How do people end up in arbitration for civil matters? How does arbitration work, and what weight does it carry? Does the agreement to enter into arbitration preclude the plaintiff (i.e., the one asking to enter into arbitration) from going to court later if the arbitrator’s verdict is unfavorable*? *If not, can the arbtrator’s decision at least be contested (perhaps in a court of law) on technical merits on the grounds that proper procedures were not followed?
Bonus Round: Has any SD actually been through the process? Please share your experiences.
The parties agree to arbitrate, either in an underlying contract, or by agreement after the dispute has arisen. Sometimes the agreement to arbitrate is a condition of purchase, or of membership in an organization.
An arbitration award will be enforced by the courts in almost all situations. (Yes, there are a few, rare exceptions.) A disappointed arbitration participant is usually stuck with the award.* Although serious failures in how the arbitration took places can (rarely) lead to a court challenge, it is tougher than appealing from a trial court decision. (*There are such things as non-binding arbitrations, but they are far from typical.)
Yes, I have been involved in arbitrations. Time and confidentiality concerns prevent me from fully discussing them here.
I agree with Random. I would add that there are a lot of different situations in which arbitrations that are commonly held. Union arbitration; NASD (now FINRA) arbitration; no-fault arbitration – to name a few. If you share what sort of dispute you have that may end up in arbitration, it will be easier for people to share relevant arbitration experiences.
In Illinois (at least Cook and DuPage counties - I believe the entire state), many categories of civil actions filed in court go to mandatory, no-binding arbitration. There is a max dollar limit - they increased it since I did them. It may be $15K or more now. Lots of car accidents and contractual disputes.
Matters are heard by a panel of 3 lawyers who issue a decision. Either party can reject the arbitration decision by paying a fee - a couple of hundred $ essentially to pay for the costs of the arbitration.
It was initially started to get rid of a substantial backlog, and was quite successful in that. I used to serve as an arbitrator until a new S.Ct. rule prohibited me from doing so. My wife still does.
Lots of contracts have arbitration clauses in them. In a few circumstances, arbitration clauses are prohibited. Otherwise, these clauses are generally enforced.
Sometimes the parties will agree, again as **Random ** said, to arbitrate a dispute after it arises.
As **Dinsdale ** points out, there are some court-annexed arbitration programs that are mandatory, but non-binding. Non-binding arbitration is really a different animal from run-of-the-mill binding arbitration and serves different purposes.
There are lots of styles of arbitration. The American Arbitration Association has several sets of rules, each for a different kind of arbitration. There are other organizations that also offer rules. Sometimes the agreement provides the rules. Weight? The idea behind arbitration is that it’s supposed to resolve the dispute.
In binding arbitration, yes, it almost always does.
Yes. The typical grounds for challenging an award are:
Arbitrator bias. I actually helped get an unfavorable award set aside once based on the arbitrator’s undisclosed bias in *favor * of my client.
Failure to comply with the arbitration agreement. If the arbitrator exceeds her authority the award can be set aside. One issue that comes up a lot is which issues are submitted to the arbitrator. In one case, I inherited a case after my firm’s real estate department finished “arbitrating” it. There was a provision in the contract that said the winning party gets attorney fees. The arbitrator refused to award fees, and the real estate guys were too chicken to brief or argue the issue before the arbitrator. I was forced to attack the award because the arbitrator had exceeded his authority by deciding an issue (entitlement to attorneys’ fees) that was not submitted for arbitration.
Manifest disregard of the law. This is very hard to establish.
Here’s an article about why it’s not a good idea to challenge an arbitration award without a good reason: Home - Eversheds Sutherland
If you have an arbitration agreement and sue instead, the opposing party can move to compel arbitration. Once you have an award in hand, every jurisdiction has a method of turning the award into a judgment.