Arbitration is meant to be expeditious and to avoid the time and expense associated with proceeding in court. While that is still the goal, at times the speed of the arbitration process can vary significantly.
As a preliminary matter, an arbitration agreement is a contract, generally governed by contract law and any applicable statutory authority. Arbitration "is a process in which parties voluntarily trade the safeguards and formalities of court litigation for an expeditious, sometimes roughshod means of resolving their dispute." Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 831. There is a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. "Limiting discovery "is one important component of the 'simplicity, informality, and expedition of arbitration'" Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 106, fn. 11 ("Armendariz").
The Many Benefits of Arbitration
It is important to note that even if the goal of an expeditious hearing is not met, there are important reasons why the arbitration process is beneficial to the parties. Unlike a proceeding in court, an important benefit when proceeding through arbitration is greater ability to control the timing of the case. In court, while some judges are sympathetic to the needs of the parties, others may be less so due to docket demands and otherwise. For example, an attorney can face a jury trial setting either too soon, or so far down the line that one may question whether justice is served. In the arbitration context, if the concerns of counsel are reasonable, it is likely that they will be considered by the neutral arbitrator with lessened time demands. Other potential benefits include (1) the ability to maintain confidentiality; (2) control over the process: the parties can determine procedural rules, limits and deadlines subject to the arbitrator's approval; and (3) parties may choose to agree on some process that is considerably less expensive than proceeding in court. However, whether contractual arbitration is less expeditious and expensive than proceeding in court depends on several factors, a primary factor being the extent of discovery permitted.
The Dynamics of Discovery
Discovery may proceed in accordance with an agreement between the parties which defines the scope of discovery (subject to the approval and oversight of the arbitrator). Subject to such oversight, attorneys may agree to a discovery process that either varies little from that in a civil case in court or which is substantially limited.
The Arbitration Clause Defines the Scope of Discovery
The extent to which the process is truly expeditious depends upon the arbitration clause and the nature of the claim. "Generally, the first step in reviewing an arbitration dispute is to determine whether the question presented is subject to the FAA or the CAA because different rules apply under the two acts..." Aixtron, Inc. v. Veeco Instruments, Inc. (2020) 52 Cal.App.5th 360, 391-392.
Governing Laws and Their Impact
Some arbitration agreements specify only that it is governed by the Federal Arbitration Act ("FAA") found at 9 U.S.C. § 1 et. seq. If that is the only reference to governing law or arbitration rules of a private neutral provider, the FAA allows limited or no pre-hearing discovery. This would result certainly in an "expeditious" process as compared with proceeding in court, but would potentially materially limit case development. Whether discovery from a third-party is permitted is a major focus. In addressing the propriety of a pre-hearing document production subpoena issued by an arbitrator to a third party, the court in CVS Health Corp. v. Vividus, LLC (9th Cir. 2017) 878 F.3rd 703, 708 ("CVS"), noted that "[u]nder a system of pre-hearing document production ... there is less incentive to limit the scope of discovery and more incentive to engage in fishing expeditions that undermine some of the advantages of the supposedly shorter and cheaper system of arbitration. ... Practical constraints on document production during an arbitration hearing may often result in lower production demands upon third parties." [Citations omitted]. Under the FAA, as third parties are not a party to the arbitration agreement, an arbitrator may not issue a subpoena for pre-hearing discovery. CVS, 878 F.3rd 703, 706.
On the other hand, if the California Arbitration Act ("CAA") found at California Code of Civil Procedure ("CCP") § 1280 et. seq. is adopted by agreement or by implication, in some circumstances the full range of pre-hearing discovery may be available to the parties. If so, the process may be far less expeditious than if the matter were proceeding in court.
Under the CAA, full discovery is available if the arbitration agreement adopts California Code of Civil Procedure § 1283.05; or (2) if section 1283.05 is deemed a part of the arbitration agreement by implication in cases involving personal injury or wrongful death. Here third parties are still subject to pre-hearing discovery.
"As pertinent here, section 1283.05's subdivision (a) states that after the appointment of an arbitrator, the parties to the arbitration have the same rights to take depositions and obtain discovery and to 'exercise all of the same rights, remedies, and procedures, and be subject to all of the same duties, liabilities, and obligations in the arbitration ... as provided in' the statutory provisions governing subpoenas (§§ 1985–1997) and in the Civil Discovery Act (§ 2016.010 et seq.) 'as if the subject matter of the arbitration were pending before a superior court of this state in a civil action....' Thus, parties to arbitration have a right to discovery. And because section 1283.05's subdivision (a) incorporates the Civil Discovery Act and that law permits discovery from nonparties (§ 2020.010 et seq.), the right to discovery includes discovery from nonparties."
Berglund v. Arthroscopic & Laser Surgery Center of San Diego, L.P. (2008) 44 Cal.4th 528, 535.
Even if there are full discovery rights, under § 1283.05(e) "[d]epositions for discovery shall not be taken unless leave to do so is first granted by the arbitrator or arbitrators."
In practice, where the CAA is adopted, there are still efficiency benefits to the arbitration process. There is still oversight by the arbitrator of pre-hearing discovery, oversight of the motion practice, and of the arbitration process generally.
The Role of the Neutral and the ADR Provider
If a neutral from a private ADR provider such as JAMS or AAA is adopted, those rules provide for limited discovery under the control and supervision of the arbitrator. These rules typically include comprehensive rules, but the parties may also adopt even more restricted rules which further support expeditious proceedings. For example, JAMS has expedited rules and streamlined rules in addition to the "JAMS Comprehensive Arbitration Rules & Procedures".
Employment and Consumer Cases
Overlaying the above is the Armendariz decision. Here, the California Supreme Court noted that in employment cases an employee must be permitted to vindicate his or her rights. To do so, employers are deemed to consent to reasonable discovery sufficient to permit the claims to be brought. The court tasked the arbitrator with balancing the need for adequate discovery with the goals of "simplicity, informality and expedition" of the arbitration process. Id., at 106.
Regardless of any arbitrator-imposed safeguards, employment and consumer cases often involve discovery and motion practice not dissimilar from proceeding in court to the extent that the arbitration agreement is trumped by Armendariz.
Finding the Right Balance
In the end, while in certain instances the extent of pre-hearing discovery may not differ significantly compared with proceeding in court, arbitration is still desirable. The parties can agree on a litigation process; if the arbitrator can help them resolve any disagreements. There is the potential to limit discovery, if the right to discovery exists at all. Motions may not generally be filed as a matter of right in the arbitration context, unlike proceedings in court. The matter being arbitrated is a focus of the arbitrator's attention; in court, the case would be one of hundreds being considered. To a significant extent, attorneys have more control over the proceedings of an arbitration than they do in court. As such, while in some instances there may not be much difference in the extent of pre-arbitration hearing or pretrial discovery, the additional controls associated with arbitration lead to a process that is far more expeditious than proceeding in court.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.