I’ll See You In Court!

No matter how good you or your company is, occasionally jobs just go “South.”  You may have an unreasonable owner or insurance adjuster; it may be because of industry shortages causing a delay.  Regardless, you have tried to negotiate a settlement, but the other side remains unreasonably entrenched.  You know you will win big time in litigation.  So, you puff up your chest, put on that “tough guy” look and emphatically state: “I’ll see you in Court!”

But is court the best venue to resolve, favorably, your dispute?  Perhaps you should have yelled: “I’ll see you in arbitration!”  How do you know which is best for you?  The goal of this article is to help you decide which option is best suited for you.  Once you decide, make sure that your Work Authorization (the Contract) properly addresses your choice.

Listed below are the significant differences between traditional court litigation and arbitration.  I have attempted to list the considerations in order of significance.  As you go throughthe list, make notes on the margin as to whether your disputes would be better resolved under the traditional court system or arbitration. 

1. No Appeal. Arbitration lacks an appellate safeguard.  Unless you can demonstrate bribery or that your arbitrator was drunk during the proceedings, an arbitration decision is final.  In other words, the fact finder makes the final decision.  Which is better?  Well, if you are the kind of person that naturally irritates people, but generally has a winning argument, you may need to preserve your appellate appeal.  Appeals can also forestall the entry of an unfavorable ruling.  The appellate process can also allow you the opportunity to financially drain your opponent; appeals are expensive.  In contrast, no appeal means your case is decided quickly, promptly, and no legal fees for the appeals.

 2. Privacy. Arbitration proceedings are held in private; they are not open to the public. That fact that an arbitration has been filed or the arbitration docket is not open to the public.  An arbitration award, if promptly paid, remains out of the public domain.  So, if you are sued under consumer statutes, such as unfair business trade practices, those claims would remain out of the public domain, even if you receive an adverse decision.

3. Expenses. Historically, arbitration has had a tradition of being a cost effective method of resolving a dispute.  This is not as true these days.  In arbitration, the parties must pay the arbitrator’s fee.  Under the court system, the public taxes pay the judge’s salary.  So, if you have 3 arbitrators, each charging $400 an hour, the costs can rack up considerably.  While not required, each side still generally hires attorneys, so you still have that expense.  In a major case, your only savings may be from the avoidance of an appeal and the added preparation needed for a jury trial as opposed to a bench hearing before the arbitrator.  Keep in mind though, if you deal mostly with smaller claims, in arbitration you are not required to hire an attorney and can represent yourself.

4. Evidentiary Proof. Under the traditional court system, the attorneys often spend considerable time and expense merely getting the evidence before the court.  Attorneys must demonstrate a chain of custody and have the offering party present the document.  In contrast, arbitration generally allows any relevant document admitted without any testimony, and will quite often permit the use of affidavits or depositions on some of the smaller collateral issues.  So, if you are not a good record keeper, arbitration can make proving your case a lot easier.

5. Specialized Fact Finders. In court you take the judge as you find him/her.  Generally, judges are attorneys that come from all different walks of the legal system:  criminal, domestic, personal injury, etc.  In arbitration, you generally have the ability to select someone specialized in your field.  For engineers, this means the arbitrator is not necessarily an attorney, but could be a peer professional engineer.  Thus, if you feel your disputes will involve primarily technical issues, arbitration allows you the ability to have a fact finder versed in the specialized field.

6. Scheduling.  Under the court system, the parties are at the mercy of the court’s schedule.  Generally, a court places 10 to 20 matters on a trial docket, and all parties must be on standby to commence their trial with only 24 hours notice.  Under arbitration, your final hearing date will be mutually scheduled and you will know the specific date well in advance.  For those control freaks, arbitration may be the way to go.

7. Promptness.  As with expenses, arbitration in the past has traditionally been speedier than the court system.  This promptness has somewhat subsided to allow the parties additional discovery and filing of motions, but it still is generally faster getting to a final hearing in arbitration than a court trial.  In conjunction with the finality of an arbitration award, arbitration is still substantially quicker.  So, if getting to the money fast is important, consider arbitration.

Alright, we have the significant differences listed above.  Your task is to now decide which one suits best the resolution of your disputes.  Sit down and conjure up in your mind your past disputes that have either gone to litigation or were on the brink of going to litigation.  What kind of disputes are these?  How do the above factors play into these disputes?  If you have a large firm, conducting large projects, the traditional court system probably suits you better.  If you have a small company, or are a sole practitioner, such as a professional engineer, arbitration likely weighs in your favor.  Regardless, be strategic and decisive about your company’s future.  Make a decision intelligently.  Use the known data that you have and compare it with the issues listed above.  While we do not know what the future holds, we can still plan now to better prepare for the future.

If you find that arbitration is best for you, you must include in your work authorization.  Unless both parties agree to arbitration, you cannot force arbitration.  I have found that once a dispute arises, the parties do not agree on anything, including even when to have a restroom break.  The time to get agreement on arbitration is at the time of signing the contract.  Arbitration clauses need not be elaborate or complex.  In fact, less is better.  Please consult your attorney in your specific jurisdiction as to the required wording.  What you want to see is wording along the lines of submitting to arbitration “any claim or dispute arising out of the work or this contract.”  The clause should also refer the parties to their local arbitration board or to the American Arbitration Association to follow their prescribed procedures.

So, remember, when negotiations fail, puff up your chest, put on your tough guy look and yell at the opposing side, “I’ll see you in ___________!”  (Fill in the blank: arbitration or court)