We live in a world of over 7 billion people. One thing that is constant is a dispute. But with disputes come deliberate attempts at resolving them. Over the years, we have seen courts as a preferred destination. The times are fast changing. Arbitration is now taking center stage.
Arbitration is a fascinating process. It is referred to by lawyers as a “creature of contract.” Perhaps a better way to describe it is as the red-headed bastard offspring of a secret union between contract law and civil procedure.
Arbitration has a number of benefits over litigation, some of which are beneficial to businesses and some of which are neutral.
Neutral Considerations
It is less expensive
A straightforward trial often costs more than $50,000. These days, civil trials are essentially becoming extinct due to expense. Particularly in civil cases, jury trials are rather uncommon. They need a lot of preparation, and that just costs a lot of money. Most people won’t recover enough money from the lawsuit to make it worthwhile.
Contrarily, arbitration is typically less expensive and involves less planning. The laws governing evidence are typically a little more lenient.
Both the consumer and the company benefit from this.
It’s Faster
A civil lawsuit can take anywhere from one to five years, depending on its complexity, from the time it is first filed until the conclusion of the trial.
Contrarily, the procedure of arbitration can take a few weeks to a few months. Spending less time equates to saving money.
Expertise of Arbitrator
As opposed to a trial court judge, the arbitrator might have more expertise.
Trial court judges are not frequently specialized, especially in small counties. They might not have ever encountered that specific kind of instance. They could be aware of the law or not.
In contrast, arbitrators deal with numerous cases similar to yours each year and may be subject matter experts in that particular area of the law.
Arbitration is often confidential
Trials are open to the public. Whatever is disclosed becomes public knowledge.
On the other hand, even the fact that you attended arbitration may be a matter of confidentiality, depending on what the arbitration contract or rules you agreed to say. For litigants, this can occasionally be advantageous.
Positive Consideration for Consumer
it is faster and cheaper
Some data indicates that in arbitration, consumers perform better than companies.
This is contested, but even more cautious research demonstrates that when consumers really contest something in arbitration, they actually have a greater chance than they would at a civil trial.
The consumer typically saves money on the upfront fees.
Corporations frequently shoulder the majority of the upfront fees for arbitration in an effort to avoid judges rejecting their enforcement as being unconscionable. For claims under $10,000, the consumer’s expense might frequently be as little as $100. A state court file might easily cost more, and the filing fee in federal district court is already above $400.
Positive Considerations for the Corporation
Arbitration clauses are becoming more effective at stopping class actions.
This is really offensive to the customer. Nobody will sue the corporation or even hold an arbitration hearing if it defrauds 5 million consumers of $5 each. And it amounts to $25 million in corporate funds.
b. Arbitration agreements can now ban class action arbitration in addition to class action lawsuits. Additionally, as a requirement of employment, businesses may legally compel you to sign these arbitration agreements (including waivers).
It’s common for arbitration to be private. You are not allowed to discuss the outcome of the arbitration, win or lose. You cannot encourage the millions of additional victims to seek arbitration as well. You are not allowed to inform anyone if you win a million dollars. This is great news for the company, which avoids a PR disaster.
The beginning of arbitration might be challenging.
Arbitration is, once again, what lawyers refer to as “a creature of contract.” When you signed the first contract, you agreed to have everything arbitrated, including the procedures required to enter arbitration.
i.For example, if the company cheated you out of $100, and they offer you $200 to make up for it, even in the form of store credit, you have to accept it or you’ll lose in arbitration. This is another example of accepting a claim for twice as much as you are asking for or suffered damages for.
You might need to attend arbitration in person at a certain location if you want to contest it. And due to scheduling, that may occur across a number of days spaced out over a number of weeks. Even if there is a clause that pays all of your costs… if you win—if you live in New York and must file a lawsuit in California—this is prohibitive.
This is intentional. You are more inclined to accept the defeat or give up the more challenging it is for you to enter arbitration.
In essence, there is no appeals procedure.
There are just a few extremely specific reasons to have an arbitral award annulled after it has been made.
Even worse, there aren’t enough grounds to overturn an arbitration decision due to mistakes in fact or law. The Supreme Court has accepted “improvident, even silly factfinding” by arbitrators. Therefore, even if the arbitrator misapplied the law or even if the arbitrator misunderstood what the law was, you can still be in trouble if the arbitrator misheard you or even outright ignored you.
Even if the contract is illegal, corporations can drive you into arbitration nearly entirely without your awareness, and you are stuck with the results.
The Supreme Court has consistently supported arbitration provisions in “adhesion contracts.” In law school, we made fun of the fact that they are called that because you may attach them to passersby. Adhesion contracts are those “terms and conditions” that you click “I agree” to when you join up for most things; you never read them.
I. When you registered for Quora, you consented to an adhesion contract. In truth, an arbitration clause is included in Quora’s terms and conditions.
How many of you have ever read the entirety of the “terms and conditions” before clicking “I agree”? Legally, your response of “I agree” assumes you did. The truth doesn’t matter legally.
Even if the contract you signed is invalid or otherwise unenforceable, you could still be stuck in arbitration hell while the arbitrator determines whether it is. Also, keep in mind that violating or misapplying the law does not give you the right to have the award vacated.
Therefore, even if you went to arbitration and the arbitrator said, “Well, if they stop your heart, technically you aren’t alive, so they can have your kidneys, and I don’t see any law that says otherwise,” it might not be enough for a court to overturn the award. This is because if you click “I agree” to an adhesion contract that allowed a third party to harvest your organs while you were still alive, and you went to arbitration.
All of this is done in an effort to persuade you, the customer, to settle rather than file a lawsuit against the business. Additionally, they will probably receive a higher settlement than an award or a lawsuit because they have the authority on their side.
The Federal Arbitration Fairness Act is one such piece of legislation that Congress is considering, but it has been shot down or killed in committee for more than ten years. Corporate lobbyists have been using every tool at their disposal to try to eliminate or neutralize it.