Arbitration of Commercial Cases

The Florida Bar Journal, April 2010

To the extent the well-written article “Re-examining the Presumption in Favor of Arbitration in Complex Commercial Cases” might give the impression that arbitration is less efficient than litigation, I respectfully disagree. The primary concern seems to be that some parties will institute litigation to avoid arbitration. For many arbitrable disputes, there is no credible argument to do this. Courts should dispose of such claims quickly, with sanctions against parties bringing them frivolously. As to post-award litigation, grounds for attacks on arbitration awards are quite narrow. Indeed, the cases cited in the article show that parties bringing post-award attacks risk sanctions under Rule 11 (and presumably under F. S. §57.105).

Parties in arbitration pay for the forum, including the arbitrators. Litigants have their dispute resolution subsidized by the taxpayers, with parties only paying a very small portion of forum costs. This does not make litigation more efficient, it just allows litigants to impose on the rest of us some of the costs of their inability or unwillingness to work out their dispute voluntarily.

Parties may reduce costs of arbitration by agreeing to such things as a single arbitrator rather than three-arbitrator panel, proceeding on the papers without a hearing, routinely conducting hearings via telephone, allowing witnesses to appear by telephone or video link, etc. Final hearings in arbitrations are scheduled for a certain date — there is none of the uncertainty of attending a calendar call, not knowing whether your case will be set for trial at all, and then being set as the fourth case and not being heard, or perhaps being heard days or weeks before expected. Arbitration offers a flexibility that, with professional, skilled counsel, can greatly reduce stress and expense.

It is true that the grounds for appeal of an arbitration award are much narrower than those for a judgment. While this is a disadvantage when an arbitration panel is simply wrong, in my view, having argued cases to both juries and arbitration panels, and having served as an arbitrator, the chances of a result that is simply wrong is less in arbitration than it is with a jury. The limits on appeals are an advantage when it comes to costs and finality. Appeals are expensive and can delay the final resolution of the matter for months or years. Most appeals are unsuccessful, even when directed to judgments reached by a court in the first instance. Appeals of arbitration awards are rare.

The potential “extra” costs of arbitration referenced in the article virtually all relate not to arbitration itself, but to litigation, most of it frivolous, attempting to undermine arbitration. While there are exceptions, generally arbitration is more efficient, faster, less expensive, and less stressful than litigation, particularly compared to a jury trial. Many, and I suspect most, arbitrations proceed without contested litigation. At least some of the exceptions end in sanctions for the party who instituted the unwarranted litigation. The principal remedy for the concerns enunciated in the article is not judicial hostility to arbitration, but judicial hostility to groundless attacks on arbitrations.

(By way of full disclosure, I am qualified as an arbitrator for state court matters, and am an arbitrator for FINRA and the National Futures Association (NFA). I am not an employee of FINRA or the NFA and the views herein are strictly my own.)

Will Murphy, Hollywood

As appeared in The Florida Bar Journal, May 2010, Volume 84, No. 5