Arbitration Agreements 101: Who pays the judge?

Webster’s New World Dictionary, Second Edition, defines the word “arbitrate” as “1 to submit (a dispute) to an arbitrator 2 to decide (a dispute) as an arbitrator -ar’ bi tra’ tion n.” Easy right? End of article, let’s go have lunch. Not so fast. Let’s take a closer look at what an arbitration is to help us better understand what we are dealing with when one becomes involved in anarbitration.

In the beginning, we litigator types would typically “go to court” to “litigate” (i. e., to contest in a lawsuit) our clients’ beefs with others that they could not resolve in a more peaceable fashion. The “court” (i. e., a place where trials are held-thanks Webster) is typically a “public” forum where ALL are entitled to come and resolve their beefs (provided the necessary filing fees are paid). In California, Courts are typically organized by county, and therefore judges are typically employees of the respective county where the court is located. Therefore, the litigants do NOT pay the judge. The county does. Furthermore, as a general rule, the rules of evidence and procedure that are commonly found in our statutes (and as interpreted in our “case law,” i. e., prior rulings of judges as they go about their business of “interpreting” the rules of evidence and procedure as they apply to a particular case and set of circumstances) apply and are enforced. This is particularly true in the case of jury trials. This is because juries are not experts in the law, do not generally understand the rules of evidence and procedure, and need the court’s guidance in these areas to help them do their job as best they can. In the end, the judge will reach a decision, or the jury will reach a verdict, and if a litigant is unhappy with the result, he or she can seek to appeal the unhappy result.

Our courts became a popular place for the redress of grievances. So popular in fact, that their crowded “dockets” (i. e., case loads) resulted in cases taking sometimes years to get to completion. Sure, many cases settle, but if you needed a trial, you might find that your case was at the back of a very, very long line. According to Wikipedia, around 1926 the American Arbitration Association (AAA) was founded “to provide dispute resolution and avoid Civil Court proceedings.” Such organizations of which there are now quite a few are known generally as “alternative dispute resolution” (ADR) companies. So how do AAA and other ADR companies allow you to “avoid civil court proceedings” you might ask? Well, typically, you AGREED to it! How you wonder? Well, take a closer look at that contract you signed. Did you notice the “arbitration provision” stating that in the event of a dispute you will proceed to “binding arbitration” and WAIVE your right to go to court and argue your case to the judge or jury. Can I change my mind you ask? With limited exceptions the answer is no. You are stuck in binding arbitration. (I want to mention that some parties that do not have an arbitration provision in their agreements can nevertheless agree to go to arbitration so long as ALL parties agree to do so – but this article will focus on “Contractual Arbitration”). So as I said, you are stuck in binding arbitration. This is a good thing right … or we would not have agreed to it in our contract. Well, perhaps yes and perhaps no. It depends …

Remember I told you that the county pays the judge to hear your case (and a lot of others). Well, in arbitration, the PARTIES pay the judge (who is typically called the “arbitrator” or “neutral”) to hear their case. The parties pay the judge BY THE HOUR. In my experience, and most recently, the hourly rate can be as low as $375 or $400 per hour for a lawyer to $600 or $700 per hour and up for very experienced retired Superior Court judges who have decades of experience as judges in our court system. The PARTIES will also pay the ADR company to “administer” the proceedings. Depending on the amount at stake and the complexity of the case this can run to many thousands of dollars. This is how ADR companies allow the litigants to “avoid Civil court proceedings” … the litigants have their case heard by a “private judge” who they pay … not the county. Yes, your case will get heard and resolved much more efficiently and timely, but you will pay for this privilege. I have heard it said that ADR is supposed to help the parties keep attorneys fees in check as well. In my experience you cannot necessarily rely on that being the case.

There are many other issues and topics to cover with regards to ADR and I intend to cover them in future articles. In this initial article however I simply want to draw your attention the important distinction between WHO PAYS THE JUDGE when considering whether or not to agree to binding arbitration and a related WAIVER of your right to have your case heard by the judge or jury down at the courthouse. Certainly it is an important factor to consider.


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