- SELECTING ARBITRATORS
- Arbitration Examples
- Major Experience
- Arbitration's Advantages
- TIPS ON ARBITRATION
SELECTING ARBITRATORS
CHOOSING AN ARBITRATOR:
Time spent on selecting arbitrators is time well spent. Parties picking appointees or the chair often feel tremendous pressure to make these choices rapidly. Agreements often contain unreasonably prompt schedules for selecting a full panel.
Making a pressured choice is a mistake because selecting one’s own arbitrator, and then the chair, are two of the most important decisions parties make in arbitration. Moreover, selecting the decisionmakers is an advantage almost never available in court. Parties should never deprive themselves of this comparative advantage of arbitration.
Parties should have three core goals when selecting arbitrators. First, in disputes with specialized or technical aspects, the parties should take the time to find arbitrators who have the necessary technical background. Picking arbitrators with industry expertise for technical disputes makes it less likely that the arbitrators will be led astray on core issues and makes it easier to try the matter efficiently because technical matters can be covered relatively quickly.
Second, parties should find arbitrators whom they know are skilled as arbitrators. This ability covers a cluster of skills – knowing how to act fairly and neutrally, having arbitration management experience (particularly important for sole arbitrators and chairs), and knowing how to treat other panelists as full colleagues and so being likely to be effective with them.
Third, if a dispute is especially complex, the parties should insist on having enough time to confirm that their chosen arbitrators are experienced in handling disputes with highly complex records.
Parties should insist on enough time to verify that candidates under consideration have these qualifications. They should find other lawyers or arbitrators who have arbitrated before or sat with the candidates. An underused but effective way to secure useful information is to interview the arbitrators. Parties should not shy away from joint interviews that both parties conduct with prospective arbitrators, including chairs. Such interviews can start building trust between the chair and the parties. Making them joint interviews ensures that neither side strays into discussions of the merits.
Arbitration agreements often contain selection processes that are too brief. But parties can agree to provide more time. Usually major delays in selection are due to the parties not trusting each other, not to a lack of arbitrators qualified for the dispute. Distrust deepens whenever a side picks a party appointee who is likely to appear partial to the other side.
The selection process works much better if each side chooses an appointee not obviously partial to their interest, and the two truly independent appointees then agree – with party support – to look for chairs whom both sides also perceive as independent and unbiased. Looking for consensus picks cuts out many wasted discussions.
The problem with “non-neutral” arbitrators
Non-neutral arbitrators who keep talking to their appointing party as the process proceeds once were not uncommon in some industries. In McArthur’s first arbitration, the appointed arbitrators were non-neutral and authorized to communicate with their appointing party until the merits hearing.
Non-neutral arbitrators are allowed to be “predisposed” to their appointing party. McArthur frequently has served as a party-appointed neutral, but he has not served as a non-neutral again. To him a fair arbitration process, one as good as any judicial process, requires all arbitrators to consider the evidence and the law without predispositions and to be equally willing to rule for either side. i.e. fair arbitrators rule based on the facts and law, not their appointing party.
Arbitration Examples
ARBITRATION EXAMPLES
Arbitrations center on contracts that contain an agreement to arbitrate. Most matters McArthur has handled as a trial lawyer or arbitrator involve a breach of contract claim as well as alleged business torts and, often, statutory violations. He has been involved in such claims and the exceptions and defenses to them throughout his career. He has worked on disputes at all levels of the oil and gas industry. He has extensive experience with antitrust work, starting with his clerkship and at his first law firm, Susman Godfrey, which was a new antitrust boutique law firm when McArthur joined it in 1983. McArthur also worked on securities matters from the first days of his practice and, as a FINRA arbitrator, continues to do so, including as frequent panel chair. McArthur has worked on matters involving investment contracts, partnership and joint venture agreements, royalty agreements, franchise agreements, supply contracts including take-or-pay contracts, purchase and sale contracts, employment agreements, and other common business contracts.
