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The Key to Saving Time and Money in Dispute Resolution: Staying Out of Court

The Key to Saving Time and Money in Dispute Resolution: Staying Out of Court

Source: Daily Business Review
Date: November 21, 2017

Patricia H. Thompson, Esq.

Resolution Centers


| | DAIL Y BUSINESS REVIEW NOVEMBER 21, 2017 The Key to Saving Time and Money in Dispute Resolution: Staying Out of Court Commentary by Patricia Thompson Delayed dispute resolution is harm- ful to the parties and the economy. Not only is it true that justice delayed is justice denied, but lengthy litiga- tion is exhausting, unduly harassing and prohibitively expen- sive for individuals and all but the largest busi- nesses. Moreover, in a recent five-year study covering 10 high popu- lation states, including Florida, a group of econ- omists at Micronomics Economic Research and Consulting found that federal court lawsuits lasted more than a year longer than arbitrations decided during the same period, excluding litigation appel- late time. The survey estimated this litigation delay caused direct business losses exceeding $10 billion, result- ing from causes such as the cost of management’s involvement in the litigation; the effect of prolonged litigation uncer- tainty on management decision-mak- ing, creditworthiness, and investor concerns; and lost use of resources tied up by litigation. In most jurisdic- tions, state court litigation takes even longer than federal, thereby exacer- bating the greater delay and cost to the parties over that incurred in the typical arbitration. Consequently, businesses should reexamine how they can better save time and money by arbi- trating rather than litigat- ing business, consumer, and employment disputes, provided they use well drafted, fairly balanced arbitration agreements. However, merely inserting “stan- dardized” arbitration agreements into every transactional document and employment agreement is not enough to insure the speedy , cost-effi- cient resolution of related disputes. Without a well worded arbitration agreement and a strong arbitrator, parties can easily morph an arbitra- tion into a proceeding that looks like an expensive and lengthy lawsuit. To avoid such a result, authorities suggest that arbitration agreements be thoughtfully tailored to fairly but efficiently limit the availability of discovery and motion practice, which activities have been proven to be the two most time intensive BOARD OF CONTRIBUTORS PraCTiCe foCus / alTernaTive DisPuTe resoluTion ShutterStock Thompsonand expensive aspects of litigation. Parties also should carefully investi- gate and then select arbitrators with expertise in the law at issue, as well as experience and training in the efficient management of arbitration proceedings and final hearings. But more attention to the drafting of an arbitration agreement is nec- essary for any related arbitration to live up to the cost savings and effi- ciency that this form of dispute reso- lution was created to achieve. Case law has many examples of arbitrations delayed—sometimes for years—pending resolution of court proceedings in which the parties liti- gated the meaning and enforceability of boiler-plate arbitration provisions that defeated the purpose of having such an agreement. Consequently, the drafters of arbitration agreements should con- sider the following examples of how best to avoid the type of mistakes that can spawn expensive lawsuits. Clearly define the scope of the arbitration agreement. • To avoid litigation, the arbitration agreement should make clear:Whether its scope applies to all disputes or con- troversies arising out of or related to the relationship of the parties or the transaction at issue, including statu- tory, tort, equitable, common law or contract-based claims, including those arising before as well as after the arbi- tration agreement; • That objections to the scope and validity of the arbitration agreement and the underlying contract must be arbitrated rather than resolved by a court; and • Whether it binds entities related to the contracting parties, whether it requires consolidation of all related disputes to avoid multiple, parallel proceedings, whether any contem- plated non-parties to the agreement may enforce it, and whether it pre- cludes class actions. Define the arbitrator’s authority. The arbitration agreement should leave no question as to the arbitra- tor’s authority. It should: • Give the arbitrator sole author- ity to determine whether the parties have satisfied conditions to arbitra- tion, as well as the enforceability of the underlying contract(s), and the scope and enforceability of the arbi- tration agreement; and • Clarify that the arbitrator has broad authority to award damages, injunc- tive and other equitable remedies, and assess fees, costs and sanctions. Draft a fundamentally fair agreement. One-sided or substantively uncon- scionable arbitration agreements invite litigation to invalidate the agreement. In turn, because “bad facts make bad law,” such litiga- tion may result in an erosion of the inclination of most federal and state courts to broadly enforce arbitration agreements in consumer and employ- ment contracts. If one is in doubt as to what constitutes a fair agreement, the rules, sample provisions, and other suggestions for use in crafting con- sumer, employment and other types of arbitration agreements offered by well-known dispute resolution organi- zations like JAMS and the American Arbitration Association are good resources for drafting language that is clearly worded, balanced, and com- mercially reasonable. Also, in the consumer or employ- ment context, it may be wise to pref- ace an arbitration provision with an introduction that explains how dis- pute resolution by arbitration ben- efits both parties to the agreement, including factors such as the more private and less intrusive nature of arbitration, as well as its expediency, relative cost savings, flexibility, and use of expert decision makers. Avoid inconsistent contract terms. Litigation often results when language in a boiler plate arbitra- tion agreement conflicts with other standard provisions in the underly- ing or related contract documents. Commonly inconsistent provisions to avoid may concern: • Choice of law and availability of remedies, • Inapplicable references to courts and judicial venues for dispute reso- lution, and • Confusion as to selection or number of arbitrators or the appli- cable arbitral rules. There is not one way to arbitrate a dispute and no one form of arbitra- tion is best for every circumstance. Critics of arbitration may be basing their objections on results of poorly drafted agreements or badly man- aged arbitration proceedings. Or, it is possible that proponents of litigation over arbitration may have an interest in the litigation process that is differ- ent than the interests of the actual litigants. Nevertheless, more likely than not, a well drafted arbitration agreement should foster a more cost- effective, flexible, and swift resolution of disputes, by using language that is consciously crafted to avoid litigation or a litigation-like proceeding. Patricia H. Thompson is an arbitra- tor and mediator with JaMs in Miami. she is a former chair of two construc- tion-related committees in the Tort and insurance and litigation sections of the aBa. Ms. Thompson can be reached at pthompson@jamsadr.com. r eprinted with permission from the 11/21/17 edition of the DAILY BuSINeSS re VIeW © 2017 ALM Media Properties, LLc. All rights reserved. Further duplication without permission is prohibited. c ontact: 877-257-3382 reprints@alm.com or visit www.almreprints.com. # 100-11-17-14