How Do You Resolve Conflict When You Can't Agree? Consider Arbitration.
Arbitration in the News
George Clooney lost his fight for screenplay credit for the movie Leatherheads in a 2 to 1 Writers Guild of America arbitration ruling against him, even though he wrote, directed, produced and starred in the movie.
Jennifer Lopez was awarded $545,000 by a court-ordered arbitrator, and her ex-first husband ordered to pay, after he attempted, but failed, to publish a tell all book dissing her.
During the Olympics, diver Laura Wilkinson, and her diving partner Jessica Livingston, lost an arbitration hearing to overturn USA Diving's decision not to have the pair compete in synchronized platform diving at the Beijing Olympics.
Bobby Brown, who owes his divorce lawyers over $90,000 in unpaid fees, has been ordered to show up for arbitration proceedings pursuant to an arbitration clause in his legal representation agreement.
What is Arbitration?
Essentially arbitration is a form of conflict resolution in which you agree to submit your dispute to a neutral, independent third party, an arbitrator, for resolution. The dispute is decided through a hearing conducted by one arbitrator or a tribunal of arbitrators (rather than a judge and jury) - almost always an odd number like 1 or 3. Evidence and arguments are presented at the hearing to the arbitrator who subsequently hands down a decision. You hand over the power to decide the conflict to the arbitrator whose decision is generally as final and binding as a court decision.
While less formal than court proceedings, arbitration hearings are conducted according to specific rules of procedure which include both state court rules of procedure as well as those set forth by the organization administering the arbitration, such as the American Arbitration Association or the National Arbitration Forum. Often contracts you and a company, business or another person sign include an Arbitration Clause requiring that disputes that arise be submitted to arbitration rather than litigated. Court-annexed arbitration occurs when a lawsuit is filed but the court requires you to first submit to arbitration before allowing a court trial. However, even if not mandated by court or contract you can always agree with the other side to submit a dispute to arbitration.
Why Consider Arbitration
Arbitration is usually quicker, shorter, and less expensive than litigation. If you have a deadline by which you need a decision, you can pretty much ensure a decision by an arbitrator within your deadline. Thus, arbitration is considered more efficient than litigation.
Arbitration allows you to choose the decision maker rather than having to accept whatever judge and/or jury is assigned to hear your case. You can choose someone with good judgment, who is an expert on the subject matter.
Arbitration is convenient. Hearings are arranged at times and places agreeable to the both sides and the arbitrator and witnesses.
Arbitration allows you to choose your forum. You can avoid a forum, or court, that is a problem either because it is overcrowded or has bad law on cases that yours.
Arbitration ensures a result. Arbitration always ends in a definitive outcome which prevents the dispute from dragging on.
Arbitration is final. Generally there is no right of appeal from an arbitrated decision.
Arbitration is flexible. The procedures can be steamlined, simplified or segmented depending upon the circumstances.
Arbitration is private. Unlike a courtroom, arbitration hearings are confidential, private meeting which the public and the media are not allowed to attend.
Supporters of arbitration contend that because the arbitrator has the power to "do equity," (making decision based on fairness) s/he can split an award, rather than granting complete relief to one side.
Types of Arbitration
Baseball Arbitration is a form of binding arbitration in which each party picks a number s/he thinks is fair. The arbitrator is required to pick one of the figures as the award.
Commercial Arbitration is a dispute between two businesses. This is the most common kind of arbitration.
Consumer Arbitration involves disputes between you a supplier of goods or services.
High-Low Arbitration is a way for you to limit risk. You and the other side agree in advance to a "low" and "high." If the award is lower than the pre-set "low" the defendant will pay the agreed "low," and if the award is higher than the pre-set "high" the plaintiff will accept the agreed "high." If the award is in between the "low" and "high" the arbitrator's amount will be accepted.
Labor Arbitration involves employment related disputes.
Mandated Arbitration is that required by court or law to resolve pending court cases. It usually applies to cases in which the amount in dispute is less than $50,000.
Night Baseball Arbitration is similar to baseball arbitration in that each side picks a number to represent the value of their case. However, the number is not revealed to the arbitrator who assigns his or her own value. The side whose number is closest to the arbitrator's value wins.
Non-Binding Arbitration follows the same procedure as binding arbitration except that the award issued after the hearing is not binding but rather advisory and the parties do not forfeit their right to a jury trial.
Beginning the Arbitration. This will either be triggered by an Arbitration Clause in a contract, or a request by one side for arbitration.
Appointing an Arbitrator. Arbitrators are appointed either: (1) By the disputing parties; (2) By existing members i.e. each side appoints one arbitrator and those 2 appoint a 3rd; or (3) By an outside organization or institution agreeable to the parties.
Preliminary Meeting. During which the arbitrator meets with both sides and their lawyers to discuss the process and timetable.
Statement of Claim and Response. A formal document in which the plaintiff sets forth a summary of the dispute and the relief sought. The defendant then submits a response admitting or denying the claims. These become the "pleadings" which identify the issues to be resolved.
Discovery and Inspection. These are legal proceedings to identify relevant documents for review by the arbitrator.
Interchange of Evidence. Written evidence is exchange and provided to the arbitrator for review before the hearing.
Hearing. Each side presents witnesses and arguments supporting their view. The arbitrator can ask for clarification of any information.
Legal Submissions. Briefs in which the lawyers provide summaries of the evidence and applicable law.
Award. A written decision summarizing the proceedings and the arbitrator's reasons for his/her decision.
Why Not Consider Arbitration
Attorney. Arbitration is a legal proceeding. You cannot do it for yourself and will need to hire a lawyer. You lose your ability to participate.
Cost. One or both sides pay the arbitrator's fees which generally range from $150 per hour to $600 per hour depending on the amount in dispute, type of dispute, geographic location, and subject matter expertise of the arbitrator. For disputes where claims range up to $100,000 the minimum fee for one arbitrator is $2000 but the maximum can be up to 10% of the claim. The court system provides a decision maker for free.
Lack of Creativity. Arbitration lacks the creativity and versatility of mediation.
Lack of Control Over the Outcome. This may be the biggest drawback because someone else makes the decision. However, for matters that you can't agree on this may be the only option.
Time. Many attorneys believe that arbitration moves as slowly as ordinary litigation.
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