Hi,

I have a few questions on Arbitration:

First the framework:
I don't want to use small claims court.

I own a business and there is a contract between me and the customer.
Within the contract I want to put a Arbitration clause.

The amount I would be arbitrating is around $500.00.

Artbitration clause Framework - 3 Arbitrators, one picked by me, one
picked by the other party I'm suing, one picked by the two
arbitrators.

Questions:

1. Does the other party have to be "served" as in Small Claims Court
or can I send a letter to their place of residence notifying them that
action has been taken against them and they must act? This
notification would serve the same purpose of being "Served" for Small
claims Court.

2. Once I get a judgement using Arbitration against this person, can I
still attach wages etc. using the County Sheriff.  When I get a
judgement now using Small Claims Court, the County Sheriff will do the
collection.

3. I would like an overview of the pluses and minuses of using Arbitration.

Thank you

---

Clarification of Question by just4fun2-ga on 29 Jul 2004 12:54 PDT

The State I live in is Nevada.

---

Request for Question Clarification by pafalafa-ga on 29 Jul 2004 12:58 PDT

Does the *existing* contract contain an arbitration clause?

If not, I'm not aware of any way that you can compel your customer to
agree to arbitration.  You can only suggest it as an option to avoid a
small claims suit.

Let me know if I am misunderstanding your situation.

pafalafa-ga

---

Clarification of Question by just4fun2-ga on 29 Jul 2004 14:03 PDT

"Does the *existing* contract contain an arbitration clause?"
 
No it does not.  The reason for the question is to find out if I
should add it to my contract.  If it's easier to collect by this
means, then I will add it.

1.  If you have a contract that has an arbitration provision, you
merely need to send the other party a demand for arbitration--no
formal "service" like small claims court is required.  Most often the
aggrieved party will commence an arbitration with the arbitration
forum delineated in the contract, like the American Arbitration
Association, and once the arbitration is commenced that body will send
a notice to the other side.  It depends on how you word the
arbitration clause.

2.  If the arbitrator issues an award in your favor, you will most
likely need to turn it into a judgment since the decree of the
arbitrator alone is not tantamount to a court judgment in many states.
 There is some time and expense involved in this because most times
you must actually sue the other person for a judgment based on the
arbitrator's award (if the other person simply does not pay up
afterwards).  Some states have laws that permit an award issued by a
binding arbitration to have the same effect as a judgment, i.e., you
can record it and it acts as a lien on real property and you can levy
upon wages using the award, etc.  Check your state laws.

3.  Arbitration is usually cheaper and faster than litigation,
although that's not necessarily true if you are using small claims
court for your litigation.  Also, arbitration lacks the ability to
issue subpoenas and compel witnesses to appear.  Also, you cannot get
injunctive relief (like a temporary restraining order) in arbitration.
 Plus, if the other side doesn?t show up you do not get a default
judgment like you would in small claims court.  I thus look at
arbitration as a means of alternative dispute resolution only and not
as the only or chief means.  I think regular old litigation is better
than arbitration in most cases for the reasons I mentioned.

Thank you Ipfan.

Just4Fun2:

OK, I checked the Nevada statutes at
http://leg.state.nv.us/NRS/NRS-038.html#NRS038Sec233.  It looks like I
was right--in order to truly enforce anything the arbitrator does
(including subpoenas and awards), you have to go to a court to make it
have legal authority.  Thus, if the issue is collectability, I would
not use arbitration.  Arbitration developed as a means of avoiding the
time and expense of litigation and may be appropriate for very large,
complex commercial contracts.  But if you are a small business and the
amounts you need to collect are $1,000 or less, small claims court is
the way to go.  Now I admit it's not perfect--you have to get the
judgment, then you have to record it, then you have to execute and
levy and garnish and all that stuff.  But with arbitration, at the end
of the day you might end up with an arbitrator's award in your favor
but you still have to court to collect!  Here?s what I would do? put a
clause in that says, ?At Just4Fun2?s sole discretion, arbitration may
be commenced by Just4Fun2 as a means of enforcing Just4Fun2?s rights
hereunder, and in such case [other party] agrees to submit to the
arbitration and be bound by the findings of the arbitrator(s) pursuant
to the laws of the state of Nevada.  This provision is without
prejudice to Just4Fun2?s right to pursue any other available remedy,
including actions at law or equity.?

Thank you Ipfan