Justice And The Law Do Not Mix

15 07 2013

 By Timothy D. Naegele[1][2]

Justice is in the eye of the beholder, and not some absolute standard that is clearly and quantifiably definable or identifiable.  However, human beings have a sense of what is just and what is not, which is often governed by their belief systems and experiences in Life.  The law, on the other hand, is an imperfect discipline governed by grossly-inflated egos and political considerations, and flavored by incompetence and arrogance.

Is the law ever just?  Perhaps this question is the proper starting point.  “The law” is not some idealistic and intellectually pure result, resting on a cloud somewhere.  Rather, it is a hard-edged and hard-fought amalgam of competing ideas and biases, dictated by judges who are imperfect at best—and often egotistical, callous, mean-spirited, power-hungry, self-righteous, condescending and, yes, incompetent and arrogant.  They can smile at you, just as easily as they can slit your throat and never think twice about doing it.

How on earth can the dispensers of that magical ingredient, justice, do so when they are “unsavory” themselves?  How can they judge another person when they often bring distorted realities and moral visions to the process?  Many of them, at least in the United States, are former prosecutors who seemingly have never laid eyes on an innocent criminal defendant.  To put on black robes does not change their mindset.  Indeed, many seem to relish the power trip.  Shakespeare’s famous quotation—“The first thing we do, let’s kill all the lawyers”—must have been written in some light-hearted moment with the dark and sinister characteristics of judges in mind.

Having been a lawyer for more than 45 years, and having received two law degrees from prestigious American law schools, I can honestly say that the thought of becoming a judge has never crossed my mind.  Indeed, when I arrived at Berkeley for my first year of law school, I was stunned by how many of my classmates had dreamed of becoming lawyers most of their lives.  The pinnacle was to become a judge, which was repulsive to me.  While I read many learned and well-written opinions in law school, I never figured out why anyone would want to be a judge.

We had fine law professors who taught the best of the law; and they instilled in us a belief in the purity and sanctity of the law.  Forty-five years later, I do not doubt their sincerity at the time, but I have never encountered a sitting judge who met their expectations.  The best reason for being a judge was told to me one day in chambers by a California Superior Court judge, who said that it was easier than practicing law.  I respected him for his honesty and candor, and his willingness to tell the unvarnished truth.  Most judges would never do that.  It was refreshing.  He smiled when he said it, and did not slit my throat or even come close.  In fact, he decided in my favor.

If the law is little more than decisions made by judges based on whether they got up on the wrong side of their beds or not, or took umbrage with a lawyer or client, then is there any rhyme or reason to it, which makes sense judicially?  I concluded ages ago that the proceedings in most American courts are remarkably close to “Law West of the Pecos by Judge Roy Bean,” the hanging judge.  In Bean’s court, the law was what he said it was, and nothing else mattered.  Too often in U.S. courts today, very little has changed.  Judges have become the law unto themselves.  Any citation of legal precedents is met by judges whose eyes glaze over, because many of them were taught in law schools where the purity and sanctity of the law did not matter.  Brute force governs far too many courtrooms.

State courts—certainly those in California—are a total joke. Judges routinely ignore the applicable law, or twist the law to suit their desires. It is a travesty, and really no law at all.  Our federal courts are somewhat better, only because federal judges have law clerks who actually research the law; and federal judges are mindful of the fact that they can be overruled on appeal.  Owing to the fact that our Supreme Court takes so few cases these days, and most of its cases are heard for political reasons, our federal courts of appeal become the only real checks on the actions of District Judges.

At the U.S. Supreme Court building in Washington, D.C., there is a statue of “Justice” with blinders on her eyes to depict the impartiality and objectivity that the word justice is supposed to represent.  However, another interpretation can be given to the statue; namely, blindness to injustices that occur each and every day in our legal system.  More than eight thousand petitions for certiorari are filed with the Court every year, yet the number of cases that are heard is usually less than one hundred.  Justice William Brennan was the last jurist to read such petitions.  They are now read exclusively by the individual justices’ law clerks, who decide which cases the Court hears and those that are never heard.

