The Arbitration Process: A 7 Step Guide

Understanding the Arbitration Process: A Guided Overview by Meyer Wilson

Arbitration has become an increasingly popular alternative to traditional litigation, offering a streamlined and cost-effective approach to dispute resolution. Not only does the arbitration process have its benefits over court litigation, but quite often arbitration is the only choice. Investors and consumers often give up their rights to take a dispute to court and instead agree to mandatory arbitration in their customer agreements.

This comprehensive guide provides detailed arbitration guidance, walking you through each stage of arbitration and explaining how the process serves as a path to resolving disputes. Whether you’re about to begin the arbitration process or simply want to understand its intricacies, this guide will equip you with the knowledge you need to manage the arbitration process.

Key Stages of the Arbitration Process

Arbitration is split into seven distinct stages, each pivotal in advancing towards resolution and a potential recovery of losses.

1. Initiating the Claim

2. Respondent’s Answer

3. Selection of Arbitrator(s)

4. The Initial Scheduling Conference

5. Discovery Phase

6. Hearing

7. Decision

1. Initiating the Arbitration Claim

When it comes to disputes involving securities, the Financial Industry Regulatory Authority (FINRA) plays a significant role. When disputes arise between investors and brokers or brokerage firms, they are often required to be brought into FINRA’s arbitration process. Initiating a claim in FINRA arbitration involves:

• Submitting a Statement of Claim that outlines the characteristics of the dispute, identifies the parties involved, and specifies the amount in question.

• Signing a Submission Agreement acknowledging FINRA’s authority to administer the case.

• Paying the required filing fee, calculated based on the claim amount.

In addition to FINRA arbitration, investor claims also often are required to proceed though other private dispute resolution forums, such as the American Arbitration Association (AAA). The claims initiation process for AAA is very similar to FINRA. Our team at Meyer Wilson will work with you to provide a thorough and accurate account, supported by relevant documentation, to strengthen your case from the outset.

2. Respondent’s Answer and Defense

Once the claim is filed, the respondent—the party against whom the claim is made—has a certain amount of time to file an answer. This response, known as the respondent’s answer, is the respondent’s opportunity to present their side of the story, outlining defenses. The answer might refute the allegations made in the Statement of Claim, provide additional context, or offer alternative interpretations of the events in question.

3. Selection of Arbitrators and Prehearing Preparations

The selection of arbitrators is a critical stage in the process, directly impacting the fairness and outcome of the arbitration. FINRA provides lists of potential arbitrators along with detailed reports on their backgrounds, allowing both parties to have input on who will hear their case. AAA defaults to simply assigning an arbitrator, unless the contract between the parties calls for a different process.

4. Initial Scheduling Conference

Following the selection, an initial prehearing conference is held, typically via phone or video call. During this conference, both parties and the arbitrators convene to lay out the roadmap for the arbitration process. These prehearing conferences play a vital role in the arbitration process and help streamline the arbitration timeline. They discuss procedural matters such as:

• Deadlines for submitting evidence and witness lists

• Dates for future hearings

• Any preliminary issues that might arise

• The possibility of mediation – this is a voluntary process where a neutral third party helps facilitate a mutually acceptable settlement

Legal representation is essential at this stage to effectively manage the complex arbitration process. Our experienced attorneys at Meyer Wilson are here to represent your interests and guide you through each step. Some parties may choose arbitration as an alternative to litigation due to its flexibility and efficiency.

5. Discovery Phase

The discovery phase is an indispensable part of the arbitration process where both parties gather and exchange pertinent information. This may include requesting documents such as account statements, emails, contracts, and other evidence that supports their claims or defenses. The discovery process is often more streamlined than in court litigation, focusing on the most relevant information to expedite resolution. This cost-efficient dispute resolution method emphasizes efficiency over formalities.

For example, if an investor alleges misrepresentation by a broker, discovery might involve obtaining marketing materials and communications that demonstrate what information was provided at the time of investment.

6. Arbitration Hearing

The hearing itself is the centerpiece of the arbitration process, where parties present their evidence and arguments to the arbitrators. Hearings can be conducted in person or via video conferencing, offering flexibility to accommodate various circumstances.

During the hearing, each side presents evidence, examines witnesses, and makes arguments to support their position. The goal is to provide a fair and impartial forum for the resolution of the dispute.

7. Arbitrators’ Decision and Arbitration Award

After considering all the evidence and arguments, the arbitrators issue their decision, known as the arbitration award, which is legally binding on all parties involved. The arbitrators’ decision provides legal finality to the dispute. This decision is the final resolution of the claims and counterclaims presented during the process. The award may include monetary compensation, specific actions to be taken, or a combination of both.

There are very few situations where an arbitration award can be challenged or appealed in court. These exceptions include cases where there was evidence of fraud, corruption, or misconduct by the arbitrators, or if the arbitrators exceeded their powers. This limited ability to appeal ensures that arbitration provides a swift and definitive resolution to disputes. This legal finality is one of the advantages of arbitration over traditional litigation.

Enforcing an arbitration award involves filing a petition with a court to confirm the award, which is a crucial step in how to enforce an arbitration award. This process allows the prevailing party to use legal mechanisms to collect damages or ensure compliance with the award’s terms.

Conclusion

The arbitration process offers a structured yet flexible approach to dispute resolution, providing an effective alternative to traditional litigation. From the initial filing of a claim to the final award, each stage is designed to facilitate a fair and efficient resolution. As arbitration continues to transform, it remains a valuable tool for resolving conflicts in a timely and cost-efficient manner. At Meyer Wilson, we provide the proficiency you need to manage the arbitration process, allowing for thorough preparation and informed decision-making throughout the proceedings. Reach out to us any time for a free consultation and we would be happy to discuss the arbitration process with you.

Frequently Asked Questions

What is the process of arbitration?

Arbitration is a structured process for resolving disputes outside of court, known as an alternative to litigation. It typically involves claim initiation, receiving a respondent’s answer, appointment of arbitrators, engaging in the discovery phase, participating in a hearing, and receiving a binding decision from the arbitrators. This process is designed to be more flexible and efficient than traditional litigation while still providing a fair forum for dispute resolution.

How long does the arbitration process take?

The duration of the arbitration process can vary depending on the intricacy of the case and the cooperation of the parties involved. On average, cases that reach a settlement through arbitration take about one year, while those that proceed to a full hearing typically take around 16 months.

How many arbitrators are involved in an arbitration process?

The number of arbitrators involved in a case depends on the amount and characteristics of the claim. For FINRA arbitrations, claims of $100,000 or less are typically decided by a single arbitrator, while larger claims may involve a panel of three arbitrators. In AAA, parties typically get one arbitrator, unless the contract between the parties calls for something different. The specific rules can vary depending on the arbitration forum and the agreement between the parties.