Arbitration

If you’ve tried mediation and “the magic didn’t work,” arbitration might be a good option. At the very least, it will assure you and the other party of a fast, private, and—at least as compared to court—reasonably-priced way to resolve your dispute.

In binding arbitration, a neutral third party (called the arbitrator or sometimes the arbiter) conducts a hearing between the disputants and then makes a final and legally binding decision (called an award). The arbitrator’s award is almost always enforceable in court just like a judge’s order. Unlike mediation, arbitration requires you to give up control of your dispute to the arbitrator, who takes the place of judge and jury. If you go to binding arbitration, your hearing is, in effect, your “day in court”; you will not get another. For more on the differences between mediation and arbitration, see Chapter 1, Section D.

Except in highly unusual circumstances, an arbitrator’s decision will not be overturned in court. Most state laws allow a court to overturn an arbitrator’s decision only if there was fraud involved in the hearing, the arbitrator was biased against one of the parties, or important procedures were not properly followed. A judge almost never overturns an arbitrator’s award just because the arbitrator made a bad decision or misapplied the law. These very restricted appeal rules make sense, because the whole point of arbitrating is to let disputants resolve a case once and for all without a court fight.

A full discussion of how to prepare for and present a case in arbitra­tion is beyond the scope of this book. However, to familiarize you with the process, here is a brief overview of arbitration.

1. Which Cases Are Suitable to Arbitrate

Arbitration tends to work best in cases that have a “dollars-and-cents” solution, such as insurance claims, consumer complaints, and contract disputes.

Similarly, cases involving relatively small amounts of money—less than a few thousand dollars—are often too small to arbitrate, because the arbitration fees will be too high compared to the amount you hope to gain. (However, this isn’t always true, as some community mediation centers do offer free or low-cost arbitration.)

2. Arbitration Through “Med/Arb”

When you first submitted your dispute to mediation, some mediation services may have offered an option known as “med/arb” (pronounced “meed-arb”). In med/arb, the disputants consent to mediation, with the added provision that if mediation does not produce a settlement, then the mediator (or another neutral party) can act as arbitrator and make a binding decision. Med/arb assures that, one way or the other, the dispute will be resolved: Either an agreement will be reached or a decision will be handed down.

Most mediation services that offer med/arb use a system in which the decision-making arbitrator is someone other than the person who acted as mediator. In the jargon of the dispute resolution field, this system is often called by the horrendous title “sequential med/arb.” First there is a mediation. Then, if that fails, an arbitration session is sched­uled before a different neutral. Separating the two eliminates the prob­lem of a mediator-turned-arbitrator rendering a decision based, in part, on information provided in confidence during the caucus stage of mediation.

If you submitted your case to med/arb, then at some point in the mediation—after caucuses and negotiation—the mediator might indicate that it’s just about time to move to arbitration.

EXAMPLE: Mediator to Disputants: “I have to tell you candidly that I’m not seeing a lot of progress here.

If you did not submit your case to med/arb and your mediation effort was unsuccessful, you can still ask the mediator to arbitrate a decision. (Also see Section A2, above, for a discussion of asking the mediator for a nonbinding recommendation instead.) Of course, the other side will have to agree to this plan, the mediator will have to be willing to arbitrate, and the proper agreements and disclosures will have to be signed by the parties.

But again, having your mediator become an arbitrator can raise a problem if, during mediation, either party disclosed information to the mediator that was not also shared with the other side. This would happen, for example, if the parties prepared pre-mediation memoranda for the mediator (see Chapter 5, Section D) but did not exchange them with each other, or if private caucuses were held with the mediator. In either case, you can’t be sure that the mediator-turned-arbitrator will disregard this information when making the arbitrator’s award.

If you and the other party did not sign up for med/arb but now agree that you both want the mediator to arbitrate a decision, you will have to sign an agreement to arbitrate.

For information on the various types of arbitration, see Chapter 1, Section D.