As a practical matter, the American system of justice no longer exists—because the presumption of innocence no longer exists.  In U.S. courts, even though it is not articulated—certainly by the judges themselves—there is a presumption of guilt instead of innocence in criminal cases.  Any appearance of bending over backwards to help the defense is window dressing and largely form over substance.  Many judges are courteous, but their long knives come out before the process is completed.  Others do not mince with words, and are tyrants from Day One.  Still others defy one’s imagination with respect to how they got there.  They do not understand the law or facts of the cases, nor do they care; and they seem to be political appointees who have overstayed their welcome.

 The United States is a nation where rogue prosecutors reign, whose goals in life include the prosecution of even the innocent. Federal, State and local prosecutors ruthlessly and gleefully pursue countless numbers of innocent Americans for a multitude of crimes that were never committed; and the judiciary has allowed this to happen.  Corruption is rampant among federal prosecutors and those who work with them, such as FBI agents.  No amount of rational thinking or discourse can be applied to a system that is inherently and systemically corrupt.

A federal official with reason to know told me that between 15-20 percent of the indictees in our federal courts are probably innocent.  Some are elderly who have been charged with cheating the Social Security system—America’s retirement benefit program—and they are scared to death, so they agree to plea bargains rather than fight for their innocence.  The latest figures indicate that 97 percent of convictions in federal courts were the result of guilty pleas.  In 2006, the last year for which data was available, the corresponding figure for State courts was 94 percent.

Indeed, Justice Anthony M. Kennedy wrote for the majority in a recent U.S. Supreme Court opinion—quoting other sources:

[Criminal justice today] is for the most part a system of pleas, not a system of trials. . . .  [Plea bargaining] is not some adjunct to the criminal justice system; it is the criminal justice system.[3]

He added—again quoting other sources: “[L]onger sentences exist on the books largely for bargaining purposes.”[4]

What Kennedy neglected to mention is that “criminal justice” today in the United States is not a system of justice at all, at least for many Americans.  It is appalling that so many innocents are swept up in our criminal system.  Even if they do not go to prison, the mere fact that a prosecutor comes after them and they have to deal with the system is brutal and tragic.  Lives are wrecked in the process by zealous prosecutors and callous judges, who should be consigned to prison life themselves—where they would come to understand the true meaning of justice.

Fortunately, America has a very good public defender system, at the federal, state and local levels; and this helps a great deal, although far too often its lawyers are burdened with very heavy caseloads, and the accused may not understand that they can avail themselves of such assistance.  Anyone who thinks that prosecutors are advocates of truth and justice is living in a “Mary Poppins” fantasy world, and knows nothing about how our legal system really operates.  It is seldom if ever discussed or written about, yet it is often said—by lawyers—that the only thing separating prosecutors from guilty criminals is the “badge.”

Also, in criminal prosecutions, there is often the systematic concealment of significant exculpatory evidence, in some instances intentionally, which gave rise to the guilty verdicts against former United States Senator Ted Stevens of Alaska being set aside, and a dismissal of the case against him.  It is another travesty and miscarriage of justice that three years after the federal judge set aside the verdicts, the wrongdoers within America’s Justice Department have not been subjected to criminal prosecution, convicted, and sent to prisons—where true justice would be meted out—instead of getting “slaps on the wrist” for their criminal misconduct.[5]

To be fair and put things into perspective, victims of criminal conduct need and deserve protection as well; and the guilty must not be sheltered or coddled if there are to be deterrents against the commission of crimes, especially those of a violent nature.  Also, many crimes are not reported or dealt with, such as rampant fraud that is occurring over the Internet each and every day, and bilking sophisticated and unsophisticated Web users out of billions of dollars.  Clearly, none of us would like to be a “jailed innocent,” but similarly we do not want to be harassed by vicious or other criminals either.  Those people who are truly innocent should not enter the criminal system; and innocent victims must be protected at all costs.

It has been noted that if we want to be 100 percent certain that no innocent will end up in jail, the inevitable result is that nobody will be in jail.  There is no such thing as perfect evidence or a perfect judge.  Indeed, as noted at the beginning of this article, the law is an imperfect discipline and process.  Also, it must be recognized that the cost of criminal and civil litigation in the United States and globally is staggering; and it takes years to resolve complex litigation.  The cost of business litigation in America’s federal courts often exceeds $1 million on each side of the action; and this figure does not include the cost of a trial or appeals.

