To Arbitrate or Not To Arbitrate

Real Estate, Land Use & Construction Law

To Arbitrate or Not To Arbitrate

May 10, 2010 | Real Estate, Land Use & Construction Law

Scales of justiceI regularly face the question of whether arbitration is “good or bad”, “better than court”, or best for a particular client. I always give that most lawyerly of all answers: It depends.

Arbitration is presented as a means of streamlining disputes, cutting down expenses, and providing the parties with a more informed decision maker to boot. I have seen arbitration work just like that. I have also participated in more than one arbitration that seemingly was sidetracked by the arbitrators into examinations that neither counsel nor the parties believed was germane. I have seen the process work in a streamlined fashion with cooperative document and information exchange. I have also seen the same types of discovery sandbagging and withholding of information and documents that are way too prevalent.

Anyone considering arbitration should understand that their dispute will almost certainly be permanently decided at the end of the arbitration. The right of appeal and legal challenge is so limited as to be almost completely non-existent in most disputes. In some states, this might be a huge change. In Virginia this is less of a factor due it its limited appellate access in civil construction cases.

The question in my mind often comes down to types of disputes, potential for motions practice, and cost/benefit. I tend to like arbitration in smaller, less complex matters where streamlined discovery makes sense. Bigger cases with more issues translate to a far greater potential for the high-jacked “frolic and detour” arbitration that breaks down into multiple arbitration hearings. Legally complex matters often present excellent contract arguments, legal defenses (such as statute of limitations), and evidentiary arguments. Be prepared for such legal maneuvers to mean little in arbitration due to its nature. For this reason, I often prefer the courtroom for more complex cases.

If you follow this pattern, make sure to avoid having three arbitrator panels hear small cases as that breaks the bank. For budget reasons, you may also want to consider alternatives to AAA for arbitration as their filing fees have gotten extremely expensive, especially when the arbitrator’s fees are added in as well.


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