Arbitration is an alternative to litigation, but it is still adversarial in nature. Moreover, the end result is often permanent, without the right to appeal. Agreeing to arbitration, therefore, is not something to take lightly.
Arbitration as Alternative Dispute Resolution (ADR) in Arizona
A form of ADR, arbitration involves both parties presenting their case to a neutral third-party (an arbitrator) who considers the issues and makes a decision (called an award).
An arbitrator has the power to make a range of awards depending on the circumstances of the case. Awards may include:
- Monetary compensation
- Declaratory relief
- Legal fees
- Punitive damages
Arbitration can be binding or non-binding. Binding means an arbitrator's award is final, whereas the parties can reject an arbitrator's non-binding award and elect to go to trial.
Arbitration is less formal than trial proceedings and is often more cost-effective and quicker. However, it is more formal than other forms of ADR, like negotiation and mediation.
Arbitration may suit cases where the parties want to avoid time-consuming and expensive litigation. It is also good for parties who want an impartial, informed decision-maker to provide an objective evaluation of their respective positions. It can be a useful avenue for disputes involving technical arguments, as arbitrators are often experts in the relevant subject-matter.
However, if parties want to retain control over their case as well as the option to go to trial, arbitration may not be a suitable choice.
Types of Arbitration: Mandatory Binding vs. Binding vs. Non-Binding
Arbitration may be mandatory binding, binding, or non-binding. Each produces benefits and disadvantages and should be considered and weighed accordingly.
Mandatory Binding Arbitration
Mandatory binding, or forced, arbitration is addressed in a contract between parties. In a mandatory binding arbitration clause, the parties agree to waive their right to sue and instead must arbitrate their dispute.
Mandatory binding arbitration clauses can be detailed. They may name the arbitrator who will hear the matter and identify which party bears the costs of arbitration. They also require that the outcome of the arbitration is binding.
This means parties must go to arbitration, they cannot request a trial. Mandatory binding arbitration clauses are often found in cell phone contracts, employment agreements, and credit card agreements.
In binding arbitration, the arbitrator's award is final. The parties cannot request a trial. The parties also cannot appeal the arbitrator's decision, except in exceptional and limited circumstances.
In non-binding arbitration, the arbitrator's award is advisory. Both parties have the right to reject it and opt to go to trial. Non-binding arbitration is often used in simpler cases where the parties want to play out the strengths and weaknesses of their case. In doing so, they can often resolve the dispute.
Advantages of Arbitration in Arizona
The advantages of arbitration can be many, but it often depends on whether it is mandatory, binding, or non-binding. Keep the latter in mind when considering these general advantages.
- Less costly than a trial. Arbitration is less formal and may not need the same level of preparation as litigation nor does it follow the strict rules of evidence and procedure like a trial. It also offers more flexible scheduling, so it can often be heard earlier than a trial.
- Private. Unlike a trial heard in open court, arbitration proceedings are typically private and the arbitrator's decision may remain confidential. This is useful in situations where the parties want to keep the details of the dispute and its resolution private.
- Parties have more control. They can choose the arbitrator with subject-matter expertise and decide on the procedures for arbitration.
- Maintains the relationship between the parties. Arbitration can be less adversarial than trial proceedings, allowing parties to maintain their contractual relationship.
Disadvantages of Arbitration in Arizona
There can also be many disadvantages to arbitration, and these should be considered in light of your unique situation.
- Cost. While less expensive than a trial, arbitration is more expensive than negotiation or mediation. An arbitrator's fees can add up quickly and, in non-binding arbitration, without a guaranteed resolution.
- No avenues of appeal. Parties typically cannot appeal a binding arbitration award except in limited and exceptional circumstances – for example, evidence of undue influence exists.
- Lack of transparency. Arbitrators are not required to provide written opinions or explanations of their decisions. The limited options for review and the private nature of arbitration reinforce this lack of transparency.
- Limited discovery. This means the parties may have to prepare their case for arbitration on less information than would otherwise be available to them at trial.
- No rules of evidence. The rules of evidence do not apply, and so the arbitrator may accept evidence damaging to your case even if the same evidence would have been inadmissible at trial.
- No cross-examination. Parties are sometimes prohibited from cross-examining any witnesses in arbitration. Thus, if a witness is lying or saying something contrary to the alleged truth, it cannot be addressed directly.
When is a Lawyer Needed for Arbitration in Arizona?
It is your choice whether to have a lawyer represent you through the arbitration process, and it is a decision you should take seriously. Although not required, the benefits of having a lawyer can outweigh the cost for at least the following reasons:
- Your rights will be affected by the arbitration finding. Arbitration is a legal process that can impact your legal rights, especially when the arbitration is binding. You do not get a second chance, nor will you have an opportunity to appeal, so making sure your rights are safeguarded is critical.
- You do not know how to make legal arguments. To win at arbitration, you must present a compelling case. Your arguments must be supported both by the facts and the law. It is not enough to know yourself what you think the outcome should be, you must be able to persuade others, like an experienced arbitrator, to think the same.
- Your opponent is a large company or employer. Arbitration is often part of a contractual agreement. Companies and employers have experienced lawyers that know how to present their cases. They also have the resources to commit to presenting their case in a logical, clearly defined manner that can easily persuade an arbitrator. As it is, arbitrators often favor large companies and employers. A lawyer helps even the playing field.
Contact an ADR Attorney in Phoenix Today
If you have a dispute that is subject to arbitration, or you think arbitration may be a good choice for resolving your dispute, contact us today either by using the online form or calling us at 480-771-3986 to schedule a Consultation.