Most AIA construction contracts contain a binding arbitration clause. These contract clauses come in many variations, but typically state that the parties agree to waive their right to a civil lawsuit and agree to have their dispute decided by an arbitrator. If your contract contains such a provision, it is likely enforceable and you may be required to resolve the dispute through arbitration as opposed to a civil lawsuit.
Arbitration has its benefits and detriments. Those who favor binding arbitration over civil litigation usually state the following reasons: (1) arbitration is usually speedier than the civil court system allowing the parties to argue their case before an arbitrator as early as several months after the demand for arbitration is filed; (2) the cost of arbitration is less expensive than civil court; (3) the parties can select an arbitrator who is well versed in construction law, as opposed to a jury who may have no experience with construction disputes; (4) the rules of evidence are more relaxed in arbitration than in civil trial and thus result in more facts coming into evidence; and (5) other than a few exceptions, arbitration is binding and non appealable, resulting in a quicker final decision than a trial court where the award can remain on appeal for years.
However, these days, the above rationale is less true than it used to be. For example, more often than not, parties are finding that it may take as long, if not longer to get through arbitration than it does trial. Second, the cost of arbitration is usually very expensive at the outset of the case. For example, if the arbitration provision requires the arbitration to be filed with the American Arbitration Association, you will quickly discover that the filing fee alone may be in the several thousands of dollars, as opposed to just a few hundred dollars to file in district court. Third, although the arbitrator may know construction law, he or she may be biased toward a particular trade or profession, which leaves the parties questioning whether the arbitrator can truly be neutral. Typically, a lot of time and money is spent in just trying to agree upon a “neutral” arbitrator.
Regardless of whether arbitration is or is not more efficient than a civil lawsuit, before you can decide which route to take to enforce payment, you need to read your contract to determine if you are bound to arbitrate your claim. If you are required to arbitrate, you can ask the arbitrator to determine the validity of your lien (if you are going to file one); however, the arbitrator is without the authority to foreclose on the lien, which rests solely with the district court and in counties with a population over 2 million, the county court as well (for matters less than $100,000.00). All other construction claims and remedies can typically be decided and awarded by an arbitrator.