Arbitration Agreements – Ensuring a Better Way to Resolve a Dispute

Often, the first words out of the mouth of someone who feels they’ve been wronged are “I’ll sue you!”

But is filing a lawsuit really the best way to resolve a dispute?

Arbitration is a process where a neutral third-party decides the outcome of your dispute. This third-party may be an attorney, a retired judge, or another legal professional, but it is someone that the disputing parties jointly select.

The arbitration process is similar to litigation, because each party submits its evidence, witnesses may be called, and there is a final decision, declaring which party prevails.  The procedural rules may be more relaxed than with a court case, and often the arbitrator has discretion to determine how the process will go without being strictly tied to the formal rules of court.

As a business owner, you are in control of the agreements you have with your customers, your suppliers, and your contractors.  Consider the benefits of having a written agreement specifying that the parties will submit any disputes to arbitration, rather than permit either party to file a lawsuit in the Arizona courts. (Arizona permits an employer to have an arbitration agreement with its employees, but that process is outside the scope of this article.)

  • Court records are public.  Arbitration is private.
  • Lawsuits can take years to resolve.  Arbitration is likely faster.
  • The losing party in a lawsuit in Arizona has the statutory right to appeal the decision to a higher court.  Arbitration decisions are final and binding.
  • But is it cheaper than litigation? The litigation rules are the rules. With arbitration, you can put controls on the scope and expense with a written agreement.

An arbitration agreement can be a stand-alone document, or it can be a single section within a more comprehensive agreement, such as a master services agreement or consulting agreement. In the agreement, the parties can lay out some or all of the rules of the proceeding – how much discovery is allowed, how many depositions will be permitted, how long is permitted for the entire process, and what type of damages the arbitrator can award.  At its most brief, the arbitration provision may just detail the procedure for jointly selecting the arbitrator, who then is given the discretion to determine the rules and overall process.

In Arizona, the courts can require opposing parties to arbitrate if the dollar amount in contention is less than $50,000.  Otherwise, each party has the right to initiate litigation if there is no agreement. Having this agreement or clause as part of your business documentation library will ensure that – should there be a dispute that cannot be resolved through conversation and negotiation – the dispute resolution process is clearly defined and eliminates the right of the opposing party to haul you into court!

Litigation can be protracted, expensive, public, and unpredictable. If you would like to take control of this potential situation before it arises, give me a call and we can determine the best way to protect your business from being subject to the litigation process.

NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES.

By Wendy M. Anderson, Esq.
Law Office of Wendy Anderson, PLLC
480-825-4509
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