By Ashley Walters*, Law Clerk
You enter into a contract and thereafter a dispute arises.
How the dispute is resolved may be part in your contract.
Most real estate contracts and more and more business
contracts provide for arbitration dispute resolution.
Here is a brief overview of the pros and cons to arbitration.
What is Arbitration:
Arbitration is the most traditional and well-known form
of alternative dispute resolution. Arbitration can arise
in two circumstances. The most common is in the contract
formation stage where the parties agree that if a dispute
arises, it will be arbitrated. The second way Arbitration
is used is by agreement by both parties after a dispute
has arisen. When parties submit a dispute to arbitration,
they are handing their decision-making power over to
an Arbitrator whose decision will be binding on the parties.
The arbitrator acts as the Judge and the jury.
The Arbitrator is generally an impartial but experienced attorney in the field of the dispute or retired Judge selected by the parties. Although the arbitration generally does not take place in a courtroom, arbitration proceedings do have similar formalities as trial.
Pros of Arbitration:
|Cost to the parties: Generally, the cost
of arbitration will be less than trial.
|Expedites resolution process: Trial is
usually not set for 12 to 18 months from litigation
inception. Arbitrations can take place in as little
as 60 days, but usually 9 to 12 months from inception.
| Parties have more control: Parties may
control the process by making certain decisions
regarding the arbitration process and procedures
in advance including selecting the arbitrator,
agreeing on the extent of discovery, experts, and
length of the arbitration hearing.
|No Jury: A jury is tough to predict and
can easily be led into making gigantic awards to
a sympathetic, but undeserving party.
|Split the difference: Arbitrators
sometimes “split the difference” when
making an award, which may not be a desirable solution.
They also may be inclined to make a small award
to a less-than-meritorious claimant.
| Generally not appealable: It is almost
impossible to appeal an arbitration award because
arbitrations are final and binding. The problem
is that an Arbitrator may not follow the law or
the facts and if the resulting award is against
you, you have no reviewing process.
There are clear advantages and disadvantages to arbitration. In my opinion the
main advantage to arbitration is control by the parties and their respective
counsel as to scope of discovery and timing of the arbitration hearing. The main
disadvantage to arbitration is the finality of the arbitration award and the
inability of appeal.
This newsletter is published for the interest of friends, clients and prospective clients of the
Law Offices of Jeffrey L. Marcus and should not be relied upon or considered as legal advice.
*Ashley Walters is a law clerk at the firm. She is a
third-year student at Pepperdine University School
of Law with an emphasis in Real Estate Transactions
and Estate Planning. She is a member of the Phi Alpha
Delta Legal Fraternity. Before joining the firm, she
clerked for a Criminal Law Firm in Virginia.