It is a commonly held myth that arbitration as a method of dispute resolution is faster and cheaper than litigation. Entertainment companies, publishers and ad agencies who financially benefit by screwing photographers and illustrators, frequently insert an arbitration clause in their agreements requiring that any disputes (often including claims of copyright infringement) be arbitrated via a private arbitration service rather than litigated in our courts. Photographers who cling to the notion that arbitration is cheaper and better, often sign such agreements requiring arbitration without consultation with a lawyer or having a second thought.
Little do they know that arbitrating disputes is a far more expensive proposition for a photographer or illustrator than filing a legal action.The costs are frequently prohibitive and prevent the creator from ever seeking redress via the arbitration process. Here’s why:
Say a photographer files a copyright infringement suit in Federal Court in New York. The court’s filing fee is $350. Regardless of the complexity of the case or whether the case is settled early on or ends after a trial lasting one month, the photographer’s court fees will likely total $350. Judges do not get paid for their time in deciding motions, reading papers or presiding over trials. Court fees are essentially a one time, flat, affordable fee.
Arbitrators on the other hand, get paid for all of the time they spend on a case. Fees generally range from $2,000 – $4,000+ per day, per arbitrator. There are additional fees that are payable to the various private services such as The American Arbitration Association or JAMS who run these hearings and provide the venues. The arbitrators get paid to read papers, decide motions and to hear a case – if there is ever a hearing. Some agreements provide for more than one arbitrator. While amounts vary, it is not at all unusual for a party to incur $20,000 – $40,000 in arbitration costs before any hearing on the merits ever commences.
These fees are of course, in addition to sums paid attorneys. Even if an agreement provides for the recovery of all or a portion of such fees by the prevailing party, one still needs the resources to lay out tens of thousands of dollars which would not be required if the matter were in the courts. The amount of time spent by lawyers for similar type cases whether arbitrated or litigated, is virtually the same. Worth repeating, legal fees in controversies whether litigated in the court or arbitrated are utterly comparable. No legal time is saved via arbitration.
Clients of creators are nearly always better capitalized than individual creators. They can lay out the money win, lose or draw. Can you?
Can you afford to lay out say $25,000 in arbitration costs, plus attorneys’ fees betting that you will ultimately be successful on your claim? That same case would be $24,650 cheaper in a Federal Court.
A few other items to remember about arbitration:
1. Typically an arbitrator’s decision is not appealable absent extreme circumstances ie proof that the arbitrator accepted a bribe. So a wrong decision will remain a wrong decision;
2. An arbitrator need not base his/her decision on the applicable law(s). Yes, you did read that statement correctly;
3. Entertainment and media companies put arbitration clauses in contracts to deter creators from bringing claims but when claims are brought, the arbitration service is getting paid thanks to the inclusion of the clause by the media company/publisher. The media company/publisher is thus a customer of the arbitration service. The bigger the company the greater number of disputes, the more disputes the more fees paid to the private arbitration service. Some of us lawyers may be cynical but we think that tips the scales in favor of the big companies and against the little guy who is virtually always a solo creator with limited financial resources.
4. You lose your right to a jury. Juries are the great equalizer. Juries tend to side with the “little guy”, the “David” not the “Goliath”. You have a constitutional right to both your copyright and to have a trial by a jury. Why would you possibly give up your constitutional rights before you even knew what the nature of your dispute would be? You might have a lousy judge but a great jury. If you have a lousy arbitrator you are SOL.
Arbitration as a concept, strikes just the right warm, fuzzy, non-confrontational tone that appeals (pun intended) to the sensibilities of creatives. Creatives are suckers and the media companies are well aware of that fact. Ed dissuades creatives from agreeing to arbitration as a means of dispute resolution virtually without exception. Will this article help dispel the myth held by creators that arbitration is cool? Probably not, as the unfounded proclivity to arbitrate is so entrenched in the minds of creatives that logic is left behind.