Choosing an Arbitration Provider – Don’t Go With The Flow

It’s a given these days that most agreements with customers and employees will have an arbitration clause and a class action waiver. There’s an ever-evolving area of law as to what those clauses can and cannot say, and when they may lose their enforceability.

Often overlooked when crafting an arbitration clause though is identifying which company will administer the proceeding. Common providers are AAA, JAMS, NAM, and many new upstart companies purport to offer streamlined procedures. Each of these providers has different fee structures, fee amounts, case procedures, and customer service experiences.

Rather than researching which provider is best suited to resolve disputes related to their business, I’ve noticed many companies choose a provider without much, if any, research. The result of this approach can be higher than expected fees, slow cases, and a general dissatisfaction and frustration with the process. Remember, arbitration clauses are binding on you as well, and a mistake in selecting the provider could haunt you for years.

So what do you do?  Three tips:

1.       Treat choosing an arbitration provider like selecting any vendor. Inclusion of a company in your arbitration clause is potentially providing them thousands of dollars in business – why give that away without understanding what you are signing up for? Speak to a customer service representative for multiple providers and make them tell you about how arbitrators are chosen and their qualifications, typical timelines to trial, and make sure you understand their case management process. If you can’t get someone to help you at this point, imagine how frustrating it could be down the road.

2.       Understand the fee schedule and what you should expect to pay on a per arbitration basis, both for individual claims and when a large number of cases are filed at the same time. Did you know a consumer arbitration under AAA triggers $1,800 in fees payment by the business, that if not paid on time could risk your right to arbitrate?  Don’t be caught off guard.

3.       Have your counsel review the arbitration rules and determine if they are a fit for your business. If your company commonly faces straightforward cases, make sure the rules provide for expedited proceedings and limited discovery. If you foresee complex disputes, make sure you’ll have ample opportunity to develop your case and a sufficiently sophisticated arbitrator to hear it.

You’re not going to (and shouldn’t) win your case when you select an arbitration provider, but you still need to treat this as an important decision.

*This blog is intended to provide a general summary of best practices and does not constitute legal advice. You should consult with counsel to determine the exact legal requirements in a given situation.