Last month, Evan Chall and I wrapped up an arbitration hearing on behalf of a corporate client and several of its key employees. We had been litigating the matter for over a year, and it proved to be one of the rare cases that proceeded all the way to a hearing without a settlement. At this point, both sides will prepare and file “closing briefs” that summarize the evidence and the arguments. After that, we sit back and wait for the arbitrator to issue his decision.
America is famously litigious compared to other developed countries. Consequently, both the judicial system and private litigants seek alternatives for resolving disputes outside of our crowded courtrooms. “Binding Arbitration” is a popular option.
Arbitration looks a lot like the traditional “bench trial” in which a judge, rather than a jury, hears the evidence and decides the disputed facts. In an arbitration proceeding, the “judge” or “arbitrator” (typically an experienced lawyer or a retired judge) is engaged privately by the parties and operates outside of the state or federal judicial system. In larger cases, the parties may select a panel of three arbitrators rather than placing the decision with a single decision maker. While the process resembles a traditional lawsuit in most respects … the parties still take depositions and exchange discovery, for example … it provides a certain amount of flexibility (and privacy) not always available in the court system.
To submit a dispute to arbitration and sidestep the judicial system, the parties must agree contractually (either in advance, as part of an employment contract for example, or at the time the dispute arises) to engage in and be bound by the arbitration process. Additionally, they must assume financial responsibility for the arbitrator’s time and expense rather than using the judicial system funded by the taxpayers. Consequently, the best time to think about using arbitration is at the outset of the business relationship, long before any specific dispute arises.