Arbitration is a form of voluntary or contractual process for resolving legal disputes outside of the court system. In arbitration, disputes are resolved by an arbitrator or a panel of arbitrators (sometimes referred to as "neutrals" or, collectively, an "arbitration panel"). An arbitration concludes when the arbitrator(s) or arbitration panel render a decision, typically referred to as an “arbitration award.” Arbitration awards are final and binding; they also are enforceable in court. Courts are highly deferential to the arbitrator(s) or arbitration panel and typically confirm arbitration awards. However, in rare circumstances, a court may vacate an arbitration award.
  • Advantages and Disadvantages of Arbitration

There are advantages and disadvantages to arbitration. For parties that prefer a voluntary and private process, arbitration has some advantages. For example, parties can decide the scope of the arbitration and powers of the arbitrator. This may reduce time and cost to reach a decision. Parties can also choose the arbitrator, and can select arbitrators with expertise in the industry or subject matter of the dispute. Arbitration is also a private proceeding without the public filings associated with going to court. However, parties to an arbitration typically waive jury trial rights, and some might prefer public courtroom proceedings to deter wrongdoing or the public jury trial as a stronger inducement to settlement.  

Arbitration is open to anyone but often is triggered in the context of contract disputes. Indeed, many contracts include arbitration clauses because the arbitration process is often more efficient and cost-effective than protracted litigation. If you are a party to an agreement containing such a clause, or if you otherwise enter into an enforceable agreement to arbitrate a dispute, then you likely will be compelled to arbitrate any such dispute by a court considering or adjudicating the relevant contract or agreement.

  • Arbitration Forums

There are several organizations that offer arbitration services, both domestically and for international arbitrations. These organizations include the American Arbitration Association (the “AAA”), JAMS (f/k/a Judicial Arbitration and Mediation Services, Inc.), and the International Chamber of Commerce (“ICC”). There are also industry-specific organizations that offer arbitration services such as the Financial Industry Regulatory Authority (“FINRA”) and Independent Film and Television Alliance (“IFTA”). These organizations provide a set of rules and procedures to conduct arbitrations, which may vary depending on the type of dispute. However, a litigant need not use an organization such as the AAA or JAMS to conduct an arbitration. While "organizational arbitration" typically is how arbitration is conducted, arbitration may also proceed before private individuals, typically attorneys or those with particular expertise, selected by the parties.   

  • The Arbitration Process

Arbitration has stages similar to a court proceeding, but typically involves fewer steps and procedural obstacles. Arbitration usually is commenced upon the filing of what is referred to as a "Statement of Claim" by an aggrieved party referred to as the "Claimant."  As with a legal complaint or lawsuit, the Statement of Claim explains the basis for the dispute and sets for the nature of the relief sought by the Claimant. The Statement of Claim is then served upon the counterparty referred to as the "Respondent." Service of the Statement of Claim customarily is accomplished by the arbitral organization. The  Respondent then files and serves what is referred to as a “Statement of Answer” responding to the claims and allegations set forth in the Statement of Claim, including defenses and counterclaims, again, similar to an answer filed in response to a complaint or lawsuit.

After the parties have filed their respective pleadings, they typically will select an arbitrator or arbitrators to hear their dispute from a list of arbitrators provided by the arbitral organization, or as otherwise agreed. Prior to going to arbitration, however, the parties may first be required to participate nm mandatory mediation in order to ascertain whether the dispute may be resolved or settled without the need for further proceedings. If not, the selected arbitrator or arbitrators and the parties will then agree on procedures for exchanging evidence, presenting arguments and/or motions and conducting hearings. Usually, any evidence that may be admissible in the context of a court proceeding also is admissible in arbitration. However, unless the parties otherwise agree, discovery in the context of arbitration is relatively limited. The arbitration concludes when the arbitrator(s) or arbitration panel renders an arbitration award. 

  • Vacating an Arbitration Award

Courts will rarely vacate an arbitration award. In the absence of manifest disregard of the law or the evidence by the arbitrator(s) or arbitration panel, an undisclosed conflict of interest, significant and demonstrable due process violations or the failure to the arbitration award rendered to resolve the parties' dispute, an arbitration award will, in all likelihood, be upheld or affirmed.   

At Law Offices Stuart L. Melnick, LLC, we regularly represent clients in the connection with a wide variety of arbitration proceedings, principally those conducted before the AAA, FINRA and JAMS.  Whether you are a Claimant or Respondent in an arbitration, you will need knowledgeable and experienced arbitration counsel. Please contact us to discuss.