Arbitration is another form of Alternative Dispute Resolution (ADR).
I. What Is Arbitration?
Arbitration is a dispute resolution in which a neutral party, an “arbitrator,” decides the case. An arbitration can be a mini-trial or hearing where the rules of evidence are suspended.
Generally, an arbitration is a much shortened trial or hearing. Where a regular trial before a jury can last five days, an arbitration can be held in a few hours.
The advantages of arbitration are speed, economy, informality, and finality.
However, a decision to arbitrate must be made very carefully with the client since the result is final and non-appealable.
Let’s look at each step.
An arbitration is much faster than a trial in the courts.
First, before an actual trial begins, there might have been many pre-trial appearances over a period of months or years. This is eliminated.
Second, the arbitration hearing can be scheduled at the convenience of the parties, attorneys, and the witnesses. In many instances, especially in the federal courts, the court gives the parties a trial date solely for the court’s convenience.
Third, the arbitration can be held much sooner than a trial. Often there can be a wait of at least one year from the point that the parties are ready for trial. The wait is eliminated.
Fourth, the arbitration hearing itself is a much abreviated trial or mini-hearing. A trial of five days can be heard in a single morning in an arbitration.
Arbitrating is much less expensive than trying a case in the courts.
Since the laws of evidence do not apply, an arbitrator may accept a medical report as proof of an injury; in comparison in the courts the physician would have to testify. The cost of bringing doctors to court is very expensive, therefore, both parties can save this significant expense. Doctors charge anywhere from $2,500 to $10,000 to appear in court.
Another advantage is informality.
The formal rules of evidence are suspended. The arbitrator can consider evidence which appears reliable.
The relaxation of the formal evidentiary rules is a big plus because at trial certain evidence may be excluded, and there can much expense and needless anxiety in trying to get documents into evidence.
For example, at a recent trial I had a problem of getting into evidence two medical records. The first one, an MRI film, was lost by the court. The subpoenaed records clerk denied losing the film, and my associate spent a couple of mornings tracking-down the film. Finally, he found it, however, it was in computer disk format, and we did not have a computer ready in court that day. The second troublesome record was a key hospital record. The hospital sent the subpoenaed record to court, however, it failed to provide a certification page that these were authentic copies of the records. Defense counsel objected to the introduction of the hospital record, and the court sustained the objection. Fortunately, we settled later that morning.
This is an example of some unforeseen problems that occur in trial. In comparison, the strict rules of evidence do not apply in arbitration, and these two contested pieces of evidence would have been considered by the arbitrator without objection. Therefore, the informality of the proceedings allows the arbitrator to accept evidence which might be hotly contested in a courtroom.
Another plus is finality. An arbitrator’s decision is final and non-appealable. The parties do not have to have the possibility of appeals and re-trials hanging over their heads.
There are disadvantages to arbitration over trial in courts.
First, the case is decided by an aribtrator rather than a jury. A jury can award a much higher verdict. Certain cases should be tried before a jury, such as where the damages are high, and liability is fairly clear. Also, with an arbitrator we are playing to one rather than an audience of six.
Second, there is no appeal. The arbitrator’s decision is final and binding.
Third, the rules of evidence are relaxed. An arbitrator may consider evidence which would be excluded in court. This could be a deciding factor in a case.
V. Some Arbitrated Cases
A. An Auto Case
Our client suffered serious injuries from an intersection accident. Although our client claimed that she had the green light, defendant, her passenger, and a non-party witness claimed that our client ran the red light and was at fault.
We felt that a trial in court would result in a defendant’s verdict. We felt that arbitration would be the better route.
We were able to negotiate with defendant’s insurer to not only arbitrate but agree to high/low parameters. The case was arbitrated, and the arbitrator gave a favorable decision. The client was satisfied with the result.
B. A Stairwell Case
Our client fell down stairs in a small synagogue. He was a visitor, and he asked for the coat closet. He was pointed to a door. He opened the door which was the landing of a staircase. There was no lighting, and he fell down the stairs. The client fractured his arm.
We had some negotiations with the insurance company, and we were not terribly far apart. Nonetheless, we did not agree on the settlement number, and we were able to arbitrate the case. We felt that arbitration would be beneficial since the damages were limited in that the client did not miss time from work, and he had an excellent recovery.
The arbitration was held with certain high/low parameters. We had our engineer testify that the location of coat hooks at the top of a dark and unmarked landing was dangerous. The client also testified. The arbitrator issued an award which was closer to the number that we sought.
Arbitration can save our clients valuable time and expense. Arbitration is preferred over a full-blown trial by jury where either the liability is in issue or the exposure is limited.
Whenever we consider arbitration, the client always agrees in writing to the procedure. All of the benefits and risks are discussed.
Some cases should not be arbitrated, such as high damage cases where liability can be proved.
We make a case by case determination whether arbitration is beneficial to the client.
To paraphrase the drug advertisements, “ask your lawyer if arbitration is right for you.”