Brooklyn Museum – A Defense Lawyer at the Court of Arbitration Discussing Business at his Usual Office Premises (commons.wikimedia.org)
Today’s General Counsel published its Arbitration Trends for 2014. This is a good read.
General counsels were asked why they arbitrate and why they don’t. Respondents said that they arbitrate because (1) it’s required by contract; (2) it’s confidential; and (3) it’s less costly. Interestingly, none of these top responses obtained 50% approval.
When asked why they don’t arbitrate, respondents said they don’t because (1) arbitration can be too quick; (2) arbitrators tend to “split the baby”; and (3) cost and time advantages can be illusory.
Lately, I’ve been thinking a lot about the users (clients) of ADR processes. While Today’s General Counsel has another article summarizing a study showing arbitrators don’t “split the baby”, that perception exists. If the hard numbers show the opposite of perceptions, why do so many users have perception?
What are your thoughts on the state of arbitration? Is arbitration meeting its promise of an alternative to traditional litigation? Or has it become a form of private dispute resolution with the same discovery expenses and motion practices found in traditional litigation? Please share your thoughts.
Is arbitration constitutional? This is the question that Margaret E. Randels tackles in her article that was awarded an honorable mention in this year’s James B. Boskey Law Student Essay Contest on Dispute Resolution. This article is worth reading, because it asks a question that, perhaps, needs asking and that some may have taken for granted. The essence of Randels’ argument is that private arbitration agreements, often times entered into through contracts of adhesion, remove cases from constitutional courts and decisions are made by non-Article III judges.
Among the recommendations Randels makes is requiring mediation. Mediation, according to Randels, doesn’t implicate the same Article III issues as arbitration: there is no decision maker, the parties are reaching a settlement, instead of a judgment, and mediations don’t crowd the court’s docket.
What do you think? Are arbitrations constitutional?
Bloomberg BNA reports that a Texas law firm’s retainer agreement was procedurally unconscionable because the client “was not informed of the advantages or disadvantages of arbitration” including the requirement that arbitration must be brought in Texas.
According to Bloomberg,
After seeing an Internet advertisement, Washington residents Sherrie K. Gorden and Debbie K. Miller separately enrolled in a debt settlement program administered as a joint venture by Texas attorney Lloyd Ward, his law firm and other parties (collectively, LWG). The clients signed a service contract that included a retainer agreement. The contracts stated that the agreements were governed by Texas law, and that any disputes relating to them would be resolved through binding arbitration in Texas. Those provisions were not discussed with the clients, the court said.
After failing to settle the dispute between the attorney and the client, the attorney moved to arbitrate the claim. The trial court denied the motion, ruling that the provision was unconscionable and the appellate court agreed. According to the appellate court, under Washington law, an arbitration agreement between an attorney and client is allowable only if the client has been given “sufficient information to permit her to make an informed decision about whether to agree to the inclusion of the arbitration provision in the retainer agreement.” The appellate court concluded:
“Here, no attorney or attorney’s representative discussed the arbitration provisions with Ms. Miller, or advised her of the rights at stake,” Brown said. “She was not counseled or advised regarding the consequences of relinquishing the legal protections provided by Washington law or of the protections provided by Texas law. Ms. Miller was not informed of the advantages or disadvantages of arbitration, including the requirement she must bring arbitration claims in Texas.”