Many business owners we have worked with have asked us about arbitration at one point or another. For various reasons, arbitration still has a good name.
Yet it is not to be recommended in any business to business agreement. A primary reason for this is that the arbitrators’ decision is not appealable to the Courts barring some form of dishonesty by the arbitrator (so long anyway as the arbitrator has jurisdiction). So if an arbitrator, be it an individual or a panel, makes an egregious error of law, the losing party has to live with it and pay up. Courts have consistently held that this is a risk the parties agree to take when they bind themselves to arbitration. This is true under both the Federal and Florida’s arbitration act, the U.S. and our state’s Supreme Court having each refused to consider other grounds for appeal.
One source of Arbitration’s enduring popularity is its reputation for being quicker and less expensive than adjudication in court. But that is often a myth. The American Arbitration Association’s commercial rules, for instance, may be said to rival Court Rules in their complexity and offer near as many avenues for discovery. In short, it is unlikely to hasten the case’s resolution, and the filing fees are much higher to boot.
Another reason for the practice’s continuing good standing may be that giant corporations use it. But Verizon or Comcast have a sound logic for liking arbitration: it allows them to force their customers into giving up class action rights, and class actions are pretty much the only meaningful threat to those gargantuan consumer businesses. There is no such incentive in business to business agreements, or for more sensibly-sized businesses, or for any business, really, in most industries.
Unfortunately, too many contracts are laden with still-popular arbitration agreements. The better ones avoid it.