Arbitration is a form of adjudication in which the neutral decision-maker (the arbitrator) is not a judge or an official of an administrative agency. Arbitration is a private proceeding based on the parties’ agreement to arbitrate. Unlike negotiation or mediation where the disputing parties determine the outcome, in arbitration, the arbitrator decides the parties’ rights based on evidence or other submissions at a hearing. In this way, an arbitration proceeding is much more like litigation than negotiation or mediation. Arbitration is, however, less formal than litigation in that the parties may explicitly agree that the arbitration will not be conducted according to the same rules of law and procedure as a civil trial procedure.
In general, there are three types of arbitration and each has its own legal basis:
· The first type is commercial arbitrations between two or more business entities/businesses and consumers or employers and non-unionized employees. These arbitrations are governed by the Federal Arbitration Act (FAA), 9 U.S.C. §1, et seq. (2000), and related state arbitration laws.
· The second type is arbitrations between employers and unions, which are governed by §301 of the National Labor Relations (Taft-Hartley) Act, 29 U.S.C. §185 (2000).
· The third type is international arbitrations which are governed primarily by the 1958 U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards as adopted by Congress in 9 U.S.C. §201, et seq. (2000).
Private arbitrations are established by contract and the parties may shape the contours of their agreement to arbitrate to meet their specific needs. Typically, parties either agree in advance that particular designated categories of disputes will be arbitrated or they enter into an ad hoc agreement to arbitrate after a dispute has arisen. Most private arbitration agreements allow the parties to select the arbitrator jointly. The written arbitration agreement will provide the substantive standards that the arbitrator will use in making a decision (Award).
There are several factors you should consider when deciding whether to incorporate a mandatory arbitration clause into a contract or individually seek an arbitration hearing.
ARBITRATION versus LITIGATION:
Often an arbitration proceeding may be concluded or resolved more quickly than a dispute filed in court. In some judicial districts it is not unusual for a complex civil dispute to languish in court for months or years. This is, in part, because of the hesitancy of state legislatures to spend scarce state resources to create more judges and courtrooms to deal with an increasing volume of civil trials. The procedurally faster arbitration process hastens finality and enables litigants to reduce the large cost of expenses and legal fees in litigating in the courtroom.
Important cost-savings in arbitration are often the result of stricter information gathering (discovery) rules and the likelihood that an arbitrator will be less inclined than a judge to entertain expensive discovery or motion practice. If there is a concern that the cost of discovery or motion practice in a civil proceeding may outstrip the value of the case, arbitration may be a better alternative.
In arbitration, there is no public hearing and, thus, no public record. The parties may agree in their agreement to arbitrate that the dispute will be held in confidence. This is an important advantage when the dispute involves commercially sensitive matters or the need to preserve relationships.
The arbitrator is required to implement the parties’ agreement; thus, the arbitrator may not always be constrained by statute or case law, or be governed by state or federal rules of evidence or procedure. The parties may expressly agree in their agreement to arbitrate that they will abide by the arbitrator’s interpretation of a statute or case law. Generally, arbitrators have much greater flexibility to consider whether evidence is relevant and then reach an Award that is perceived to be equitable, even if it is not precisely consistent with the law. The structure of the agreement to arbitrate may, therefore, avoid the risk of the potential of an extraordinarily high jury award and minimize the exposure to punitive damages.
The ability of the parties to select arbitrators who have specific subject matter expertise or arbitrator process expertise may be a significant value to the parties. If the parties desire to seek an arbitrator with substantial experience and expertise in a substantive area of the law such as employment discrimination, construction, insurance, labor relations and personal injury and the like, the parties may receive a substantial time and expense value with arbitration.
The arbitration process may be specifically designed to be less adversarial than litigation. When there is an ongoing business relationship that the parties may wish to preserve, the arbitration process may be more conducive to preserving the relationship. In general, the arbitration process tends to be less formal and more collegial than traditional courtroom litigation.
Generally, the arbitrator’s decision is not subject to appeal. The finality of the arbitration award and the fact that there normally is no right to appeal to the courts to change the award may sharply reduce attorneys’ fees and legal expenses.
ADR LLC attorneys Larry Rute, Patrick Nichols, Patrick Brazil, Tim Brazil, Michelle Parry, Arthur Chaykin, and business executive, Michelle Minor, provide arbitration services. ADR LLC has arbitrated cases involving the following disputes:
· Labor Relations
· Personal Injury
· Real Estate
· Trademark and Patents
For a copy of our arbitration submission agreement, Click Here.
To review ADR LLC arbitration rules please contact our Case Manager, Dawn Dawson