Examples of complex matters McArthur has arbitrated:
- 9-figure claim between electricity purchaser and power company under long-term electricity supply (tolling) agreement over power company’s alleged breach, including major disputes over who had duty to arrange required distribution facilities and upgrades needed to transport electricity away from the plant, whether power company failed to provide adequate assurances, and the measure of damages
- Consultant in sale of oil company suing for 8-figure commission, also seeking declaratory judgment and damages for unjust enrichment
- Contract interpretation dispute under gas purchase agreement over appropriate price for natural gas, including successor issue over binding nature of price floor under applicable law
- Investors in oil ventures suing operating company for 8-figure damages claim in derivative action with common-law fraud, breach of fiduciary duty, bad faith, negligence, and breach of contract claims, and for violation of federal and state securities laws, in multi-year, multi-program investments
- Broker disputing termination by national brokerage firm for failure to properly confirm orders bringing breach of contract and of good faith and wide variety of tort claims
- Investment company in startup with mobile safety-alert technology suing to recover funds from company and its chief officer on fraud and related claims about product performance and development schedule
- Distributor of manufacturer’s telecom fuel-cell batteries claiming that battery manufacturer breached distribution agreement, with 9-figure manufacturer counterclaim for breach, business torts, and anticompetitive conduct in violation sections one and two of the Sherman Act
- Investor claim of fraud and breach of agreement in startup marijuana-growing investment
- Natural gas purchaser and marketer bringing 9-figure claim over alleged right to purchase natural gas and natural gas liquids from exploration and production company
- Termination dispute by ousted partner in professional partnership with counterclaims including breach of contract, breach of fiduciary duty, and interference with customer contracts
- Interest owner in intricate contract dispute with gold mining company over allocation of gold to different sections of mine
- Oil and gas producer bringing 9-figure claim against field service company under gathering and processing agreement and related agreements over proper accounting for gas and NGL sales
- National investment and financial services firm suing former high-level employees for allegedly taking confidential company secrets and business to new firm
- Investors’ lawsuit for fraud and related claims against company claiming to have installed anaerobic digesters on large dairy farms to produce biogas
Major Experience
Major areas of experience:
Complex Commercial Cases: Contracts and Torts
Most matters McArthur has handled over his career have involved breach of an underlying contract, often coupled with allegations of one or more business torts and issues. Even the cases he has handled as lawyer or arbitrated with antitrust, securities, or other statutory claims have generally included contracts and tort claims as well. He has spent his career interpreting the plain meaning, purpose of contracts; extrinsic evidence when admissible under applicable law; and the many defenses to contract and tort claims. Tort issues he has handled in one or both of these capacities have included aiding and abetting, bad faith, conspiracy, constructive trust, conversion, deceptive trade practices, disparagement, economic loss rule, fraud, fraudulent inducement, fraudulent transfer, fiduciary duty, lost profits (and new business defense), negligence, negligent misrepresentation, punitive damages, timing of valuation, tortious interference, unfair business practices, unfair competition, and unjust enrichment. He has been handling contract and business torts disputes, first as a trial lawyer, then as an arbitrator, and exceptions and defenses to these doctrines, for 42 years.
Energy, Particularly Oil and Gas
McArthur has been involved with energy matters throughout his career. On AAA Oil and Gas and National Energy panels; CPR's Oil and Gas Panel, and Fed-Arb Energy Oil Gas & Water panel. For many years he was a Sponsoring Member of the Institute for Energy Law. Appointments by major and independent oil companies, investors, electric utility, field service company, mining company, oilfield equipment inventor, pipeline, and battery company. Experience includes all levels of oil and gas industry: exploration, development, production, transportation, refining, processing, and marketing. Between his former trial work and his work as an arbitrator, he has handled disputes over billing (partnership, JV, and JOA), AFEs, prospect structure, geology, liquids, reservoir engineering, pricing, deductions, equipment, drilling, production allocation, purchase and sale agreements, take-or-pay agreements, unit agreements, operating agreements, compressors, royalties, and severance taxes, as well as hard-mineral mining, and electricity generation and distribution.
