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1
ARBITRATION: THE “NEW
LITIGATION”
Thomas J. Stipanowich*
Provisions for binding arbitration of disputes are now employed
in virtually all kinds of contracts, making arbitration a wide-ranging
surrogate for civil litigation. This has also subjected arbitration to
unprecedented strains and unparalleled criticism. Once promoted as
a means of avoiding the contention, cost, and expense of court trial,
binding arbitration is now described in similar terms—“judicialized,”
formal, costly, time-consuming, and subject to hardball advocacy.
Though “court-like” arbitration has alienated many business users,
others strive to make arbitration even more like court trial, as through
agreements for expanded judicial review of arbitration awards.
Meanwhile, the emergence of mediation and other “thin-slicing” me-
thods for resolving disputes more quickly and effectively has raised
serious questions about the value of arbitration and its continuing
role in the conflict resolution marketplace.
Additionally, broad judicial enforcement of arbitration provi-
sions in standardized adhesion contracts governing employees and
consumers has fueled impassioned debate over the need for regula-
tion of arbitration agreements. The real concerns of reform advo-
cates, lawmakers, legal commentators, and educators have produced
strong responses that “spill over” into the realm of arm’s-length busi-
ness-to-business agreements—often imposing new transaction costs
without commensurate benefits.
These developments point to a critical need for more effective
exercise of choice by users of arbitration and others whose decisions
affect the arbitration experience. The most important difference be-
tween arbitration and litigation—and the fundamental value of arbi-
* William H. Webster Chair in Dispute Resolution and Professor of Law, Pepperdine Univer-
sity School of Law; Academic Director, Straus Institute for Dispute Resolution. The author is in-
debted to a number of individuals who offered comments and criticisms, including Curt von Kann,
David McLean, Steve Ware, Jeffrey Paquin, Katherine Gurun, John Hinchey, Peter Collison, Walter
Gans, Jim Durham, and Richard Cupp, as well as participants in the symposium entitled “Whither
Arbitration?” sponsored by Benjamin Cardozo School of Law, November 6, 2008. The author extends
special thanks to Pepperdine School of Law Research Librarian Gina McCoy for her invaluable re-
search assistance. He also thanks Pepperdine Law/Straus Institute students Chris Chatelain, Angela
Eastman, Jonathan Loch, Travis McDermott, Paula Pendley, Catie Royal, and Ira Yasnogorodsky for
their research support.
STIPANOWICH.DOCX (DO NOT DELETE) 1/11/2010 3:29 PM
2 UNIVERS ITY OF ILLINOI S LAW REVIEW [Vol. 2010
tration—is the ability of users to tailor processes to serve particular
needs. In order to make the most of the promise of arbitration, con-
tract planners and drafters must move beyond a monolithic one-size-
fits-all view of arbitration and make deliberate process choices based
on client goals and priorities. The need for a more nuanced approach
also requires planners to strategically assess arbitration’s particular
value in a world of expanding process choices. Similarly, those who
make or propose laws affecting arbitration and those who prepare
tomorrow’s lawyers must look “beyond the monolith” to understand
that regulation that is essential in one transactional setting may be de-
trimental in another.