Lawyers are trained in law schools to be advocates, and sometimes this becomes a curse.  When they represent clients in divorce proceedings, the last thing that estranged couples need is their respective lawyers “stirring the pot” to earn greater fees, and increasing the acrimony that exists already.  However, it happens, which is why lawyers are ill suited to handle such proceedings.  Also, male lawyers prey sexually on their distraught and emotionally vulnerable female clients, which should give rise to automatic disbarments.  Both the American Bar Association and State bar associations “turn a blind eye” and do little or nothing to curb such abuses.  Like rogue prosecutors who are sheltered from discipline, so too are lawyers in divorce proceedings who abuse their positions and power.  This is among the many reasons why non-lawyers in the United States and elsewhere view lawyers with such contempt and disdain—not dissimilar to how they view leeches and vermin.

Without the law though, we would have anarchy and chaos.  Yet, there is a certain amount of inherent anarchy and chaos within the legal system itself.  Harsh economic times produce demands on lawyers and courts, and bring citizens in contact with the system who otherwise might not be there except for their economic plight and hardships.  Whether the issues involve housing foreclosures or evictions, or the loss of jobs or dissolution of marriages, the American legal system is taxed like seldom before.  Budgetary constraints dictate shorter court hours and over-burdened judges, and closed courthouses and furloughed prisoners to ease overcrowding.  What is certain is that the situation will become worse between now and the end of this decade, at least in the United States.

Perhaps the only saving grace about the American legal system is that it may still be the best in the world, albeit very imperfect and flawed.  Indeed, it is the only legal system that I can address with a modicum of understanding and authority, having spent my entire career thus far dealing with it.  Unfortunately, too few lawyers are willing to speak out and criticize the profession, and “tell it like it is.”  The judiciary is almost completely blind to the problems, because its members are at the root of many of these issues.  Also, the American Bar Association is essentially worthless; and State bar associations are not much better.  I am a member of the District of Columbia Bar, which I have always been proud of though.

These are a few of the very serious problems that face our system of justice and fairness for all, which demand attention.  They are not easily fixable or remedied, yet they are at the tip of an enormous iceberg of problems.  There is a real question as to whether our system can be “fixed.”  Much like family members or loved ones of alcoholics or drug addicts, it is arguable that we cannot fix or change our legal system.  All we can do is take care of ourselves, and hope that we never come in contact with it.  There are even those who believe that quantitative and qualitative analyses can and must be applied to “redesign the judicial structure . . . into a practical process with an understood functionality and imperfection”—in the words of one engineer with a keen sense of justice.

© 2012, 2013, Timothy D. Naegele

Twill Magazine version of the article 

Justice And The Law Do Not Mix

(Image: Andrè Azevedo)


[1] Timothy D. Naegele was counsel to the United States Senate’s Committee on Banking, Housing, and Urban Affairs, and chief of staff to Presidential Medal of Freedom and Congressional Gold Medal recipient and former U.S. Senator Edward W. Brooke (R-Mass).  He practices law in Washington, D.C. and Los Angeles with his firm, Timothy D. Naegele & Associates, which specializes in Banking and Financial Institutions Law, Internet Law, Litigation and other matters (see www.naegele.com and http://www.naegele.com/naegele_resume.html).  He has an undergraduate degree in economics from UCLA, as well as two law degrees from the School of Law (Boalt Hall), University of California, Berkeley, and from Georgetown University.  He is a member of the District of Columbia and California bars.  He served as a Captain in the U.S. Army, assigned to the Defense Intelligence Agency at the Pentagon, where he received the Joint Service Commendation Medal.  Mr. Naegele is an Independent politically; and he is listed in Who’s Who in America, Who’s Who in American Law, and Who’s Who in Finance and Business. He has written extensively over the years (see, e.g.,www.naegele.com/whats_new.html#articles), and can be contacted directly at tdnaegele.associates@gmail.com; see also Google search:Timothy D. Naegele

[2]  This article was published originally in Europe and distributed globally by Twill Magazine; see http://www.twill.info/wp-content/uploads/2013/03/justide_and_the_law_do_not_mix.pdf (issue #15, pp. 8-11); see also http://www.twill.info/ and http://www.twill.info/?p=1850

The author wishes to thank Fosco Bianchetti, Twill‘s Editor In Chief and Manager, for publishing it.  He was a pleasure to work with, always.

[3] See Missouri v. Frye, Case   No. 10–444. Argued October 31, 2011—Decided March 21, 2012 (emphasis in original); see also http://www.supremecourt.gov/opinions/11pdf/10-444.pdf

[4] See id.

