Special to the Sun
When was the last time you looked closely at an agreement you signed for the purchase of a major consumer item or a service contract (such as a security system or pest services of your home)? Chances are you will find a provision that requires arbitration. In fact, commercial and construction contracts frequently include a provision requiring arbitration of disputes. This provision may also state that you have waived your right to a jury trial. Even if it does not include this language, the Mississippi courts have found that when you agree to arbitrate, your right to a jury trial is extinguished. And, your failure to read the document containing the agreement to arbitrate is generally not a defense to being required to arbitrate, because the presumption is that if you sign a document you have read it and are aware of its content.
It should be noted that some arbitration clauses include language that requires mediation before arbitration can be commenced. Mediation is a non-binding procedure whereas arbitration is intended to be binding and final. Mediation is conducted by a mediator who is engaged to facilitate resolution of the dispute but has no authority to decide which party is right or wrong. In the event mediation is unsuccessful, the parties have the option of proceeding to arbitration.
So, what is arbitration? It is an alternative to a judicial or court proceeding. One or more private individuals—not a judge with or without a jury—decides the parties’ claims and defenses. Arbitrator decisions are final and binding (unless the arbitration agreements state otherwise). Instead of hearings being open to the public, arbitrations are private and not subject to public scrutiny.
The intent of arbitration is to resolve disputes more expeditiously than the court system. Also, it allows the parties to agree on the arbitrators or to participate in their selection from a pool of arbitrators who have experience in the industry or type of dispute involved. For example, structural engineers can be selected as arbitrators to hear and decide disputes involving a building failure. Your dispute can be resolved by someone who understands the contractual and technical issues rather than a jury of your peers who likely have little or no experience in the area involved in your dispute.
Unlike judicial proceedings that are subject to challenge on appeal, arbitration is intended to conclude the dispute between the parties. Arbitrator’s decisions on liability and damages are not subject to challenge except for limited reasons: (1) an allegation that the arbitration award was procured by corruption, fraud or undue influence; (2) evident partiality or corruption on the part of the arbitrator(s); (3) refusing to hear evidence pertinent and material to the dispute; or (4) the arbitrator(s) exceeded their powers. These extremely limited grounds—and no others—are statutory. The party challenging the arbitration award has a substantial burden because of the finality associated with an arbitration award.
The arbitration process is commenced by making a written demand to arbitrate on the other contracting party and to a third party administrator, if one is identified in the arbitration provision such as the American Arbitration Association (“AAA”) to administer the arbitration. In the event there is no third party administrator, Mississippi has a commercial arbitration statute and a construction arbitration statute that provide mechanisms to utilize the court to assist parties to ensure the arbitration process is followed in a fair and equitable matter. In addition, if the contract between the parties involves interstate commerce, which most transactions do, the parties can also utilize the procedural provisions set forth in the Federal Arbitration Act.
Once the arbitration process is commenced, an arbitrator is selected who should have the legal and/or professional expertise in the area related to the controversy. This is particularly important in complex matters. After the arbitrator is selected, the parties typically conduct very limited discovery that can involve exchange of documents and depositions. The parties will also generally exchange their proposed exhibits that will be used to prove their case or defenses in advance of the arbitration hearing. The arbitration hearing will then be conducted at an agreed upon location, typically a conference room. The arbitrator will consider the evidence presented, including the testimony of witnesses. Arbitrators have subpoena power just like courts and can compel attendance of non-party witnesses at hearings.
Once the hearing is deemed closed, the arbitrator is required to issue his or her decision within a relatively short period of time. If the matter is being administered by the AAA, a decision is required to be made within thirty (30) days after the close of the arbitration. Depending upon what the parties agreed, the award can be as simple as a statement of the amount awarded to a claimant or that the claimant is awarded nothing; no written explanation is required. This is known as a standard award. If the parties agreed on a different form for award, it could include some explanation by the arbitrator concerning his or her decision, which is called a reasoned award. Or, the arbitrator can be required to issue detailed findings of fact and conclusion of law.
After the arbitration award is made, a party against whom the award is rendered can voluntarily pay the award or challenge the award based upon the extremely limited grounds discussed above. If a challenge is made to the award decision, the party seeking to enforce the arbitration award can, in the same proceeding, seek to have the arbitration award confirmed. This means the arbitration award, if confirmed, will be converted into an enforceable judgment that can be executed upon just like any other judgment obtained in court.
Arbitration is nothing to be feared and can ultimately result in the resolution of a dispute without the economic hardship and delay frequently experienced in judicial proceedings. There are many other nuances involved in the arbitration procedure and you should consult legal counsel where you have a dispute with another party and the contract includes an arbitration provision.
Christopher Solop is the managing member of Biggs, Ingram and Solop, PLLC, chair of the construction and government contracts group and a certified arbitrator for the American Arbitration Association.
