A recent issue of Massachusetts Lawyers Weekly features extensive discussion with Steve Riden in an article titled “Benefits of business-to-business arbitration on trial.”
The article covers a decision by U.S. District Court Judge William G. Young concerning the use of arbitration clauses in commercial transactions. The decision was entered in the case titled Cellinfo, LLC v. American Tower Corporation, 18-cv-11250, United States District Court, District of Massachsuetts.
Procedurally, the decision addresses a motion to dismiss based on the defendants’ argument that a dispute resolution clause in the parties’ contract required the matter to be submitted to private arbitration. After addressing the merits of the motion, Judge Young concludes his opinion with a lengthy analysis of private arbitration in general, titled “Whatever Were They Thinking? Myths and Realities Concerning Courts and Arbitration.”
The court introduces its analysis of arbitration as follows: “How could an otherwise sophisticated agreement have made such a hash out of the parties’ intentions concerning the interplay of arbitration and court processes? It appears that in this ‘big law’ era, the drafters operated under the myth that arbitration is cheaper, faster, and more confidential than litigation (only one of these is true) without talking to trial lawyers who understand the reality that while people may not want trials, what they do want is a firm and reasonably prompt trial date before an impartial fact-finder as the best chance for a fairly negotiated settlement.” Judge Young’s analysis proceeds with in-depth discussion of the pros and cons of arbitration, and comparisons to court proceedings.
In the article, Steve Riden is quoted as follows:
Boston commercial litigator Stephen D. Riden says Young made some very good points in CellInfo, points that he himself has raised with his corporate clients.
“In dealing with companies, there’s a perception that arbitration is always going to be faster, cheaper and more confidential than a federal court proceeding,” Riden says. “That’s not always right.”
The judge acknowledged that federal litigation is “expensive as well — too expensive.” However, he concluded it was plainly a myth that arbitration is always a bargain by comparison. . . . Noting a typical arbitrator might charge $400 an hour, Riden says Young made one of his better points on the issue of up-front costs.
“For arbitration, it’s going to cost thousands of dollars up front, and it can cost tens of thousands of dollars just to pay for the arbitration over the course of the case,” Riden says. “Compare that to federal court where you put a few hundred dollars on your credit card and you’re off to the races.”
Riden acknowledges the popular perception that the costs of discovery in litigation far outweigh the costs of discovery in arbitration. However, he says his experience has shown that the costs tend to be comparable.
“I don’t see much of a difference in terms of cost between conducting discovery in federal court as opposed to conducting discovery in arbitration,” he says. “You’re still going to have to pay for the same forensic experts in both cases.”
According to Riden, a main benefit of litigation is that a party can start “pulling levers” to get rulings from a judge on dispositive motions much faster than parties can get decisions on the merits from an arbitrator.
“Typically, an arbitrator is not going to issue a decision on the merits in a case until the very end of the dispute,” Riden says. “Whereas in a federal or state court case, you ask for dispositive rulings up front or move for a preliminary injunction. Then you will have input from a decision-maker at the outset of a case.”
Riden says he typically advises clients to insert arbitration clauses in their contracts when he knows the client cares more about the confidentiality as opposed to the cost of a proceeding.
“Absolute confidentiality can be provided in an arbitration, but it certainly comes at a cost,” Riden says.
The article is by Massachusetts Lawyers Weekly’s reporter, Pat Murphy.
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