By: Roger J. Buffington, Esq.
Buffington Law Firm’s Breach of Contract litigation attorneys often deal with contract disputes involving an arbitration clause. An arbitration clause is a provision in a contract that provides that the parties have agreed to conduct any disputes arising from the contract, usually a breach of contract claim, by means of some kind of binding arbitration rather than in ordinary state or federal court. There are many forms of arbitration. Most typically, the arbitration will require that the dispute will be decided by a single arbitrator, who sits as judge and jury, i.e. as the finder of both fact and law. Thus, the dispute will be conducted by an arbitrator or arbitration panel, rather than by a sitting judge possibly with a jury.
The most common scenario in which parties are required to arbitrate is one in which the written contract that applies to the dispute contains a clause requiring “binding arbitration,” “submission to arbitration” or similar language. One of the important things to know about such contract provisions is that they are almost always enforceable. The Federal Arbitration Act (“FAA”) specifically provides that such clauses are favored by public policy as expressed in this Act. The Government favors arbitration mainly as a way to unburden the court systems, and allow parties to resolve their differences privately. States lack the power to override any such provision under State law, since Federal law takes precedence in this context. If one side to such a contract dispute wants to enforce an arbitration clause, it can force any dispute to arbitration and remove it from state court, if the other party went ahead and filed in state court regardless, as sometimes occurs.
Often parties who negotiate and enter into a contract assume that the arbitration clause in the contract is somehow required, is “legal boilerplate” or somesuch. This is not the case at all. Usually an arbitration clause is optional as between the parties, and is a negotiated term just like any other. An arbitration clause in a contract is one of the most far-reaching provisions that a contract can contain if the parties develop a breach of contract dispute or a similar dispute deriving from the contract. Unless the clause provides otherwise (and they almost never do) an arbitration clause alters the conduct of any breach of contract disputes in many fundamental ways, including:
- Waiver of the right to a jury trial.
- Almost no right of appeal. The overwhelming majority of arbitrations provide for almost no right of appeal of the arbitrator’s decision. The decision is effectively final.
- Limited discovery. While some arbitration procedures enable discovery comparable to an ordinary lawsuit, most arbitration procedures limit discovery so that there is less discovery allowed than in a civil lawsuit.
- Somewhat different rules of evidence than provided by federal or state court.
- And of course, the parties must pay the arbitrator fees. These fees typically run in the $1,000/hour range as of 2026.
These are some of the more critical differences between arbitration and ordinary court forums. There are far-reaching effects that derive from these differences.
Disadvantages of Arbitration
Experienced trial lawyers will often opine that the lack of much right of appeal puts too much arbitrary power in the hands of the arbitrator. Many trial lawyers believe that the right of appeal keeps an ordinary judge more honest, since he or she knows that the decision is subject to review, scrutiny, and possible reversal. Thus an arbitrator may feel empowered to be more arbitrary and perhaps less fair. Similarly, many lawyers believe that the right to a jury in a breach of contract action limits the judge’s power, placing the power to determine facts in the hands of ordinary citizens, thereby enhancing fairness. The right to a jury, after all, is an ancient civil right. Limitations on discovery can constitute a trade-off between thoroughness on the one hand, and efficiency and brevity on the other, that may work against one side. And of course, many lawyers point to the expense of arbitration. Arbitrators are most commonly retired judges or very experienced neutral attorneys. The parties must pay for their services. Not uncommonly, such an arbitrator may bill $1,000/hour, or even more. Court judges are paid for by the taxpayers.
Advantages to Arbitration
Sometimes an arbitration can be a way for the parties to avoid publicity that might occur from a trial in court. Trials in state and federal court are public. Additionally, arbitrations can be, and often are, much swifter than an ordinary civil breach of contract case that is tried in the court system. A breach of contract case may take one or more years to get to trial. Since arbitrations are almost always private, they can often proceed more swiftly. Since there is very little right of appeal, usually effectively no such right, the non-appealable decision is truly final. Some attorneys believe, notwithstanding the considerable cost of the arbitrator or arbitration panel, that arbitration can be less costly than an ordinary trial in court due to the limitations on discovery and the procedures within the arbitration, which may lead to informal, quicker, and cheaper resolution of pretrial disputes, such as discovery disputes. Sometimes an arbitrator may be more qualified than an ordinary court judge or for that matter a jury, to make findings of fact or law because the parties may agree on an arbitrator who is familiar with the type of dispute that constitutes the breach of contract case. Sometimes you really get something extra in exchange for those arbitration fees.
Other Considerations to Arbitration.
One very important issue in Arbitration is where to arbitrate. A contract arbitration clause will often specify a specific arbitration forum. Other times the clause may say that the arbitration will be conducted “in accordance with the rules” of a given arbitration forum. This component of the arbitration clause can be very important because not all arbitration forums are equally good. One positive thing about arbitration clauses is that even if arbitration is required, if the clause only specifies the rules that apply to the arbitration, rather than the arbitration forum itself, a party can avoid a bad arbitration forum because most arbitration firms or individual arbitrators are happy to apply the specified rules. Thus, for example, it is very common for arbitration clauses to specify that “the arbitration will be conducted in accordance with the rules and procedures of the American Arbitration Association (“AAA”)…” Many litigation attorneys dislike AAA for various reasons. Other, perhaps better arbitration forums such as JAMS (Judicial Arbitration and Mediation Services) and ADR (Alternative Dispute Resolution, Inc.) are happy to conduct the arbitration in accordance with AAA rules. (In fact, JAMS, ADR, and AAA rules are very much the same.) I have seen attorneys submit their arbitration claim to AAA without recognizing the distinction between AAA rules, and having to engage AAA itself. Lastly, even if the arbitration clause does stipulate AAA (or some other undesired arbitration forum) sometimes the parties will be able to negotiate a better forum. We have done that at Buffington Law Firm many times.
The important thing to know about arbitration is that in the context of breach of contract cases it should be something that the parties carefully consider ahead of time. But if a dispute arises that must be decided in arbitration, you will need an experienced breach of contract litigation attorney, with experience in arbitration. If you are involved in a breach of contract dispute, Buffington Law Firm invites you to contact us for a free legal consultation. All consultations are with an experienced breach of contract trial lawyer, are completely confidential and protected by the attorney-client privilege, and of course there is never any obligation.