[5] See also http://naegeleblog.wordpress.com/2012/03/21/the-united-states-department-of-injustice/


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12 responses

15 07 2013
PalomaGenios

Loved it.
There is however one perfect Judge: Jesus Christ.

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15 07 2013
Timothy D. Naegele

Thank you so much.

Yes, I agree . . . and God. :-)

See, e.g., http://naegeleblog.wordpress.com/2010/05/12/what-and-where-is-god/

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15 07 2013
g stiles

Bravo

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15 07 2013
Timothy D. Naegele

Thank you. :-)

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15 07 2013
Mary Orth

I think justice was served in the Zimmerman case. It probably never should have gone to trial.

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15 07 2013
John R Hanson, Sr.

Thank you for this well written and I might add timely article. I could be wrong but in today’s courtroom it appears promotion (whether political or otherwise) is more important than getting to the truth and justice. Since our nation’s birth, what has separated the United States from other countries in the world has been our justice system. It has to be fair and equitable for everyone or we ALL lose. I fear for our country.

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15 07 2013
Timothy D. Naegele

Thank you, John, for your comments.

Yes, I agree with your second sentence. “Promotion” is the name of the game, sadly. The legal profession has gone astray, and has become “mesmerized” by TV and movie portrayals of lawyers.

The judges also view themselves as “mini-gods,” which is tragic as well.

As I concluded in another article:

Can our legal system be fixed, and will the American people come to trust and respect lawyers and judges again, and believe that justice not only exists but prevails in this great nation? Maybe . . . if the profession is restructured, and if it attracts those people who believe that the law is sacred, sacrosanct and pristine—truly a shining city upon a hill—and they put such principles into practice. The profession does not require saints, but it does need something different than “Law West of the Pecos by Judge Roy Bean.” And it needs people who are different than it has been attracting: who are often driven, ruthless, unprincipled, money-hungry, and power-hungry.

See http://naegeleblog.wordpress.com/2011/01/03/the-american-legal-system-is-broken-can-it-be-fixed/

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17 07 2013
Timothy D. Naegele

VIOLENCE

If we want to reduce or eliminate violence, then Hollywood should not make and distribute any violent films and TV shows; such violence should be banned from TV programming; violent video games should be banned; advertisers that support violent media undertakings should see their products boycotted; parents who allow their children to commit violence should be prosecuted; and those who advocate violence should be prosecuted as well.

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20 07 2013
Timothy D. Naegele

Judges Are The Worst Of The Legal Profession

Judges

As I have written in my article above:

[J]udges . . . are imperfect at best—and often egotistical, callous, mean-spirited, power-hungry, self-righteous, condescending and, yes, incompetent and arrogant. They can smile at you, just as easily as they can slit your throat and never think twice about doing it.

. . .

I can honestly say that the thought of becoming a judge has never crossed my mind. Indeed, when I arrived at Berkeley for my first year of law school, I was stunned by how many of my classmates had dreamed of becoming lawyers most of their lives. The pinnacle was to become a judge, which was repulsive to me.

. . .

I concluded ages ago that the proceedings in most American courts are remarkably close to “Law West of the Pecos by Judge Roy Bean,” the hanging judge. In Bean’s court, the law was what he said it was, and nothing else mattered. Too often in U.S. courts today, very little has changed. Judges have become the law unto themselves. Any citation of legal precedents is met by judges whose eyes glaze over, because many of them were taught in law schools where the purity and sanctity of the law did not matter. Brute force governs far too many courtrooms.

Judges go out of their way to hurt people, and to wield their power to accomplish this. They rewrite laws, even though that is the domain of legislatures. In short, there is not much of a redeeming nature that can be written about judges . . . although I have some friends who are judges, but I knew them before they became judges.

In a democracy like ours, courts and judges must serve the people, not the other way around. Judges are not mini-gods, or anything remotely close.

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7 01 2014
Timothy D. Naegele

Don’t Talk to the Police Under Any Circumstances

Food for thought

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25 01 2014
Timothy D. Naegele

Imagine If The Internet Went Down: Court System Hit With Cyberattack

Internet

POLITICO has reported:

Unidentified hackers took aim at the federal court system Friday, blocking access to its public website while preventing lawyers and litigants from filing legal documents online.

