ACR-GNY - Quantum Issues in the Award

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Quantum Issues in the Award

Quantum Issues in the Award

Friday, August 29, 2025 12:03 PM | Anonymous

Is Quantum Computing Closer Than Ever?! Unlikely U.S. Tariff Beneficiary!

How should arbitrators approach quantum calculations? How much should arbitrators ask of the parties and quantum experts? Should the arbitrators decide the quantum issues and write the Award based on the parties submissions and not ask for additional materials from parties or their quantum experts? Or, should the arbitrators ask for additional materials from parties or their experts if they deem such additional information relevant and material to deciding the "quantum" outcome of the case in the Award?

What are your thoughts?

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Comments

Friday, August 29, 2025 12:20 PM | Nasri H Barakat

The arbitrator and or the panel are responsible to deliver an award which includes no confusion as to the Quantum. The award should provide finality regarding the Quantum and the other aspect (s) of the dispute (s). Often times the arbitrator or the panel asks the parties to "hash out" their differences regarding the Quantum and rightfully so, Often times there are payments in the pipeline and or mechanical differences between the amounts claimed and the final amounts. Following any reconciliation of the accounts it is up to the arbitrator or the panel to make sure the parties agree the final amounts. Failing such agreement the arbitrator or the panel should intervene in order to arrive at the final Quantum and issue the award accordingly. The time for this process is always before the issuance of the award.

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Friday, August 29, 2025 12:28 PM | Hon. Alvin Zimmerman

I’m ok with the arbitrator seeking as much information as needed to be able to make an award on a quantum issue.

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Friday, August 29, 2025 12:31 PM | Steven Skulnik

Keep engaging with the experts until their considered views on all relevant issues are elicited.

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Friday, August 29, 2025 12:37 PM | Mark Bunim

The quantum issue is one of, if not the key determinations in an arbitration. The arbitrator[s] must get it right. Whatever information the Tribunal feels they need should be requested. The experts should certainly be questioned by the arbitrators until each arbitrator is satisfied that they have all the data and information to issue the award. There is also no harm in asking for supplemental submissions, if necessary.

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Friday, August 29, 2025 12:49 PM | Peter Rundle

Quantum / Damages evidence is often given short shrift by counsel, which can lead to information gaps appearing late in the process, sometimes as the award is being drafted. It can be helpful to remind counsel to focus on details and not leave it to the tribunal to pull all the pieces together. So, to answer the question more directly, engage and solicit evidence on quantum so that guesswork and speculation does not infect the award. There is a line, however, between a failure to establish / prove damages and poorly presented evidence of quantum. The tribunal should not rescue an unproven case of damages. To quote that famous jurist, "It depends."

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Friday, August 29, 2025 12:59 PM | Mark Kantor

The parties care deeply about the monetary award. Yet, both sides often take exaggerated positions regarding the proposed amount of an award, the claimant seeking a very high sum (often supported by expert evidence) and the respondent seeking a very low or zero sum (often supported by expert evidence). If the arbitrators are limited to choosing between the two, the resulting award will almost always be seriously incorrect in such circumstances. Arbitrators should therefore certainly ask intelligent questions in order to accumulate evidence on the record to reach a principled decision.

My practice, when I am chair, sole arbitrator or can persuade my tribunal colleagues, and the nature of the dispute justifies the cost, is to include a provision of this type in Order No. 1 when quantum expert evidence is expected:

** Process. Promptly after submission of their initial expert opinions, the parties’ experts shall confer with one another, without the presence of counsel for the parties, in an attempt to resolve any material disagreements. The expert conference shall be without prejudice, and no party may seek to impeach an expert or otherwise utilize information from the expert conference in this or any other proceeding on the basis of information from the expert conference. Expert opinions shall include all relevant and material non-privileged information with respect to the subject matter of the report to the extent reasonable for such a report, whether supportive of or adverse to the expert’s material conclusions, and shall be accompanied by all proposed exhibits related to the experts’ testimony (but without unnecessary duplication of information or exhibits submitted in connection with a prior expert opinion). Each expert shall disclose in reasonable detail, and certify in writing that to the extent of his or her professional competence she or he has professionally assessed the reasonableness of, any assumptions provided by a party or counsel on which the expert relies in his or her expert opinions. The experts for each subject matter shall jointly prepare and submit to the Tribunal promptly after exchange of their final expert reports a list of all material items of agreement and disagreement between the experts, and references to the parts of the respective expert opinions dealing with each item of disagreement.

Acknowledgments. Each expert opinion by an expert shall acknowledge in writing that the expert will be bound in these proceedings by the following ethics responsibilities [These are based on the ethics principles of the American Society of Appraisers and similar professional organizations].

