What is Arbitration?
In contractual arbitration, the parties agree to have their dispute decided by a neutral third party, known as an “arbitrator”. The arbitrator will act as a judge and jury. After giving the parties the opportunity to present their case, present witnesses and any relevant documents or other evidence, the arbitrator will decide who wins and losses.
The Arbitration Agreement
The arbitration process starts with the parties signing an agreement to arbitrate. This agreement may occur well before any disputes develop, such as at the initiation of the relationship between the parties. Good examples are employment arbitration agreements used by employers upon hiring an employee. In other instances, the parties to an ongoing dispute may decide to have their matter resolved by an arbitrator rather than continuing on with a lawsuit. In some cases, courts will order the parties to go to judicial arbitration.
The Arbitration Agreement will usually describe the initiation process, arbitrator selection process, the arbitration rules and other details.
The Arbitration Process
Generally a party initiates the arbitration process by making a “demand for arbitration”. The timing of the demand is usually a term in the arbitration agreement. Upon demand, the parties usually have a limited amount of time to select an arbitrator. The arbitration agreement may specify a particular arbitration service such as American arbitration Association (AAA) and the rules to be followed. Depending upon the arbitration provider, the arbitration fees can run several hundred dollars or more per hour. In California, an employment arbitration agreement cannot require an employee to pay the costs of arbitration, beyond with the employee would normally pay to file a lawsuit.
Choosing the Arbitrator
The parties are generally free to select from a list of available arbitrators. Frequently, the parties will pick out a list of arbitrators who are acceptable, then alternately strike names from the list until one person remains. That person will become the arbitrator. Once an arbitrator has been selected and an agreement signed for payment of fees to the arbitrator or arbitration provider, the arbitrator will generally hold a conference with all parties and discuss the manner in which the arbitration will proceed.
California arbitration agreements typically provide for discovery. Discovery is the process by which the parties obtain evidence to prove their case or prove their defenses. Discovery can take the form of written questions, requests for documents, requests for admissions, deposition testimony and other evidence. In some cases the arbitrator may limit the amount of discovery. Part of the purpose of arbitration is to reduce the cost of litigation. Generally, the discovery plan will be approved or modified by the arbitrator.
The arbitrator will decide, in consultation with the parties, the date and time of the arbitration hearing. At the hearing, the parties, through their attorneys if they have them, will typically provide a written brief to the arbitrator setting forth a summary of the facts and legal arguments. The parties, through their attorneys, will then make opening statements after which the plaintiff or claimant (the person bringing the action) will proceed by putting on their evidence. Depending upon the arbitrator, testimony may typically be in live form or may be by declaration.
After the plaintiff presents their case, the defendant will present their case. Thereafter, some arbitrators will allow the plaintiff to present a brief response to the defense evidence, sometimes followed by the defendant presenting their response to Plaintiff’s evidence. The parties usually have the opportunity to cross exam witnesses. The Arbitrator usually has the power to issue subpoenas to compel witnesses appearances.
The arbitrator will consider the evidence and make a written ruling. Arbitration rulings are generally binding unless the parties have agreed to a nonbinding arbitration. The arbitration award in a binding arbitration is generally not appealable.
Civil Enforcement of the Ruling
Following the issuing of a ruling by the arbitrator, either party may petition the court to confirm the award.