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Arbitration
Arbitration is a private forum for settling disputes. Cases are tried in arbitration as in court. Usually, though, rules of evidence and procedure are relaxed. The award of an arbitrator or arbitration panel can be enforced as a court judgment. Arbitration is usually required by a provision in a contract. Sometimes, parties agree to arbitrate a dispute in a "submission agreement". Arbitration has been the preferred form of trial in commercial construction for decades, because of its relative speed and economy. Its adoption by the homebuilding industry was a response to growing jury verdicts and the perceived hostility of the court system to builders.
The advantages and disadvantages of arbitration are essentially the same, with the exception of speed. Claims are typically disposed of in arbitration in a matter of months. Many jurisdictions have court dockets requiring at least a year before trial. The other features of arbitration-economy, finality, and factfinders familiar with the subject matter-can help or hurt.
Since arbitration is private, no tax money pays for the judge, courtroom, or clerk's office. The parties do. In cases before the American Arbitration Association, the oldest organization providing alternative dispute resolution services, administrative fees can run into thousands of dollars. The fees of the arbitrators themselves can easily double that amount. Other organizations may charge less.
The increased cost of the tribunal is often offset by the economy of the process. Lawyers defending court cases may take many depositions and serve written "discovery" to wear down plaintiffs and exhaust their resources. Arbitration panels usually limit pre-trial procedures to conserve money.
The parties choose their own judges. Sometimes each side picks an arbitrator, who in turn select a third. More frequently, the arbitration agreement specifies an organization to provide administrative services and a panel of "neutrals". Organizations like the AAA have specialized panels, comprised of persons experienced in consumer claims or construction. Trials before these judges are usually more efficient, since less time need be spent educating the panelists. Other organizations, regrettably, were created specifically to serve builders in resolving disputes. Their arbitrators are so closely allied with the building industry they can scarcely be considered neutral.
Arbitrations are, with few exceptions, final. There are few grounds for appeal from an arbitration award. If you receive a fair shake in arbitration (usually determined by whether you win), finality is a good thing. It means you can reduce the award to judgment and enforce it just like a jury's verdict. If you weren't treated fairly, though, the game is probably over when you receive the award you didn't want.
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© 2007 The Construction Defects Legal Network.
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