because of the significant upfront costs and the expense of an arbitration service and arbitrators. Of course, my impression is more anecdotal. This is a benefit that needs to be considered closely. ∙ No juries, no runaway verdicts. This may be the most important advantage for dealerships specifically. Jury verdicts of $10 million or more (“nuclear verdicts”) have grown sharply in both frequency and size. Arbitration takes the jury out of the equation entirely. ∙ Conf identiality. Arbitration proceedings and pleadings generally aren’t part of the public record, unlike court filings. ∙ Predictability and control. Arbitration outcomes are far more consistent than jury verdicts, and the agreement itself can be drafted and rolled out in the way that best fits your business. WHAT THE DATA SHOWS There is no single national database tracking arbitration outcomes, but the following, albeit only for employment matters, available numbers consistently favor arbitration over litigation: ∙ According to the American Arbitration Association (AAA), for employment cases between late 2017 and late 2022, 77% settled, only 9% went to a final award and the rest were resolved other ways. ∙ Of the cases that did reach an award, employees won roughly 26% of the time. ∙ More recent data (2024) shows similarly high settlement rates between arbitration and civil cases. ∙ By comparison, employees who go to trial in federal court win less than arbitration, but the rare wins can be enormous, which is exactly the “low-probability, high-reward” dynamic that makes litigation so risky for employers. In West Virginia, I do believe a consumer or employee’s chance of prevailing is higher than the average in the federal system across the United States. ∙ Arbitration usually resolves faster with streamlined discovery procedures and more limited motion practice that occurs in court. The takeaway for dealership owners: Arbitration doesn’t eliminate liability, but it substantially caps exposure to individual claims and will generally limit a runaway verdict, while resolving disputes faster for everyone involved. THE DISADVANTAGES, THEY’RE REAL Arbitration isn’t a silver bullet, and dealership owners should go in with clear eyes about the downsides. ∙ Disputes don’t disappear. Arbitration can reduce the volume and cost of disputes, but it doesn’t eliminate them. ∙ Compelling arbitration isn’t free or guaranteed. Motions to compel arbitration take time, cost money and aren’t always granted. ∙ You pay the upfront costs. If you use an arbitration provider/agency, those administrative costs — plus the arbitrator’s fees — typically fall on the company, not the employee. ∙ Extremely limited appeal rights. Under the FAA, your ability to appeal an unfavorable arbitration decision is much narrower than it would be after a court judgment. Practically, there is no appeal of even a bad decision. ∙ Not every claim is arbitrable. Unemployment claims, certain benefit claims, Dodd-Frank whistleblower claims (i.e., whistleblower claims protected under the Dodd-Frank Wall Street Reform and Consumer Protection Act) and sexual harassment/assault claims are generally excluded from mandatory arbitration by federal law. ∙ Mass arbitration risk. A coordinated wave of individual arbitration demands can generate extreme aggregate costs and can be more disruptive than a single class action would have been. ∙ Arbitration doesn’t stop agency action. Government agencies can still bring or process charges regardless of your arbitration agreement. ∙ King Solomon effect. I find that juries are more likely to tell a plaintiff they are wrong than an arbitrator, who may “split the baby” in their decisions. WVADA NEWS 8
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