To arbitrate or not to arbitrate, that is the question. That has become a pretty hackneyed way of putting an issue in play. Here’s another hackneyed way of expressing something: “We’re not going to touch that third rail.” Roughly translated that means that Ruminations, in its old age [approaching 200 blog postings] is getting too wise to take a firm stand and offer anything other than an equivocal answer to that question, a lawyer’s answer so to speak – “It depends.”
Before anyone switches off to watch Pawn Stars or something else, let us explain. To us, it depends on what the subject matter of a dispute might be. An easy example is that only a court can issue a warrant of possession that a governmental official will enforce. So, we’re thinking that’s not a good “subject” for arbitration.
On the other side of the equation, except with respect to a few substantive areas where a subset of “special subject matter” judges has been selected, the rest are expected to be able to parse their way through the substance of any kind of dispute. So, when it comes to highly technical matters, such as construction issues, using a subject-matter expert arbitrator would seem to be the way to go. That is, it would be if both sides of the dispute are ready to accept some form of “objective” truth. By the way, the court process (and, by extension, the arbitration process) is thought of as a “truth-seeking” process.
So, for Ruminations, the first reason “it depends” relates to the subject of the dispute. Do the parties want to “teach” the technical background to a judge in order that she or he is able to reach the “right” answer? Or, will a judge’s general background be sufficient?
When we’ve been in a room where the judge versus arbitrator question is being discussed (argued?), what we’ve almost always heard are arguments about “process.” That means about cost, time to resolution, availability of discovery (i.e., the ability, before the “trial” or “hearing,” to get the other side and third parties to give you all of their paperwork and tell you everything they know), and things like that. So, another “thing” to which the answer to “which is better” depends on is what you believe about each of the two processes. Discussing that is really the “third rail” we alluded to above.
Generally, those who negotiate agreements have little experience with actual court/arbitration dispute resolution though some (many?) negotiate that “choice” as if they do. What they have in common is that they’ve heard lots of opinions about “which is better” and what they’ve heard is lopsided in favor of the “litigator’s” point of view. That’s unfortunate, not because litigators aren’t in a good position to teach us about the appropriate decision criteria, but because they are litigators. If you go to a surgeon, you’re going to hear how surgery is the “cure.” Classically, law schools teach from “cases,” using court decisions to explain the “law.” So, law students (who grow up to be lawyers) get a very court-centric view of dispute resolution. Add in a healthy dose of “civil procedure,” “evidence,” and trial courses, and graduates are primed for facing judges. They are “armed” with rules of discovery (depositions, requests for interrogatories, requests for production of documents, subpoenas duces tecum, etc.) and think all of those “tools” are the cat’s meow. And, they certainly are, in the right circumstances. On the other hand, while a sledgehammer is a useful tool for heavy construction, and can be used to hang a picture, it isn’t universally wise to use it for every task around the house.
So, what one often hears from litigators about the utility of arbitration is that it is no less costly than a “trial,” takes just as long (if not longer), doesn’t allow for “discovery,” and decisions aren’t appealable. If the first two assertions are correct, then we can’t use either factor as part of our decision criteria because you could hear the following objections to using the court process: “It costs the same as arbitration and takes just as long (if not longer).
So, what about “discovery”?
One of the “nice” things about arbitration is that the parties can make up their own rules. They can call for “discovery” right in their agreement. In their agreement to arbitrate, they can incorporate all of a state’s discovery rules or establish their own set of “abbreviated” rules. They can require a “reasoned” opinion. They can even agree that an appeal can be heard. In fact, the American Arbitration Association has a set of “appellate” rules. Other arbitration services may have their own as well.
None of that is to suggest that arbitration is better than judicial resolution or vice versa, only to point out that we’re singularly unimpressed by the arguments we hear from either “side” about why arbitration is “great” or “don’t go near it with a 10 foot pole.” That leaves us with our own uniformed, but reasoned position: use it when it makes sense to do so. Arguments about the includability of a particular item as part of recoverable operating costs seems like something for which arbitration in front of an experienced person makes sense. So would a disagreement as to whether denial of consent for an alteration was reasonable. We’re less sure about “he said – she said” disputes even though arbitration can be made to mimic the judicial process. After all, if the advantages of doing so aren’t clear, why use the imitation when you can use the original?
Basically, we’re circling back to where Ruminations started today; we think arbitration is a good idea when you want an “expert” to create the outcome. This isn’t necessarily because arbitration is less expensive and it isn’t because it is faster. Both of those things, though probably true in the overall sense, may not be true in any particular situation. It is because parties should want to get to the “truth” whatever that might be. Perhaps knowing that an “expert” (or at least an experienced) arbitrator will decide what the facts “really” are and will know how those facts fit in with the words or your lease or other agreement, will encourage people to resolve the dispute between themselves.
We’re not going to suggest any particular “how to arbitrate” language for inclusion in an agreement. The outfits that provide those services have such language on their websites. What we do suggest is that agreements include a section with such an arbitration provision. We also suggest that the agreements clearly say that arbitration is to be employed only where expressly called for in the agreement and not for resolution of any other disputes. And, with all of that done, Ruminations suggests that the words: “Disputes arising out of this Section are to be resolved by arbitration pursuant to Section ‘X’” be inserted wherever it makes sense to employ arbitration. The bottom line is that it isn’t an all or nothing issue.
What do you think?