A Practical Look at Arbitration as a Growing Trend

September 27, 2019  |  Joan M. Quade

In the 30-some years that I have been a lawyer, there have been many changes in the way companies do business and in how disputes are resolved. In that same period, however, I have not seen the same depth and breadth of changes in the court system. I have been a litigator representing businesses and individuals in all kinds of cases. I have been an advocate for clients in jury trials both short and long, court trials, mediations and arbitrations. I am also now a mediator and an arbitrator.
Companies are now doing business at the speed of email and have global and international goals and inspirations. They have 30, 60 and 90-day business plans. When a company has a dispute, their lawyer must tell them that it will take about a year to get to trial to resolve that dispute, and longer if you are in federal court. It is not surprising that clients find this timetable and its inherit price tag unacceptable. During that year they need representation through a legal process that has been in place in the court system for longer than I have been an attorney. The process involves exchanging discovery documents, responding to Interrogatories, taking and defending depositions, preparing and arguing motions and preparations for trial. It is expensive, and is a distraction for businesses from doing their business.

If the dispute is between individuals or small business, or involves a small amount of money, using the court system for dispute resolution may not be an option at all because of the expense and time. Many disputes are too small to justify the expense. And many disputes, even if involving large sums of money, need a faster resolution so that the business can get back to business and the individual can get back to normalcy and move on. The court system will always have its place, but in many cases, arbitration is the perfect alternative. It is faster and less expensive. You can choose arbitration in any type of case. There is no case that is too complex or too small or too large for arbitration to be an excellent alternative to the court system. In fact, it took me some years of experience to learn this, but arbitration is a better choice for many disputes. I have represented many different individuals, public entities and private companies in arbitration for years and 3 years ago I actually became an arbitrator for the American Arbitration Association, because I have seen firsthand how it has changed dispute resolution.

The arbitration rules set up by the American Arbitration Association are fair and thorough. There can be claims and counterclaims just as in court, but deadlines are most often shorter and the entire process is monitored to ensure timelines are not dragged out needlessly. The rules provide for a full exchange of important information but yet there are many times limits upon discovery, thereby controlling the urges of advocates and litigants to drive up the cost of the dispute, for no other reason than to try to outspend or harm the other side financially through the process. There is no one size fits all as in the court system. Arbitrations are tailor made to the size of the case and the need for discovery, timing and cost. Arbitrators are armed with the ability to control the process and to ensure that it moves forward fairly and efficiently, no matter the complexity of the issues or amount in controversy. The rules provide for motions and full evidentiary hearings.

The arbitration hearings are conducted under rules similar to the rules of civil procedure, but may be a little less formal than the courtroom. Opening statements can be given, witnesses are given the oath to tell the truth and there is direct and cross-examination. Evidence is entered and objections are made. The Claimant presents their case first and then the Respondent. Rebuttal may be allowed and then closing statements may be made orally or in writing. There generally is no court reporter. The record is closed after the final closing arguments or briefs and the arbitrator then renders a decision usually within 2 weeks to 30 days, depending upon the case type. There are special rules for some cases like Construction cases and Consumer cases. The entire process most often takes only months especially on the small cases, not a year or more, and the cost most often is not even comparable to a long drawn out court battle. Businesses and individuals can go to arbitration by agreement and agree to do so under the American Arbitration Association rules, or an arbitration clause can be written into contracts so that disputes must be resolved through arbitration.

Litigation through the court system can take well over a year and cost hundreds of thousands of dollars, sometimes more. On small cases, for example, involving $50,000 or less, it is almost impossible not to expend that much in attorney’s fees through discovery, depositions and trial. It makes no sense to spend more on the dispute than is at issue, yet that happens in legal cases sometimes. In arbitration I have seen the expenditure in attorney’s fees of as little as $5,000, and there can be claims made in arbitration for the non-prevailing party to pay the fees, or there can be an award by the arbitrator of the arbitration filing fees and arbitrator fees.
The AAA trains the arbitrator well for disputes and is very selective on who is allowed on the roster. Parties can choose by agreement an arbitrator that best suits their case, or they can go through an AAA arbitration selection process. The vetting process for arbitrators is thorough to ensure no conflicts and a fair and impartial arbitrator. Arbitrators provide detailed resumes so that if litigants are looking for particular backgrounds and skill sets for a particular case, a wise arbitrator selection can be made.

Arbitration is the perfect option for resolution of the smaller cases because of fewer expenses, and it is the perfect option on larger, even multiparty, cases because of the streamlined process and control on discovery, yet allowing for the exchange of the needed information. It is a fair, efficient, lower cost and quicker dispute resolution process for companies or individuals. Companies can get back to business faster and individuals can move on from the conflict. Any experienced attorney will tell you that the outcome in a courtroom from a judge or jury is very unpredictable. Therefore, there is no way to know if the outcome would be any different in a courtroom than by arbitration, but that is because even if you take the same case to court in front of different judges or different juries multiple times, it may come out differently each time depending upon the particular judge or jury, or arbitrator for that matter. What is very predictable with the court system is that the litigants will more often spend more money and it will take longer in the court system versus the arbitration process through AAA.

Some attorneys may not recommend the arbitration system for disputes because the court system is what they are more comfortable with and have used for many years. Some lawyers may want the ability through the yearly discovery process to leave no stone unturned, but whether the expense and time of such an approach significantly changes the outcome is very questionable. I have seen cases over the years where over 10,000 documents, and sometimes more, were exchanged but the reality is that only a small few were relevant to the case and used in trial. As an experienced litigator, I can tell you that the more lengthy court process would generate more attorney’s fees for the law firm, but it may not be in the best interests of the client. As lawyers, most of us really do care about what is in the best interests of our clients. We want repeat business and to have a good reputation. Many of our clients have been with us for years and we want an efficient and cost effective resolution process as much as they do.
The court system has its place, but arbitration seems to be more in line with what businesses and individuals now want and need. A more streamlined dispute resolution system that does not break the bank. Is the court system outmoded? Some would say yes. It is trying to change with the times, but change is slow. I think it still has its place, but arbitration seems to be what answers a need for a more up-to-date, less expensive, more efficient way to get past a dispute without taking over the company’s or individual’s time and money through a year-long process.
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