Under this title to his article, Aaron Krauss, a partner at Cozen O’Connor, points out some disadvantages to arbitration (See my post of Dec. 9, 2005 regarding some ADR statistics.).
He agrees that arbitration probably reduces runaway verdicts, but points out that a company should be more concerned with the average verdict amount than with the rare excessive verdict. Most arbitrators, he feels, tend to split the baby, which raises the average verdict cost. He also believes that it is nearly impossible to convince an arbitrator to dismiss the case prior to hearing, whereas judges resolve many civil cases on motion.
Krauss also questions whether arbitration is faster and cheaper than litigation. A demand for arbitration is often met with a court challenge to the enforceability the arbitration clause. Further, discovery may be as broad in arbitration as in litigation, yet an arbitrator lacks the court’s ability to compel discovery. He also notes that arbitrators have little incentive to force the parties to curtail their presentations, because they are often paid by the hour.
Finally, arbitrations remove the possibility of an effective appeal.
These points make sense to me, and law departments should bear them in mind, but I am the first to admit that I have no practice or consulting knowledge in this area.