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TO ARBITRATE OR NOT TO ARBITRATE Arbitration is rapidly taking over the traditional court system as a means to resolve disputes. But, is it always the best option? The decision whether to arbitrate or not is a very critical decision, which must be made early in the litigation process; often even before all the facts are known. 1. What is Arbitration? Simply, it is a process to resolve disputes without a judge or jury. Who decides the case? A third-party, usually an attorney, preferably with construction experience. The arbitrator is either chosen from a list provided by an arbitration service, such as American Arbitration Association (“AAA”), or by agreement of the parties and attorneys. Where does it take place? Arbitrations usually take place in an informal location such as a conference room at the arbitrator’s office or at a Bar Association office. How much does it cost? The amount generally depends on the amount of the claim. Recently, such organizations such as AAA have changed their procedures where the builder/contractor bears the majority of the initial filing fees and deposit for the arbitrator’s fees. If you are using AAA, you can access this information off of their website at www.adr.org. How long will the arbitration hearing last? Before the hearing, there will be one or more preliminary hearing, such as scheduling the actual hearing date and other deadlines for the parties to follow. The actual arbitration hearing itself generally lasts no more than two (2) or three (3) days; however, it depends on the number of issues, parties, and experts necessary to put on each party’s side of the story. 2. Upside to Arbitration. Arbitration is generally quicker than the traditional route of a judge or jury. Generally from the time the arbitration process begins, it will take four to six months until the actual arbitration hearing. On the other hand, the court system may take up to two years or longer, depending on the amount of cases on that particular court’s docket. Another benefit of arbitration is that the parties receive a definite time and date for the hearing. Unless there is an emergency or someone becomes extremely ill, the arbitration hearing will go forward at the time and place planned. This is extremely beneficial for scheduling time to prepare for the hearing and attending the actual hearing itself. Another benefit of arbitration is that the sometimes difficult and burdensome evidentiary and procedural rules in the court system are relaxed. Said another way, nothing gets in the way of the arbitrator hearing ALL of the evidence. Arbitration also eliminates the runaway jury verdict factor. Generally, it is less likely that sympathy will play a major role in the arbitrator’s decision. 3. Downside to Arbitration. Although in attorney time and cost, arbitration is generally less expensive than going through the court system, if you use an arbitration provider such as AAA, you may be faced with thousands of dollars of filing fees upfront. If you are not using such a service an AAA, you can avoid some of the filing fees, but will still have to pay for the arbitrator’s time. Another potential downside to arbitration is that as stated above ALL of the evidence comes in. In the court system, there are ways to keep damaging testimony from the jury. In arbitration, it is very likely that the arbitrator will listen to all evidence for all parties. Another problem with arbitration is the extra steps necessary once an award is rendered. An arbitration award must be confirmed by a trial court judge in order for it to be enforced. If the losing party wishes to fight the arbitration award, under certain circumstances, it can be quite a lengthy battle at the trial court. Additionally, the losing parties’ grounds for challenging the arbitrator’s award was a manifest disregard of Texas law. Each case and situation is unique. Therefore, instead of automatically deciding that arbitration is always the right decision, you should consult an attorney, preferably on e with construction law/arbitration experience. Arbitration is still generally a much better way to resolve disputes between a homebuilder and a homeowner. ______________________________________________________________________________
Matthew L. Motes is a named-shareholder of Bush & Motes, P.C., an Arlington based law firm that represents builders, remodelers and developers across Texas. Mr. Motes focuses his practice on residential, commercial construction law and title insurance defense. |
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