TABLE OF CONTENTS
Introduction ...................................................................................................... 3
I.Arbitration Becomes the New Litigation ............................................. 8
A.The Expansion of Arbitration ......................................................... 9
B.Changes in Arbitration Procedure and Practice ......................... 11
1.Jurisdictional Issues ................................................................. 11
2.Prehearing Discovery .............................................................. 12
3.The Hearing Stage ................................................................... 15
4.Post-Hearing Process .............................................................. 15
5.Unauthorized Practice of Law; Conflict of Interest ............ 19
C.The Impact of Statutory Reform .................................................. 20
D.Evolution of the Arbitration Bar; Perceptions of Counsel
and Arbitrators ............................................................................... 21
E.Trends in International Arbitration ............................................. 23
II.The Revolution in the Dispute Resolution Marketplace; the
Appeal of “Thin-Slicing” ...................................................................... 24
A.The Search for Reduced Cost and Risk, Greater Value in
Dispute Resolution ......................................................................... 24
B.Embracing ADR ............................................................................. 25
C.The Phenomenon of Mediation .................................................... 26
D.Other Thin-Slicing Processes ......................................................... 32
E.Moving Upstream: Systemic Conflict Management and
Cultural Change .............................................................................. 34
III.“Consumerized” or “Mass” Arbitration and the “Spillover”
Effect ....................................................................................................... 35
A.The Evolution of Arbitration in Adhesion Settings ................... 36
B.The “Spillover” Effect: Legal Enactments .................................. 40
1.State Statutes ............................................................................ 40
2.Proposed Revisions to the FAA ............................................ 46
C.The “Spillover” Effect: Scholarship and Teaching ..................... 49
IV.Addressing the “New Litigation”: Looking Beyond the
Monolith ................................................................................................. 50
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No. 1] ARBITRATION: THE “NEW LITIGATION” 3
A.Contract Planners and Drafters Need to Make
Affirmative, Appropriate Choices Regarding Arbitration ........ 51
1.Choice as the Central Value of Arbitration ......................... 51
2.The Role of Clients and Counsel ........................................... 53
3.The Role of Provider Institutions and the Need for
Templates ................................................................................. 54
4.The Role of Advocates and Arbitrators ............................... 55
B.Arbitration Should Be Considered in the Context of an
Array of Conflict Management Tools .......................................... 56
C.The Legal Framework for Arbitration Should Be Tailored
to Reflect the Very Different Realities of Different
Transactional Settings .................................................................... 57
Conclusion ...................................................................................................... 58
The moon waxes only to wane, and water surges only to overflow.
—Ancient Chinese Proverb1
INTRODUCTION
The latest edition of the American Institute of Architects (AIA)
construction forms, the nation’s most widely used template for building
contracts, eliminates the default binding arbitration provision, long a sine
qua non of construction contracts; parties must henceforth affirmatively
elect arbitration or go to court.2 A new, much-heralded rival set of stan-
dard construction contract documents also relegates arbitration to an op-
tion rather than a default procedure.3 Along with a drumbeat of head-
lines heralding arbitration’s ebb tide,4 such developments provoke
discussion and introspection among commercial arbitration5 practition-
1. 100 PEARLS OF CHINESE WISDOM 189 (Sinolingua 1999).
2. AM. INST. OF ARCHITECTS, AIA DOCUMENT A201-2007, GENERAL CONDITIONS OF THE
CONTRACT FOR CONSTRUCTION art. 15 [hereinafter AIA DOCUMENT A201-2007]; AM. INST. OF
ARCHITECTS, AIA DOCUMENT B101-2007, STANDARD FORM OF AGREEMENT BETWEEN OWNER AND
ARCHITECT art. 8 (Projects 2007); see also Am. Inst. of Architects, Contract Documents, http://www.
aia.org/contractdocs/AIAS076659#P8_1567 (last visited Nov. 25, 2009) (comparing current and pre-
vious versions).
3. CONSENSUSDOCS LLC, CONSENSUS DOCS 240: STANDARD FORM OF AGREEMENT
BETWEEN OWNER AND ARCHITECT/ENGINEER art. 9.5, at 19 (2007).
4. See, e.g., ROBERT GAITSKELL, SOC’Y OF CONSTR. LAW, TRENDS IN CONSTRUCTION DISPUTE
RESOLUTION (2005), http://www.scl.org.uk/files/129-gaitskell.pdf; Editorial, 17 CONSTR. L.J. 1, 1–2
(2001); Leslie A. Gordon, Clause for Alarm, A.B.A. J., Nov. 2006, at 19; Sylvia Hsieh, Arbitration Fall-
ing out of Vogue, LAWYERSUSA, Mar. 10, 2008, at 1; Knocking Heads Together, ECONOMIST, Feb. 3,
2000, at 62 (noting that arbitration is no “cheaper, fairer or even quicker” than trial); Mary Swanton,
System Slowdown: Can Arbitration Be Fixed?, INSIDECOUNSEL, May 2007, at 51; Lo u Whiteman, Ar-
bitration’s Fall from Grace, LAW.COM, July 13, 2006, http://www.law.com/jsp/cc/PubArticleCC.jsp?id=
900005457792.
5. Throughout this Article, “commercial arbitration” is used in its stricter, more straightforward
sense—arbitration between commercial entities. The term is sometimes used more broadly to encom-
pass many forms of binding arbitration outside the collective bargaining sphere. See Thomas J. Stipa-
nowich, The Evolving Standards and Persistent Challenges of Employment Arbitration, in RESOURCE
BOOK FOR MANAGING EMPLOYMENT DISPUTES (CPR Inst. for Dispute Resolution, Inc. ed., 2004). It
