Arbitration – Aww, Good Gawd Y’all – What is it Good For?

Posted on June 6, 2008


Many business clients approach us with the preconceived idea that an arbitration clause can only bolster their contract, regardless of the context. After all, if the client finds itself in a pickle, arbitration is the cheapest, most business-friendly way out, right? Well, the answer is simple – it depends.

Arbitration is normally depicted as the best alternative to
litigation because the decision rests with a seasoned and neutral
decision-maker, rather than with an often unpredictable jury
(especially in certain Alabama venues). However, now that arbitration
is relatively time tested and many of its flaws have surfaced, it has
recently become the subject of increased scrutiny from individuals as
well as the business community – and as a result, legislators are
taking a look.

In my view, the three biggest complaints about arbitration are (1)
there is no right to appeal an unfavorable decision, (2) many
arbitration contracts are (considered) contracts of adhesion, or
contracts that give one party no bargaining power or meaningful choice,
and (3) the cost of arbitration in many cases is actually higher than
litigation, and in certain cases the cost is prohibitive.

I recommend reading the following article that highlights the battle that is brewing over these concerns: Pressure Grows to Rethink the Use of Mandatory-Arbitration Clauses.

Brice Johnston, Goodrich Law Firm, LLC