Dispute Settlement in the Era of COVID-19: Our “New Normal”?

7 min

COVID-19 is bringing new changes to all aspects of life, and dispute settlement proceedings are no exception.  One such change is the use of Zoom and video-conferences to keep dockets on track.  But such changes are not without novel issues.  In April 2020, a judge in Florida pleaded that attorneys put on shirts before logging in to court hearings via videoconference, requesting in an open letter to the bar association, "please, if you don't mind, let's treat court hearings as court hearings, whether Zooming or not." i This alert focuses on the use of arbitration and the use of courts in the era of COVID-19.

In general, given concerns about COVID-19, U.S. courts are moving to teleconferences and other means to keep cases on track.  Prior to the pandemic, only two appellate courts—the Ninth and D.C. Circuits—allowed for live listening or viewing of their oral arguments.ii In May, for the first time, the U.S. Supreme Court announced plans to hold oral arguments by teleconference.  A day after the Supreme Court's announcement, the Eight Circuit held oral arguments by telephone in Swinton v. Stark, No. 18-3186 (8th Cir. 2020).iv Reportedly six public listeners attended. v As of May 26, the only holdout is the Third circuit; in stark contrast, the First, Second, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh and the D.C. and Federal circuits had held or announced plans for oral arguments.

Aside from criminal cases—which have their own set of unique issues, such as the fact that most require jury trials—litigants in civil cases are adjusting to the use of Zoom and teleconferences for hearings.  Often clients ask: Which is better—courts or arbitration?  With the changes following COVID-19, does this answer change?

Courts

Faced with social distancing and stay-at-home executive orders in many states, a number of courts have entered orders postponing or suspending all non-emergency trials and in-court appearances.  Most such standing orders allow individual judges assigned cases to make exceptions.  Similarly, discovery may be left to what agreement the parties can reach, and, absent agreement, individual judges decide.  But with courthouses remaining shuttered and social distancing the norm despite a phased reopening around the country, many cases remain relegated to video for deposition or oral argument in the near term.vi

Arbitration

In arbitrations, arbitrators or panels have been taking the lead in individual cases, as opposed to across-the-board standing orders from the administrator.  The American Arbitration Association (AAA), for example, shut down all hearings scheduled to take place at AAA-International Centre for Dispute Resolution facilities through at least September 1, 2020.  Importantly, however, the AAA has permitted individual parties, arbitrators, and mediators to discuss alternative arrangements, which include the use of video, teleconferencing or agreed-upon postponements.  Meanwhile, the International Chamber of Commerce (ICC) has issued a guidance note that sets forth possible measures that may be considered to "mitigate the adverse effects of the COVID-19 pandemic on ICC arbitrations."vii The ICC remains steadfast in its commitment to resolving disputes efficiently, noting that "the COVID-19 pandemic should not necessarily delay tribunals' deliberations or their preparation of draft awards, as these activities can be conducted remotely."viii A number of other arbitration organizations, including the Hong Kong International Arbitration Centreix and the Singapore International Arbitration Centre,x  have implemented some form of guidance related to minimizing the risk of transmission of COVID-19 through physical contact.

