Arbitration can be a risky business

Among the perceived advantages of arbitration is a faster and more efficient resolution of the parties’ dispute. But, faster and more efficient does not always mean better. What if the Arbitrator(s) make a mistake? What if they get the result totally wrong? Well, you can always appeal, right? In California, the parties may waive their right to appeal under the California Arbitration Act [see Pratt v. Gursey, Schneider & Co. (2000) 80 Cal. App. 4th 1105, 1110, 95 Cal. Rptr. 2d 695 (dismissing appeal because parties’ stipulation to arbitrate expressly waived right to appeal any judgment or order)]. That’s right folks. Many arbitration clauses in effect provide that the decision of the arbitrator is final and binding – no matter how correct or incorrect that decision may be. Arbitrators are human too. They make mistakes. However, in California, unless your arbitration clause provides that the arbitrator’s decision may be appealed, the parties will have no choice but to live with bad decisions. More than a few lawyers that I have spoken with recently about such matters feel that arbitration clauses no longer are in the best interests of their clients, and no longer mean the legal proceeding will be any less expensive than going to court. If you go to court, however, you can generally appeal the court’s rulings if you feel the judge just got it wrong. And remember, in court, you don’t have to pay the judge like you have to pay the arbitrator in an arbitration. Arbitration may still make sense depending on the circumstances, but you should think about it before blindly agreeing to an arbitration clause in a contract.