In scanning the fine print in contractual agreements requiring your signature, have you noticed the arbitration clause now being incorporated into many contracts?
Typically, such a clause states that, if a dispute of any kind arises out of that transaction or association, you or the other parties involved may resolve the matter through arbitration.
“Many businesses are deciding not to go through the courts to resolve disputes because of the length of time and expense involved in a courtroom situation and the adversarial nature of litigation” says Michael B. Hendler, an attorney and managing partner with Goldman & Rosen Ltd. in Akron. “Instead, many companies have employees, suppliers and major customers sign agreements with arbitration provisions.”
Arbitration clauses — for decades a standard in collective bargaining agreements and in the securities industry — are now used in myriad business situations. In a 1998 study by Cornell Institute’s School of Industrial and Labor Relations, 90 percent of the corporations surveyed had used mediation, arbitration or both, and the majority preferred these dispute resolution alternatives to litigation.
Mediation involves hiring a neutral mediator to help you and the other party reach a solution, while arbitration is for situations in which the parties cannot reach an agreement even with a mediator’s help. This dispute resolution alternative can be used in almost any type of dispute, such as discrimination, harassment or employment termination, and other tort claims — but there are exceptions, such as issues concerning real estate, Hendler says.
Arbitration can be accomplished in several ways, using the rules of organizations such as the American Arbitration Association, or under the statutes of the state of Ohio, which provide mechanisms for appointing an arbitrator.
“Arbitration is less expensive because the hearing is informal — you don’t need to follow the strict rules of evidence applicable in a courtroom situation,” Hendler says, “and you can have an arbitration in a matter of weeks, depending on the complexity of the case.”
Unless there have been clear abuses of authority by the arbitrator, arbitration is final — there is no appeal.
The caveats, says Hendler, center on proper forum — whose courts will be used to determine the outcome — and jurisdiction of law (if the other party to the contract isn’t from the same area of jurisdiction, conflict of law issues may result).
“Attorneys drafting such agreements will normally want to use the law applicable in the state their client is from, but that might not be in the other party’s best interest,” Hendler says. “These are both very important considerations.” How to reach: Goldman & Rosen Ltd., (330) 376-8336
Victoria Reynolds is a contributing editor to SBN Magazine.
Brokering the best solution
Using the established rules of groups like the American Arbitration Association, you can arbitrate a settlement (have a third party make a decision) or mediate (have a third party broker a decision).
In arbitration, attorneys for both sides gather facts and summarize their cases in a brief. Both parties to the dispute mutually approve the arbitrators assigned to the case (typically a panel of three). At the proceeding, witnesses are examined, cross-examined and asked direct questions by the arbitrators.
After closing arguments, the arbitrators issue their ruling (usually within 30 days) stipulating how the matter should be resolved.
For more information, contact the American Arbitration Association at (800) 778-7879 or www.adr.org.