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The Evils of Arbitration

Be wary of arbitration. Organizations like the American Arbitration Association (AAA) bill themselves as being a more cost- and time-efficient alternative to traditional litigation cases in front of trial courts. These claims are simply not true. While some arbitration cases may be resolved faster, that is the only benefit arbitration offers.

To start, arbitration is not more cost-efficient for any party. As opposed to a nominal filing fee in a traditional court, arbitration organizations like the American Arbitration Association charge large fees for the use of their organizations. These fees include separate hefty fees paid to the arbitrators themselves. The more complex the case, the more arbitrators needed and the higher the fee each arbitrator receives.

The second pitfall of arbitration is there is no guaranteed right to receive the reasoning for the decision made by the arbitrators. The American Arbitration Association’s default rule is that arbitrators “need not render a reasoned award.” In layman’s terms, this means the arbitrator could flip a coin as his basis for deciding the case, and the parties would never know. All the while, the parties are paying extremely high fees to the arbitrator for the privilege of a coin-flip decision.

The final nail in the coffin for arbitration is the lack of oversight or right to appeal an arbitrator’s decision. The American Arbitration Association admits the “AAA can only handle an appeal of the arbitration award if the parties have agreed that an appeal is allowed. There is no right to appeal in arbitration like there is in court.” Fat chance of getting the winning party to agree to an appeal of their win. So that coin-flip decision stands.

To summarize, arbitration costs more than traditional litigation, the reason for the decision reached is not required to be given, and the decision is unappealable. Therefore, an arbitrator could roll out of bed, decline to review the parties’ briefs or engage with the facts and arguments made, make a decision based on his mood that day, and be guaranteed his decision will go without oversight, all while collecting a hefty paycheck for five minutes of work.

Unfortunately, you will likely never find yourself in the position of choosing whether to arbitrate a claim or file a traditional lawsuit. A strong push has been made in recent years by arbitration organizations to convince businesses to resolve their disputes through arbitration. This means the lease agreement you sign with your landlord, the contract with your lawn service company, waivers for your kids’ summer camps, etc. all likely include binding arbitration clauses. These binding arbitration clauses, always buried deep within the legalese of the “terms and conditions,” remove your right to avoid arbitration without you even knowing it. You are then stuck in arbitration with an arbitrator who has likely seen your opposing party countless times before.

Knowing a binding arbitration agreement is included in any contract, waiver, or agreement is important before signing the agreement. Shinners & Cook, P.C. has experienced attorneys who draft and review contracts every day. Our Firm also has experienced attorneys who have appeared before arbitration organizations giving you a better chance to succeed in the uphill, costly battle that arbitration entails.

Should you find yourself bound by an arbitration agreement or seeking to avoid being bound to arbitration, contact the attorneys at Shinners & Cook, P.C. today at 989-799-5000. We are ready and able to assist you in receiving fair treatment from an unfair process.