Arbitration
A private dispute resolution process where a neutral arbitrator hears evidence and issues a binding (or non-binding) decision outside of court.
Arbitration is a private adjudication process where parties present evidence and arguments to a neutral arbitrator who issues a decision. Binding arbitration produces a final, enforceable award that can only be overturned on narrow grounds. Non-binding arbitration produces a recommendation that either party may reject and proceed to trial.
Arbitration clauses are ubiquitous in consumer and employment contracts—credit card agreements, cell phone contracts, employment offer letters. These mandatory clauses require consumers and employees to arbitrate claims rather than sue in court and often waive the right to join class actions.
In commercial contexts, arbitration is often preferred for complex disputes: specialized arbitrators with industry expertise, faster resolution than court dockets, privacy, and finality. The American Arbitration Association (AAA) and JAMS are the dominant US arbitration providers.
Real-World Example
The employment contract's mandatory arbitration clause required the employee to bring her discrimination claim before an AAA arbitrator rather than in federal court.