Counsel to Counsel - May 2008 - (Page 9)

MAyEr BrOwN LLP Drafting Fair, Efficient and Enforceable Arbitration Agreements Arbitration provisions in standard consumer and employment contracts provide a simple and informal way to resolve relatively small disputes. Consumers and employees benefit from a quick, inexpensive and convenient resolution. The business achieves greater certainty and lower legal costs by reducing the risks from litigation and, in particular, lawyerdriven class action lawsuits that do little to benefit the putative clients. situation implementation steps • Develop a pre-arbitration process to resolve claims amicably. • Offer to pay costs of arbitration and financial incentives to ensure that the arbitration process is affordable. • Make sure that the arbitration location is convenient to the plaintiff. • Do not limit remedies available in arbitration such as punitive or consequential damages. • Include a non-severability clause, which voids the entire arbitration agreement if a class arbitration prohibition is struck down. • Rely on a team of lawyers capable of defending your arbitration agreement in any jurisdiction. Guided by the strong pro-arbitration policy of the Federal Arbitration Act, most courts enforce arbitration agreements containing class waivers. Some courts, however, have declined to enforce agreements to arbitrate on an individual basis. To maximize the odds of a class waiver being upheld, inside counsel must craft an arbitration agreement that courts will deem fair to consumers and employees. challenge in-house counsel likely to be enforced; enhances customer/employee relationships; and gradually lowers a company’s litigation costs, particularly in the context of consumer and employment claims. Establish a simple pre-arbitration process to resolve most claims amicably. One approach is to create a Web site that provides consumers or employees with instructions on how to file a claim. A pre-arbitration notice procedure will increase the chances of resolving the dispute quickly and preserving the consumer or employee relationship. approach adopted future issues to consider The law governing the enforceability of arbitration agreements continues to evolve. While much of the action is taking place in the lower state and federal courts, the U.S. Supreme Court has taken an interest in the Federal Arbitration Act and whether it preempts state law rules that would deny enforcement of arbitration agreements. Businesses should keep an eye on future arbitration law developments. Make arbitration affordable for customers/employees. If feasible, offer to pay the full costs of arbitration. Where claims are small, also consider incentive payments that increase potential recoveries for consumers and their attorneys. Don’t limit legal remedies. Courts deemed early arbitration agreements unfair because they limited the company’s punitive or consequential damages, precluded recovery of attorneys’ fees or had an unusually short statute of limitations. Early arbitration clauses also required the claim to be brought in the company’s home territory. For a small claim, that’s impractical. Ensure that the location is convenient to the plaintiff. Protect your company with a non-severability provision. If the court won’t uphold individual arbitration, the provision will prevent the court from forcing you into high-risk class arbitration. Finally, because state laws vary, establish a team of lawyers familiar with the laws to defend your arbitration clause regardless of where the dispute occurs. As members of Mayer Brown LLP’s Litigation and Supreme Court and Appellate practice groups, Partner Evan M. Tager and Associate Archis A. Parasharami have extensive experience drafting arbitration agreements and defending their enforceability in courts throughout the country. Evan can be reached at etager@mayerbrown.com and Archis at aparasharami@mayerbrown.com. measuring success An arbitration provision is worth adopting to reduce dispute resolution costs. A successful arbitration provision is fair to all parties; is more martindale.com/c2c May 2008 best practices 09 http://www.martindale.com/c2c

Table of Contents Feed for the Digital Edition of Counsel to Counsel - May 2008

Counsel to Counsel - May 2008 Contents Harassment Policies NEC Corporation of America and Duane Morris LLP Lost or Stolen Data: Minimizing Fallout On-Boarding the Board Drafting Fair, Efficient and Enforceable Arbitration Agreements Responding to Counterfeit Products Crafting an English-Only Workplace Policy Distressed Debt: New Players, Global Sophistication Make Restructuring More Complex IP Confidential: Plan Ahead, Act Fast to Protect Your Trade Secrets Adverse Changes: Think Ahead in a Strained M&A Market Optimizing Web 2.0 Technology: Expanding Your Professional Network Union Pacific Railroad Company and Patton Boggs LLP Warming Warning: Develop Your Climate Change Strategy Now Risk Sharing: Expect New Obstacles and Expenses in Syndicated Loans E-Discovery in Action Diversification at the Gate Energy

Counsel to Counsel - May 2008

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