Collections: Arbitration - A Collection Alternative

Arbitration has become an increasingly popular way of resolving disputes. For those readers unfamiliar with the concept, arbitration is a process in which parties agree to submit the issues in controversy for determination by a party that they choose. The purpose behind the decision to arbitrate is usually to reach a resolution to the dispute in a quicker and cheaper manner than court action. Although most parties to the arbitration retain counsel to represent them, costs are normally less than court action because the rules of evidence are more relaxed, and the proceedings are less formal.

Virginia law recognizes the arbitration process and provides for the legal enforcement of arbitration awards.

The American Arbitration Association has developed standard rules, procedures, and panels of trained professionals to serve as arbitrators - the finders of fact.

The structure of the arbitration hearing is similar to a regular court hearing. A party has the right to representation by an attorney. Both parties also have an opportunity to make an opening statement, discuss the remedy they are seeking, introduce and cross-examine witnesses, and make a closing statement. Unlike a regular court proceeding, neither party in arbitration has the burden of proof because each party must persuade the arbitrator that its position is correct.

Virginia Code §8.01-577 to §8.01-581.016 establish Virginia's rule for arbitration. First, both parties must agree in a written agreement to submit a case for arbitration. The parties then select an arbitrator from a list of names. The court also may appoint an arbitrator.

An arbitrator has several duties. The first and foremost is to preside over the arbitration hearing. An arbitrator in Virginia may issue subpoenas for witnesses to appear. Lastly, the arbitrator issues and signs the award.

The court then confirms, modifies or vacates the award. The reasons for modification or vacation vary from a mistake in calculation to the arbitrators exceeding their powers (see Virginia Code §8.01-581.010 and §8.01-581.011). The court proceeds to enter a judgment or decree on the award. A party may appeal an award as one would in a civil action.

The California Court of Appeals has ruled on the enforceability of arbitration clauses. In Bell v. Congress Mortgage Co., Inc., the California Court held that an arbitration clause in a contract must be highlighted in bold type or the consumer needs to initial beside the specific clause. These methods should make the consumer aware of the arbitration clause in the contract, as previously a consumer might waive his right to a jury trial without realizing it because, the California Court stated, an arbitration clause is not within the reasonable expectations of the consumer. There is no such requirement in Virginia law for the arbitration clause to be highlighted, however, but until the issue is litigated in Virginia, initials next to the clause would be a good measure of caution.

I have litigated several arbitration cases, each to positive results, once to an amount higher than initially requested by the client.