Arbitration and You

I sometimes run into arbitration clauses in contracts. I also have discussed arbitration experiences with other attorneys. Most of the attorneys with whom I have discussed arbitration don’t see any big advantage in it and a lot of negatives. After a long discussion with a fellow attorney, he finally came up with an explanation for the popularity of arbitration clauses among certain attorneys, especially those who draft contracts for large companies. If you’re representing a large company, you’re counting on the arbitrator or arbitration panel to minimize the damages awarded to the plaintiff. The other expenses aren’t a big deal to a large company, but the amount awarded or the relief granted is. One area where I’m starting to see more arbitration clauses are in real estate contracts. At least two real estate lawyers have told me that they routinely delete these clauses when asked to review a real estate contract.

Arbitration is a method of alternative dispute resolution. That is, it is a method of resolving disputes through a means other than traditional litigation in court. Instead of a judge hearing the case in accordance with the requirements of the Florida Rules of Civil Procedure and the Evidence Code, the case is decided by an arbitrator or a panel of arbitrators that the parties pay. The procedure and rules are supposed to be expedited. Theoretically, it is cheaper and faster than a court proceeding, but I haven’t always found that to be the case. In my experience, it has cost just as much, if not more than, trying the case in court. This is probably less true the more money is actually involved in the case.

There is at least one court case where a party asked to be excused from arbitration because they couldn’t afford the retainer for the arbitrators. The court refused to grant any relief to the consumer who could not afford to pay for arbitration of a moving bill. I have seen arbitrator bills of $17,000.00 for a one-third share of a three arbitrator panel. In another case a client paid a $3,600.00 retainer. The arbitrator kept the retainer even though we settled the case before she actually heard it.  I think both of those cases would have been cheaper to try to the local courts.

The Florida Arbitration Code which is Chapter 682 of the Florida Statutes, is probably the arbitration law that applies to most people. An agreement to arbitrate must be in writing. This can take the form of an agreement to arbitrate incorporated into a contract (i.e., an arbitration clause) or an agreement between the parties to settle their existing dispute via arbitration. A written arbitration agreement is “valid, enforceable, and irrevocable without regard to the justiciable character of the controversy.” See, Florida Statute section 682.02.

Florida’s appellate courts love arbitration and have ruled that Florida’s public policy favors the enforcement of arbitration clauses. Generally, any time there is a valid arbitration clause it will be enforced by the Courts and the matter will be referred to arbitration. However, providing for arbitration in a contract doesn’t mean that there won’t be any involvement of the courts because any disputes about arbitration are settled by the courts in accordance with the Florida Arbitration Code.