The old refrain, “See you in court!” is so last century. The latest trend in resolving contractual disputes is the less expensive, out-of-court process of arbitration. Even the Kardashians include an arbitration clause in their contracts, and you can’t get any trendier than that.
Though arbitration is intended to be cheaper and speedier than a legal trial, for South Florida law firms it also has become an important and growing revenue stream.
Twenty years ago, arbitration was considered a niche area of the law. Today, hundreds of local attorneys practice arbitration.
Arbitration typically involves less paperwork — due to limited discovery and depositions — and instead of a jury, one to three “judges’’ decide the outcome. The arbitrators — called “neutrals” — can decide the case based on the law or their own common sense. Also, like Las Vegas, what happens there stays there, unless the parties agree to go public.
But while cases can be cheaper and more streamlined, the more complex matters can take as long as a trial and be as costly. And in most cases, there’s no option for appeal.
Still, backlogs in the courts have made arbitration increasingly popular. As the number of pending cases has skyrocketed, the number of civil suits actually being heard by juries has slipped off the edge. In just six years, from 2006 to 2012, the number of cases pending in Miami’s civil court grew nearly 250 percent, from roughly 37,000 to more than 91,000. By contrast, between 2009 and 2012, civil jury trials dipped from a high of 279 to a low of 210 in 2012, according to figures supplied by Scott Silverman, a retired 11th Circuit Court judge. That’s a reduction of nearly 25 percent.
The crisis in the courts is exacerbated by a high-volume turnover in the judiciary due to recent pay cuts, says Silverman, who left the bench last year. On May 1, 2012, Silverman became one of the founders of the Miami branch of JAMS, which bills itself as “the largest private alternative dispute resolution provider in the world” with more than two dozen U.S. offices. The list of its Miami-based neutrals reads like an A-list gathering of former chief judges: former Chief Justice of the Florida Supreme Court Gerald Kogan, former Chief Judge of the Third District Court of Appeal Juan Ramirez Jr., former Chief Judge of the Eleventh Judicial Circuit Joseph P. Farina, and former Chief U.S. Magistrate Judge Ted E. Banstra.
“The court system is a mess; it’s a real mess these days,” says Jeff Schneider, managing partner of the Miami firm Levine Kellogg Lehman Schneider & Grossman. A decade ago companies with arbitration clauses in their contracts might opt to litigate, he says. “Now, if they have it in the agreement, they pursue it,” he says. “There’s simply no choice.” Accordingly, he’s seen arbitration rise from a third of his practice five years ago to 80 percent today.
Bolstering its appeal are recent U.S. Supreme Court rulings that have enforced arbitration decisions in consumer and employment contracts, giving them the full weight of a court decision. Cellphone contracts, employment agreements and nursing home arrangements all typically include clauses calling for arbitration in matters of dispute, in part because they block expensive class-action lawsuits. And because arbitration proceedings are private, they avoid the spotlight of high-profile trials.