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Pike & Lustig, LLP. We see solutions where others see problems.

How Arbitration Can Sometimes Hurt Businesses And Employers


It is generally accepted that for many businesses, arbitration agreements can be helpful, and avoid long or costly litigation. Many consumers and employee organizations fight against arbitration agreements, as they are seen as “pro-business” or “pro-employer.”

To some extent this is true. Certainly, arbitration can expedite the resolution of a claim, lower the costs of what would otherwise be costly litigation, and, most importantly, can remove the emotions of a jury from a claim. This can be especially helpful when you feel that the other side may be more appealing or sympathetic to a jury.

Drawbacks to Arbitration

But there are some drawbacks to arbitration agreements that your business should think about before incorporating them into your agreements and contracts. This isn’t to say they shouldn’t be used—this is just to remind you that there are pros and cons to everything, including arbitration agreements.

  1. Ease of Suit – Arbitration may not have a filing fee, or otherwise, may have a filing fee of less than what it would cost to file a lawsuit. Additionally, many consumers may feel more comfortable suing you in an arbitration, where they may feel like they don’t need an expensive attorney representing them. That means you could be encouraging suits against you.
  2. Unknown Arbitrators – Arbitrators can come from any profession or from any background, and not necessarily a legal background. You could easily end up with an arbitrator with a background that is more sympathetic to the other side.
  3. Contesting Arbitration –If a party disputes the validity of the arbitration clause, they can fight that in court. That means you could be in court anyway, with a protracted fight over whether or not your arbitration clause is enforceable, before you even get to the merits of the case itself. This extra step could add time and expense onto the suit, even if you ultimately do get to arbitrate.
  4. Discovery Limits – Arbitration limits discovery. If you feel there may be a party or business on the other side that is outwardly lying you may need more discovery to prove that. Arbitration could limit the information you get from the other side, and the amount of advance notice you have about the evidence the other side intends to present at the hearing or trial.
  5. Cost – Arbitrators charge for their time, often by the hour. Judges do not. That means that even if you are sharing in the arbitration cost, there is still an expense that wouldn’t be there if you were in court.
  6. Complexity – If you feel that your case involves very complex legal issues, you may prefer a judge over an arbitrator. A judge may be more likely to take the time to understand your arguments, and may simply have a background making him or her better suited to digest complex legal cases.

Call the West Palm Beach business litigation lawyers at Pike & Lustig to help you with your business contract and agreements.

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