Litigation Finance and Arbitration: Part III

In a world where arbitration has some fans but also some opposition it is important to consider why some are hesitant to agree to arbitration.  Additionally, it may be important to find a way to come around to accepting arbitration because it does not look to be going away as it seems to be essential for international commerce.

One of the main complaints against arbitration is something along the lines of “we had a bad experience when our last arbitrator seemed biased.” While bias is a legitimate concern, it is important to remember that a majority of state courts in the United States have elected judges.  Meaning that the judges could potentially be dependent on your adversary and its counsel for fundraising and support.  Or if it’s a jury trial, just remember that statistics show, at least in the employment context, that juries are much more likely to make an unusually large award to a claimant.

A second complaint of arbitration is that parties do not like not having discovery.  But part of the overlooked beauty of arbitration is that the parties set the terms.  Therefore, if you want discovery be sure to include it in the terms of arbitration, this means that there can still be depositions in arbitrations if both parties agree to it.  Or parties can agree to set a limit on discovery, for example, only two depositions each.  The flexibility and customization allows parties to make arbitration what they want.

Another reason some people avoid arbitration is that they would prefer to be in federal court.  However, when considering this complaint it is important to consider the limited scope of federal jurisdiction.  Unless the complaint raises a question of federal law (which is probably less likely than you think) or there is diversity or alienage jurisdiction than it is not coming into federal court no matter what the parties would like.

Lastly, for bigger corporations and businesses in particular, they often want to proceed to court because they know they have more financial baking and resources than the plaintiff does.  However, because litigation finance has become such a viable option to so many people, this point makes less sense.  Litigation finance or arbitration finance seeks to level the playing field and facilitate justice no matter the resources of each of the parties.

Topics:  litigation finance, alternative litigation finance, third-party funding, arbitration, alternative dispute resolution

Works Cited: John Shope, Making an Informed Choice About Arbitration, Law360 (March 1, 2018).