An initial decision in an arbitration is where to file the arbitration demand. The following explains the pros and cons of filing an arbitration with a case management organization, such as the American Arbitration Association (AAA), versus initiating an independent, private arbitration.
Federal crop insurance policies require the parties to use AAA’s rules (see a copy of their rules on their website, www.adr.org/sp.asp?id=22440). However, the parties do not have to hire AAA to manage their arbitration case (see RMA Final Agency Determination FAD-007). This means that the parties could instead use a different case management organization (for example, Judicial Arbitration and Mediation Service (JAMS)), so long as that organization agrees to use AAA’s rules.
This also means that the parties do not have to use a management organization at all – they can independently hire an arbitrator, without going through a case management organization. Again though, that arbitrator must agree to use AAA’s rules.
One big initial difference is the filing fee. For example, AAA (like most, if not all, case management organizations) charges relatively hefty fees just to file an arbitration, and those fees vary depending upon the dollar amount of the dispute. Under AAA’s current commercial rates, a party who claims he is due $100,000 must pay a filing fee of $1,850 just to start the arbitration (and later will have to pay a portion of the arbitrator’s hourly rate on top of that). Compare that to what it costs to file a lawsuit in this firm’s local general jurisdiction court: only $100 (and of course the parties do not pay the judge an hourly rate in a lawsuit).
When the parties independently hire their own arbitrator, there is usually no filing fee at all, which can be a significant cost savings for the complaining party.
One drawback of an independent, private arbitration is that the parties usually must first agree upon an arbitrator to use. It can take a significant amount of time to search for, and then negotiate an agreement upon, an arbitrator to use. AAA eliminates that hassle by giving the parties a list of (usually) ten prospective arbitrator candidates. Each party can rank the arbitrator candidates, and can cross off any arbitrator it does not want to use. AAA says that it does its best to abide by the parties preferences, but ultimately AAA can and will pick an arbitrator for the parties, sometimes regardless of the parties’ preferences.
Another difference can be in the pacing of the arbitration. Generally, AAA’s case manager will get the arbitration off to a running start, at quickly get everyone at least to the point of the arbitrator conducting a conference with the parties to set the case schedule, often including setting a date for the arbitration hearing itself. In a private arbitration, there is no case manager moving things along, and the parties can be at the mercy of the arbitrator in getting the case moving.
Although there are many highly qualified arbitrators who might be available to officiate a private arbitration, many of those arbitrators might not be all that familiar with AAA’s rules. One advantage to using AAA is that the case manager is always available to administer and explain AAA’s rules, and the arbitrators that AAA offers often have received extensive training from AAA. When there is a question over AAA’s rules, some of which can be rather vague, having someone with AAA experience can be crucial in quickly resolving that question, rather than spending an inordinate amount of time parsing the rule’s wording and potential applications.
