Arbitration: a faster, cheaper option than business litigation |
Authored by:
Thomas J. Keuler, Partner
tkeuler@dklaw.com
|
|
 |
Most business people don’t like litigation and see it as a necessary evil. In many cases, they will bend over backwards to resolve a dispute simply to avoid going to court. But there are times when a dispute can’t be resolved, no matter the effort. That’s when they reach for the phone to call their lawyer.
One thing for sure: Litigation is an expensive, time-consuming, drawn-out process. It begings when your lawyer files a complaint against the other guy, who then gets his own lawyer. The attorneys soon spend a lot of their time and your money exchanging interrogatories and documents, taking depositions and filing a barrage of discovery motions.
Finally, after year or so, the lawyers will get ready for trial. That’s when your case gets really expensive and time consuming. But that’s not the worst part. Even if you win, the other guy may appeal, which will add another year or two to your case and continue those seemingly unending legal expenses.
There is an alternative. Under federal and state law, business owners have the right to resolve disputes through arbitration by simply inserting arbitration clauses in their agreements. The law then requires each contracting party to arbitrate. Make no mistake, a judge will enforce every arbitration clause that comes his or her way.
As with any legal proceeding, arbitration has its pros and cons. Here’s a quick summary:
Pros
Expedited proceeding – Arbitration offers an expedited proceeding for resolving disputes. Once selected, the arbitrator will set the matter for hearing. Prior to the hearing, the parties will submit briefs outlining their respective positions. After they present their cases at the hearing, the arbitrator will enter an award within 30 to 60 days. And entire arbitration proceeding often can be completed within six months.
Saving legal fees – Since arbitration is an expedited proceeding, lawyers’ time will be substantially reduced, affording significant savings in legal fees. This is especially true when there is no discovery prior to the arbitration hearing. In most cases, arbitration can cut legal fees in half.
Non-appealable ruling – As a general rule, the arbitrator’s award is final and binding. The prevailing party can then seek immediate enforcement in any court with jurisdiction over the non-prevailing party. Appeals from arbitration awards are very rare, permitted only in cases of fraud or when an arbitrator has made an obvious miscalculation.
Con’s
Arbitration fees – Since arbitrators are highly educated, professional people, their fees can be substantial - $250 to at least $450 per hour. Generally, the parties must prepay some of the fee before the hearing. Depending on the complexity of the case, prepayment can be $2,500 to at least $15,000. The parties must pay the balance following the award, and the amount again depends on case complexity.
Element of surprise – Expedited arbitration has one major drawback: surprise. Since there is little if any discovery in arbitration, no one can fully prepare for the testimony and proof that the opposing person offers in the hearing. That can be a real problem because it’s difficult to defend against unforeseen evidence, especially in cases in which someone gives false testimony or presents fraudulent documents.
Element of compromise – Arbitrators tend to render awards that give a little something to everybody, which often frustrates or aggravates one or more of the parties. But binding rulings mean everyone must be prepared to live with compromises.
In my opinion, arbitration proceedings are ideal for resolving business disputes. Though there are some drawbacks, arbitration offers businesses an expedited, economical alternative to litigation. I suggest business owners consider inserting arbitration clauses in their agreements. Believe me, they can save a lot of time and money. |
Tom Keuler has been a partner in
Paducah’s Denton & Keuler law firm
for more than 30 years. He represents
many of the firm’s commercial,
industrial and banking clients, and has been special counsel to the City
of Paducah and counsel to the Municipal
Commission in Frankfort.
Printed in Four Rivers Business Journal (Paducah Sun), January 2010. |
|
| |
|
