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ARBITRATION OVERVIEW

 
INTRODUCTION
Arbitration is similar to litigation, but less formal and usually less expensive. Instead of a judge and jury, the arbitrator, usually a lawyer or a retired judge, is the decision maker. In place of a court trial, an arbitration hearing is typically held at one of the lawyers’ offices.

WHY CASES GO TO ARBITRATION
A dispute ends up in arbitration for one of three reasons:

  • The parties’ disagreement arises out of a contract that requires disputes to be resolved by arbitration, known as private arbitration.
  • When a lawsuit requests damages of $50,000 or less, Oregon law requires that the case be sent to arbitration, called court-annexed arbitration.
  • Even if the parties are not required to use arbitration, they may still agree to have their case decided by an arbitrator, another form of private arbitration.

CHOOSING AN ARBITRATOR
The process for choosing an arbitrator will depend on how the case got into arbitration. If the parties’ contract requires disputes to be resolved by arbitration, the contract will usually specify a private arbitration service to oversee the arbitration process. The service will present the parties with a number of names from a list of approved arbitrators maintained by the service. In court-annexed arbitration, the court will offer names of proposed arbitrators from its list. In most cases, if the parties can agree on an arbitrator from an approved list or otherwise, he or she will be appointed. If the parties cannot agree, the arbitrator will be appointed as specified in the rules of the private service, or in the court rules.

ONE VERSUS THREE ARBITRATORS
In some cases the parties will have the choice of using a single arbitrator or a panel of three arbitrators. Using three arbitrators is more expensive, but does result in a decision that represents the collective wisdom of three decision makers, as opposed to one. That consideration is especially important in binding arbitration where the decision cannot be appealed.

PROCEDURAL DIFFERENCES BETWEEN ARBITRATION AND LITIGATION
The arbitration process is less formal than litigation. For example, most scheduling issues and procedural disputes are handled by phone conferences among the lawyers and the arbitrator, as opposed to the court filings and court appearances required in litigation. But arbitration cases can involve the filing of papers similar to court pleadings or discovery, i.e., the trading of documents and depositions, the use of expert witnesses, and so forth. The more complicated the issues in a case, and/or the more that is at stake, the more closely the arbitration process is apt to resemble a court case.

THE ARBITRATION HEARING
An arbitration hearing is similar to a trial, although the typical setting of a law office is less formal. Each side presents evidence in the form of witness testimony, documents, and other exhibits; each side's witnesses are subject to cross-examination; the lawyers can object to the other side's evidence; each side makes opening and closing statements, etc. And, like a judge in a court trial or a jury in a jury trial, in arbitration the arbitrator will decide who wins and who loses the case.

DIFFERENCE IN COST BETWEEN ARBITRATION AND LITIGATION

Administrative fees

Litigation
Each side in a lawsuit pays a fee, typically between $150 and $200, when they file their initial pleading. Additional fees are charged for hearings. The plaintiff pays a daily fee of $200 for each day of trial.

Court-annexed arbitration
Because court-annexed arbitration takes place after a case has been started in litigation, the parties will have already paid the litigation filing fee. Once a case has been placed in court-annexed arbitration, the parties are required to pay the arbitrator’s fee. Those fees are capped at rates far below the market rate for arbitration services. In Multnomah County and Clackamas County those rates are $125 per hour, up to a maximum of $1000. In Washington Country the hourly rate is $100, up to a maximum fee of $600.

The private arbitration services have varying filing fees, which can range from a few hundred to several thousand dollars, depending on the service and the dollar amount at issue . Some services cap the hourly rates that their arbitrators can charge, some don’t.

Attorney Fees

A party is apt to incur lower attorney fees in arbitration than in litigation, for two primary reasons.

First, in arbitration, procedural issues and pre-hearing disputes can often be resolved in short order via a telephone conference among the lawyers and the arbitrator, as opposed to the more paper-work intensive, in-person hearing process usually required in litigation.

Second, significant attorney fees are incurred during the period of intense preparation in the days before, and continuing through, an arbitration hearing or court trial. When the parties and arbitrator agree on a hearing date, in most cases that is when the hearing will actually occur. While in litigation, trial dates are frequently re-scheduled by the court, often the day before or even the date scheduled for trial. Each time a trial is re-scheduled, the attorneys will need to duplicate a good deal of their prior trial preparation efforts.

In that the losing party in a court-annexed arbitration can challenge the arbitrator’s decision by requesting a trial, it is possible that the parties will incur administrative and attorney fees for both an arbitration hearing and a court trial. But because of the economic forces at work in court-annexed arbitrations, where the amount at issue is less than $50,000, many parties accept the arbitrator’s decision rather than incurring the expense of a trial.

APPEALING AN ARBITRATION DECISION
In private arbitration, the arbitrator's decision is, for all practical purposes, final and binding. In court-annexed arbitration the parties can appeal the arbitrator’s decision and demand a circuit court trial, and the result of that trial can be appealed as in any other circuit court case.

© Law Office of Charles E. Corrigan, P.C.

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