Arbitration Is Efficient….Or Not

David Reif shares the following cringeworthy arbitration morass in his “go to” blog:

“Judge Rosenthal refers to the proceedings surrounding Sullivan v. Feldman, 2020 U.S. Dist. LEXIS 227774 (S.D. Tex. Dec. 4, 2020) as “the Bleak House of arbitration.”  The case involves, by the judge’s count, twenty-one parties spread across six different arbitrations in front of six different arbitrators.  Unless you are engaged in the litigation or enjoy figuring out the difference between a second cousin three times removed and a third cousin twice removed, do not worry about the facts of the case. Its interest lies in two issues. First, is venue selection a question of procedure or arbitrability?  After citing cases from numerous Circuits and Districts, the court holds that the factual issues related to venue should be left to the arbitrator, at least where, as here, they raise an “unclear procedural question.”  However, he distinguishes cases where the party demanding arbitration or the arbitrators themselves have chosen “a location clearly foreclosed by the parties’ forum selection clause,” which situations may need judicial intervention.  Second, the opinion briefly addresses the issue raised in the age of COVID shutdowns and remote arbitrations – where is a virtual proceeding being “held.”  While the discussion here is dictum and cites to only two authorities, the potential issue reminds arbitrators holding virtual proceedings to designate a venue, as this may become relevant in determining where vacatur or confirmation hearings may be held and what court gets involved if judicial assistance is needed during the proceedings. Likewise, parties drafting arbitration clauses should consider inserting language providing that their designated venue controls, even if no one is literally in that location.”

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