How To Make Arbitration “Worth It” Again

Arbitration has been the talk of the town amongst the legal community this week, and really, it should be.

One could say that arbitration is at a crossroads these days.   Over the years, the expenses and delays associated with arbitration have rivaled litigation.   From a personal level, I can tell you that arbitration is simply feeling more and more like ordinary litigation.   In recent arbitrations, the parties have engaged in a substantial amount of discovery, and the proceeding itself felt wrapped in a court-like formality with objections to evidence made left and right.

And let’s not even mention the costs associated with an arbitration.   I recently filed for arbitration with the American Arbitration Association paying a $4,500 filing fee, and then, just a few months later being asked to pay another $4,000 for our share of the arbitrator’s fee.   Even the AAA knows their fees are out of hand, as I’ve recently gotten a survey phone call from them where it seems the AAA’s administrative nightmare is looking for answers.

After all of this, you may think I’m opposed to alternative dispute resolution?   Well, I’m not .   Not yet.

Similar to the online discussion about arbitration this week, I believe there is a way to make arbitration worth it for the parties (despite the natural slippery slope tendency of things).   It requires some extra front end work and legal jargon, and yes, counsel from an attorney to predict which type of ADR situation will work best for your matter.

Part One:   Conversations on What’s Wrong (or Right) with Arbitration

There’s no shortage of complaints about arbitration (we’ve even done it!)   Just this week, the WallStreet Journal published this on its Law Blog:  Has Arbitration Become More Burdensome than Litigation? It starts with this revealing statement:

Arbitration was once known as a faster, cheaper, better way to settle disputes.

But has the process become as bogged down as conventional litigation?

And look at some of the comments to this article; scathing lawyers, of course:  “Of course Arbitration has become hugely expensive;” and “Arbitration is extremely more expensive than litigation;” and, my favorite, “So lawyers complicate arbitration and make it way more expensive.  Is this news?”

Are the criticisms true?   The National Arbitration Forum would argue they are not, and they even have a website dedicated to the issue:   Arbitration-Truth.com.   Pointing to surveys and empirical studies like one performed by John Chalk, Sr. of for the Texas Bar ADR Section, these anti-critics argue the “empirical studies do no support the current criticisms of arbitration.”

Whose right?   Well, both the critics (like me) and the anti-critics are probably part right, and that’s exactly why folks should look at their options in making arbitration work for them, and “worth it” again.

Part Two:  Tips to Make Arbitration Worth It

So, what can you do to make the arbitration process actually work as intended?    Here’s the good news – since the rules of arbitration are left to the parties, you can do a heck of a lot.   And where do you start setting these rules?   Your contract.

Take a look at the recent article by our friend Alan Haley on the Louisiana Construction Law Blog at Blogspot:  Should Arbitration be a Standard Clause in Construction contracts? Alan comments that he advises clients to “tailor arbitration clauses…to their specific desires and the needs of the parties.”   Want more specific instructions on how to tailor the contract – check out the related post here.

Another blog post this week helpful to those looking to make arbitration right again with better contracting comes from one of my favorite blogs, Adams Drafting (we’ve talked about this blog previously here).    Interestingly, Ken Adams refers to an article on law.com and not the one on the WSJ, but it’s just a different shade of gray.

Ken highlights the importance of making the ADR clause work specifically for you with the following:

Whatever arbitration clause you use….commentators on arbitration generally recommend that you supplement it.

Part Three:  Choose Your ADR Company After Thinking About It

I’ll make this point very quickly.   Do not choose the American Arbitration Association just because it’s the company you’re heard of.   The AAA has plenty of competition, and in most cases, the competition will be cheaper and offer a more pleasant ADR experience.    In fact, the AAA uses many of the same arbitrators as these other companies.

Look around and ask your lawyer about their positive and negative experiences with these companies, and select one that works.  It might be the most important thing you can do to make the arbitration process worth it.

A Great Blog Focused On The Importance of Words

Ken Adams is the leading authority on modern and effective contract drafting, and I’m one of the many happy readers of his blog, Adams Drafting.

The blog focuses entirely on words, and how they effect the meaning of contracts.

Too frequently, lawyers draft contract documents by resurrecting a form from their database and changing party names.   While a lawyer may spend hours inspecting a contract’s wording when a dispute has arisen, they infrequently spend time inspecting the words when drafting the agreement.

Ken examines words and phrases used frequently in contracts, and discusses the problems they may cause.

Ever think about the word “specific” in a contract?   Ken’s post on the word specific discusses how it “more often than not…serves no purpose.”

Or what about the combination of words in a contract…we frequently see the terms “fraud” and “intentional misrepresentation” used in a contract together.  Ken asks, doesn’t these two words mean the same thing?  And if so, why use both of them?

The Adams Drafting blog also has good tips on contract layout issues, like how to number pages and what to put in a contract’s header and footer.

Words are so important to the practice of law, and as such, every lawyer should at least be thinking about their use of words.   Adams Drafting is a great resource for this.

But Adams Drafting is not just for lawyers.  Contractors and those in the construction business sign contracts left and right – sometimes they write those contracts, sometimes they negotiate its provisions, and sometimes they sign a provided form agreement.   They too can benefit from this blog’s discussion of words, and how they can affect agreements.