By Jeffrey T. Zaino, Esq.
A primary objective of arbitration is to reduce the costs of dispute resolution. Arbitration costs can include administrative fees of an alternative dispute resolution (ADR) service provider and the arbitrator's fees. It is imperative that ADR service providers, neutrals and advocates work together to ensure that no one is precluded by cost from using an arbitration process. At the same time, ADR service providers and arbitrators deserve to be fairly compensated for their time and services.
Arbitrators should keep in mind the need for simplicity in their fee structure but rates for serving on AAA panels, for most case types, are at the complete discretion of the arbitrator. There are, however, certain best billing practices for an arbitrator. This article will provide some guidelines and best practice recommendations made by AAA Neutrals Services. It should be noted that these guidelines and best practices for billing are important regardless of the ADR forum. Also, many ADR providers likes JAMS and CPR also have similar high expectations with respect to arbitrator billing practices.
Per Diem/Hourly Fees
Arbitrator fees should be all inclusive. Per Diem fees are expected to include a full day's hearing time (7 hours). With either per diem or hourly fees, no billing should be submitted for (a) time spent discussing the case with AAA staff; (b) written, telephonic, faxed, and electronic communications with case management staff; (c) local travel time and expenses; (d) personal administrative assistants; or (e) stamps, local calls, copying of materials, etc.
If the arbitrator intends to charge for any of these costs separately from the hourly or per diem fee, the arbitrator must so state in the fees section of the AAA panel biography.
If the arbitrator intends to be compensated for study time, it must be listed as a separate fee on the panel biography. A detailed billing sheet documenting the specific activity and actual time spent should accompany the fee request on each case on which the arbitrator serves.
The possibility and extent of study time must also be discussed with the Case Manager at the time of appointment or following the first preliminary hearing. Parties have a right to know in advance the approximate amount of your charges.
Since many AAA arbitrators are busy practitioners, they do not charge a cancellation for postponements of hearing dates or cancellation because of settlement. If an arbitrator requires a cancellation fee, it must be listed as a separate fee on the resume, it should be for unusual circumstances, and it should require no more than 48 hours notice. Notice of postponements or cancellations may be received from a Case Manager by telephone or by e-mail. Any request for postponement or cancellation fees must be accompanied by a statement that the arbitrator was unable to reschedule or make professional use of the billed time.
In most cases, no additional expenses will be incurred as hearings will be held locally. If the arbitrator serves as an arbitrator on a case outside of his or her locale, it should be clarified before the hearing that reasonable, necessary air travel, hotel room accommodations and meals will be reimbursed. Entertainment costs and personal expenses are not reimbursable. An arbitrator may be required to submit receipts for expenses.
If a request or remand by the court to modify an award is necessitated by an error by the arbitrator, the arbitrator should dispose of the request or remand without additional compensation.
If a request or remand for modification does not require a great deal of effort, such as the omission of a word in a company name, the arbitrator should dispose of the request or remand without additional compensation.
If a request or remand for modification is not the result of an error by the arbitrator or requires significant effort on the arbitrator's part, then it is appropriate to be compensated for such activity. AAA will attempt to collect such compensation in advance.
The language used in describing fees and expenses should be clear and detailed, not summarized, as for example, "for services rendered".
Every effort will be made to collect arbitrator compensation before the hearing date. If the compensation has not been deposited, pursuant to the rules the arbitrator will be given the option to suspend or terminate the proceeding.
Jeffrey T. Zaino, Esq., is Vice President for the Commercial Division of the American Arbitration Association in New York.