MORE ARBITRATION PITFALLS

Our readers are well familiar now with many reasons why arbitration is not recommended in business to business contracts.  And more pitfalls keep coming to mind on a regular basis.

So it was, again, when a securities fraud lawsuit was thrown out by a federal court of appeals because the plaintiffs waited too long to file.  But wait, they pleaded: for part of that time, we were in arbitration, like we were supposed to.

The court was unsympathetic.  That was, in part, because there is an established procedure known as file-and-stay to handle such a dilemma.  It was not well known enough, though, for an attorney to remember it in a $700,000 lawsuit. Arbitration killed the case.

While that particular case involved securities fraud, the warnings it carries are valid in every area of law and in every contract with an arbitration clause.  Attorneys representing businesses must know when to avoid, but also how to handle, arbitration clauses.