those about discovery being proportional. How do you see the effect of those Rule changes impacting arbitrations? 

As a starting point, you don’t really see the state or federal rules of evidence being applied wholesale in arbitrations. They are not incorporated into our rules, and in fact, we generally don’t recommend that parties incorporate statutory rules of evidence into the arbitration process. Every once in a while you’ll see an arbitration clause that specifically says that the federal rules of evidence shall apply in an arbitration. That takes away from some of the advantages in terms of cost savings and really expansive discovery and delay. So the Federal Rule changes don’t impact the day-to-day life of the arbitration process.

However, we do see more arbitrators considering the notion of proportionality with regard to discovery in arbitration. In the arbitration context, even given that discovery is more limited, you still have questions about whether it makes sense to incur the cost and time of mandating the production of certain documents against the need for a party to get information that might be important to their case.

What should readers who are less fluent in ADR know about how the process works?

Arbitration is not just a litigation outside of the courtroom. It is a different process. It is less formal than court in terms of pleading requirements, rules of evidence, and many other aspects of the process. While the process is controlled and managed by the arbitrators, it is an adversarial process – both parties need to present evidence and legal arguments that impact the case – but parties that approach arbitration simply as a full blown litigation that takes place outside the courtroom will not enjoy some of the benefits of the process.  

Parties, and particularly in-house counsel, who are not familiar with arbitration would benefit from being involved in the process at various points. If it’s an AAA-administered case, you want to talk to your case manager. You want to affirmatively say, “This is the type of arbitrator we want. This is the type of person that has the background that we think is needed for this dispute.” “I'd like this case to be resolved by X.” “The issues in play are causing other negative effects.” Taking advantage of their control over the design of the process can really work to a party’s advantage. Instead of letting the arbitration process just happen in terms of how the process works, parties should be proactive in using the flexibility that arbitration offers.

Who do arbitrators typically work with on in-house teams?

Generally, arbitrators are appointed by in-house counsel or their outside counsel since many parties, including corporations, retain outside counsel for arbitrations. However, you do see parties representing themselves through in-house counsel or other company representatives with the only caution being that some states have taken the view that corporations must be represented by lawyers.

You’ve mentioned the importance of selecting an arbitrator. What other key points should in-house counsel keep in mind?

One topic is the importance of clause drafting, which is sometimes a challenge for in-house counsel who don’t utilize arbitration frequently. The AAA has a standard clause and an online “ClauseBuilder” tool that will assist parties in drafting an arbitration clause. It runs through all of the primary options that they might want to consider. It is very effective both in helping draft a clause but also, in some respects, using it as a checklist of what the parties should consider when drafting a clause. 

When in doubt, however, you want to either use a standard clause that is contained in the provider’s rules, like the AAA’s, or address the specific issues, like choice of law, locale and maybe arbitrator selection that you have in mind. Drafting something entirely new frequently results in more problems than it solves when an arbitration actually occurs. 

If there’s equivocation, for example, on whether you really intend to arbitrate, if the clause says, “The parties may arbitrate disputes arising out of or relating to their agreement,” some courts interpret that to say it’s just an agreement to potentially agree after the dispute arises, to arbitrate at some point in the future, but it doesn’t mean the parties are required to arbitrate their dispute. If you are including an arbitration clause, it’s important to have the clause clearly reflect that intention.


Eric P. Tuchmann is Senior Vice President, General Counsel and Corporate Secretary of the American Arbitration Association. He is responsible for managing the legal affairs of the organization including litigation related matters involving the Association and its arbitrators, and he oversees the International Centre for Dispute Resolution, the AAA’s international division.