What is Arbitration?

Many are not aware of what arbitration is, and how arbitration could be used to the plaintiff’s advantage when asserting their legal claim against a defendant. It is important to hire experienced attorneys who are knowledgeable in arbitration disputes in order to be able to get just compensation.

General Overview of an Arbitration

Both parties must agree to an arbitration in order for it to occur. Both parties then must choose whether it is binding or non-binding. Arbitration is essentially a type of a private legal process where the two parties (plaintiff and defendant) both come together to agree that one neutral individual could decide the entire dispute. This is done instead of going into court. The person deciding could be one neutral individual or a neutral group of individuals. Both parties have to decide who that neutral arbitrator would be. Under the American Bar Association website, they also provide a list of neutral arbitrators that could get involved in the arbitration process.

Both parties bring in evidence and arguments to that neutral individual. After that individual hears both sides, they come to a decision. Arbitration is somewhat similar to the legal process of mediation. Both processes have some type of neutral individual that decides the outcome of the case rather than having a trial and letting a jury determine the outcome of the case. A jury trial occurs when a jury comes to some type of resolution. Arbitration and mediation are considered to be private legal processes in which both parties do not have to show up to court. The neutral individual that listens to both sides of the argument does not have to apply any type of specific law, compared to a jury trial and a judge who have to adhere to that jurisdiction’s statutes.

Arbitration Award

The arbitration award is also determined by the neutral individual. The individual determines what type of award a party will be receiving. The award could take the form of a general or a specific award. A general award example would include a monetary sum without a specific explanation as to why the award was given to that party. On the other hand, a “reasoned” award give specifics as to why the party is entitled to receive that amount.

The arbitration resolution could be determined to be binding or non-binding. Both parties, at the start of the arbitration, must agree whether that resolution is binding or non-binding. When the resolution is binding, the losing party cannot challenge it in court. The court will respect the arbitration’s resolution. When the arbitration is determined to be non-binding, the losing party could argue against it in court. The court does not necessarily have to uphold the arbitration resolution.

Confidentiality

The arbitration, under the rules of the American Bar Association, must protect the confidentiality of the two parties. Therefore, similar to a trial, a party could request to have trade secrets or other confidential communications protected, and prevent the arbitrator from listening to those communications.

An arbitration has both negative and positive attributes. It depends on what type of relief the plaintiff is seeking, and what type of claim the plaintiff is bringing in. That’s why it is important to hire an experienced arbitration attorney to determine the best course of action, and whether to engage in arbitration in the first place.

Negatives of Arbitration

1. Costs: arbitration was originally some type of cost-effective way to come to a resolution without going to trial. Going to trial could result in high costs. Costs from a trial may include hiring experts and attorney’s fees. The longer the trial, the likely the attorney’s fees will be costly. Since arbitration is limited in time, it was considered to be cost-effective. However, nowadays, the cost of arbitration is also on the rise. For example, in certain jurisdictions, the cost of filing a lawsuit to later arbitrate it is higher than filing the action in the court for jury trial. Sometimes the administrative fees of filing an arbitration dispute are higher.
2. Uncertainty: although both parties agree on a neutral individual to be the arbitrator, the arbitrator does not have a specific set of standards and guidelines to abide by. In contrast to a trial, a judge and the jury must abide by the jurisdiction set standards and laws and apply that to the case at hand to determine the outcome of the case. But an arbitrator is not required to apply the jurisdiction’s rules or laws. There is a fear that the arbitrator could act on their own will and against the great weight of evidence side with the other party.
3.  Subjectiveness: arbitrator could also end up being subjective and favor one party over another on a whim rather than applying the rule of law.
4.  Binding arbitration: many parties fear that if the arbitration is binding, they will be stuck with it forever, and will not be able to argue against it in court. Whereas in trial, a party could use the appeal process to argue against the final verdict. No system like that is in place for an arbitration resolution.
5. Transparency: trials oftentimes have a record where each person’s statements and evidence are recorded. During arbitration, there is no such type of record.

Positives of Arbitration

1. Consensus: almost all the steps during arbitration are determined by a consensus of both parties. For example, both parties must agree to resort to arbitration. Both parties must also agree to the neutral deciding individual.
2. Costs: although arbitration cost are still on the rise, in some jurisdictions arbitration is still considered to be cheaper than trials. Parties are able to seek some type of justice without shedding away thousands of dollars.
3. Speed: an arbitration resolution is quicker than a verdict decided by a jury. A trial can last several months, possibly even years to reach a general verdict by the jury. However, an arbitration can last only a couple months.
4.  Rules: since it is not necessary for the neutral arbitrator to apply the jurisdiction’s rules, there is more leniency in allowing in evidence and other court decisions.
5. Privacy: some parties prefer going to arbitration rather than trial because of the privacy. Because a jury trial is open to the public, and has a record, some parties would want to litigate in private. This is more likely the case when the party has confidential information, or the party is a public figure.

Our Los Angeles arbitration attorneys are experienced in different types of cases. For more information, please contact our team. If you or someone you know is involved in a dispute and would like to resort to arbitration, contact our experienced Los Angeles attorneys today for a free consultation. We are always readily available for our clients with accessible offices in Los Angeles, Fresno, Sacramento, Irvine and Las Vegas. Heidari Law Group will be there to assist you.

***Disclaimer: This page is created by Heidari Law Group for educational purposes. This article provides a general understanding of the law. It does not provide specific advice. By using this site and reading through this page, there is no attorney-client relationship created between you and any member of Heidari Law. Further, due to the constant change of the law, some parts of the information above may no longer be good law.