I’m here today to talk about arbitration, what it is and how it can help you resolve some of your business disputes.

Arbitration is a form of alternative dispute resolution or ADR. When we say alternative, it means it’s an alternative to litigation. We did an earlier presentation regarding mediation, which is also a form of ADR, but is much different than arbitration. In terms of the process itself, arbitration bears some similarity to litigation. It’s an adversarial process whereby a neutral third party labeled as the arbitrator is going to make usually a binding decision for the parties.

The way it works is, the parties select an arbitrator. The arbitrator may have some preliminary conference calls and fact gathering from the parties, but ultimately a hearing is set. A hearing is scheduled for an attorney’s conference room and the arbitrator, parties and their attorneys all attend. Typically the parties are placed under oath, there’s a stenographer making a record of the proceeding, and the hearing is conducted much like a trial. There are opening statements, there’s testimony taken, direct and cross examination, and closing statements. The arbitrator usually asks some questions, will review documents that are presented to him at the hearing and beyond, and then after the hearing will make a written decision. Again that is typically binding and there are very limited appeal rights that can flow from that.

Arbitration can be a very useful process for all types of business disputes including things like breaches of contract, government contract disputes, non-compete agreement disputes, employment law claims, franchise or franchisee disputes, and other types of business disputes that you may be having. Typically what you see is an arbitration agreement that is set out in a contract that is the subject of the dispute to begin with. So the ADR clause will be placed in the contract. One thing to keep in mind if you have contracts with vendors or other entities that doesn’t contain an ADR clause, is to possibly think about including one. It can save you a lot of headache down the road if the parties up front agree to use arbitration if a dispute should arise.

Now there are a number of benefits associated with arbitration and why it truly can be a useful alternative to litigation. The first benefit is that it can save the parties an enormous amount of time and money if done properly. Typically if you go to court and file a complaint, by the time a trial rolls around, a year and a half or two years has gone by. After a verdict or a judgment is entered, somebody may appeal it and yet another year or year and a half goes by. In arbitration, you can set a hearing very quickly, and typically maybe two weeks or four weeks after the hearing a decision is made. And again, there are very limited appeal rights. So it can save you a considerable amount of time and money as compared to protracted litigation.

The second benefit associated with arbitration is that it can provide you closure. Mediation is a very valuable tool, but it doesn’t ensure that the dispute is going to end. Arbitration it does. The dispute is over once the arbitrator makes a decision.

The third benefit is that it’s confidential. Again, if you litigate, all of the documents, all of the testimony, all of the arguments made are part of the public record. Arbitration, it’s done in a private conference room with an award just issued to the parties, not placed in the public record.

And the fourth benefit associated with arbitration is that the parties actually get to pick their decision maker. If you go to court and file a lawsuit, you’re gonna be assigned a judge or randomly assigned a jury. Arbitration, you get to pick the person you want to make the decision. So it gives and affords the parties the right to select somebody whom they know to be knowledgeable in that area of the law, somebody who’s respected for making fair impartial decisions. So that is a huge benefit as opposed to litigation.

Arbitration isn’t perfect for every type of dispute, but for many of the business disputes you may be encountering, arbitration does provide a very useful and powerful tool to resolve your disputes when compared to protracted litigation.

Thank you very much. Again this was Erik Johnson presenting on arbitration. You have any questions, please feel free to email me at Erik@CreativeDisputeResolutions.com, or you can visit our website www.CreativeDisputeResolutions.com for more information. Or send an email at Podcast@LegalRiver.com. Thank you.

Thanks for listening to this edition of the Legal River podcast. If you have a business law question you would like to see answered in a podcast, please email us at Podcast@LegalRiver.com. To reiterate, all views expressed in this presentation are intended only as a general discussion of the issues and should not be regarded as legal advice. For additional details or advice about a specific situation, please consult legal counsel directly.