Locke Lord QuickStudy: Can an Arbitrator Require Arbitration by Videoconference?

In response to the stay-at-home orders issued by various state and local authorities aimed at slowing the spread of COVID-19, all aspects of the economy have been experimenting with various online platforms as a way to keep connected and keep working. Legal work is no different: the United States Supreme Court is conducting oral arguments by teleconference, and many attorneys are utilizing Zoom and other online platforms for depositions and mediations. Alternative dispute resolution is also feeling the effects of this new push, and parties to ADR proceedings must consider the pros and cons of proceeding with hearings via online platforms, versus postponing in favor of waiting for traditional in-person hearings. 

1. Videoconferencing May Fundamentally Alter An Evidentiary Hearing. 

Videoconferencing is certainly convenient, and has seemed like the only way to keep litigation moving forward in a time of stay-home orders and social distancing. While many argue these conveniences have demonstrated that videoconferencing will play a greater role in future proceedings, it may not be appropriate for every stage of litigation and dispute resolution. Parties should be particularly concerned about how remote presentations of witness testimony and attorney questioning could affect their case at a merits hearing. The choice of a medium over which to conduct an evidentiary hearing (e.g., via videoconference) is not a mere gateway procedural issue and instead affects the parties’ substantive rights to a fair hearing. “The simple truth is that confrontation through video is not the same as physical face-to-face confrontation . . . Indeed, no court that has considered the question has found otherwise.” United States v. Yates, 438 U.S. 1307, 1315 (11th Cir. 2006). Expert studies have confirmed the qualitative differences between in-person and videoconference presentations of witness testimony and attorney examination. Professor Anne Wallace summarized one such set of studies this way: 

[a] videoconference doesn’t simply act as a ‘pipeline’ conveying an individual’s picture and words from one place to another so that they are ‘present’ in the courtroom in a way that is equivalent to physical presence. Their presence is ‘mediated’ by the technology in ways that make the experience of appearing by videoconference, and the experience of others viewing them, different to the equivalent ‘in court’ appearance. The ‘remote’ participant – whether it is the defendant, the witness, the judge or the lawyer – will likely experience some or all of these issues:

• Difficulty in giving and receiving non-verbal cues from the other participants in the proceeding;
• Difficulty in hearing or seeing all or some of those participants as well as they could if they were in the courtroom;
• Lacking the same opportunity to observe and take cues from others in the remote physical space, and perhaps even to fully appreciate the significance of their role;
• They will be seen and heard by those in the physical courtroom in ways that are dependent on the quality and configuration of the videoconferencing set up: how it frames them, how good the sound is, how fast the connection is and how well it is synced with the picture, and what views are available at either end of the link.

See Anne Wallace, Courts and Coronavirus: Is Videoconferencing a Solution?, COURTLEADER (March 16, 2020), https://courtleader.net/2020/03/16/courts-and-coronavirus-is-videoconferencing-a-solution/ (compiling studies).

Accordingly, there may be reasons to conclude that conducting an evidentiary arbitration hearing via videoconference can be fundamentally different from a traditional proceeding held in-person. 

2. An Arbitrator’s Authority is Defined by the Parties’ Agreement. 

Arbitrators can only compel parties to accept this fundamental change in litigation practice if they already agreed to it. Arbitrators derive their power from the parties’ agreement. City of Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex. 2009). They have no independent source of jurisdiction apart from the parties’ consent. American Life, Inc. v. Myer, 440 S.W.3d 18, 21 (Tex. 2014). It ultimately falls to courts and arbitrators to give effect to these contractual limitations, “and when doing so, courts and arbitrators must not lose sight of the exercise: to give effect to the intent of the parties.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 684 (2010). 

Because an arbitrator’s authority is limited to the parties’ agreement, an arbitrator has no inherent power to make policy decisions the parties did not express in their agreement. Id. at 673. Going forward, when parties negotiate their arbitration provisions they should consider whether videoconference is the “the most efficient,” or the “wave of the future,” or the “best way to move forward at this time.” But once the parties have formed their agreement, the arbitrator’s power will be measured by the contract they actually made, not the contract they could have made. Hindsight might cloud the task of interpreting the parties’ intent, especially now that the COVID-19 pandemic has turned a previously unforeseeable disaster into a known risk for a whole generation of attorneys. 

Similarly, the authority to compel a videoconference hearing probably cannot be inferred solely from the fact that the parties entered into an agreement to arbitrate. This is because a videoconference arbitration may change the very nature of the arbitration to such a degree that it cannot be presumed that the parties consented to it simply by entering into an arbitration agreement. See id. at 685 (class action cannot be inferred because “class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator”).

3. Recent Model Orders Lay the Groundwork for Arbitrators to Compel Videoconference Hearings.

Of course, many arbitration agreements expressly incorporate the arbitration rules of various organizations. Some organizations have recently addressed whether arbitrators can compel evidentiary hearings by videoconference. The International Institute for Conflict Prevention and Resolution (CPR) and the American Arbitration Association (AAA) / International Centre for Dispute Resolution (ICDR) have both recently issued model procedural orders to provide guidance for conducting virtual hearings via videoconference. Both model orders appear to assume that the arbitrator can order an online proceeding over the objection of one of the parties. Going forward, parties should carefully consider whether to accept these organizations’ new orders, or to expressly reject those orders through their contractual arbitration provisions.

Nevertheless, these model orders should not apply retroactively to arbitrations that were already underway when the COVID-19 pandemic swept the world, because the rules that govern an arbitration are those in effect when the arbitration was commenced. E.g., AAA Commercial Rule R-1 (a). While the rules for many organizations allow for the admission of evidence by videoconference in certain circumstances, those same rules do not envision holding the entire evidentiary hearing by videoconference. For example, AAA Commercial Rule 32 allows evidence to be presented by videoconference in certain circumstances while Rules 34 and 35 appear to require in-person presentation of certain evidence. Also, Rule 32 seems to be limited by AAA Commercial Rules P-2, xiv which requires parties to agree to the use of on-line evidentiary presentations at the beginning of the case. 

4. Evaluating the Changed Arbitration Landscape.

Because an arbitrator’s authority is derived from the parties’ agreement, each situation is different and there is no way to make a one-size-fits-all argument as to whether the parties’ agreement allows for an online-only hearing. However, the following checklist is useful in formulating an argument for or against.

• Review the Arbitration Agreement – Does it mention remote presentation? Does it require that the arbitration be held in a specific locale? Does it require the use of any specific tribunal or rules?
• Review Applicable Procedural Rules – If the arbitration agreement incorporates specific rules, review those to see: (1) do the rules allow for introduction of videoconference evidence – either entirely or for only unavailable witnesses; (2) do the rules require in-person attendance (for example, see AAA Commercial Rules 34 & 35); (3) do the rules allow the parties to agree to a specific locale (for example, see AAA Commercial Rule 11); and (4) do the Rules require or assume that the use of videoconferencing must be agreed to at the outset (for example, see AAA Commercial Rules, Preliminary Hearing Procedure P-2).
• Even if the Arbitrator has General Authority to Order a Videoconference, Would the use of Videoconference Prejudice You? Would some witnesses be required to testify from home with whatever technology or space is available to them? Are there special reasons (e.g., a fraud claim) why in-person credibility assessment may be especially important? Parties should review the comments that are a part of the CPR model rule as to whether videoconferencing is fair for any particular case.

Organizations that plan for their recovery and are rebuilding for the future will be better positioned for a post-pandemic world. Please visit our Adapt. Adjust. Advance. Resource Center often for up-to-date information on navigating these and other important legal considerations in the postpandemic reality.