The Use of Arbitration vs. the Use of Courts During the Pandemic
  • Courts and arbitration organizations vary in their readiness for conducting remote proceedings.  Both are currently functioning with teleconference or live streaming video hearings, but in the civil litigation context, most trial courts currently are ahead of arbitration organizations in their ability to conduct evidentiary hearings with live witnesses. One court recently issued a hybrid scheduling order, requiring that only one attorney for each party attend the trial in person, while all witnesses would be examined remotely by Google Meet, and other counsel and party representatives would also attend virtually.  It appears that some arbitration organizations may be catching up soon.  For example, the AAA has published a virtual hearing guide for arbitrators and parties, setting forth, among other things, methods for optimizing the virtual hearing experience and various security considerations related to conducting a virtual hearing.xi
  • If stay-at-home orders are lifted and then later reinstated, arbitrations will be easier to postpone.  Moreover, with the experience they have gained during the previous three to four weeks, major arbitration firms like AAA will be better equipped to structure evidentiary hearings by remote videoconference without the parties having to coordinate most of the logistics themselves.
  • Even in the era of COVID-19, arbitration continues to provide less publicity and a higher entry cost for complainants to institute suit.  And a perception—whether correct or not—is that arbitration provides a smaller chance of success on dispositive motions for a respondent, a greater likelihood of allowing a party to miss deadlines so that the dollars keep rolling in to the panel, and no real appeal if they get it wrong.
  • Arbitration, unless otherwise agreed by the parties, also limits discovery at least by significantly reducing fact depositions.
  • Depending on the jurisdiction, courts can be faster or slower than arbitration, so depending on the goal, forum selection for either tribunal can be key.  Beware of consumer-oriented arbitration provisions in which the provider agrees to pay the other party's filing costs for the arbitration as part of the incentive for mandating arbitration.  That was the case recently for DoorDash.xii  A plaintiffs' firm filed 6000 arbitrations with AAA and, under such a provision, DoorDash was hit with $9 million in filing fees.  After DoorDash refused to pay the filing fees, the dispute went to court, and currently at the trial level, a federal judge has ordered DoorDash to proceed with the AAA arbitrations and pay the fees.
The Use of Arbitration vs. the Use of Courts After the Pandemic

It remains to be seen whether the choice of using arbitration organizations or the courts to resolve disputes will become clearer after the pandemic passes.  However, the commitment of various arbitration organizations, such as the AAA and the ICC, to continue to hold virtual hearings and issue awards amid this crisis may lead to an increase in the pursuit of arbitration as a form of dispute resolution.

Please let us know if you have any questions regarding dispute settlement issues, whether in litigating them or in drafting appropriate contract provisions, particularly in relation to the response to COVID-19 and what appears to be our "new normal."


Footnote

i See Letter from the Hon. Dennis Bailey to Weston Bar Association, available here ("One male lawyer appeared shirtless and one female attorney appeared still in bed, still under the covers. And putting on a beach cover-up won't cover up [that] you're poolside in a bathing suit.")

ii Cara Bayles, "Virus Forces Transparency Reckoning Among Highest Courts," Law 360 (April 19, 2020).

iii See Press Release from Supreme Court, available here ("In keeping with public health guidance in response to COVID-19, the Justices and counsel will all participate remotely."); see also Jess Bravin and Brent Kendall, "Live-Streamed and Teleconferenced, the Supreme Court Enters the Coronavirus Era," Wall Street Journal (May 3, 2020).

iv Bayles, supra ("Virus Forces Transparency"). Appeal alleging SquareTrade Inc. settled a copycat class action in Iowa to kill an original lawsuit in New York—before Judge William Duane Benton.

v Id.

vi See, e.g., In the Court of Appeals of Maryland: Administrative Order on the Progressive Resumption of Full Function of Judiciary Operations Previously Restricted Due to the COVID-19 Emergency (May 22, 2020) (detailing five phases for reopening with all courts resuming full operations, including jury trials in criminal and civil cases, as of October 5, 2020, although "[t]o the extent that [such matters] may be handled remotely, courts are encouraged to do so.").

vii ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic, International Chamber of Commerce (April 9, 2020), available here.

vii Id.

ixSee Precautionary Measures at HKIAC in Response to COVID-19, Hong Kong International Arbitration Centre (March 26, 2020), available here (providing that all guests of the HKIAC's facilities must complete a Health Declaration Form confirming, among other things, that they have not traveled outside of Hong Kong in the past 14 days, they are asymptomatic, and they have not, to their knowledge, come into direct contact with a person diagnosed with COVID-19).

See Enhanced COVID-19 Measures at SIAC, Singapore International Arbitration Centre (April 6, 2020), available here (providing that the SIAC will remain operational, through telecommunication, despite the indefinite closure of its physical offices on April 7, 2020).

xi See AAA-ICDR Virtual Hearing Guide for Arbitrators and Parties, AAA-ICDR, available here.

xii Michael Corkery and Jessica Silver-Greenberg, "'Scared to Death' by Arbitration: Companies Drowning in Their Own System." New York Times (April 6, 2020), available here.