Arbitration Not Always Best Option

Daily Herald (Arlington Heights, IL), February 8, 2016 | Go to article overview

Arbitration Not Always Best Option


For nearly two decades private arbitration of business disputes has been promoted as a preferential alternative to traditional courtroom litigation. Arbitration became such a wildly popular concept that many drafters of business contracts began to automatically include mandatory arbitration provisions in those contracts without giving adequate consideration as to whether arbitration would serve the company's best interests in the event of a dispute. While arbitration does have its benefits under certain circumstances, here are five potential disadvantages that business owners should be aware of before inserting mandatory arbitration clauses into contracts.

Cost

Arbitration was originally promoted as a way of keeping litigation costs in check by means of limited discovery and an expedited hearing. However, arbitration presents costs that traditional courtroom litigation does not such as arbitrator fees and higher filing fees. Serving as an arbitrator has become a lucrative practice area for many attorneys and former judges with rates typically in the $500 per hour range for commercial disputes. Assuming a moderately complex business dispute, it is not unreasonable that an arbitrator could incur $40,000 in fees from start to finish.

Now consider that some arbitration provisions call for the selection of three arbitrators to decide the case which means that the arbitrator fees would increase to $120,000. Meanwhile, the judges in state and federal court will hear the case at no charge. Filing fees are also much higher in arbitration and can exceed $7,500 depending on the amount in dispute between the parties.

Filing the same case in state or federal court would cost less than $500.

Lack of discovery

The arbitrator will be able to summon witnesses via subpoena to appear before the arbitration panel to give testimony or produce documents.

If a witness fails to comply with the arbitrator's subpoena the parties must seek enforcement of the subpoena in the federal court for the district in which the arbitrators are sitting and asking the federal court to enforce the subpoena.

However, federal rules limit the jurisdictional reach of a court's subpoena power. Thus, parties engaged in an arbitration hearing in Chicago would not be able to subpoena witnesses or relevant documents from a nonparty located in Texas for example.

This limitation on the means to conduct discovery can impair the ability to develop and present an effective case.

Inconsistency

Business owners generally assume that the arbitrator deciding their dispute will apply the law and rules of evidence just as a judge would do. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Arbitration Not Always Best Option
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.