In the Aug. 24 Outside Counsel column, “First Department Decision Raises Drafting Issue for Arbitration Clauses,” the authors would have been wise to note how, far from a holy grail, the AAA can often be a death knell. The first key to understanding this is the realization that most business collection in the United States operates under the auspices of the Commercial Law League of America, a system by which nationwide corporations hire attorneys throughout the 50 states on a primarily contingent fee basis, using CLLA rates. What collection manager, looking at a receivables run, wants to deal with a minimum fee of $2,600 to the AAA to collect a $100,000 debt? ($1,850 initial filing fee plus $750 hearing fee plus arbitrator’s fee plus room fee, etc.)
Confirming any award results in an additional court proceeding and filing fee anyway, after half a year is eaten up by the AAA process. Nor does this substantial investment in time and money guarantee collectability. Arbitration may be great for fact-laden labor claims of construction companies against viable building owners, but the same cost benefit could be obtained by a contract clause forbidding the discovery process, the chief benefit of arbitration.
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