For almost two years, the coronavirus pandemic has delivered shock waves around the globe. Like the rest of our society, America’s court system has been disrupted in ways that it has never experienced.
Courts have resumed most of their operations, but many are still experiencing a significant backlog of civil cases. Some courts are scheduling civil jury trials years out from filing, and cases are being continued on a regular basis. Some civil case trial dates have been delayed two, three, or even more times since filing, all because of the pandemic and the logjam of cases and trials.
In addition to the congestion in the courts, another unfortunate consequence of Covid-19 has been a considerable increase in business and commercial disputes. Legal matters concerning payments, employment, and contracts are often accompanied with a request for a jury trial.
During my four decades-long career as a trial lawyer, I have tried a significant number of highly complex commercial disputes and have a great deal of confidence in our civil jury trial system. That said, with an already stressed court system facing an unprecedented backlog, clients and their counsel may now wish to consider arbitration and other methods of alternative dispute resolution, which could alleviate the pain of delayed resolution.
In addition to providing flexibility, arbitration also presents a streamlined, solution-oriented, and time-saving approach that could significantly benefit clients and their legal counsel, and the system itself.
New Technologies Add Flexibility and Save Time
From video meetings to more flexible work-from-home setups, the pandemic has facilitated new efficiencies and opportunities for how we work. This is also true in the legal sector where we have seen the adoption of new technologies and modalities. But, amid the slate of innovation, the time-tested practice of arbitration also presents a uniquely effective way of dealing with 21st-century challenges.
This makes good sense considering the fundamental purpose of arbitration is to avoid litigation and to reach a resolution of the legal matter within a reasonable amount of time. Arbitration can offer the potential to resolve most disputes in less than 12 months. Just as importantly, it provides the ability to do so from any location that has access to telephone and internet connections.
One other unintended—but for most firms, highly-welcomed—outcome of this low-threshold approach to resolution is the flexibility itself. Arbitration is a flexible and more informal process that, crucially, does not depend on the availability of the court.
Removing that bottleneck empowers parties to cooperate regarding scheduling and procedures. Arbitration also allows for the parties to choose experienced arbitrators who have a thorough understanding of their specific legal matter.
Privacy and Finality Can Add Value to Arbitration
Factoring in other key considerations like cost, privacy, and finality makes it clear that arbitration may offer a viable option to litigation during this time of significant delays. Arbitration is, in most cases, less resource and labor-intensive, which can also make it less expensive in some cases.
Unlike with a trial, details concerning the arbitration can be kept confidential in most cases, ensuring privacy for the client and their case. And since arbitrations are generally binding, there are limited opportunities for an appeal to alter the outcome or create further uncertainty, leading to the end of the legal dispute.
Some Drawbacks of Arbitration
As noted, I am a civil trial lawyer, and I love juries. It is my opinion that juries “get it right” most of the time. Having peers of the litigants sitting as a jury, being the voice of the community to address significant issues in the community, is a great advantage.
A private arbitration proceeding is both “private” (shielding it from public scrutiny) and necessarily not subject to the “voice of the community” process. While most jurors are not “experts” in the type of case being decided—and if they are, they run the risk of being stricken from the panel— it is extremely rare to find a juror who does not take their service seriously
Arbitrations are usually presented to “professional” deciders— individuals who by training and experience are willing to hear cases, make decisions, and be paid the “prevailing rate” for their efforts. In contrast, jurors are compensated at a very modest level (usually only in an amount sufficient to offset some of the opportunity cost of serving on a jury, and certainly not enough to constitute a “wage”) for their service. Most jurors understand that jury service is a civic duty and service to the community and the litigants.
Having an “audience” of professional deciders (arbiters) decide a case eliminates the value and perspective brought by jurors contributing their civic duty efforts. Further, professional arbiters sometimes bring what at times can be perceived as an element of cynicism to the process. While the good arbiters will resist the pull of these elements, it is clear that the “professional” elements of an arbitration can adversely impact the process.
As to cost, while arbitration can utilize streamlined “discovery” and presentation tools to limit cost, paying a private arbiter—and certainly a panel of three or more arbiters—for their time can be expensive. Courts and jurors are funded through public revenue streams, but private arbitration will require the parties to pay for the time of the arbiters and the location of the arbitration, in addition to the costs of their lawyers.
A multi-week arbitration to a professional panel of three or more arbiters can result in a prohibitive economic impediment. Litigants and their lawyers will want to be careful to balance the proportionality aspect of the cost to the likely recovery.
If the pandemic has taught the world of law anything, it’s that the time for adaptive change is now. Arbitration is not a panacea, and clients and their attorneys must consider its potential limitations, but this alternative method of dispute resolution may offer a more attractive solution for parties in many legal cases.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
David P. Hersh is the practice group leader of the business and commercial litigation department of Burg Simpson Eldredge Hersh & Jardine P.C. He focuses on contract disputes, breach of fiduciary duty, ownership disputes, construction matters, “bet your company” litigation, Covid-19 business interruption claims, and professional negligence.