3. Where to Go for Arbitration

If you used (and were satisfied with) a mediation service that also offers arbitration, you and the other party may be able to sign an agreement to arbitrate before you leave the mediation session. But if the mediation service does not offer arbitration (many community mediation centers do not), ask the mediator or a staff member to refer you to an organiza­tion that does.

Most private dispute resolution companies that provide services to business clients also offer arbitration.

The problem with some independent arbitrators. Lawyers, retired judges, and others sometimes promote themselves as independent arbitrators who hear cases on their own, outside of an arbitration service. This is often less expensive than using a service, but there are some disadvantages as well:

• Without an administrative agency, there is no independent source of information about the background, skill level, and achievement record of the arbitrator.

• There is no buffer between the parties and the arbitrator; the parties must contact the arbitrator directly, which creates the potential for communications in which one side may improperly influence the arbitrator—even inadvertently.

• If any problems arise with the arbitration—for example, one side believes incorrect procedures were followed—there is no one to evaluate or help remedy the problem.

4. Initiating Arbitration

If you and the other party are still at the mediation session when you agree to arbitrate and the mediation service also handles arbitrations, then you can both just sign an “agreement to arbitrate” form supplied by the service. If, however, you have already left the mediation session or the mediation service can’t help you with arbitration, then one of you will need to begin the arbitration process much as you did mediation, by going to an arbitration service and completing an intake form, usually called either a “submission to arbitration” or, if your dispute is covered by a contract that includes an arbitration clause, a “demand for arbitra­tion.” Arbitration clauses are often found in contracts involving the construction industry, professional sports, sales of stocks and bonds, and employment.

No matter which form you use, it will ask you to describe the nature of your claim and the remedy you seek, including the amount of money (if any) at stake.

All arbitration services conduct their hearings in accordance with a set of rules that spell out in detail such things as the duties of the arbitrator, use of evidence, confidentiality, fees and expenses, and appeals. Study these rules and ask questions about any provisions you don’t understand.

5. Choosing an Arbitrator

Most arbitration services maintain rosters or “panels” of arbitrators who have expertise in fields like business contracts, construction, personal injuries, and employment. Staff members of the arbitration service or panel members with more general backgrounds may also be available. When you are ready to choose an arbitrator for your case, the service will send you a list with the names of half a dozen or more arbitrators, sometimes with a brief biographical sketch of each. From this list, you will usually be asked either to cross off the names of anyone you do not want to hear your case, or to rank in order of preference the names of arbitrators you would like to hear your case.

The procedures and strategies for investigating and choosing arbitra­tors from a panel are the same as for choosing a mediator. (See Chapter

3. ) These include reading the material sent by the arbitration firm, looking for someone who is knowledgeable about the subject area of the dispute, and getting referrals from friends, businesses, community leaders, lawyers, and others.

Although most arbitrations are conducted before one arbitrator, a panel of three arbitrators is sometimes used, either because an arbitra­tion clause in a contract requires it or because the parties agree to this procedure. For example, some auto insurance policies require three arbitrators to decide a case when a claim is made under the policy.

Although cases heard by three arbitrators will obviously be more expen­sive than those heard by a single arbitrator, there are reasons why you may want to consider using a panel.

6. Do You Need a Lawyer?

In mediation, you generally don’t need a lawyer, unless lots of money or property is at stake, or the underlying legal issues are complex. By comparison, it’s often wise to have a lawyer represent you in arbitration.

When you agree to participate in arbitration, you are giving up your right to go to court on this particular dispute, and the decision of the arbitrator will be binding and final, just like a decision by a judge. If you have a significant amount of money or property in dispute, or you would be severely affected by losing the case, then hiring a lawyer or a background law coach to help you prepare for arbitration (and possibly go with you to the hearing) makes more sense. Because most arbitration hearings last a day or less, your legal fees won’t be too overwhelming.

7. The Arbitration Award

Many arbitration services require the arbitrator to issue an award within 30 days after the hearing, unless additional information has to be submitted. The arbitrator has broad authority to make any award that she “deems just and equitable and within the scope of the arbitration agreement made by the parties.” Nevertheless, a typical arbitration award simply orders one party to pay money to another.

D.