The incident affected uscourts.gov, the federal court’s public hub, as well as most if not all federal court sites—not to mention the federal court system’s electronic filing system and its access page, PACER, a spokesman for the Administrative Office of the U.S. Courts said Friday.

The aide described the incident only as a denial-of-service attack, and that the court system, which manages its own cybersecurity, is still investigating the exact nature of the incident and who’s responsible.

Earlier Friday, a federal court clerk from Arkansas indicated in an email obtained by POLITICO that it appeared to be a “new national cyberattack on the judiciary,” but he did not provide any additional information about the type of attack or who might be behind it.

The Justice Department, for its part, did not comment for this story. The Department of Homeland Security, which plays a key role monitoring federal networks and disseminating information about cyber threats, could not be reached for comment.

See http://www.politico.com/story/2014/01/cyberattack-federal-courts-102594.html

I can personally confirm that certain courts could not be accessed yesterday.

A bigger question involves: could any documents be changed or deleted as a result of a Cyberattack?

Anything is possible. However, the federal court system maintains hard copies of recent filings, which are also available online. Thus, it is unlikely that hacking would make a difference in that regard.

Because America’s court system is already burdened by budget cuts (e.g., shorter hours, layoffs), hacking’s immediate effect is to create chaos in the system.

It seems that this hacking episode was relatively short lived. A sustained and effective hacking effort could bring the legal system to a screeching halt. So many filings are made online these days.

Yet, one must realize that the federal system is way ahead of State systems. Docket sheets and individual filings are not available online in many if not most States. However, as the States transition to fully online systems, they will become vulnerable too.

Obviously, all of this raises the larger question about efforts to bring down the Internet itself:

Imagine if someday we went online and there was nothing except a blank screen.

Worldwide terrorism is growing, not receding; and anything is possible.

Clearly, an EMP Attack would bring this country to a screeching halt . . . killing millions of Americans in the process.

See http://naegeleblog.wordpress.com/2010/01/19/emp-attack-only-30-million-americans-survive/ (“EMP Attack: Only 30 Million Americans Survive“)

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29 07 2014
Timothy D. Naegele

Arbitration Is An Unmitigated Disaster In Most Instances.

Arbitration is a disaster

In a fine article entitled, “Big Risks and Disadvantages of Arbitration vs. Litigation,” Aaron Foldenauer writes for Corporate Counsel:

Three recent high-profile arbitral awards highlight the risks of arbitration and demonstrate that, contrary to widespread belief, arbitration is often not cheaper, faster or more predictable than litigation. These three awards, as well as emerging trends in arbitral proceedings, call into question the common practice among corporations of including contractual provisions mandating arbitration in the event of any disputes.

In May of this year, in arbitration proceedings that have been pending for nearly eight years involving a patent license agreement between the technology companies Amkor Technology and Tessera Technologies, Tessera was awarded $145 million. And this was on top of $64 million Amkor had already paid to Tessera in connection with a prior, related ruling. These adverse awards far exceeded even Amkor’s publicly disclosed worst-case estimates of its possible exposure. The Amkor proceedings present a recent example of the delays, costs and unpredictability often associated with arbitration. But they are by no means a worst-case scenario. The dangers of arbitration hit two prominent retail corporations on a far greater scale.

Specifically, Starbucks Corporation and Tiffany & Co. were recently on the wrong side of decisions by arbitrators who imposed massive awards against each—awards that were expected by neither management nor by shareholders. Coffee giant Starbucks lost an arbitral award totaling $2.76 billion, including $527 million in interest and legal fees, to Kraft Foods Group Inc. in connection with a dispute related to the termination of an agreement that allowed Kraft to distribute Starbucks coffee in grocery stores. Even for a successful corporate stalwart like Starbucks, the size of the arbitral award was of enormous significance. Starbucks’ net profits for the years 2011 and 2012 were $1.2 billion and $1.4 billion, respectively. Thus, standing alone, the award wiped out two years’ worth of Starbucks’ profits.

And late last year, jeweler Tiffany lost $449.5 million, plus interest, costs and attorney fees, in an arbitral proceeding to Swatch SA concerning a failed partnership in which Swatch was to develop watches for Tiffany’s brand. Tiffany’s loss surpassed the profits it had earned during all of 2012.

As is commonly the case in arbitrations, neither Tiffany nor Starbucks apparently has the ability to effectively appeal the decisions, and in fact, Starbucks was forced to issue $750 million of additional debt to help raise money to satisfy the adverse award.

