Wednesday, September 30, 2009

Quicktip: Arbitrate Disputes and Save Time and Money

BIG CONFESSION: I’m involved in litigation with former business partners.

As much preaching as I do about business partners having a good quality written agreement, we didn’t have one. You know the story about the cobbler who lets his kids run around with holes in their shoes. My bad.

It’s a long, sad story about how we got here. Mostly it’s the result of strong personalities and differing opinions about how a piece of commercial real estate should be managed.

Hindsight being 20/20, as we now progress into the second year of litigation, a side battle with my first set of lawyers, and generally a lot of aggravation, the dispute has greatly changed my opinion about the use of arbitration clauses in commercial contacts.

In any contract, the parties can agree to arbitrate any dispute that may come up.

Arbitration is a form of alternative dispute resolution (ADR), that allows parties to resolve disputes outside the courts. One or more “arbitrators” are selected who hear each party’s side of the story. The arbitrator makes a decision about the outcome of a case, and their decision is legally binding on the parties.

Once you enter into an agreement to arbitrate, absent a new written agreement from both parties to change the terms of the arbitration clause, courts will not let either party "opt out" of arbitration. By the way, our over-burdened court system LOVES arbitration clauses.

Arbitration can be a lot like achieving a settlement in litigation. Unlike the final verdict in litigation, where there is usually a "winner" and a "loser", arbitration panels take into consideration each party's interests when rendering a decision. Rarely are there ever pure winners or losers.

The downside, of course, is when you are 100% "in the right" and would likely win a claim in litigation (eventually), you could end up with a decision in arbitration for an award that is something less than 100% of what you feel you are entitled to. Also, if you don't agree with the award, you are stuck with it--appeals are not an option in Arbitration.

In my opinion, this is a small price to pay for getting yourself into the dispute in the first place. Most disputes are avoidable by drafting good agreements at the outset of a relationship and picking partners, customers and vendors selectively.

In the end, parties who resolve disputes in arbitration wind up with a final outcome that is fairer and rendered more expediently than in litigation. The result is less time wasted and a fraction of the expense spent as compared fighting battles in court.

When you factor in the benefit of reduced time and legal expense, prudent business people--especially the owners of small businesses whose customers may have deeper pockets that their own--should seriously consider adding mandatory arbitration clauses to all their contracts.

If arbitrating potential disputes is right for your business, I have set up a way for you to get a copy of an Arbitration Clause that you can easily add to your agreements. Go to

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Monday, September 21, 2009

To LLC or not to LLC?

The Freelancer's Union picked up on our quote in Crain's New York last week and mentioned us in their Blog .

While you’re there be sure to sign up for the “Legal Basics For Every Freelancer” Seminar on September 30th.

Wednesday, September 16, 2009

Save Hundreds Now, Lose Thousands Later

Steve Furnari and our friend and colleague Howard Samuels, CPA , were quoted this week in Crains New York in an article about the costly mistakes entreprenuers make when they use a legal form service, like legal zoom. Check out the article to discover the one mistake (according to Steve) that business owners commonly make that can cost them $8,500+ a year. See: