Construction law : contracts – value of arbitration?

Posted by: May 28, 2013By Brian Stutheit

To a construction defect lawyer, arbitration means a binding decision by what amounts to a private judge.

Colorado courts will essentially always require the parties to arbitrate a dispute if arbitration is built into the contract.

Mediation is a non-binding negotiation process.

Arbitration is expensive.  Many arbitrators charge the parties as much as $400 per hour.  The American Arbitration Association charges a significant set up fee. Under AAA Construction Industry Arbitration Rules fees will be billed in accordance with the following schedule:

Claims $0 to $10,000 :  Filing fee  $775  Final fee $200
Claims above $10,000 to $75,000:  Filing fee $975 Final fee $300
Claims above $75,000 to $150,000:  Filing fee $1,850 Final fee $750
Claims above $150,000 to $300,000: Filing fee  $2,800 Final fee $1,250.

Arbitration rulings are not appealable.  Arbitrators can sting either party with a bad decision, enforceable under law as if it were are court judgment, and the parties have little recourse.

Many contractors believe that an arbitrator will be less sympathetic to a claimant than a jury would be.  This may or may not be true, but an alternative contract clause to arbitration would bar the parties from having a jury trial.

There is frequently value in an arbitration as opposed to a lawsuit because arbitrations end more quickly than litigation in court.  However, there are jurisdictions in Colorado where you can get to trial fast, if the lawyers step on the gas.  Jefferson County and Boulder County move quickly.  Arapahoe and Douglas Counties can take forever.