Resolving disputes through arbitration - The Legal Spotlight

Arbitration is a widely used method of dispute resolution, because the American Institute of Architects contracts are widely used and they contain clauses requiring it. While it is in most contracts for construction, architectural, engineering and interior design services, not all attorneys are experienced in handling them and know the free points of how the process works. Attending an arbitration hearing is not an everyday occurrence for most contractors and design professionals.

There is a special panel of construction arbitrators. Everyone on the panel has experience in some aspect of the industry. There is also a separate commercial panel of arbitrators for disputes such as those that occur between partners or involving business contracts in general. Here are some things you should know about the process.

Most arbitrations are handled by the American Arbitration Association ("AAA"). Disputes involving less than $50,000 are handled under expedited rules. This means that AAA will select the arbitrator. Of course, you can still object if there is a conflict of interest or a problem. AAA will also try to have telephone conference calls to resolve procedural disputes rather than having everyone come to a formal hearing.

The next milestone amount is $250,000. If the amount in dispute is higher than this, there may be three arbitrators. It is not an absolute right, but it is generally allowed. Sometimes there is written argument as to why this should or should not be allowed.

Occasionally, a hearing will start in which the amount in controversy has not been stated. At the hearing the Claimant may for the first time state what he is suing for. If respondent raises the issue of his right to three arbitrators, the hearing will likely be adjourned to allow two more arbitrators to be added to the panel. If you anticipate needing a three-person panel, the Respondent's counsel should request that the Claimant disclose the amount in controversy before the hearings begin.

When the sum in dispute is between $50,000 and $250,000, there will be one arbitrator selected from the lists submitted by the parties. Each party can strike several names for any reason.

Out-of-state companies doing business with New York companies should pay particular attention to the provision in their contract stating where the arbitration hearings will occur and which state's law will apply. Otherwise, a dispute involving construction in New York can wind up in another state.

The rules of evidence do not apply and there is no set method for the manner in which the arbitration proceeds. This can be disconcerting for lawyers inexperienced in arbitration and clients alike because they do not know what to expect. Affidavits and hearsay evidence that would never be allowed in court are frequently allowed in arbitration. The parties all have an opportunity to put everything they want to say before the arbitrator.

There is no absolute right to discovery. At the most, the parties may request an exchange of documents at one preliminary conference. That is usually the extent to which documents are exchanged. There are no formal motions. There are no depositions. Issues requiring a ruling are either raised in correspondence to AAA, which is then forwarded to the arbitrator for a ruling or they are raised at the hearing. The general idea is to move the case along expeditiously to decision.

The end result of an arbitration is an award. While the Respondent has thirty days to pay, the Claimant may immediately go to court to convert the award into a judgment. This should encourage Respondents to make arrangements to pay the award quickly, since a judgment is a matter of public record, but an arbitration award is not. Privacy is one of the pluses of the arbitration process. The records are not open to the public. This is one reason that many businesses chose arbitration. They know that if trade secrets are discussed at hearings, the public will not have access to the information.

Generally speaking, it is an excellent vehicle for resolving small to medium-sized disputes. You should consult with an attorney knowledgeable in this area before inserting such a provision in a contract involving a large sum of money, because it may not be the best method of dispute resolution if the dispute winds up involving a lot of money. Awards are basically not appealable. This can be problematic if there is a large award. You may want to keep open your option to appeal and rise arbitration for disputes involving smaller slims of money.

C. Jaye Berger of Law Offices of C. Jaye Berger is an attorney in New York City who specializes in building construction, real estate, environmental law bankruptcy and litigation. The firm represents a number of owners, contractors, architects, and interior designers. Ms. Berger has written a h@k about hazardous substances in buildings, which was published by John Wiley & Sons in 1992 and another book about interior design law published in 1994.

COPYRIGHT 1996 Hagedorn Publication
COPYRIGHT 2004 Gale Group