Is Arbitration Working?
"In a 2020 national survey, civil litigators and jurists ranked arbitration last on fairness and personal preference," writes Daniela Holmes of Lynn Pinker Hurst & Schwegmann.
November 14, 2024 at 11:00 AM
5 minute read
Alternative Dispute ResolutionToday, alternative dispute resolution is commonplace. Back in 1987, when Texas’ ADR Act was passed, ADR was “alternative” in the word’s modern connotation: a little on the edge—not radical, but by no means traditional. Arbitration is supposed to be an expeditious means to resolve contractual disputes by jury trial. No one knew then how much arbitration would embed itself into the business world’s contractual relationships. Almost reflexively, arbitration provisions are found in employment agreements, law firm-client engagement letters, and consumer contracts (to name a few).
In a 2020 national survey, civil litigators and jurists ranked arbitration last on fairness and personal preference. Conversely, in the same survey civil litigators and jurists “ranked jury trials as the least predictable, slowest and least cost-effective procedure, attorneys on average viewed jury trials and second only to mediation as the fairest form of case resolution.”
This survey, conducted by LSU Law at the request of the ABA Commission on the American Jury, confirms anecdotal evidence from litigators and clients who are by and large dissatisfied with arbitration, and “all respondent groups, both judges and attorneys, on average viewed mediation as the most preferred form of case resolution.”
At times, courts also reflect on problems with arbitration and acknowledge that the notion that arbitration is superior or even comparable to litigation, including a false belief that “contractual arbitration is relatively low cost and efficient when compared to a judicial proceeding. That assumption overlooks the thousands of individuals who … would resolve their disputes at much less cost and more quickly in small claims court, and, in many cases in municipal or superior court.” Moore v. Conliffe, 7 Cal. 4th 634, 660 (1994).
|
Consider Contractual Alternatives
In the face of dissatisfaction, here are some contractual provisions to consider in the alternative or in addition to the commonplace arbitration clauses we have become accustomed to seeing. These can be used independently or in combination.
- Texas Business Courts: The newly created system has jurisdiction to hear certain types of disputes, including “an action that arises out of a contract or commercial transaction in which the parties to the contract or transaction agree[]” and the amount in controversy “exceeds $10 million.” Gov’t. Code Section 25A.004(d)(2). This statutory provision allows contractual parties to proactively (or retroactively) select the Business Court as the preferred forum to hear their contractual disputes if the amount in controversy exceeds $10 million. Such forum selection clauses, permit parties to avoid both district courts and arbitrations and should be considered by contractual drafters for all transactions over $10 million. Although the Business Court system in Texas is new, and its success remains to be seen, the structure offers many benefits for litigants. The judges in the Business Court are sophisticated and equipped to handle complex matters; they have the capacity and availability to be responsive to litigants and move cases efficiently. And in contrast to arbitrations—the Business Court will provide written opinions and establish precedent to increase the predictability of outcomes and its decisions are subject to appellate review to correct errors of law or fact.
- Mandatory Mediation: In the ABA survey, all civil litigator and jurist survey respondents agreed that mediation was the most predictable, fastest, most cost-effective, and ranked highest on fairness. Thus, it is no surprise that those same respondents most preferred mediation overall. Given all the positive attributes of mediation, and potential benefits to all parties, contractual drafters should consider including a mandatory mediation provision for any dispute arising from the contract, independent of court-imposed mediation. This could be drafted as a stand-alone provision or used in connection with a forum selection clause. Drafters should also consider imposing an early mediation timeline. Early mediation and resolution can help parties avoid the expense of protracted litigation.
- Jury Trial Waivers: Again, all civil litigator and jurist survey respondents to the ABA survey agreed that jury trials ranked lowest on predictability, speed, and cost-effectiveness. The same group also significantly preferred bench trials to arbitration both overall and specifically in terms of fairness. Thus, contractual drafters should consider including jury waivers as an arbitration alternative. In particular, this is a useful provision if concerned with the slow speed and cost ineffectiveness of jury trials. Avoiding a jury can increase the predictability of an outcome and bench trials are ranked higher in fairness over arbitration because they are more transparent, and have pathways to reverse errors, unlike arbitrations. In combination with a mandatory mediation or business court forum selection clause, parties can dramatically improve their prospects of resolving disputes fairly and cost-effectively compared to arbitration.
You are not alone if you’re feeling dissatisfied with the experience of arbitration, but there are alternatives. Consider using one or more of these provisions when negotiating your contracts going forward, or renegotiating and drafting addendums to include in your current contracts.
Daniela Holmes is an attorney focused on commercial litigation with Lynn Pinker Hurst & Schwegmann in Dallas.
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllJust the Tip of Iceberg as Bellwether Plaintiffs Get $10.3M in Arbitration
5 minute read'Blunder': Litigant Compels Arbitration, Then Seeks to Vacate $5.5M Award
5 minute readTrending Stories
- 1Senate Democrats Advance 4th Circuit Pick Ryan Park’s Nomination
- 2Judge Rejects Meta’s Plea to Send FTC Antitrust Suit to Trash Heap
- 3How Have You Fared in 2024? Share Your Insights in the Managing Partners Survey
- 4Court Rules Mere Conduit Defense Not Suitable for a Motion to Dismiss
- 5Ironclad Officially Launches New Gen AI Assistant Jurist
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250