The Limits of Arbitration/Martin Rosenfeld, JD

Posted on October 8, 2017


One of the tools found in ADR (Alternate Dispute Resolution) is that of arbitration. A dispute that is arbitrated is decided by a panel of experts, who are often part of an organizational structure. In effect, arbitration is a less costly form of going to Court. The decision is reached in a quicker manner than Courts can accomplish. Often, arbitration clauses are placed in corporate contracts, union agreements, etc.

The limits of arbitration? In the October 9th edition of Time magazine, an interview is found that was conducted with Ellen Pao, a former CEO of Reddit. Ms. Pao had said “No” to an attempt by Kleiner Perkins, a venture capital firm, to arbitrate a discrimination lawsuit. This is the reason given by Ms. Pao: “Arbitration is generally part of most employee¬† contracts at large companies in most industries. I think it hinders the free flow of information. It’s supposed to be designed to allow for faster, cheaper resolution. But it often ends up covering bad behavior.”

Mediation is clearly superior to litigation in allowing for a civil, dignified, and open-ended method of resolving disputes. Arbitration is a step forward over litigation. But is has limitations and is not geared towards Win-Win, nor does it allow the parties to exchange ideas and concerns. Arbitration or mediation? The choice would seem clear. Mediate and don’t arbitrate.