Arbitration is an alternative private forum for settling disputes – outside the court system. In this process, two parties agree to settle their differences before a neutral third party (the arbitrator) instead of through court action.
The arbitrator listens to both parties and reviews the evidence, then makes a decision. The process is less formal than a courtroom hearing or trial, but more structured than a mediation or negotiation. The arbitrator’s decision may be final (binding arbitration) or the parties may be able to reject the arbitration award and demand a trial if they wish (non-binding).
Many contracts now include mandatory arbitration clauses, which require that any disputes be resolved using an arbitrator instead of the judicial system. In other situations, parties may voluntarily agree to arbitration after weighing their options.
Arbitration clauses are found in all types of documents these days: from employment applications and securities trading agreements to a wide array of consumer contracts, credit cards, home repair contracts, insurance policies, mobile device, cable and internet subscriptions, car sales and financing and more. In fact, most consumers are bound by numerous arbitration agreements – whether they realize it or not!
Arbitration clauses were originally designed to protect companies from “frivolous lawsuits”, which most everyone would agree is a worthy goal. But problems arise when arbitration prevents people with legitimate disputes from being heard or treated fairly.
Since forced arbitration means the consumer or employee is required to waive their right to sue or join a class action lawsuit – it severely limits how they can respond and the relief they can obtain. And because mandatory arbitration clauses are almost always “binding” decisions, it means they cannot appeal the arbitrator’s award.
Arbitrators are typically experts in the business or field of law involved, many are even retired judges. But there are no universal certifications or qualifications for a person to call themselves an arbitrator. So, it’s certainly possible that an arbitrator could be selected who doesn’t fully understand the law, or who will improperly apply it.
Because arbitrators are “selected” for every case they work, there’s a natural bias for arbitrators to favor businesses. A business has the opportunity to steer hundreds or thousands of arbitrations to selected arbitrators. Any business may choose to work with an arbitrator again in the future, or not, depending on the result in a particular case. This is referred to as the “repeat user” bias which strongly favors businesses because individuals are unlikely to ever need an arbitrator’s services again. Contracts written by the business often name the arbitration company that must be used – the one preferred by the company.
Though having legal representation certainly isn’t a requirement for you to participate in arbitration, having someone on YOUR side that understands the process as well as THEY do is a huge advantage.
If you’re facing arbitration in a contract dispute or feel like a company has taken advantage or broken its promises to you, it pays to talk with an expert! Contact one of our experienced arbitration attorneys at Righetti • Glugoski, P.C., today for a free initial consultation. We do not charge attorneys’ fees unless we recover compensation for you.