Arbitration is a popular method of alternative dispute resolution (ADR) where parties agree to resolve disagreements outside of the traditional court system. Instead of going to trial, they present their case to a neutral third party, known as an arbitrator, who makes a decision or “award.” This process is often faster, less formal, and more private than litigation. There are various types of arbitration tailored to different needs and situations. Let’s explore some key forms of arbitration:
High-Low Arbitration (Bracketed Arbitration)
High-low arbitration, also referred to as bracketed arbitration, is a strategic approach where both parties in a dispute pre-determine the boundaries within which the arbitrator can make their award. Prior to the arbitration hearing, the parties confidentially agree on a “high” figure and a “low” figure.
Here’s how it works:
- Setting the Brackets: The parties negotiate and agree on a maximum payout (the “high”) and a minimum payout (the “low”).
- Arbitration Process: The arbitration proceeds as usual. The arbitrator hears evidence and arguments from both sides and then renders an award.
- Outcome Determination:
- If the arbitrator’s award is lower than the agreed “low” figure, the defendant is obligated to pay the “low” amount.
- If the award is higher than the “high” figure, the plaintiff will receive the agreed-upon “high” amount.
- If the award falls within the “bracket”—between the “low” and “high” figures—the arbitrator’s award is binding, and that specific amount is paid.
The high and low figures may or may not be disclosed to the arbitrator, depending on the agreement between the parties. This form of arbitration provides a degree of predictability and risk management for both sides, limiting potential exposure and ensuring a minimum recovery.
Baseball Arbitration
Baseball arbitration, a type of binding arbitration, is unique in its approach to determining the final award. In this method, each party involved in the dispute submits a single, final offer, representing their desired outcome. The arbitrator’s role is then limited to selecting only one of these final offers as the binding award. They cannot compromise or choose a figure in between.
Key features of baseball arbitration include:
- Final Offers Only: Each party must present their most reasonable and well-supported final offer. There is no room for negotiation during the arbitrator’s decision-making process.
- All-or-Nothing Decision: The arbitrator is compelled to choose entirely between the plaintiff’s final offer and the defendant’s final offer.
- Incentive for Reasonableness: This format encourages both parties to present realistic and justifiable offers. If a party makes an extreme or unreasonable offer, they risk the arbitrator choosing the more moderate offer from the opposing side.
Baseball arbitration is designed to be efficient and to push parties towards realistic valuations of their cases, leading to quicker resolutions.
Non-Binding Arbitration
Non-binding arbitration is similar in process to traditional, binding arbitration but with a critical distinction: the arbitrator’s award is advisory and not legally binding on the parties involved. After hearing the case and issuing an award, the parties are not obligated to accept it.
Here’s what to understand about non-binding arbitration:
- Advisory Opinion: The arbitrator’s decision serves as a professional, informed opinion on the likely outcome of the dispute.
- No Loss of Trial Rights: Parties retain their right to pursue a jury trial or other legal avenues if they are not satisfied with the non-binding arbitration award.
- Catalyst for Settlement: Despite being non-binding, this process is often effective in facilitating settlement. The arbitrator’s neutral evaluation can provide both sides with a clearer understanding of their positions and the potential risks and rewards of further litigation.
Many cases, following non-binding arbitration, proceed to settlement discussions or binding arbitration as parties seek to finalize a resolution based on the insights gained. Alternatively, they may choose to proceed to trial if an agreement cannot be reached.
Mandatory Arbitration (Judicial or Court-Ordered Arbitration)
Mandatory arbitration, also known as judicial arbitration or court-ordered arbitration, is a system established by legislation or court administration to manage and resolve pending court cases, particularly those involving claims below a certain monetary value (often around $50,000, but this varies by jurisdiction).
Key characteristics of mandatory arbitration:
- Court-Administered: This process is integrated into the court system and is often ordered by the court early in the litigation process to streamline case resolution.
- Informal Procedures: It typically employs less formal rules of evidence and procedure compared to a full trial, aiming for efficiency and cost-effectiveness.
- Non-Binding and Advisory: In most instances, mandatory arbitration is non-binding, meaning that if a party is dissatisfied with the arbitration award, they can request a trial de novo (a new trial). However, some jurisdictions may have variations where it can be binding under certain conditions.
- Reduces Court Backlog: The primary goal of mandatory arbitration is to reduce the burden on the court system by diverting suitable cases to a quicker, less resource-intensive resolution process.
The availability and specifics of mandatory arbitration depend on local state laws and court procedures. It serves as an initial step in dispute resolution, often leading to settlement or further ADR processes, even if the initial arbitration itself is non-binding.
For further information and to explore which type of arbitration might be suitable for your situation, you can contact JAMS (Judicial Arbitration and Mediation Services) at 1-800-352-5267 or visit their website for resources and local office details.
