Debunking The "Arbitration Is Cheaper" Myth.
Arbitration in Denver and elsewhere in Colorado is commonly rumored to be cheaper and faster than court. We do not agree, and we believe arbitration has some deep flaws. We rarely put arbitration clauses in contracts for this reason. Typically, we prefer the straight fight available in court than the opaque, costly and imprecise forum of the arbitration boards. Arbitration can be delayed at the whim of the parties and arbitrators, and it can cost even more than court. A Missouri attorney summed it up quite well:
"Arbitration deters claims because it is expensive. Someone who wants to file a civil lawsuit has to hire a lawyer and may have to pay the costs of depositions and experts. But the costs of having a forum to hear the case are usually nominal. In arbitration, the costs of the lawyer and discovery are the same (unless no discovery is permitted) but the forum costs money. Often a lot of money. And that does not even count the cost of the arbitrator. The filing fee for the American Arbitration Association in a standard commercial case is computed as a percentage of the amount at issue, and can amount to thousands of dollars. Arbitrators are typically practicing lawyers or retired judges who charge $300 to $750 per hour.
Arbitration reduces the value of claims because arbitrators commonly do not make awards to claimants as large as juries and judges do. Some of this may be the result of the "repeat player" effect. Large businesses tend to need the services of arbitration providers and arbitrators on a regular basis. These providers and arbitrators want the business, and may refrain from taking actions that might jeopardize it, like making a large award to a claimant. The California Supreme Court has acknowledged the repeat player effect, and its tendency to result in lower arbitration awards to claimants. (Armendariz v. Foundation Health Psychcare Services,Inc. (2000) 24 Cal.4th 83, 115 [99 Cal.Rptr.2d 745].)"
Arbitration Can Entail Serious Delays.
So as you can see, in arbitrations, you have to pay the judge, too. But it also can take a lot longer. In court, you are assigned a judge rather quickly. It is automatic. In arbitration, however, both parties submit their choices, confer with each other, and then allow the arbitration board to finally decide. This process alone often consumes two months or more. As you can see, there might be two whole months during which time your adversary can run roughshod over you and your interests, while the lawyers ring up bills dickering over who the arbitrators will be! Imagine your frustration. You cannot obtain an injunction, since if you file a court action to do that, the adversaries will simply point to the arbitration clause and get the matter dismissed so that it can be arbitrated. It is a frustrating place to be. When it comes time to consider an arbitration clause in your contract, think back on this and contact one of the Denver business lawyers at The Vasilco Law Group, P.C. to do the drafting.