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Business Litigation and commercial Arbitration: Part 3

On Behalf of | May 16, 2014 | Business Litigation

Buffington Law Firm’s Orange County business trial lawyers have extensive experience in the use of commercial arbitration as an alternative business litigation venue.  There are many advantages and disadvantages to the decision to use arbitration, and we discussed these in some detail in last week’s Blog.  In this week’s article we will discuss the actual selection of an arbitrator. 

The first important decision in arbitrating a lawsuit is to select an arbitration firm.  These are companies that make a business out of providing arbitration services.  In commercial arbitration the parties usually have the right to agree between themselves as to the selection of an arbitration company, and even the selection of the actual arbitrator.  Even if the contract specifies that the arbitration company will be the “American Arbitration Association” (known commonly as “AAA”) the parties can agree to change this.  In my opinion they should do so.  In Southern California at least, in our opinion AAA is a distinctly inferior choice when choosing an arbitration company.  Firstly, AAA does not even operate an arbitration center (the place for the arbitration) in many major California markets, and instead depends upon the litigants to find a place for the arbitration.  More importantly, in our recent experience with AAA virtually none of the actual arbitrators that they offered were retired judges — most arbitrator candidates were practicing lawyers.  Thirdly, we found the administration of the arbitration by AAA to be unresponsive and poorly done.  Contract draftsmen, who usually are not business trial lawyers, often specify “American Arbitration Association” simply because it has a prestigious-sounding name and it is the only arbitration company that they have ever heard of.  Needless to say, this is a poor way to make a decision of this importance.  We have found that even when we are litigating on a contract that specifies AAA arbitration that we can usually persuade the opposing side to agree to a better choice.

The second important decision in pursuing commercial arbitration is the selection of an arbitrator.  Buffington Law Firm believes that this should always be a retired judge, not a practicing attorney.  While attorneys can act as effective mediators, it is important that an arbitrator be truly neutral, and that he or she is practiced at conducting a hearing, i.e. the actual arbitration proceeding which is much the same as a court trial.  Retired judges are far more likely to have these qualifications.

In particular, experience has taught us that when you select an arbitrator you want an arbitrator that has no relationship, however tenuous, with opposing counsel.  Prior relationships between the arbitrator and someone involved in the arbitration is much less likely to happen  with a retired judge.  Lawyers often know each other through professional associations, which means that they may have interacted socially with a lawyer-arbitrator.  This is never good.  While arbitrators are supposed to disclose relationships with a side that a reasonable person would think should be disclosed, we do not like to rely on this.  Judges normally do not socialize with lawyers much, at least while on the bench, and there is a much higher probability of an arbitrator not knowing any of the parties or their lawyers if the arbitrator is a retired judge.

If you have a business litigation, trust, litigation, or real estate dispute that you would like to discuss with us, we invite you to arrange for a free legal consultation directly with one of our trial lawyers.