Antitrust
McArthur began his practice at Houston's Susman Godfrey firm in 1983 when the firm focused on antitrust work. Experience covers section-one price fixing (horizontal and vertical), nonprice restraints, customer restrictions, exclusive dealing, joint-venture arrangements, market division, refusals to deal, and tying; section-two monopoly and attempted monopoly claims; price discrimination; merger claims; Noerr-Pennington; and indirect purchaser issues. Involved in multiple Section One per se and rule of reason claims and Section Two monopolization and attempted monopolization claims. Antitrust experience has involved a diverse range of industries, from tennis balls to jet fighters, pipelines to gasoline and fuel cell battery pricing and markets.
Partnerships, Joint Ventures, Other Investment Forms Including Securities Claims
McArthur has experience in the major forms of business entities and investments: close corporations, joint ventures, partnerships, stock, and other equity structures; issues including business judgment rule, class actions, continuing torts, breach of warranty, derivative actions, damages, loan arrangements, ultra vires doctrine, piercing corporate veil, and shareholder liability. FINRA arbitrator since 2011, today often panel chair. Securities claims have included claims over broker-dealer rules, corporate misstatements, failures to supervise, insider trading, market manipulation, schemes to defraud under state and federal securities statutes, and violation of FINRA rules.
Arbitration's Advantages
WHY PARTIES SHOULD USE ARBITRATION
McArthur changed his focus in 2008 to serving as an arbitrator in the belief that alternative dispute mechanisms provide an increasingly valuable, flexible, and efficient alternative path to justice while our courts remain too crowded. With a long-standing interest in problems of case management, McArthur has published articles on arbitration and case management. For a sample of these articles, see Publications.
The growth in population and economic activity in the United States, set against underfunded state and federal court systems, has made private dispute resolution a vital part of our national justice system. Most courts have too many cases to handle their dockets expeditiously. The delays inherent in discovery and the duration of appeals are major problems for individuals and businesses. The uncertainty, delay, and cost produced by congestion in court systems too often threaten the fair administration of justice. In addition, the increasingly partisan nature of judicial selection in many state and federal courts unfortunately threatens the independence and caliber of justice in those forums. As a result, the right parties enjoy in arbitration to select neutral, independent arbitrators will become even more important. It therefore is vital that arbitrators continue administering a fair and more rapid system of alternative dispute resolution. The growing dependence of U.S. companies on international trade will increase their participation in international arbitration as well.
Arbitration will also continue to have a strong comparative advantage over court litigation because many arbitrations, properly administered, will reduce costs and delay compared to litigation under court rules. Arbitrators should not have the crowded docket of the average court. Arbitrators are trained to design shorter schedules than common in court, to be creative in paring down the amount of information exchanged before the hearing, to set firm trial dates at the outset, and to monitor activity in the prehearing period to make sure that deadlines do not slip. Arbitrators are trained to preserve arbitration’s fairness while achieving an efficient resolution. This is the reason arbitration continues to expand its reach in commercial disputes.
It is crucial to arbitration's legitimacy that speed not hinder the search for a just outcome. Arbitrators must deliver independent, objective justice. The deference courts extend to arbitral decisions should not encourage second-class decision making. For arbitration to retain its attractiveness, arbitrators must treat the law as just as binding on them as it is on the courts. They must view the limited appellate review over their decisions as a reason to increase—not decrease—the care with which they decide cases. Unless the parties ask to forego reasoned decisions, arbitrators should provide enough explanation in their decisions that the parties can see that each side’s position was heard and fully considered.
TIPS ON ARBITRATION
The attached link contains an article McArthur wrote with Northern California arbitrator Larry Mills. The magazine California Litigation published the article in September 2023. The piece provides a condensed discussion about important decision points in arbitration and suggests ways in which parties should approach them to get the most benefit out of arbitration.