Define Arbitration

Not all cases are resolved in a courtroom—or even in settlement negotiations outside of a courtroom. In fact, arbitration is one of the most traditional and well-known forms of private dispute resolution. What makes arbitration unique is that it is a binding procedure, much like the outcome of a court case would be. Private organizations typically administer the arbitration and provide the rules for the arbitration and discussions to be carried out. 

These companies may handle a part or all of the arbitration, and parties will usually select specific arbitrators based on their knowledge of the subject matter in question. An arbitrator, who is often a retired lawyer or judge, will render a hearing decision at the end of the hearing. 

That decision is binding and final, meaning that you have little to no opportunity to appeal it and go forward to the next step. In some rare cases, a limited court review may be eligible. You need to review the specifics of any arbitration agreements or arbitration documents before you start this process since this may be referred to as non-binding if the parties agree to make it so, however, most arbitration is a binding process handled by an adjudicator.

A pre-dispute contract will dictate the exact terms of arbitration. This typically says that if a dispute arises between the parties, it will never enter the traditional court system. This process is instead governed by the Federal Arbitration Act. If the parties choose some other administering authority, then that authority's rules for arbitration will determine the exact procedure that follows. 

Parties waive a constitutional and fundamental right to trial by a jury of their peers by electing to use arbitration instead. They may have a second trial after they go to arbitration, but unless they agree otherwise, the decision is non-appealable and legally binding. This can sometimes be overruled in those cases of collusion on the arbitrator’s part or in cases of fraud. In most cases, the arbitrator should not have a specific or standing relationship or reason to benefit one party over another. Most arbitrators are impartial and selected by the parties. The arbitrator will hear testimony, look at the documentary evidence, read through briefs, and render a decision on damages and liability. This is known as an award of the arbitrator. The court's jurisdiction will then review this award and approve it.

Make sure you read through any documents that detail how the arbitration will be used to resolve any disputes. Various types of arbitration may be referenced or used. Here are some examples of the most common ones.

Mandatory Arbitration

This may be referred to as quartered in arbitration or judicial arbitration. This is a scheme for the resolution of a pending court case, typically those that are valued at under $50,000 in damages. These still may be related to some court procedures, but use informal rules of evidence in advisory nonbinding arbitration that is ordered by the court. This is generally ordered in the early stages of a lawsuit to try to encourage people to come to terms of agreement on their own. The exact availability and requirements of using this process will depend on court procedures and local or state laws.

Non-Binding Arbitration

When an arbitrator issues an award after a hearing in non-binding arbitration, this means that the parties do not give up their right to a jury trial, and this agreement is not binding at all. The arbitrator's award, however, is instead a recommended or advisory opinion. Many cases go on to binding arbitration or settlement after this phase or may even continue on to a trial.

Baseball Arbitration

This binding arbitration type requires each of the parties to select one number that would resolve the case, and the arbitrator may choose only one of the figures as an award. This means there are only two possible outcomes and can greatly streamline the handling of the case.

High-Low Arbitration

In this situation, both parties must agree in advance to the parameters under which the arbitrator is allowed to render their award. This can include a preset high or low number. If the award is higher than the preset high, the plaintiff must accept the agreed-upon high. If the award is lower than the preset low, the defendant must pay the previously set low amount. If the amount is in between, the parties must agree to be bound by the arbitrator's figure, and the low or high figures are not necessarily shared with the arbitrator in these circumstances.

Arbitration holds many different benefits for people, including that it may allow for a more streamlined resolution of a complex legal matter. One of the primary reasons for this is that each party agrees to be bound by the procedure of arbitration itself. Arbitration can often be scheduled much more quickly than court hearings as well. Many companies choose to use required arbitration resolution agreements with their employees or customers in order to ensure they have some level of control over the handling of any disputes. There are some core characteristics of arbitration that may apply in your situation, including that;

• Arbitration is consensual, since it can only occur if both parties have agreed to it.
• The parties choose the arbitrator in most situations.
• Arbitration is a confidential procedure that does not generate a court document in the public record.
• The decision of the arbitrator is final and easy to enforce, so long as that is binding arbitration.
• Arbitration is neutral, since parties may be able to choose things, such as applicable language, law, and the venue of the arbitration to ensure that no one enters a distinct advantage.

The arbitration agreement determines some core elements of the arbitration process itself. This includes:

• How arbitrators may be selected.
• Whether the tribunal of arbitrators is made up of just one person or up to three.
• Whether arbitration is conducted in accordance with the rules of a particular institution.

Make sure you read through any details on a contract you receive to determine what is outlined in an arbitration agreement. An advanced contract signed with multiple parties may include things such as where the arbitrators can come from, and you may wish to negotiate these facts if it does not appear to be in your favor or a neutral selection panel. 

There are many different kinds of circumstances in which you may be asked to attend arbitration in the event of a dispute in the future. Many companies prefer using binding arbitration because it helps minimize their illegal expenses, and you'll want to read through any contract you sign with someone else to verify whether you will need to be responsible for attending arbitration in the future. 

If you receive a contract from someone stating that arbitration will be used in the future and disagree, it is strongly recommended that you negotiate on this fact prior to signing the contract. Once you sign the contract, even if you did not realize the full extent of required arbitration in the future following a dispute, you will likely be locked into attending an arbitration hearing. 

This process can take place in person, over the telephone, or by the parties submitting written documents. The parties' arbitration agreement and the applicable rules that govern the case will dictate the process and location.

If you are considering entering into an arbitration agreement, it is always beneficial to communicate with a qualified attorney first. Legal advice can help clarify some of the most important aspects of arbitration for you and can even help you to determine if it is in your best interests to agree to have your decision arbitrated at all. 

Schedule a time to meet with the qualified attorneys at Morgan & Morgan to learn more about what is arbitration, when arbitration makes sense, and whether you may need legal advice before entering into an arbitration agreement.

Contact us today for a free, no-obligation case evaluation.