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Report of the conference on arbitration under local rule, held at the Fed- Page eral Judicial Center, May 24, 1978---

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Correspondence between Dennis DeConcini, chairman, Subcommittee
on Improvements to Judicial Machinery and Griffin B. Bell, Attorney
General of the United States, June 19, 1978 and June 28, 1978__
Letter of July 11, 1978, from Steven L. Liebo, assistant research director,
Defense Research Institute, Inc., accompanied by a statement sub-
mitted by the Defense Research Institute_
Statement of the American Insurance Association Fidelity and Surety
Committee. -

Report submitted by the U.S. District Court for the Eastern District
of Pennsylvania____

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THE COURT-ANNEXED ARBITRATION ACT OF 1978

FRIDAY, APRIL 14, 1978

U.S. SENATE,

SUBCOMMITTEE ON IMPROVEMENTS IN

JUDICIAL MACHINERY OF THE
COMMITTEE ON THE JUDICIARY,

Washington, D.C.

The subcommittee met, pursuant to notice, at 9:10 a.m., in room 2228, Dirksen Senate Office Building, Senator Dennis DeConcini (chairman of the subcommittee) presiding.

Staff present: Robert E. Feidler, counsel; Michael J. Altier, deputy counsel; Kathryn M. Coulter, chief clerk; Pamela Phillips, assistant chief clerk; Rosalie Cameron, professional staff member; and Karen Kennedy, professional staff member.

Senator DECONCINI. Good morning. The Subcommittee on Improvements in Judicial Machinery will come to order.

Today we will hold the first of three hearings on S. 2253, a legislative proposal which would establish a compulsory, nonbinding arbitration program for the district courts. Under the proposal, specified categories of civil actions would be referred to arbitration with the right to a full district court trial de novo preserved.

Compulsory, nonbinding arbitration, similar to that proposed under the bill, has been in use in several States. Ohio, Pennsylvania, New York, and California, are examples which have had positive results with compulsory nonbinding arbitration for relatively small claims. However, it is recognized that in adopting a Federal arbitration plan, Congress must proceed cautiously and address itself to the unique concerns of the Federal courts.

The bill sets forth procedures for compulsory, nonbinding arbitration. Under the proposal, five to eight districts shall be chosen by the Chief Justice to try compulsory, nonbinding arbitration on an experimental basis. Any district may also adopt this arbitration procedures on its own. This combination of voluntary use and the control group of five to eight districts is warranted in order to evaluate the advantages and disadvantages of its use in the Federal court system.

Under the bill, all cases of specified types filed with each district court adopting the scheme would be referred to arbitration soon after the pleadings are closed. In addition, any matter to which the parties consent to arbitrate would also be referred to arbitration. Cases will be referred to arbitration as soon as possible after the

twentieth day following the close of pleadings, except when motions for summary relief are made or discovery is initiated during the 20-day period. Referral to arbitration must be made within 120 days after the closing of the pleadings.

Upon arbitration referral, the parties have 7 days to select an arbitrator, or panel of arbitrators. If they do not, a panel of three arbitrators will be selected from a list maintained by the district court. Those on the list would be members of the bar of the court for at least 5 years. Further, they are to be certified for a 4-year term. An arbitration hearing in a case would begin within 30 days after the action was referred to arbitration. With the Federal Rules of Evidence as a nonbinding guide, a hearing is held and witnesses and documents would be subpoenaed. Privileged material cannot be introduced during an arbitration procedure. The relaxing of the Rules of Evidence would permit the admission of some hearsay evidence, particularly in the form of documents.

An arbitration award would be a judgment of the court unless a party were to demand a trial de novo within 20 days. In this situation, the case would be placed on the district court's civil docket and treated as if it were never referred to arbitration. A disincentive to demanding a trial de novo is involved in this legislation. Unless a party who demanded a trial de novo obtained a more favorable judgment than the arbitration award, he would be assessed the costs of the arbitration proceeding.

Today's witnesses include the Attorney General of the United States, Judge Griffin B. Bell, Mr. Robert Coulson, President of the American Arbitration Association. Their testimony will be followed by two representatives from Philadelphia: Judge James R. Cavanaugh of the Court of Common Pleas of Philadelphia, and Mr. Lewis Jay Gordon of the Philadelphia Bar Association will speak on the experience of the compulsory nonbinding arbitration program currently in operation in the State court system, with an emphasis on its operation in Philadelphia County.

This morning's hearing will conclude with testimony from Mr. Craig Spangenberg of the Association of Trial Lawyers of America and Mr. Charles Tatelbaum of the Commercial Law League of America.

I welcome you, gentlemen. I appreciate your being here today. I thank you for your time and effort on behalf of this legislation. Our first witness will be General Bell.

Before calling our first witness. I would ask that the bill be included in the record. [Material follows:]

95TH CONGRESS 1ST SESSION

S. 2253

IN THE SENATE OF THE UNITED STATES

OCTOBER 28 (legislative day, OCTOBER 21), 1977

Mr. EASTLAND introduced the following bill; which was read twice and referred to the Committee on the Judiciary

A BILL

To amend title 28 of the United States Code to encourage prompt, informal, and inexpensive resolution of civil cases by use of arbitration in United States district courts, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That the Congress finds and declares that

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(a) in many Federal judicial districts, parties to civil litigation experience lengthy delays and avoidable expense in the adjudication of their litigation; and

(b) arbitration has proven to be an effective and fair means of adjudicating many kinds of civil disputes. SEC. 2. It is the purpose of this legislation to promote the

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