Binding Arbitration

Auto dealers engage in risky activities every day. Plaintiffs’ lawyers, and especially class action plaintiffs’ lawyers, have discovered how attractive auto dealers (and the deep-pocket finance companies that buy the dealers’ financing contracts) can be as defendants. Companies with 15 to 100 employees, the size of the typical dealership, are the most commonly sued businesses today.

Why binding arbitration? Because it offers dealers numerous benefits:

  • Privacy is perhaps the most important. The process is private in all jurisdictions.
  • On average, binding arbitration awards are similar to jury awards, but the risk of an outrageous award is much lower.
  • Decisions are rational, professionals make decisions. There are no juries in binding arbitration cases.
  • The decisions are final or restricted by the binding arbitration agreement.
  • It’s faster and delays are eliminated. On average, binding arbitration cases are resolved in less than nine months; the average civil case takes over two years.
  • It’s less expensive. Arbitration costs can run 15 to 20 times less than resolving a similar dispute through the court system.

How does binding arbitration work?

  • To begin a binding arbitration claim, one party completes a binding arbitration claim form, files it with the arbitration administrator, and pays a filing fee, if any. The other party responds.
  • In some systems, the parties can have a document hearing. This means an arbitrator studies the documents submitted by each party, makes a decision and issues an arbitration award.
  • Or the parties could opt for a participatory hearing where each party submits evidence and appears before an arbitrator who studies the evidence, makes a decision and issues an arbitration award.
  • The binding arbitration decision or award is legally enforceable by the courts.
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