Deal Gone Bad? Next Stop Arbitration
When a funder is unable to resolve a breach of contract with a customer on its own, litigation may seem like the only option left. But there may be an alternative, a process known as arbitration.
“Arbitration is a creature of contract,” said Zachary Meyer, a partner at a law firm. Meyer is also the co-founder and Chief Administrator of RapidRuling, an arbitration forum that has recently experienced an uptick in cases from the small business finance space. An arbitration forum is an alternative to the courthouse, where disputes are adjudicated by an arbitrator instead of a judge. It’s binding. The prevailing party, for example, can take an arbitrator’s award to the Court and turn it into a judgment.
Meyer told deBanked that part of the original vision for RapidRuling was an entirely online system that would prevent one or both parties from having to incur travel costs to participate. The overall cost of arbitration for a respondent in Montana, for example, would go up if they had to pay for a flight to New York City just to appear for it. “It’s beneficial for the [respondent],” Meyer said.
But in 2019 when RapidRuling first launched, the industry was already well accustomed to relying on AAA, the acronym for the American Arbitration Association. AAA, which was founded in 1926, resolved more than 300,000 total cases in 2019 alone. But then, Covid hit.
“It was like a perfect storm,” Meyer said. As the court system ground to a halt and struggled to move online, an all-online arbitration forum like RapidRuling suddenly had significant appeal. Meyer explained that the forum’s low filing fee compared to alternatives also grabbed attention. It understandably took off.
But the path to arbitration, including which forum to rely upon, may all hinge on the original contract itself, which a funding company’s attorney should carefully draft. Copying and pasting a random contract off the internet, for example, carries great risk, Meyer explained, because one may later discover a boilerplate arbitration clause to be limiting or disadvantageous.
RapidRuling’s website describes its arbitration process in four steps:
1. Submit Your Dispute
2. Wait For Opposing Party To Respond
3. Arbitrator Reviews Submissions
4. Receive An Arbitration Award
Contrast that value proposition to litigation, which depending on the circumstances could be drawn out for years.
RapidRuling seeks out arbitrators that are well-qualified, fair-minded, and diverse. “We have a panel of six arbitrators right now,” Meyer said, “and we’re looking to add more.”Last modified: June 21, 2022
Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.