We’ve discussed the ins and outs of arbitration at length previously. I’ve spent the last few years in a number of arbitration proceedings so in no particular order here are my recent thoughts on the process:
1. Speed. From start to finish there is no faster means to an end than arbitration. I always tell folks it is hard to go to trial, everything is stacked against it. In most cases you go once you are the oldest case meaning you are looking at 2 years before a trial. That means lots of starts and stops and fees. In the case of an arbitration, the arbitrator sets the hearing date and you go. Under AAA rules the arbitrator has to provide their ruling within 30 days from the close of evidence.
2. No Appeal. Well, that’s not exactly true. There is an appeal but it is next to impossible to flip an arbitration ruling these days. AAA is creating an appeal process but at this point you are stuck with the ruling of the arbitrator or arbitrators.
3. Cost? It can be cheaper but it also can be expensive. Remember, the parties bear the cost of paying the arbitrator. Along with that there are attorneys’ fees and other costs parties have to deal with.
4. Motions to Dismiss/Summary Judgments. Depending on your perspective this can be good and bad. In most cases you won’t get to use these devices to attack the claims of a plaintiff meaning it is very difficult to get rid of claims that don’t have merit.
Regardless on where you stand on the arbitration debate, it is critical that at the time of negotiation, both sides need think long and hard about how they want their arbitrations to proceed. More often than not that type of consideration doesn’t take place until after your in an arbitration wondering why the clause doesn’t address certain items. So what should folks be considering? A few thoughts:
- How many arbitrators and how are they selected? I’ve seen 1 or 3 picked from a roster of neutrals provided by the agency putting on the arbitration. It’s always a little risky to have just one decision maker but it’s also cheaper.
- How much discovery? If you limit depositions or discovery requests it will save money, but the chance of being ambushed at the hearing also increases.
- Do you want to limit the length of the hearing?
- What law applies (Texas or some other state?) and where will the hearing take place?
- Is there a loser pay provision? Can you get attorneys’ fees?
- What agency (if you want to use an agency) do you want to use to administer the process – JAMS or AAA?
A clause can be as specific or general as the circumstances dictate, but there are a lot of things to think about. If the company is frequently in these types of dispute spend some time on these issues.