That risk-averse, well-represented corporations would willingly put such large sums of money in the hands of ultimately unaccountable arbitrators, whose decisions are almost always nonappealable, is surprising. The instinctive decision to do so should be revisited. This is particularly so given that the oft-touted benefits of arbitration—that it is cheaper, faster and more predictable than litigation—are routinely untrue in practice. In fact, the disputes that caught Starbucks, Tiffany and Amkor off guard each have taken years to resolve, caused each side to incur significant legal fees and yielded unpredictable results.

Arbitration Is Problematic for Risk-Averse Corporations

That these three major corporations were taken aback by the size of the awards may surprise those, including many corporate in-house counsel, who believe that arbitration is inherently more predictable than litigation. Although corporate defendants are often concerned about “runaway juries” in the context of cases in which there is a sympathetic victim, in contractual and other business-related disputes juries may, in fact, be less likely than an arbitrator to award unreasonable damages or issue an unexpected, highly lopsided verdict.

In other words, in connection with business-related disputes, an experienced arbitrator in the industry may be more inclined than a jury to view the parties’ conduct in black-and-white terms and thus rule in a way that overwhelmingly favors one side over the other. Indeed, the arbitrator in the Kraft-Starbucks dispute apparently did precisely that. In that dispute, Kraft asserted that it was owed $2.9 billion, plus attorney fees. The arbitrator ultimately awarded Kraft a total of $2.76 billion, thus giving Kraft just about everything it wanted. In other words, after considering the underlying agreements and the parties’ positions, the arbitrator read the contract and calculated damages in a way that essentially mirrored Kraft’s demands.

One-sided awards in arbitration underscore what are ultimately larger concerns for risk-averse corporations: The absence of meaningful checks and balances in arbitration proceedings and the extraordinarily wide latitude that arbitrators have in rendering decisions. For instance, arbitrators have broad discretion to decide disputes and may disregard the factual evidence presented by the disputing parties. Furthermore, unlike judges and juries, arbitrators are typically unconstrained by statutes, case law or the rules of evidence. The consequence is that an arbitrator’s subjective notion of fairness in a given case can easily translate into a lopsided award against the losing party, even when the facts and the law are on the losing party’s side. For risk-averse companies seeking some semblance of predictability concerning their legal affairs, the very nature of arbitration—which some have called “ad hoc justice,” given the lack of accountability and predictability—renders arbitration a highly precarious prospect.

To be sure, the fact that some parties are less successful than others says little about the intrinsic merits of the process. After all, the results of arbitration were favorable for Tessera, Kraft and Swatch, the prevailing parties. The difficulty is that, for companies looking to manage their business and legal risks, it is impossible to know, ex ante, on which side of the win-lose column they will ultimately end up following an arbitration—and how much it will cost them if they end up on the wrong side.

Arbitration Is Often More Expensive Than Litigation

It is routinely argued—often without empirical support—that arbitration is cheaper than litigation. Although litigation can be costly, many of the costs incurred in litigation are also incurred in arbitration, and additional costs are incurred during the course of a typical arbitration to pay for what is essentially a private judicial system.

The Tiffany-Swatch arbitration provides concrete evidence of the often-significant costs associated with arbitration. Not only was Tiffany required to pay the $449.5 million award, plus interest, to Swatch, but Tiffany was also required to pay two-thirds of the cost of the arbitration and two-thirds of the reasonable attorney fees and expenses incurred by Swatch. As a publicly listed U.S. company, Tiffany publicly disclosed these amounts, lifting the veil on how both attorney fees and forum costs (including arbitrator fees) can be surprisingly high in arbitration proceedings.

Swatch alone incurred approximately $13.3 million in reasonable attorney fees, costs and other expenses (of which the arbitral panel required $8.8 million to be paid by Tiffany). For an arbitration that lasted less than three years, $13.3 million in attorney fees and related expenses is striking, particularly in comparison to reported legal fees in complex litigations in federal court. For example, patent litigations—which are among the most complex litigations that are adjudicated in federal court—are often reported to result in legal fees averaging approximately $4 million to $5 million per side through trial.

