1 PerspectiveOctober 7, 2008
Have you ever had a dispute over an amount that was too small to litigate but too big to leave behind? These are some of the most difficult issues to resolve; they can strain the attorney-client relationship and occasionally, they test the bounds of common sense. Before you file that lawsuit, consider whether non-binding arbitration can help you avoid the irrational.
Although I didn’t know what it was called at the time, non-binding arbitration came in especially handy for me in a dispute my client had with an insurer a few years ago. The matter was the last, minor claim on a long list the two had fought out, and who was really “right” in this case isn’t really relevant at this point. The more important facts were: (i) the amount in dispute wouldn’t support a full-blown lawsuit; and (ii) despite the modest quantum, a lawsuit remained likely given the egos involved and the broader relationship between the parties.
Stumbling into Non-Binding Arbitration
I searched for a way to get a judgment on a smallish case with complicated facts, and it couldn’t be done here. I talked about how to resolve the problem with opposing counsel Randy Evans and Doug Chalmers — two lawyers at a firm known for its insurance expertise — and convinced them my client would sue. In turn, they convinced me they were prepared to defend the case. We had a real problem.
With dueling claims of resolve tempered by mutual budget realities, we eventually agreed to a process that might break the impasse:
- We would hire an agreed-upon neutral evaluator;
- We would file simultaneous written position statements of 10 pages or less with the evaluator;
- We would submit simultaneous written replies a few days later;
- The neutral evaluator would give us an opinion on what he felt was owed (and why) 30 days later;
- The evaluator’s opinion would not be binding on anyone or admissible anywhere; and
- We would split the neutral’s fee (which was about $7,500).
Non-Binding Arbitration: What Is It? Why Should You Use It?
No one knew whether this workaround would help us settle the case at the time, but we knew it would quickly give our clients a credible ruling on their respective positions with little client involvement, virtually no costs, and no risk on the merits.
We had stumbled upon a form of non-binding arbitration, which is fully (and ably) explored in “Non-Binding Arbitration: An Introduction” by Steven C. Bennett. As complicated as it sounds, the JAMS website tells us that non-binding arbitration is simply a way to get to an advisory opinion:
A procedure sometimes called “non-binding arbitration” is conducted much like a (binding) arbitration, except that when the arbitrator issues the award after the hearing, it is not binding on the parties and they do not give up their right to a jury trial. In that case, the arbitrator’s award is merely an advisory opinion. Many cases go to settlement or (binding) arbitration after this phase, or they can choose to go to a trial.
Importantly, binding arbitration can be as formal or as informal as the parties agree; the process we agreed to in my case illustrates that an advisory opinion within 60 days, based on nothing more than briefs and documents, isn’t out of the question.
How Can a Nonbinding Opinion Help In Your Case?
A neutral opinion on the merits of your case can be a powerful thing. Bennett’s article tells us that non-binding arbitration opinions often serve as “springboard[s] for discussion,” and that’s just what happened in my insurance dispute. The arbitrator issued his ruling, the parties immediately used it to frame their negotiations, and — after one more tactic from the other side that I’ll post about soon – we got the case settled.
Apparently advice can be worth more than you pay for it.