By U.S. District Judge W. Royal Furgeson, Jr.
I have read with interest “Why Isn’t ADR More Popular? A Report from Harvard.” From my perspective as a judge, I would recommend that lawyers be very careful about inserting mandatory arbitration language into their client’s contracts.
First, I see a great deal of buyer’s remorse in cases where there is a mandatory arbitration clause that leaves a party no choice but to arbitrate. Mandatory arbitration is no panacea. It is costly. Indeed, I hear anecdotally from lawyers that it is becoming more costly than trials. The rules of procedure and evidence are not clear. The arbitrator can be wrong on the law and the facts and his/her decision almost always must be given full effect by courts. There is in actuality no review process under the FAA.
Second, if mandatory arbitration is such a good thing, then why not wait till the dispute arises. The parties are free to agree at that time.
Third, if the goal is to avoid juries (which is a wrong headed goal, by the way), then the parties can just as easily agree in their contract to waive a jury and try any dispute to a judge.
Fourth, if the parties still insist on putting mandatory arbitration language into a contract, they should draft the language very carefully, setting out clear procedures about how to select an arbitrator(s) and about how to conduct the arbitration. This should be thoughtfully considered, at the outset, rather than just some statement that there will be arbitration.
Source: Federal Bar Association
The Honorable W. Royal Furgeson, Jr. received a B.A. from Texas Tech University in 1964 and a J.D. from the University of Texas School of Law in 1967. He was a United States Army Captain from 1967 to 1969 and an assistant county attorney in Lubbock, Texas in 1969. From 1969 to 1970 he was a law clerk for the Honorable Halbert O. Woodward at the U.S. District Court for the Northern District of Texas. Furgeson was in private practice in El Paso, Texas from 1970 to 1993.
Furgeson currently serves as a federal judge on the U.S. District Court for the Northern District of Texas. He was nominated by President Bill Clinton on November 19, 1993 and confirmed by the United States Senate on March 10, 1994.
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