If you have a credit card, chances are you consented to resolve a payment disagreement through arbitration, whether you know it or not. Arbitration is a common method of resolving disagreements in the business world and is commonly found in employment contracts, credit card agreements, and retail contracts. As an alternative dispute resolution, arbitration is intended to save both parties the time and expense that comes with litigation. Unlike mediation, which is a similar form of dispute resolution where the parties try to resolve conflict outside of the courtroom, decisions reached in arbitration are binding.

There are two types of arbitration: voluntary and court-mandated. Voluntary arbitration is when parties agree to take conflicts through arbitration, either through contractual agreement or other express consent. Voluntary arbitration can be ad hoc or occur with support from an organization like the American Arbitration Association (AAA). Conversely, court-mandated arbitration is, simply, commanded and required by the court.

Here, we discuss the differences between AAA arbitrations and court-ordered arbitrations in North Carolina.

AAA Arbitrations

The American Arbitration Association (AAA) is a public service non-profit that provides dispute resolution services. When an arbitration clause is included in a business contract, the clause will specify the applicable rules for arbitration should a conflict arise. If the AAA is selected, the arbitration will proceed according to the AAA arbitration rules for that subject matter.

An AAA Arbitration is initiated when the claimant pays the administrative filing fee and files a copy of the contract containing the arbitration agreement and a Demand for Arbitration with the AAA. The respondent has fourteen days from the date notice of the Demand is sent by the AAA to file an Answer. Failure to respond is deemed a blanket denial to the claim and does not delay arbitration.

The AAA works with the parties to identify an arbitrator that meets their criteria. The arbitrator conducts a preliminary hearing to discuss the issues and procedural matters. The AAA rules permit this early discussion to occur by phone, teleconference, or other non-personal means. The parties will then prepare for presentations and exchange information as agreed in the procedural discussions. The hearing, scheduled during the preliminary discussions, will take place in a location that is agreed to by both parties. At the hearing, parties may present testimony and evidence to the arbitrator. This is usually the only hearing unless the case is very complex. The arbitrator will then close the record on the case, issue a decision, and include an award if applicable.

Under AAA rules, all cases involving a claim or counterclaim in exceed of $75,000 must also go through mediation according to the AAA’s Mediation procedures. Mediation must run concurrently with arbitration so as not to delay arbitration proceedings. However, the mediation component can be waived if both parties agree.

The arbitrator may or may not be an attorney, and just like in litigation in Court, parties are not required to have an attorney. However, hiring an attorney is almost always recommended.  Costs depend on the details of your case and the experience of your arbitrator. Costs include administrative fees like filing fees and hearing fees, paying the arbitrator which could be an hourly, daily, or per hearing rate, arbitrator expenses if they have to travel, and other costs like a meeting room, attorney fees, expert witness costs, and the costs of preparing discovery and exhibits.

NC Court-Mandated Arbitrations

Generally, North Carolina mandates arbitration for every civil case involving a claim for $15,000 or less and for every small claims hearing that is appealed involving claims for money if the court decides the case is subject to arbitration and when the magistrate’s order or ruling is appealed. The court clerk screens all filed complaints and appeals from magistrate judgment and notifies the court when a case is identified as appropriate for arbitration.

Arbitration begins when the court serves involved parties with a Notice of Case Selection for Arbitration. The hearing will be scheduled by the court to begin within sixty days after the appeal from a magistrate’s judgment was docketed, the last responsive pleading was filed, or the time allowed for filing a responsive pleading expired.

In North Carolina, arbitrators are lawyers who have been licensed for at least five years, with licensure in North Carolina for at least the last two of those five years. The arbitrator’s fee is divided equally between the parties, regardless of which party is awarded by the arbitrator’s decision.

How They Compare

In an AAA arbitration, the arbitrator is selected by the parties and the arbitrator may be an attorney, former judge, or a business owner. In court-mandated arbitration in North Carolina District Court, the court appoints the arbitrator and the arbitrator is an attorney. AAA arbitrations have more flexibility in determining the time, date, and location of the arbitration proceeding, whereas court-mandated arbitration in North Carolina is scheduled by the court, held in a courtroom, and open to the public.

There are many differences between the AAA arbitration process and court-mandated arbitrations in North Carolina. In AAA arbitrations, the rules change depending on the subject matter of the dispute. The AAA has a unique set of rules for commercial disputes, construction disputes, consumer disputes, employment matters, labor disputes, and international disputes. While the arbitrator may require parties to exchange information intended to support their position, there is no timed requirement to do so before the arbitration proceeding. The arbitration will continue regardless of the absence of one of the parties if proper notice was provided.

In court-mandated arbitrations in North Carolina, the arbitration rules are the same, regardless of the subject matter of the dispute. The parties are required to exchange witness information, evidence, and a brief statement of the issues and their position at least ten days before the hearing. All parties are required to be present at the hearings or have counsel appear on their part.

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The attorneys at Strauch Green & Mistretta are dedicated to delivering positive results for our clients. We take pride in offering the very best legal counsel and working with clients to devise the best strategy for their cases, whether through litigation or alternative dispute resolution methods like mediation and arbitration. Reach out to us to learn more.

This article does not establish an attorney-client relationship and must not be construed as legal advice.