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We received the following e-mail, and while we don't know if it's accurate, we thought we should let you see it. -- staff

Date:   Sat, 01 Mar 1997 12:31:57 -0800
From:   John L....@earthlink.net
To:   staff@lectlaw.com
Subject:   Arbitration clauses

Dear Staff:

I have long been a proponent of arbitration (and have been an AAA arbitrator for years), but: Did you know that the AAA has dramatically increased its rates? As of July 1996, AAA increased its rates to be about what you would pay to have a retired judge at JAMS hear a dispute. The old days of first day of arbitration free and $500 per day thereafter is gone. So indiscriminate use of an arbitration clause calling for arbitration of a dispute before the AAA will increasingly cause clients to wonder what their lawyers thought they were doing -- maybe worse. AAA rules provide for no evidence standards at all and one usually gets no discovery rights. By contrast, in California now, most cases are getting to trial in a year or so. And one has the protection of the Evidence Code and the Discovery Act. The result is that you get a cheaper dispute resolution forum that has all the traditional protections that law students work so hard to master. In other words, a changing world requires that we re-think blanket use of arbitration clauses, especially arbitration with the AAA. Your forms seem to be full of arbitration clauses and this should be reconsidered.

We were communicating with an AAA atty on an unrelated matter and mentioned the above message and that a number of visitors wrote agreeing with it. We offered to print a reply giving the other side and on June 2, 1997, this e-mail arrived:

TO:   'Lectric Law Library Staff
FROM:   George H. Friedman, Senior VP, AAA
RE:   Arbitration Clauses

      We read with interest the posting by "John L" on March 1 re: the use of arbitration clauses. The posting contains inaccuracies regarding the American Arbitration Association which ought to be corrected.
      The slight revisions made to the Association's fee schedule in July 1996 should be viewed in context. The AAA's current fee schedule is dramatically different than it was back in May 1992, when the AAA fundamentally revised its commercial fee schedule for the first time in many years. The revised July 1, 1996 fee schedule still offers greatly reduced fees to many parties, as compared to the fee schedule in effect prior to May 1, 1992.
      It is not true that the Association has completely eliminated the "first day free" arbitrator compensation policy. The Commercial Arbitration Rules provide in section 50 that this policy remains in place for cases involving less than $10,000 -- 1/3 of the Association's case load. In other, more complex cases, arbitrators do indeed receive compensation from "day one" at market rates; this is what our clients demanded, under that sacred doctrine of "you get what you pay for."
      It is not true that there are no evidentiary standards in arbitration (see section 31 of the rules), or that there is no discovery (see section 10). Moreover, other rules, such as the AAA's Construction Industry Arbitration Rules, go even further is establishing evidentiary standards (see sections 29 and 31) and discovery rights (see section 11). These rules have prompted the Association to begin the process of amending the Commercial Arbitration Rules to harmonize them where appropriate with the construction rules.
      All of the materials I've cited are on the AAA's web site, at http://www.adr.org. As Casey Stengel used to say, "You can look it up."







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