Arbitration often isn’t fast and cheap.

I’ve written before that the instinctive preference many express for arbitration over litigation in court is not always good for the client. But now it seems, according to Law.com, that litigators are beginning to question the very basis of that instinctive preference — that arbitration is faster and cheaper:

Large-scale commercial contracts often include arbitration clauses in the hopes of avoiding large-scale commercial litigation. But litigators are starting to find the quicker, cheaper, more private aspects of arbitration have turned into lengthy, expensive and often public quasi-trials.

This has a growing number of attorneys advising clients to either take their chances in court or tailor very specific arbitration clauses with the hopes of limiting the expense of arbitration. It’s a slow-moving process, however, as litigators are rarely consulted when corporate attorneys are drafting contracts.

In the old days, Cozen O’Connor litigator Philip G. Kircher said, arbitration used to mean a six-month process “from cradle to grave.” There was very little discovery, fewer depositions and less case management. The parties would go before one or three arbitrators and have a short, informal hearing with the rules of evidence more relaxed than in court.

As arbitration became more popular because of the expense of litigation, corporations’ growing distrust of juries and the length of time it took a case to get to trial, the arbitrators became all the more sophisticated. That resulted in the parties asking more of those arbitrators in terms of complex discovery, more depositions and pretrial conferences, he said.

“Slowly but surely, what was once supposed to be fast and cheap was becoming probably just as expensive, if not more so, than going to court,” Kircher said.

Kircher had two arbitrations recently that have gone through weeks of trial, hundreds if not thousands of exhibits, dozens of witnesses and lots of briefing. The panel then sits with the cases for months to review all of that material.

“Even when there’s a final award, more often than not the losing party tries to find a way to appeal it anyway, so [it gets] hung up for another year before the award is rendered to judgment,” Kircher said.

He is part of a growing segment of attorneys who would rather have the security of an appeal and the finality of a court decision by taking their cases to court. Kircher is advising his clients to create clauses in their contracts that agree to have a nonjury trial in the event of a dispute or at least agree on a certain jurisdiction, preferably in federal court.

[Hat tip to Philip Loree.]

A legal pattern – innovation, slow embrace of the innovation, abuse of the innovation, and gradual control of the abuse

Disputing — a terrific blog dedictated to issues regarding arbitration, mediation, and other means of “alternative” dispute resolution — has given me the honor of writing as a guest. Today on Disputing you can read Part One of

“Alternative” Dispute Resolution, the Rhetoric of Naming, and the Emerging Trend to Invalidate Mandatory Arbitration Clauses and Class Action Waivers in Consumer Agreements

It describes a typical arc for legal innovations. There is innovation, acceptance by the law of the innovation, abuse of the innovation that uses it for purposes other than those it was created to accomplish, and, slowly, the law’s effort to preserve the benefits of the innovation and curb its abuses.

In this case, the innovation is arbitration. As Wikipedia explains, “In the early 20th century, businessmen in New York began promoting the idea of legally binding arbitration to resolve disputes as a less costly alternative to litigation. Courts were hostile to the idea . . . .” Only in the 1950s and 1960s did courts generally accept arbitration and come to universally enforce agreements to arbitrate disputes. During my legal career (I began law school in 1981 and practice in 1984), the enforceability of arbitration agreements became an unquestioned fact.

But, inevitably, businesses began to recognize that requiring their customers to agree to arbitrate disputes rather than engage in litigation in the courts offered other benefits, benefits that had nothing to do with arbitration’s offer of faster and less expensive dispute resolution. And only now (literally, in the last month) are courts both recognizing what is going on and dealing with it effectively.

You can go to Disputing to read part 1 of the story. Part 2 will appear on Disputing tomorrow.