Brian_Cohen.jpgFormer Miami Dolphins Head Coach Brian Flores is suing the National Football League, the Dolphins and other teams for racial discrimination in hiring and retention practices for coaching positions throughout the league. Filed last week, the class action has already unleashed a torrent of discussion about the low percentage of Black coaches in a league where about 70 percent of the player population is Black. If the case proceeds to trial, sports commentators have predicted that witness testimony and documents could unearth damning secrets about how Black players and coaches are treated within the league and create a mountain of bad publicity that could devastate the NFL. But if Flores’ contract with the Dolphins contained an arbitration clause, as standard NFL coaches’ contracts do, these secrets may remain behind closed doors. 

Parties negotiating any kind of contract should consider whether they want such a clause in whatever kind of agreement they are about to execute. Whether a party should seek an arbitration clause in its contract is unique to every situation. 

Arbitration Clauses

Used in a variety of contracts, arbitration clauses require that the parties resolve disputes arising out the contract through arbitration. Arbitration is like a typical litigation proceeding in that the arbitrator, or arbitration panel, will, in many ways, act like a judge and determine the respective rights of the parties. An arbitrator’s ruling is a final, binding resolution. However, as explained below, the process differs from traditional litigation in a number of important ways.

An arbitration clause may identify a specific arbitrator or panel of arbitrators, who are often (but not always) attorneys and who have been trained to resolve disputes. The arbitrator(s) will consider the evidence presented by both sides and issue a binding decision.   

Arbitration offers a number of potential benefits. However, what might be viewed as a benefit to one side can just as easily be seen as a detriment to the other. Parties need to think ahead and try to forecast how these issues will affect them if they find themselves faced with a contract dispute.

Factors to Consider 

Quicker, More Efficient 

With crowded court dockets and complex and wide-ranging discovery, a traditional lawsuit can take years to get to trial. Arbitration is easier to schedule, and, depending on the availability of the arbitrator and the parties, and the nature of the case, hearings can typically proceed within a year. 

One of the reasons arbitrations can be completed more quickly is because the rules of evidence are less formal and the scope of discovery is more limited in arbitration, usually allowing the proceedings to move along more efficiently and inexpensively. Most local court rules continue to permit broad and expansive discovery.

Privacy/Confidentiality

Unlike traditional litigation, arbitration is a private matter that leads to a private resolution. All statements, evidence and findings will be kept confidential, which is preferable to many parties, especially – as in the case of the NFL – when the matter is of public interest and involves a sensitive subject that could damage a reputation or a business. However, from the point of view of Flores, whose goal is to compel the NFL to acknowledge and rectify an alleged history of racial discrimination, the confidentiality of arbitration proceedings could be a hindrance. 

An Arbitrator, Not a Jury, Resolves an Arbitration

Unlike many trials, arbitration does not involve a jury and therefore allows the parties to avoid the unpredictability of a jury decision. Matters are in the hands of the arbitrator or a panel of arbitrators, who act as both judge and jury and are trained to render their decision based on the evidence. When a dispute involves matters that are technical in nature, having the case presided over by an arbitrator with specialized knowledge of the discipline or industry could go a long way in ensuring a more informed decision.

For better or worse, depending on the nature of your case, juries may be more likely to be swayed by emotion and issue larger damages awards.   

Differences in Cost

Arbitration is usually (but not always) less costly overall than litigation because it usually doesn’t last as long and it involves narrower discovery. However, arbitration generally involves higher upfront costs. While court costs are usually nominal, arbitration usually involves hefty upfront fees that are typically calculated in relation to the amount at stake in the dispute – i.e., the larger the dispute, the higher the arbitrator fees tend to be. 

No Appellate Review

In nearly all situations, the arbitrator’s decision is final. Opportunities to appeal are extremely limited, so unless there was a major error in the process, you are stuck with the decision. 

Naturally, this can cut both ways. If the arbitrator decides in your favor, you walk away with a win, and you won’t have to worry about the cost and uncertainty of the matter dragging on for years.  

The Takeaway

Depending on the nature of the contract and the kind of disputes that are most likely to arise, parties should think carefully about whether they will be better served resolving those disputes in the courtroom or an arbitration.  

Novack and Macey LLP is a commercial and business litigation law firm that represents companies, entrepreneurs and other parties in disputes arising out of business relationships and commercial transactions. To contact the author, please email Brian E. Cohen at bcohen@novackmacey.com or call 312.419.6900.