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Arbitration FAQ's



What is "arbitration"?

Arbitration is a means of resolving disputes privately and promptly in accordance with a contract between the parties. It is similar to litigation in that it is adversarial, and it involves a fact-finding process. The parties present their evidence and arguments to an arbitrator who issues a written decision called an "award". Arbitration awards are usually final and binding on the parties, and they may be enforced by a court judgment.

I want to sue a business over a (defective product, breach of contract, misrepresentation, etc.). The company says I cannot sue them in court because I signed an agreement to arbitrate "any dispute". Do I have to arbitrate the dispute?

Probably. A contract containing an arbitration agreement is still a contract- you must abide by your agreement, and both Federal and State law will uphold the agreement if the product you purchased or the transaction you were involved in has an impact on interstate commerce. There are a few ways to challenge whether you are bound by the arbitration provision, and you should contact a lawyer who will examine the document and the circumstances surrounding it's creation.

Where can you find an arbitrator?

You can look in the phone book under "arbitration services". You can search the Internet under topics such as "Alabama arbitrators" or "arbitrators". Certain dispute resolution organizations have lists of qualified arbitrators, such as the American Arbitration Association (AAA) and the Better Business Bureau (BBB). The Alabama Bar Association publishes a roster of Alabama arbitrators. Call the State Bar at 334-269-0409 or go online at

How much does arbitration cost?

The costs can range from nothing (I charge nothing for controversies of $5000 or less; also, many of the arbitrations administered by the BBB have negligible costs) to several thousand dollars. Some organizations that administer arbitrations, such as the AAA, have a sliding scale of filing fees and administration fees that can reach hundreds or thousands of dollars, and those fees do not include the arbitrator's fee. Because I am not affiliated with any dispute resolution organizations, my only charge is my hourly fee of $150, which is usually split between the parties.

How is the arbitrator chosen?

The Arbitration Agreement usually specifies how the arbitrator will be chosen. Some agreements may name the arbitrator (i.e. "John Baugh") or they may state that the arbitrator will be selected by "the parties", or by a list provided by the AAA or BBB, etc. If the arbitration agreement is totally vague ("we agree to settle all disputes by arbitration."), then you are free to choose anyone and any method you can come to an agreement with the opposing party.

My business has a dispute with a supplier. I don't want to get into a drawn-out, expensive, public lawsuit because I hope our business relationship will continue in the future. Can I arbitrate instead?

Yes. You must get the other party to agree to have the dispute resolved in arbitration, and then the two of you will sign an agreement to arbitrate. My standard agreement can be accessed on this page. Alabama law sanctions and encourages these types of agreements. Your question highlights the advantages of arbitration: a court fight can be expensive, can take years, and is public. Arbitration can be accomplished in a short period of time, is generally less expensive, is private and confidential, and you have a voice in selecting the decisionmaker.

I am a lawyer representing an injured party in court. The opposing party and I have engaged in some discovery, have negotiated and mediated, but we can't settle because we are $10,000 apart. Trial is probably a year away, and I've got to take several doctors' depositions to get ready. Can we arbitrate the outcome at this point?

Sure. You and the defendant should sign an agreement to arbitrate, and then dismiss your lawsuit. You would want to use "last offer" arbitration, wherein you ask the arbitrator to hear the testimony and then choose either your last demand or the defendant's last offer. The process would be over in a matter of weeks, you'll get an enforceable award, and neither side has to worry about an appeal or a "surprise" verdict from a jury.

I own a business and want to put an arbitration provision in my contracts and purchase orders. How do I go about that?

Ask your lawyer for assistance drafting such a clause. Just be sure to list me as the arbitrator! Seriously, utilizing a local arbitrator and avoiding the process being "administered" by a dispute resolution organization will save you time and money. If you are familiar with and like the "rules" of a particular dispute resolution organization (i.e. AAA Commercial Arbitration Rules, AAA Employment Dispute Rules, AAA Consumer Dispute Rules, BBB automobile dispute rules, etc.), your contract can mandate those rules be followed by or administered by a local arbitrator. Always remember that arbitration is contractual. The parties are free to contract for the process they prefer.

I have a $500 dispute with my landlord, and my lease contains an arbitration agreement. But arbitration would cost me at least $500, wouldn't it? So why bother?

First of all, the arbitration provision of your lease may not be enforceable because there may be no involvement with "interstate commerce." Even if it is enforceable, the rules of some arbitration organizations are "consumer friendly", and it may not cost you that much. I perform arbitrations for free where small claims are involved.

I bought a new four wheeler for $4500 and I am having problems with the machine and with the dealer. I want to file a suit to get my money back, but I signed an arbitration agreement at the time of purchase, and I can't get a lawyer to help me.

Many lawyers aren't interested in "smaller" cases, and once they hear the matter must be arbitrated, they totally lose interest! Lawyers are familiar with courts and litigation, and they don't know much about arbitration. However, once an attorney realizes he or she can spend the same amount of time in a small, informal arbitration as they would have to spend in a District Court trial, and make the same amount of money, and not have the aggravation of the possibility of an appeal to Circuit Court, arbitration should become very attractive. Finally, many individuals such as yourself proceed to arbitration without a lawyer, and do just fine. Arbitration does not have the formal rules of evidence and procedure that courts must follow, so it is not as critical that you have an attorney.

Why do I see ads and billboards that are critical of arbitration?

Personal injury attorneys dislike arbitration because they perceive it as less likely to result in an award in favor of an injured person, and that the award will not be as large as a jury might award in the same case. I'm not sure statistics back up those fears and it is a common misconception that arbitrators do not have the power to award punitive damages (they do). Also, some attorneys don't like the idea that companies "force" us to sign arbitration agreements when we buy certain products or services, and often we don't know that we signed such a provision. Further, it costs some consumers hundreds or thousands of dollars in fees to arbitrate a case which they lose, or in which they only received a small award. And there is no appeal from an arbitrator's decision. I have convinced some plaintiffs' attorneys that arbitration can be a good deal for lawyer and client if you have a decent case: for example, if you have a case you feel is worth $150,000 from a jury (remember that juries are notoriously unpredictable), and you could save thousands in court costs and discovery expenses, and have the outcome decided by an arbitrator in months, rather than years, for even close to the same amount of money, then both the attorney and the client have benefited greatly. To get a case before a jury takes one to two years, and any post verdict appeal takes about another year: and lawsuits, unlike wine, do not improve with time.

OK. You've convinced me to utilize your services as an arbitrator. I'll give you a call and tell you about my case.

Please don't! If I am to potentially serve as the arbitrator, I cannot discuss the merits of the case with either party. I can inform you of the process and the costs, and I can set up the dates for arbitration with you or your attorney, but I cannot discuss you case with you.