I recently tried a case before the American Arbitration Association that was submitted to binding arbitration based upon a contract between the parties. The contract was for construction services and contained an arbitration clause which essentially stated that any dispute arising out of the contract was to be subject to binding arbitration before the American Arbitration Association.
At the conclusion of the arbitration I felt that submitting disputes to binding arbitration can be less predicatable and riskier than having a jury decide the case. The reason I felt that way is because the arbitrator does not have to follow California law but can decide the case anyway he or she sees fit. I was defending a breach of contract action and felt certain I should prevail based upon the facts and law. However, I sensed the arbitrator was going to rule against us for equitable reasons. If he had done so, he would have essentially rewritten the contract between my client and the claimant.
To my surprise and delight the arbitrator ruled in our favor but it made me question whether I would advise clients to sign arbitration agreements and to waive the right to a trial by jury.
Here are some of the pros and cons. It is often thought arbitration is less expensive. That may not always be true. I have seen arbitrator fees ranging from $400 to $600 per hour. In the court system you do not have to pay the judge to hear your case.
Often times you have no right to conduct discovery in arbitrations. While discovery can be expensive, without discovery you are shooting in the dark and can be surprised or ambushed at the arbitration. You may be presented with documents you never knew existed and you will need to cross examine witnesses without the benefit of taking a deposition.
In jury trials you have a judge who will decide if certain evidence will be excluded in what is known as motions in limine. This allows the judge to exclude irrelevant or overly prejudicial evidence. This way the jury never hears evidence that could result in an unfair verdict because it is not directly relevant in deciding the dispute. The judge also reads detailed jury instructions on the law to the jurors and tells them it is their obligation to follow the law. In arbitrations you do not know if the arbitrator will follow the law which it makes the outcome less predictable.
Arbitrations are binding meaning there is no right to appeal. In a jury trial if the court made an error or if the jury verdict is not supported by the evidence at least you have the court of appeal to corrrect any mistakes. You do not have that in arbitration.
One should consider all these issues before agreeing to submitting disputes to binding arbitration.
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With the proposed economic recovery stimulus package, I was hopeful that this would open up opportunities for the construction industry. One concern I have is how long it would take to see these public contracts available for bidding. For example, if there is a proposed construction contract to retrofit a bridge, it could take years to complete the engineering and prepare plans and specifications. Only then can the project go out to bid.
However, there are many projects where the engineering is completed but the projects have been shelfed because a lack of funding. These projects can possibly go out to bid much earlier. The question will be whether the plans are still relevant or whether there will be a need for revisions.
Time will tell when we can see the benefits of the economic recovery package to the construction industry.
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I recently filed a brief in the California Supreme Court on an interesting legal issue involving real estate. I represented a client who was a real estate developer. This developer bought vacant land in Los Angeles with the intent of building an office building on one lot and using an adjacent lot for parking to satisfy the City’s zoning and density requirements.
A neighbor who owned an adjacent commercial building, opposed my client’s application to the City for a variance to allow parking on the lot that was not zoned for that use. A lawsuit followed.
In that lawsuit the neighbor claimed he had both an express easement and a prescriptive easement over portions of my client’s property. We claimed we had the right to possess the vacant property and the neighbor’s parking on our property amounted to a trespass.
We won at trial and were even awarded damages by the jury for trespass. We proved that the neighbor abandoned their express easement. We also proved that the neighbor failed to establish a prescriptive easement because they did not show their use was hostile or adverse. We claimed their use was permissive. When use of property is made with permission of the owner of the burdened property, or by agreement with him, a user cannot acquire a prescriptive easement.
The neighbor filed an appeal in the Court of Appeals. We appeared before the Court of Appeals and won there.
The neighbor then filed a Petition in the California Supreme Court. The issue he raised was which party had the burden of proof on the issue of permissive use. He claimed that we had the burden to show that the neighbor’s use was without permission and was indeed hostile. There was a split of authority in the lower courts on that issue and this neighbor thought the issue needed to be decided by the Supreme Court.
Our position was regardless of who had the burden of proof, we proved that the use was permissive.
We are waiting for the Supreme Court to decide if they want to hear more on this issue with further briefing.
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