In part three of this blog series I discussed the Court Mandated Arbitration process. In this installment, I will discuss a variation on the arbitration theme: high/low binding arbitration. In some instances, when the parties have agreed to submit their case to voluntary arbitration, the lawyers will also agree that the verdict rendered by the arbitrator (or a group or panel of arbitrators), regardless of the amount actually awarded, will be molded or changed to reflect a binding high/low agreement.
This means that the lawyers may agree in advance that regardless of the arbitrator’s award, the actual amount to be paid will not be lower than some number and not be higher than some number. As an example: the lawyers agree to a $10,000 low and a $100,000 high. If the arbitrator awards anything less than $10,000, the award will be molded up to $10,000 and if the arbitrator awards more than $100,000 the award will be molded down to $100,000. If the arbitrator awards anything between $10,000 and $100,000, the award will not be molded and the amount awarded by the arbitrator will stand.
There are several reasons that lawyers may agree to proceed in this manner. The obvious advantage is to guarantee a litigant that he will get something regardless of the arbitration outcome. At the same time, a defendant in a lawsuit is guaranteed that he will never have to pay more than the high number, regardless of the arbitration result. As with almost all forms of arbitration, this method of litigating a case is generally cheaper and faster than a full jury trial and there is no appeal of the verdict.