ASK AN ATTORNEY

Arbitration in a construction dispute: Pros and Cons

BY: Matthew Chabal, III, Esq | SAXTON & STUMP LAWTERS AND CONSULTANTS

I am often asked if it is better to pick arbitration or litigation as the mechanism for resolving construction disputes. The difficulty in selecting one over the other is that the choice must be made before the dispute arises – in fact, before the contract is signed and the project starts. Here are some things to consider.

Pros of Arbitration
It’s faster (usually). Lawsuits can take years – months and months of pleadings, discovery, motions, and waiting to get on a trial list. Arbitration dispenses with complex pleadings, discovery is usually limited, and motions are less common, resulting in an accelerated schedule.

It’s cheaper (most of the time). The truncated timeline usually means an overall lower cost for arbitration. But unlike lawsuits in which the judge and jury are “free,” arbitrators can charge fees that exceed the hourly rates of the parties’ attorneys and experts. Some cases require multiple arbitrators (e.g., American Arbitration Association Rules call for one arbitrator on claims under $1 million and three arbitrators for claims over $1 million).

Arbitrators are knowledgeable about construction. The parties have some say in who will decide the case and can look for arbitrators with experience in relevant fields like construction law or engineering. In complex cases, the specialized knowledge may be the difference between a right and wrong answer.

Confidentiality. Arbitration proceedings are private, allowing sensitive information to be kept out of public view. Conversely, the entire record of a court case may be open to the public.

Flexibility. Parties to an arbitration are usually able to agree on procedural rules, allowing for a more tailored process compared to the rigid structure of litigation.
Finality. Typically, arbitration awards are final and cannot be appealed, providing immediate closure.

But that doesn’t mean it’s always best to go to arbitration.

Pros of Litigation
Appealability. The flip side of the finality of an arbitration award is that one is stuck with an incorrect decision. An arbitrator can be wrong on the facts or make an incorrect legal ruling, and there is no recourse. A court can be “corrected” on appeal.

Comprehensive evidence and discovery. While the limited discovery in arbitration can lead to cost savings, it can also result in surprises during the hearing or the inability to obtain critical evidence. The litigation discovery process reduces those concerns.

Tighter reins on the parties. A court has established rules and procedures that generally keep litigants on track and establish a clear course to resolution (albeit often a long course). The rules can lessen abuses of the process.

Judgment based on the law. Judges and juries are bound to follow the law, which is spelled out at trial and in opinions on motions. Sometimes it can be difficult to understand the reasoning behind an arbitration award, especially when the arbitrator is not required to explain the decision.

Pretrial motions can dispense with a trial. There are times when pretrial motions, although time consuming, can resolve a case without a trial and ultimately save time and money.

For more information visit, Saxton & Stump | The Law Firm with a Different Approach