Arbitration: A Valuable Tool for Business Dispute Resolution

Each victim’s case comes with a unique set of circumstances. Those circumstances dictate which method of resolution is best suited to achieve the desired results for both parties. In some personal injury and wrongful death cases for example, the dynamics are such that a settlement can achieve a better outcome for victims than a jury trial.

Arbitration is an alternative litigation option that we believe works particularly well for business dispute resolution—the perks being that arbitration can be more efficient and, in most cases, more confidential than a public trial.

What is arbitration?

Unless the parties agree otherwise, arbitrators’ decisions are definitive and binding like a jury’s verdict—and, they are rarely overturned on appeal. But what happens in an arbitration hearing differs in many ways from the procedures involved in a jury trial.

In arbitration, both parties present their cases to an arbitrator—or in some cases, a panel of arbitrators. The panel consists of experienced attorneys and it serves as both judge and jury for the case. Arbitrators render their decisions based on the evidence and arguments presented by both parties involved in the dispute.

There is no voir dire process in arbitration like there is in a trial. Nor is there a need to shape the presentation of a case to connect with the supposed values and attitudes of the jurors. Being familiar with the law, arbitrators are more likely to be swayed by evidence than emotional appeal.

There are some similarities between trials and arbitration as well. In both, motions can be filed, discovery is conducted, depositions are taken and presented, and expert witnesses can be brought to the hearing to testify.

Arbitration benefits for business dispute resolution

In a personal injury or wrongful death case, litigation can be part of a victim’s healing process. The public nature of a courtroom trial serves as an opportunity for victims to express their grief or anger, and to have their stories heard and decided on by their peers.

Privacy, on the other hand, can be preferred by both parties in business, shareholder or high-level employment disputes. Arbitration provides a legal forum for reaching a resolution without violating confidentiality. In most business cases, a contract has been broken or unfulfilled, and the arbitrators must determine whether genuine harm resulted and how the victim should be compensated. These types of cases frequently revolve around complex, intricate details. There may be proprietary or financial information involved that both sides would prefer to keep private.

Timeliness of arbitration

The other advantage of resolving a business dispute through arbitration is that it can bring the parties to resolution quickly. Courtroom judges are likely to have multiple court-related issues to handle in a given day, in addition to what’s on their court docket. It’s rare to have the judge’s availability for a full day, and this can extend the number of days needed to complete a trial. In an arbitration, the arbitrators booked for a hearing have no similar conflicts to disrupt the course of the hearing.

Because arbitrators are practicing attorneys or judges, there is less need for attorneys to devise complex presentations like those needed to demonstrate points to jurors who are less familiar with legal concepts. Arbitrators know the difference between hearsay and evidence, between showmanship and fact. This allows attorneys to get to the point and get through the case faster.

The value of knowing which method is best

Civil litigation attorneys must be adept at using all the tools available to them. They should be as skilled in arbitration and settlement negotiation as they are in the courtroom. Knowing which litigation method is most likely to meet the needs of the client and the circumstances of the case is key.

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The outcome of any client’s case will depend on the particular legal and factual circumstances of the case.

Reclaiming One Man’s Future through Shareholder Dispute Resolution

Business thrives on promises made with good intentions and integrity. When those promises are committed to signed documents, they become contractual obligations that compel the parties to live up to their promises even though good intentions and integrity may wane.

When promises made in good faith are subsequently discarded in the wake of ego and personal conflict, it’s likely that business disputes will arise. Sometimes those disputes can be resolved with calm reasoning, but often, litigation is needed instead.

Promises lead to shareholder dispute

James* was a young and successful corporate counsel when he was recruited by a fledgling beauty-services franchise company. At first, James was hesitant to leave his corporate position (and take a salary cut in doing so), but the promise of partial ownership was enough to lure him into taking a chance.

James’s primary job was to attract new investors, and he did his job well. Within his first year, James attracted several new investors and the franchise opened a half-dozen new outlets. Sam*, the company’s founder and majority owner, was so impressed with James’s performance that he increased the ownership incentive from three to five percent. As prospects exponentially grew, the franchise took off.

During this time, Sam was in dispute with the company’s former owner, and assured James that they would complete the proper ownership paperwork once that dispute was resolved. Being young and eager to succeed in his role, James trusted Sam’s word.

Then one day, out of the blue, James was fired—and he was denied any percentage of ownership for his contributions to the company’s growth.

He hired us to represent him in this business dispute resolution.

Promises and paperwork

Sam denied James the ownership share he had earned based on the claim that he had not signed a “unit grant agreement,” a document that would have set forth a vesting schedule for James’s units. Without that signed document, Sam contended, James had no rights of ownership.

We disagreed. James had signed an operating agreement when he first joined the company, and he had met the performance criteria to be granted five-percent ownership.

We began with a demand letter, seeking only to negotiate a reasonable settlement. The owner essentially told us to go fly a kite.

Shareholder dispute requires arbitration

The case involved years of arbitration. Sam and his franchise group did everything they could to deny James’s right to ownership.

The case became more complicated when the company was purchased by a private equity firm. No portion of the sale was designated to James, who should have received five percent of the asset sale in cash or stock.

In 2010, we filed for arbitration that didn’t begin until 2015, and then took two years to complete. The case required extensive discovery on our part, including tracking down the company’s prior attorneys and getting testimony from them supporting the claim that the promise of ownership had, in fact, been extended to James.

Ultimately, the arbitrators agreed with our position and granted James a cash equivalent of five percent of the asset purchase, plus court and attorney fees. It was vindication for the work James had done for the company—and fulfillment of the promises that had been made to him.

Years could have been saved with a signature

In the end, James won his case and received the equity value he had earned. But it came at a steep personal price. For five years James struggled to find employment, as his reputation had been extensively damaged by his former partner. Having left a secure job for this opportunity, he faced the challenge of having to reevaluate his career path.

Had a unit grant agreement been completed and executed prior to James joining the company, he very well could have avoided the civil litigation that was necessary for him to be awarded his promised share.

New partnerships often come with the glow of optimism, opportunity, and trust. Unfortunately, that glow can fade with time and with the intrusion of personality conflicts, sometimes driven by greed or jealousy. The best protection against broken promises is to be sure to get all the necessary documents signed before entering into an employment or a business arrangement.

If issues arise regarding a business or shareholder dispute and you suspect that you may have been victimized, contact the Ohio civil litigation attorneys at Cooper & Elliott. We are here to help.

*Names in this article have been changed to protect our client’s privacy. 

The outcome of any client’s case will depend on the particular legal and factual circumstances of the case.