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A Clients Guide to Arbitration


The following has been written to help you to understand arbitration and to make your arbitration experience a more profitable one.

What is Arbitration?

Arbitration is a process where a third party hears each side of a dispute and then reaches a decision which can be binding on all parties. Arbitration is primarily designed for those cases where a quick decision is necessary, or where the parties are, for various reasons unable to make their own decision and would rather have a third party do it for them.

How does Arbitration differ from Litigation and Mediation?

Litigation is the method of problem resolution that most people are familiar with. The parties, using a very formal public process, present their case through attorneys to a judge who makes the final decision. Arbitration is similar in that each party, in a relatively private process that can range from very formal to informal, present their case to an arbitrator who makes the final decision. In mediation, the parties use a very private informal process to reach their own decisions.

What are the advantages of Arbitration over Litigation?

Arbitration has a number of advantages over litigation. Some of them include: (a) the arbitration process can be less adversarial, (b) arbitrated solutions can address both legal and non-legal issues, (c) arbitration can resolve a dispute in as little as a day or two, rather than weeks or years, (d) the emotional satisfaction rate with arbitrated agreements is much higher than with court imposed rulings, (e) arbitration is less expensive than litigation, and (f) arbitrated agreements tend to hold up better over time than litigated ones.

How much time does it take?

The short answer is that it depends upon the parties and the complexity of the issues. The arbitrator will take as little or as long as it takes to throughly explore and then decide your matter. Arbitration is usually done in a single session lasting from one to four hours in length. The number of sessions can be greater in complex cases. Many matters are resolved in less than an hour.

What does it cost?

If the case is a commercial dispute, the fee will be based upon the number of parties. If there are two parties the fee is $150.00 an hour, half to be paid by each party. If there are three parties the fee is also $150.00 an hour, one third to be paid by each party. However, if there are four or more parties the fee is $40.00 per party per hour. In domestic cases fees are determined on a sliding scale based upon the combined gross income of the parties. Each party pays half unless other arrangements are made prior to the session. If the parties cannot agree on payment, each parties fee is based upon their separate income.

Less than $10,000 $20.00 Hour
$10,000 to 20,000 $40.00 Hour
$20,000 to 30,000 $60.00 Hour
$30,000 to 40,000 $80.00 Hour
$40,000 to 50,000 $100.00 Hour
$50,000 to 60,000 $120.00 Hour
$60,000 to 70,000 $140.00 Hour
$70,000 or more $160.00 Hour

If a party is self employed, gross income is calculated as total receipts less reasonable expenses. Fees are due at the end of each session.

Why does arbitration work?

Arbitration works because the arbiter moves the parties through steps that are essential to the resolution of their problem. The first step is to lay the ground rules and the procedures that the parties will follow. The second is to determine each of the issues that are important to the parties. This will include legal and non-legal concerns. The third step is to set an agenda on how these issues are to be approached. The fourth step involves exploring each parties needs on each issue and the presentation of any evidence they may have regarding those issues. The fifth step is to allow each party an opportunity to offer rebuttal to any of the things they have heard the other party state. The sixth step would be for the parties to each make a final statement of any additional material that they believe the arbiter should hear before rendering a decision. The final step is for the arbiter to make his ruling, which is then reduced to writing. This writing can then form the basis around which any additional legal documents can be prepared. During the entire process, the arbiter will interject questions so that the parties have a full opportunity to explore the emotional and practical components of their problem.

Arbitration works because it acknowledges that each problem has an emotional as well as a practical components and works with peoples real feelings and needs, rather than what may be legally significant. As parties move through the stages of arbitration they also move through the stages of emotional resolution and closure.

What is your Attorney's Role in Arbitration?

Your attorney can be an important part of preparing for arbitration. He or she can help you to gather all of the documents that will be needed, can explain to you all of the legal issues in your type of case, can provide you with a basic understanding of the law as it applies to your situation, and can often give you a good idea of the likely result if you were to litigate your case.

It is also possible to have an attorney present your case to the arbiter. These types of arbitration are more formal, and the arbiter will generally follow legal rules of procedure and evidence in handling the arbitration and in making his final decision. It is not necessary to have an attorney during arbitration, and most individuals feel more emotional satisfaction from the outcome if they have handled the matter themselves. In addition, such a decision reduces the cost of arbitration.

Are there different types of Arbitration?

There are two basic approaches to arbitration. The first is a very informal approach in which the arbiter uses many of the skills typically used by mediators to draw out the real needs, issues, and concerns and options available to the parties. The second is a more formal approach that essentially mimics the judicial process. Attorneys present their cases as in a court room, and the arbiter makes a final decision. The only advantage to this type of mediation over litigation is that it is quicker and less expensive than protracted litigation

Basic Principles of Arbitration

Arbitration works because it is based upon a number of important principles. These include: (a) the importance of individual parties, (b) the impartiality of the arbiter, (c) the voluntariness of the process, (d) confidentiality, (e) full disclosure, (f) focusing on the problem not the people, (g) exploring the interests that underlie the issues, (h) being open to possibilities and opportunities, and (i) a process that affords dignity to the parties, and their problem.

How to Prepare for Arbitration

There are a number of things that you can do to prepare for arbitration. First, you should talk to your attorney if you have one about the process of arbitration. At the beginning of the first arbitration session, the arbiter will give a detailed explanation and overview of the process that will be followed. However, it is helpful if you have some idea of what to expect before you come. This material was written with that idea in mind.

Second, you should talk to an attorney about all of the legal issues in your case and how the legal system works. It is important that you understand what attorneys call the "black letter" or "settled law", as it applies to your situation. Black Letter or Settled Law includes the basic legal principles and rules that "most" attorneys and judges agree with. However, you should understand that there are situations where the court or another attorney may disagree with a particular attorneys understanding of the law. As a result, your attorney will most often give you a range of likely outcomes in your case.

Third, you should do a detailed risk analysis with you attorney. As part of your risk analysis you should discuss the cost of litigation, the time involved including appeal, whether there are any costs or risks associated with delay, the emotional costs of litigation, whether a judgment would be enforceable or likely to be obeyed by the other party; and the concept of uncertainty as it applies to: the personality, credibility, and availability of the judge, jury, witnesses, parties, and attorneys.

Fourth, you should spend some time determining your issues that go beyond the legal ones. In arbitration we usually go beyond the legal issues to the actual needs and interests of the parties in an attempt to meet them. Arbitrated agreements are more successful that court imposed rulings because the solution is tailored to the "real world" in which the parties live. It is important before you come to arbitration to take some time to think through what your actual needs, wants, and goals are.

Fifth, you should explore any creative ideas for resolving the dispute, no matter how unlikely they may seem. You need to come into arbitration with a win/win mind set. The best solutions are those in which both parties have their needs (not necessarily their positions or wants) met. You should think of ways that you might meet the needs of the other party, so that your own needs are more likely to be met. You should also consider any possible concessions or tradeoffs that might be appropriate.

And finally, you should review the arbitration contract and make a commitment to follow the ground rules of arbitration and to participate meaningfully in the process. If you would like to see a copy of that contract, click here.