Avoiding Arbitration

It would be great if arbitration were THE alternative answer to litigating in courts with over crowded dockets and ever shrinking budgets, but arbitration hasn’t turned out to be that kind of panacea over the last 40 years.

I was stopped at a traffic light behind a vehicle with a license plate that said ARBATR8. Now, I haven’t thought about arbitration much, in years. In fact, I don’t think much about arbitration at all, but seeing that license plate got me thinking about arbitration. Mostly along the lines of, “Wow, that person must be an arbitrator or they must have had a really good arbitration outcome to put that on their license plate.”

The reason I don’t think about arbitration is that I have put it out of my mind as a potential dispute resolution solution. In my experience as in-house counsel, I see arbitration as a private litigation system that can take up just as much time and money as actual litigation. My thought has been, “Why litigate twice?” or “Why pay as much and take almost as long?”

Mostly my experience with arbitration has not been good. It has been expensive. It has been time consuming. It has been amazingly contentious. In one case, just choosing the three arbiters took almost a year. The rules used for arbitration have become as complicated as litigation, negating the simplicity and expense benefits supposedly available when choosing arbitration to resolve a dispute. And there is no appeal when the arbitration award is plainly wrong because, in the case where a single arbitrator has a blind spot or hidden bias.

The main reason I avoid arbitration is because arbitrators often use a “split the baby” approach rather than actually make hard decisions with the facts and law in front of them. This outcome leaves all parties with a bad taste in their mouth and unhappy with the outcome and arbitration experience. There is a resolution for the dispute, but the pain was divided between the parties rather than choosing a clear winner or loser, according to the law.

Moreover, where fierce competitors are trying to undo the other straight into bankruptcy or worse, arbitration just becomes another weapon of choice for draining the resources of the other company, just like litigation.

Now, I take arbitration provisions out of contracts I negotiate. I address dispute resolution from a business perspective; after all, the agreements are deals between businesses. The business people first need to talk – those involved in the deal, from a day-to-day perspective. They are the ones closest to the facts and the intent of the deal and what is really going on. Get them talking first, then move up the corporate ladder before ever resorting to litigation or other more formal dispute resolution processes.

Yes, disputes need to be resolved. It would be great to resolve them without having to resort to litigation and all of that time and expense, but I do not consider arbitration to be a viable alternative to litigation.

Sonya Sigler is a 20-year veteran of in-house positions at software companies. She started her legal career at Sega, before moving to Intuit, and then to Cataphora as its General Counsel.

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