Your company has a dispute with a vendor or customer, and the terms of the agreement between the company and the person you are about to sue provide for binding arbitration. It is common for contracts to have arbitration provisions. Arbitration is viewed as less expensive and more expeditious than litigating a dispute in court. Arbitration provisions also allow the parties to agree that consequential (e.g. down time, finance fees, lost profits) and/or punitive damages cannot be awarded. Arbitration also gives the parties more control in deciding who will adjudicate their dispute, rather than having a judge randomly assigned to your case. There are many positives to arbitrating a dispute.
The only real downside that comes to mind is that arbitration awards are extremely difficult to set aside. In California, an arbitration award will stand unless the party challenging the decision can show (1) "the award was procured by corruption, fraud, or other undue means"; (2) "the rights of the party were substantially prejudiced by the misconduct of a neutral arbitrator"; or (3) an arbitrator failed to make a timely disclosure of a conflict which would be a ground for disqualification. Cal. Civ. Proc. Code § 1286.2. The Federal Arbitration Act includes similar limited grounds for vacating an award, with "evident partiality or corruption in the arbitrators, or either of them," being one ground. 9 U.S.C. § 10.
Consequently, companies assume a significant risk when choosing an arbitrator to decide their dispute. Arbitrators also charge rates ranging from $350 – $625 per hour. It behooves the company and its counsel to research the prospective arbitrators before settling on one or a panel of arbitrators. Before the Internet, legal counsel would rely on word of mouth, and seek input from attorneys at their firm. With the Internet and the professional networking site, LinkedIn, there is much more information available.
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