By: Howard S. Goldman, Esq.
People who have been forced to litigate a dispute in court know the exorbitant expense and delay associated with this judicial procedure. Arbitration, an alternative method of dispute resolution, has become an increasingly attractive option to would-be litigants. In many instances, arbitration is a less expensive and faster means of achieving final disposition of a dispute. Before opting for arbitration, however, one should consider the relevant factors and the methods by which arbitration is implemented.
Arbitration is the settlement of a dispute by one or more impartial persons for final and binding determination, according to the American Arbitration Association (“AAA”). A majority of states, including Massachusetts, have enacted a uniform legal framework for arbitration procedures embodied in the Uniform Arbitration Act (M.G.L., Ch. 251).
The following issues must be addressed by parties considering arbitration proceedings:
1. Agreement to Arbitrate 2. Forum and Selection of Arbitrators 3. Applicable Rules and Presentation of Case 4. Arbitration Award and Judicial Review.
Agreement to Arbitrate
Arbitration is not a right, but rather, an agreement between the disputing parties. This agreement can be effectuated by the parties in the form of a future dispute arbitration clause in a contract or, where the parties did not provide in advance for arbitration, by the joint submission of an existing dispute. Written clauses should (a) state that a neutral arbitrator in the relevant field should be selected, (b) be broad enough to include any controversy arising out of a particular contract, and (c) be binding upon all parties subject to the hearing. Finally, a provision for attorney fees to be awarded to the successful party might be a method to encourage resolution short of a complete hearing.
Forum and Selection of Arbitration
There are many private and quasi public agencies eager to conduct arbitrations, but the AAA is the most established and well organized. The disputing parties should agree in their contract to arbitrate in a forum which is mutually convenient, neutral, and has the most favorable substantive law in the disputed area.
Selection of the arbitrator(s) can be provided for in the contract by establishing minimum requirements for professional expertise and arbitration experience, and a method by which the total number and choice of arbitrators is made. For example, disputes under a certain dollar amount may necessitate only one arbitrator chosen jointly by the parties from a list provided by the AAA. Finally, provision should be made for splitting arbitration fees, including fees for filing, administrative review, and cost of having the arbitrators adjudicate.
Applicable Rules and Presentation of Case
Unlike judicial trials, arbitration hearings do not follow the strict rules of procedures and evidence, are more informal, simplified, and are scheduled well before a trial date would have been set. The AAA has set the standard for certain procedural and evidentiary rules which provide for modified pre-hearing fact finding, or discovery, to include request for production of various relevant documents. These arbitration procedures generally exclude depositions of witnesses and asking of interrogatories.
For the hearing, each side should prepare a written summary of the facts, issues of dispute, the law applied to the dispute, and a copy of all exhibits to be presented. Opening statements should be given which clearly, but briefly, describe the controversy and indicate what is to be proven. Like judicial trials, the most effective evidence is direct testimony of people who have actual knowledge of the dispute or who are experts in the relevant field. Since most arbitrators are knowledgeable in the disputed area, effective presentations should be more focused on the underlying dispute and not on procedural matters which so often predominate judicial hearings.
Arbitration Award and Judicial Review
The purpose of the arbitration award is to dispose of the controversy finally and con- clusively. Unlike a judicial decision, arbitration awards involve a monetary award only, not orders to perform certain tasks. Generally, awards consist of a brief direction to the parties, without a well reasoned written opinion explaining the reasons for the decision because the parties have looked to the arbitrator for a decision, not an explanation.
The power of the arbitrator ends with the making of the award. Unlike a court judgment which may be modified by Motions for Reconsideration or for New Trial and subsequent oral argument, an award may not be changed by the arbitrator once it is made unless there is obvious miscalculation of figures or an award made on matters not submitted to arbitration. Moreover, there is a legal presumption that arbitrators properly decide those matters which have been presented. Court review of an arbitration award has been limited in order to accord finality in a timely fashion.
Conclusion
If arbitration is agreed to by the parties, a decision should be rendered more quickly and at less expense than a judicial trial, but with the same finality. Be sure to include an arbitration clause in your next contract.
The Boston metro lawyers at Goldman & Pease specialize in business law, real estate law, condo law, civil litigation, and estate planning and serve the greater Boston metro region including Alston, Arlington, Belmont, Brighton, Brookline, Cambridge, Canton, Dedham, Dover, Milton, Natick, Needham, Newton, Norwood, Waltham, Watertown, Wayland, Wellesley, Weston, West Roxbury, Westwood, and all of Massachusetts.
