{"id":891435,"date":"2016-12-09T10:40:44","date_gmt":"2016-12-09T17:40:44","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=891435"},"modified":"2016-12-09T10:41:15","modified_gmt":"2016-12-09T17:41:15","slug":"arbitration-risks-arbitration-not-necessarily-better-faster-cheaper-litigation","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/arbitration-risks-arbitration-not-necessarily-better-faster-cheaper-litigation\/","title":{"rendered":"Arbitration Risks: Why Arbitration is Not Necessarily Better, Faster, or Cheaper Than Litigation"},"content":{"rendered":"

Mike Gaddis, Ph.D., Taj Clayton and Steven H. Stodghill | Fish & Richardson PC<\/a> | November 30, 2016<\/p>\n

There is a widespread belief that arbitration is unequivocally a better, faster, and cheaper alternative to litigation.\u00a0 According to some advocates, the advantages of arbitration include (1) saving money by streamlining procedure and limiting discovery; (2) reaching a quicker resolution; and (3) achieving more predictable results by avoiding excessive or capricious jury verdicts.<\/p>\n

In the world of commercial litigation, however, these \u201cadvantages\u201d of arbitration are increasingly being called into question.\u00a0 In recent years arbitration has become increasingly like litigation, with escalating costs and delays resulting from procedural disputes and uncontrolled discovery.\u00a0 Today, complex commercial cases can take just as long to arbitrate as they take to litigate in court, and can cost substantially more.\u00a0 Arbitrated cases are rarely resolved by dispositive motions, and are less likely to reach early settlement than litigated cases.\u00a0 In contrast to many judges, who want to clear their busy dockets as quickly as possible, arbitrators are often paid by the hour.<\/p>\n

The \u201cpredictability\u201d of arbitration is also far from certain.\u00a0 The outcome of the arbitral process is not necessarily more reliable at reflecting the merits of the case than a court\u2019s verdict.\u00a0 Arbitrators are less constrained to follow the law. \u00a0Their decisions will almost always be upheld on judicial review even if they get the law wrong.\u00a0 Some arbitrators will \u201csplit the baby\u201d and make a compromise award even when the law and facts clearly favor one side.\u00a0 At the other extreme is the \u201crunaway arbitrator,\u201d guided only by a sense of fairness, who makes a massive award against the party he or she believes is in the wrong.\u00a0 Unlike a jury verdict, an excessive arbitral award is nearly impossible to overturn on appeal.\u00a0 Because of its unpredictable and unreviewable nature, arbitration may sometimes be a more risky choice than litigation.<\/p>\n

Corporate counsel have become increasingly skeptical of arbitration, and many are refusing to include arbitration clauses in their commercial contracts.\u00a0 Only 25% of in-house attorneys believe arbitration is \u201cgenerally a better solution\u201d than litigation \u2013 42% say it\u2019s a toss-up, and 21% think arbitration is worse. \u00a0The vast majority of corporate counsel are familiar with arbitration: \u00a083% of the general counsel for Fortune 1000 corporations report that they have had at least one arbitrated case within the last three years.\u00a0 However, the use of arbitration in most categories of business-to-business disputes has become significantly\u00a0less<\/u>\u00a0<\/em><\/strong>widespread today than it was in previous decades.\u00a0\u00a0 The 2011 survey of Fortune 1000 companies asked general counsel whether they had been involved in an arbitration within the past three years and compared the results to an identical question asked in a 1997 survey:<\/p>\n