In 2014, I posted Carefully Craft Your Arbitration Clause if You Want Some, But not All, Disputes Arbitrated.  A decision a few months ago, Trustivo, LLC v. Anthem, Inc. is a reminder that if a contract has a broad arbitration provision, a party may have little chance of getting court intervention – even in situations  where the general validity of the contract is challenged – unless an appropriate carve-out is inserted.… Keep reading

As I discussed in Is Arbitration Quicker, Cheaper and Better for You?, sometimes it is in a party’s interest to have a dispute resolution mechanism that is long, onerous and expensive.  Further, as the recent case Grand Wireless v. Verizon Wireless confirms, if you want some disputes resolved by arbitration and others resolved by a court, it is critical that your arbitration clause spell this out in detail.… Keep reading

Porreca v. The Rose Group was a class action lawsuit brought by Carly Porreca and Charles Walton, alleging that their employer, Applebee’s Neighborhood Grill and Bar, had violated the Fair Labor Standards Act. After Porreca was dismissed from the lawsuit, the restaurant management company that owned and operated the Applebee’s at which Porreca and Walton worked, the Rose Group, sought a stay of the litigation as well as an order (i) compelling Walton to arbitrate his claim individually, and (ii) barring him from pursuing a class action in that arbitration.  In support of this request, the Rose Group relied on the fact that Walton had signed an agreement binding him to the company’s Dispute Resolution Program, which specifically stated the following:

The Company and I agree that all legal claims or disputes covered by the Agreement must be submitted to binding arbitration …. We also agree that any arbitration between the Company and me is of an individual claim and that any claim subject to arbitration will not be arbitrated on a collective or a classwide basis …. 

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Memorializing an agreement in a written contract serves two primary purposes.  First and foremost, a written contract should clearly set out the deal terms so that there is little or no chance of a misunderstanding as to what the parties’ rights and obligations are.  Further, to be sure that they get the deal terms right, in-house counsel often turn to business people involved in the deal because they are the experts on the deal terms. 

The second reason to have a written contract is to set out the “Rules of Engagement” that will apply if a dispute arises between the parties.  Such Rules, on which I have written in other posts, include choice of law provisions, forum selection clauses, liquidated damages provisions, and arbitration clauses, just to name a few.  Surprisingly, however, and in contrast to in-house counsels’ willingness to consult with business people about the deal terms in a contract, in-house counsel often are reluctant to consult with experts on the Rules of Engagement, i.e., experienced litigators.  Whether the reason for this is a psychological aversion to placing too much emphasis on what might go wrong with a deal before it is fully in … Keep reading

In an earlier post, “Is Arbitration Quicker, Cheaper and Better for You?” I discussed why having a faster and less expensive dispute resolution mechanism may not be in your best interest.  Make no mistake, however, the differences between traditional litigation and arbitration go well beyond the time and expense it takes to complete the respective processes.  The following are a few of the more notable substantive distinctions between these two dispute resolution mechanisms:

  1. Litigation allows for extensive “discovery” (e.g., depositions, document requests and interrogatories) from parties and non-parties.  Discovery in arbitration often is limited to document requests, but can be broadened by the arbitrator or agreement of the parties.
  2. Because arbitrators are not required to abide by any Federal or State Rules of Evidence, they routinely consider information that never would be admissible in court.
  3. A “bad” decision in a court of law almost always can be appealed.  An arbitrator’s decision, on the other hand, rarely can be appealed – even if it obviously is contrary to the applicable law.
  4. Notwithstanding a lack of empirical data, most litigators agree that arbitrators are much more likely than a judge/jury to issue a compromise decision and/or one based on fairness principles
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As many in-house counsel are painfully aware, litigating a dispute in court is generally time-consuming and expensive.  Further, given a losing party’s right to appeal an adverse verdict, and with all due respect to Yogi Berra, litigation ain’t even over when it’s over.  As a result, some companies choose to include arbitration clauses in their agreements, believing that this will greatly reduce the amount of time and expense their company will have to incur if a significant dispute arises that cannot be resolved.

While it usually is quicker and less expensive to arbitrate a dispute rather than to litigate in court, that is not always the case.  For example, while it only would cost $375 to file a $5 million claim for breach of contract in the Federal District Court, the fees for commencing commercial arbitration before the American Arbitration Association (“AAA”) are $14,600 – even if the case is extremely simple. (Fees under the AAA Commercial Rules are tied exclusively to the amount of damages being claimed.)… Keep reading