The expert shall not in the writing of an expert opinion or in giving testimony in this proceeding suppress any facts, data, or opinions which are adverse to the case his or her client is trying to establish, or overemphasize any facts, data, or opinions which are favorable to his or her client’s case, or in any other particulars become an advocate. It is the expert’s obligation to present the information in his or her expert opinion without bias, regardless of the effect of such unbiased presentation on his or her client’s case.**

If the merits and damages aspects of a dispute are dealt with in one common phase of the arbitration, it can sometimes be a challenge for the arbitrators to resolve those differences into a single quantum sum without re-running the computations. Some arbitrations bifurcate into two phases to resolve differences among competing quantum valuations (especially forward-looking projections such as discounted case flow forecasts). Bifurcation, it must be noted, can be very expensive and create significant delays. Importantly, in the first phase of a bifurcated proceeding, arbitrators can resolve jurisdictional issues, liability issues, the valuation date, and a number of the damages issues not involving extensive quantification by the arbitrators (e.g., the applicable principle for damages, the valuation date, whether events after the valuation date are to be considered, whether the valuation is reasonably certain or too speculative, causation, forseeability of damages, mitigation, unjust enrichment or double-counting, the discount rate (if applicable in the dispute), country risk (if applicable in the dispute), inflation rate, the method for determining the Terminal Value (if applicable when a DCF is used), the growth rate (if applicable in the dispute), principles of pre-award and post-award interest, choice of currency issues in international disputes, taxation issues, and whether sensitivity scenarios should be used). Competing experts can then present updated valuations in the second phase of the arbitration based on the Tribunal’s first phase rulings.

Instructions to parties for the second phase of the arbitration, including revised quantum reports and models based on the Tribunal’s resolution of the foregoing phase one items can include, among other matters, (a) a list of material quantum differences remaining even after the phase one determinations and (b) financial models (if used in the dispute) that have built-in alternatives (toggles) allowing the arbitrators to see the impact of choices to resolve remaining material differences between competing financial models. The Tribunal must also decide if additional evidence is appropriate for the second arbitration phase or if the revised quantum reports and
models are limited to the evidence in the record at the conclusion of the first phase. Obviously, limiting the second phase submissions to the evidentiary record from the first phase significantly shortens the second phase and reduces costs and expenses.

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- Friday, August 29, 2025 1:41 PM | Terri Lastovka
  
  Mark's response is spot on. As a financial expert myself, I wish tribunals would take the approach Mark outlined.
  
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Friday, August 29, 2025 1:52 PM | Lee Hornberger

Mahir D Elder, MD, PC v Deborah Gordon, PLC, 343 Mich App 388 (2022). Plaintiff sued former employer for wrongful termination and received large monetary award from arbitration proceeding. Award stated plaintiff should receive compensation as calculated by Chart B, but award then listed lower monetary amount in Chart A. Plaintiff’s attorney confirmed award. Prior case was then dismissed. When plaintiff sued his attorney for legal malpractice, Circuit Court decided to send question to arbitrator to determine whether arbitrator meant to award plaintiff amount stated in award. Plaintiff appealed. COA reversed. “After you have reviewed the materials, please confirm whether you intended to award Dr. Elder $5,516,907 in back pay, front pay and exemplary damages, or some other amount?” MCL 691.1694(4) precludes “any statement, conduct, decision, or ruling occurring during the arbitration proceeding.” This prohibits compelling arbitrators from giving evidence as a witness regarding statements, conduct, decisions, or rulings that it may have made during arbitration proceeding. Lesson: Read award carefully.
https://www.courts.michigan.gov/49d9d5/siteassets/case-documents/uploads/opinions/final/coa/20231221_c359225(48)_rptr_128o-359225-asv.pdf

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Friday, August 29, 2025 1:55 PM | David Reif, FCIArb

There are two different kinds of questions that I might have and a different answer to the question as to each.
Scenario 1. The parties have presented the expert testimony, and there is something I do not understand about that specific testimony. For example, why did the Expert choose a discount rate of X percent? I think that is an appropriate question; I am trying to better understand the material which counsel has chosen to present.
Scenario 2. In preparing their opinions, neither expert considered the possibility of a shortage of one of the inputs into the product. Assume that I think that is an important omission and, if I were an advocate, I would have cross-examined on the issue. Should I ask the experts why they didn't consider that? No. My job is to decide the case on the basis of the information presented, not to conduct an independent inquiry. Question 2 would take me into the latter realm.

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Friday, August 29, 2025 2:43 PM | Sheila Carpenter

This is an area that deserves more attention from counsel than it often gets. I find it helpful to ask counsel to address any issues before the record closes, in closing argument and/or post-hearing briefs.

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Friday, August 29, 2025 4:43 PM | Anonymous

I’m fascinated by this topic and have already read about a half-dozen books on the subject of quantum computing (and the underlying mechanics) and have actually started practicing – as a hobby only – quantum coding using IBM’s Qiskit.

I think it’s a great idea to get out in front of this and applaud you and the AAA in taking on an issue such as this early on.

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Saturday, August 30, 2025 4:32 AM | Georges Affaki

It is noteworthy that none of the excellent comments so far have considered the possibility of the tribunal appointing its own expert or consultant as provided in the IBA rules and in the majority of arbitration rules and laws. Experienced arbitrators know that this does not amount to an abdication of the tribunal’s decision-making role, nor to the appointment of an arbitrator bis. While tribunal-appointed experts do entail costs, they can ultimately generate significant savings by helping the tribunal navigate complex expert evidence, identify the right questions at the hearing, and ensure the accuracy of calculations in the award. This, in turn, can substantially reduce the need for correction applications. Where the circumstances so warrant, tribunals should raise the prospect with the parties.

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