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I’m a big fan of “privatizing” trusts and estates litigation whenever possible, which we can do in Florida by incorporating mandatory arbitration clauses in all our wills and trusts (see here). Florida was one of the first states to statutorily authorize these clauses in F.S. 731.401, removing all doubt as to their enforceability in this jurisdiction.

But no solution’s perfect. There are always tradeoffs. And arbitration’s no different. I was recently reminded of this fact in a conversation I had with Steven K. Schwartz, an Aventura, FL wills and probate lawyer with years of experience as a litigator. Steve’s thought long and hard about arbitration in the trusts and estates context. I invited him to share his thoughts on the blog and he graciously accepted.

Steven K. Schwartz on the “other side of the coin regarding arbitration”

First, the initial cost of proceeding via arbitration is usually more than in court.  Filing fees plus cost of the venue can be many thousands of dollars.  For a disappointed beneficiary this may be a barrier to proceeding.  Of course, while some cases should be stopped early, I am using the assumption that my hypothetical beneficiary has a meritorious claim.

We all know that mistakes get made and judges or arbitrators are not immune.  The inability of appellate review may prevent the meritorious position from being revealed, even if the arbitrator was, er, arbitrary.

The fact that there is little or no opportunity for appellate review multiplies the risks of proceeding.  Because of that limited review, the risk/reward evaluations that should be made by a party in evaluating the benefits of continued litigation, compared to settling, cannot be based upon precedent because there is no guarantee that the arbitrator’s decision will be based on precedent.  Therefore, the lawyer’s skill and expertise and judgment are diminished because the lawyer is operating in a more unpredictable environment.  For a disappointed heir, the risk may be too much.

The arbitrator may allow in evidence that would not be admissible in court.  The rules of evidence have developed over 1,000 years and the rules that have survived this long have value.  I certainly would not want to give them away for free.  In a similar note, discovery may be more limited thereby preventing facts from coming to light.

Arbitrators may have a predisposition towards trustees because there is a potential for future referrals from one trustee to another (or repeat business) and therefore a subtle bias in favor of the trustee and against the beneficiary may be in play.

While some cases may take a long time in court, that may not be bad.  Attorneys need time to prepare a case.  An arbitrator may insist on a case being prepared too quickly.

There is also a societal cost to arbitration.  If a case goes to court there is a chance the disappointed party will take an appeal.  We all benefit from those appellate decisions because they help attorneys to advise their clients as to the law as the law develops.  Fewer appeals means fewer appellate case to guide the bench and bar.

In conclusion, I am not saying that all these are always true or will be true in every case.  However, when choosing a dispute resolution forum, an informed choice must include discussion of these issues because ultimately it is the client’s choice.  Otherwise, you have essentially arbitrated away your client’s right to make an informed choice of a dispute resolution forum.

Of the points made by Steve, all of which are valid and worth considering, the lack of appellate review is the most significant to me. In my opinion the trade-offs still weigh in favor of arbitrating inheritance disputes. However, if you’re on the fence and looking to do a deep dive into this issue yourself, a good starting place is a Florida Bar Journal article entitled On What Grounds? Challenging an Arbitration Award Under Federal and Florida Law. Here’s an excerpt:

The benefits of arbitration, however, do not come without trade-offs, one of which is the right to traditional appellate review. Just as courts will enforce the parties’ initial decision to arbitrate, they will not interfere with that decision after an arbitration award is issued beyond a few limited, statutorily defined grounds. Crucially, these grounds do not include substantive review of the award for “mere” errors of law or fact. As a result, “judicial review of arbitration decisions is among the narrowest known to the law.”