The amount of legal fees that Swatch incurred in arbitration—a supposedly cost-effective venue—was more than twice that of the average total fees for patent litigation in federal court, again showing that the common contention that arbitration is inexpensive is often plain false. Indeed, features of arbitration that once may have made it a less-costly alternative to litigation are increasingly a thing of the past. In many arbitrations today, for instance, discovery is as common as it is in litigation, increasing both the cost of arbitration and the time required to complete it. And recalcitrant parties to an arbitration can often employ dilatory and other tactics that result in significant attorney fees to both sides as the parties spar over procedural and other issues. In contrast, many courts and judges have established, routinely enforced rules that parties must follow and which are not subject to challenge. But in arbitrations, more flexible rules often apply, which give litigious parties and their attorneys more things to argue about, thus further increasing the cost of arbitral proceedings. Furthermore, litigations (sic) often can be dismissed at a preliminary stage, such as decisions on motions to dismiss or motions for summary judgment, but such preliminary determinations are less-frequently used in arbitration.

On top of attorney fees, the parties to an arbitration must pay fees to the arbitral tribunal and to the arbitrators themselves. In the Tiffany-Swatch arbitration, the costs of the arbitration, which was heard by a panel of three arbitrators pursuant to the rules of the Netherlands Arbitration Institute, totaled $1.2 million ($800,000 of which was paid by Tiffany). In comparison, had the parties used a court in the United States, these costs would have essentially been nonexistent, given that courts and judges are paid for by the public. Indeed, a 2013 study described in the Global Arbitration Review found that costs for the arbitrators themselves and the arbitral tribunal with respect to one type of arbitral proceeding have risen by 56 percent in just the past eight years. Contributing to the growing cost of arbitration is the fact that unlike in litigation, for which judges are appointed to preside over a case, in an arbitral proceeding the parties will first have to decide on mutually acceptable arbitrators, which often takes time and runs up the attorney fees of the parties. Once an arbitrator is agreed upon, the parties then have to pay for their services. Since arbitrators are often top lawyers or retired judges with steep hourly rates, this is almost always a significant expense.

Concerns about the costs of arbitration and the time it takes to arbitrate disputes are not limited to high-stakes and international arbitrations. A 2012 study of single-plaintiff cases found that, on average, arbitration is significantly more expensive than litigation and results in each side’s incurring significantly higher attorneys’ fees. The study found that even in these less prominent cases, the average attorney fees incurred by parties in arbitration were 25 percent greater than those incurred in equivalent litigation. Factoring in total cost and outside counsel fees, arbitration was 31 percent more expensive than litigation in these small-scale cases. In fact, corporate clients are beginning to appreciate the potential costs involved in arbitrating disputes. A 2013 survey by PricewaterhouseCoopers found that the top two reasons corporations avoid arbitration were the costs and the delays associated with arbitration.

The Bottom Line

Despite the disadvantages of arbitration, there always will be circumstances under which arbitration is preferable and perhaps even required. For example, an arbitral proceeding may be the only venue in which a party can secure an enforceable judgment against the assets held by a counterparty in a given country. The fact remains, however, that even as arbitration can, in theory, offer some advantages over litigation, in practice it is often an inefficient method of dispute resolution. Arbitration, despite its promise of efficiency, often drags on for years and results in substantial fees and costs—which can add up to more than the parties would have spent in traditional litigation.

Most worryingly, for companies seeking to effectively manage their legal risks, arbitration places their financial fortunes in the uncertain hands of arbitrators bound by only their own sense of the proper outcome, and which may have only a tenuous connection to the law. The lesson for corporate parties is that, instead of agreeing to arbitrate disputes as a matter of course, they should carefully consider whether arbitration will actually be beneficial in a particular instance. As companies like Amkor, Starbucks and Tiffany have discovered, the downsides of choosing arbitration can be significant indeed.

See http://www.corpcounsel.com/id=1202665052210/Big-Risks-and-Disadvantages-of-Arbitration-vs-Litigation%3Fmcode=0&curindex=0&curpage=ALL (emphasis added)

Like a hurricane, arbitration is an unmitigated disaster in most instances.

The arbitrators consist of lawyers, who come with their usual biases, or retired judges who are even worse—and have not had their fill of the power trip they were on. And there is no right of appeal.

Also, in one instance that I know of, the ultimate losing party went to its friendly state court judge and obtained an injunction to prevent an expert witness from testifying, which distorts the arbitration process completely, and effectively turns it into litigation in two forums.

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