What To Expect if You Find Yourself in Arbitration?
This article was written for Birmingham Business Journal and was published Sep. 16, 2022.
Businesses and health care providers have increasingly turned to arbitration to resolve disputes of various kinds. Fortunately, most entities find themselves with the need to arbitrate a claim only infrequently, so here is what to expect when the need arises.
Arbitration is a process by which parties choose an independent third party (the arbitrator), to conduct a hearing and render a binding decision to resolve a dispute. Arbitration is like a court trial in that the arbitrator has the authority to render a decision that binds the parties. Essentially, an arbitrator is a private judge.
Generally, arbitration is less formal than a court trial. An arbitration can resolve a dispute in a much shorter period, and at a lower cost, than a court trial. For example, arbitrations tend to involve less discovery, such as fewer depositions.
Arbitration and mediation are often confused with one another. Mediation allows parties to negotiate a settlement of their dispute using a neutral third party (the mediator), who facilitates discussions and conveys settlement offers. Unlike an arbitrator, a mediator does not render a decision. A mediator helps the parties to reach an agreed-upon resolution. Arbitration and mediation are not mutually exclusive, and parties may mediate their dispute and arbitrate only if the mediation is unsuccessful.
Most arbitration agreements specify the rules that will apply to the arbitration. The agreement may state that the arbitration will follow the rules of an arbitration services provider, such as the American Arbitration Association or the National Arbitration Forum and their rules will specify the method for selecting the arbitrator or arbitrators.
Arbitrators are usually practicing attorneys or retired judges. Often, the arbitration services provider gives each party a list of potential arbitrators and the parties each strike some number of them from the list with the arbitration service provider making the final selection. Most parties try to select an arbitrator who is knowledgeable about the subject area of the dispute which, arguably, leads to a fairer result.
The parties may agree to vary from the terms of the arbitration agreement, such as by selecting an arbitrator outside of the arbitration service provider’s rules. The parties may even agree not to use the arbitration service provider at all.
Arbitration hearings are usually held in a conference room and the conduct of the hearing tends to be less formal than in court. On the other hand, while court hearings are generally open to the public, arbitration hearings are usually confidential. Only parties and their attorneys are normally allowed in the hearing room, along with testifying witnesses. Expert witnesses or consultants who are helping to prepare the case may be allowed.
Most arbitrations use the same substantive law that would apply in a court trial. Rules about discovery and admission of evidence, however, tend to be more relaxed in arbitration. Some arbitrators are inclined to be more lenient in admitting evidence with the philosophy that they can then decide how much weight to give to it. Because there can be significant variation among arbitrators as to how closely they adhere to the rules of evidence, it is important to understand the arbitrator’s approach before the arbitration.
Please contact Jim Henry or any member of Phelps' Health Care team if you have questions or need advice and guidance.
