Skeletons in the Closet: Arbitration and Conflict Dispute

Deal Us In

When you’re a dealmaker, there’s always a risk that you’ll find yourself stuck in a complicated arbitration if things go awry. Regulatory issues can sneak up on you, so watch out!

On this Halloween episode of Deal Us In, McGuireWoods partners and litigation specialists Jodie Lawson and Susan Rodriguez are here to guide you through the haunted maze that is dealing with business disputes.

Jodie and Susan both advise digging into the specifics of your situation before deciding whether to handle it via arbitration or litigation. They say that a lot of clients think arbitration will be the easiest and cheapest way to solve a dispute, but that’s not necessarily the case. Don’t think you’re getting a treat and stumble into a trick!

Jodie and Susan also discuss the nightmares that Form I-9s can give you. If a company you’re working with doesn’t have a workforce that is fully authorized to work in the United States — or it hasn’t made sure its employees filled out their Form I-9s correctly — you might be in for a long, conflict-filled road ahead.

“It can be a real deal-killer: We've actually seen Form I-9 issues kill a deal,” Susan says.

Tune into this spooky special to find out what skeletons may lurk in the arbitration closet, so you can be a better and safer dealmaker. With the right kind of legal support, you can unmask those legal monsters, and see that they aren’t so scary after all.

👻 Featured Ghost 👻

Name: Jodie Lawson

What she does: Jodie is a partner at McGuireWoods and a high-stakes litigator, representing clients in federal and state court, and arbitrations. She defends Fortune 100 companies and other businesses in cases involving torts, contract disputes, property disputes, and class actions, and fiduciary, energy, and financial services litigation.

Company: McGuireWoods

Where to find Jodie: LinkedIn

👻 Featured Ghost 👻

Name: Susan Rodriguez

What she does: Susan is a partner at McGuireWoods, and co-leader of the firm’s financial institutions industry team, primarily focusing on government investigations and complex civil litigation. She has defended clients in numerous government enforcement actions by the Department of Homeland Security (DHS), Department of Justice (DOJ), Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC), among others.

Company: McGuireWoods

Where to find Susan: LinkedIn

🗝️ Key Points 🗝️

Top takeaways from this episode

Beware of the hidden costs of arbitration — Jodie and Susan say that sometimes attorneys think arbitration will always be the cheapest way to solve a dispute. This can be true, and there are other benefits to handling a conflict this way. However, sometimes litigation is the best route, because of all the fees that come with arbitration.

Choose your state cautiously (no ouija boards) — Different states have different provisions that might impact whether you decide to go to court or get an arbitrator involved. If you can choose which state your dispute is addressed in, Jodie recommends picking the one that has substantive laws that fit with your specific agreement. But your business or dispute must be connected to the state or dispute in some way. It’s also a good idea to have legal counsel that is familiar with the specific laws in that state.

Don’t get tricked by this scary form — Dealing with Form I-9, which verifies the employment authorization of people hired to work in the United States, can be tricky. Treat it with care: Susan says making mistakes on this form can be very costly. Make sure any workforces involved in your deal are authorized to work, and have filled out Form I-9 correctly. Or it won’t be trick-or-treaters at your door, it will be USCIS!

🎃 Episode Highlights 🎃

[6:26] Think strategically about who should solve your disputes: When dealing with dispute resolution in a deal, there are pros and cons for working with arbitrators versus going to court. This will vary greatly depending on the circumstances, so make sure to look into it each time.

[10:18] Consider who should front the attorney fees: Susan says she usually recommends people follow the “American rule” with arbitration clauses in deals, which means each side pays for their own attorney fees. There are situations in which you might have some extra leverage if you foot the cost for the other party’s fees. That can work well in specific situations, but Susan says she mostly steers clear of that potential landmine.

[14:00] Every state has different requirements: When choosing which state to handle your dispute resolution in, Jodie says it’s important to consider the different substantive laws that will apply to your case. People gravitate toward Delaware because of its robust substantive law. But if you don’t have an office in Delaware, your client will have to pay extra for local legal counsel, potentially negating the benefits.

[18:00] Think about whether you want to handle an issue in federal or state court: Jodie says that most disputes over general breaches of conference will be handled in state court, unless the controversy exceeds $75,000, or involves parties from many different states. But there are times when you may want to consider moving your dispute to federal court, depending on what’s in dispute.

[21:18] The Biden administration hasn’t reduced Form I-9 enforcement: It was widely predicted that President Biden’s comparatively immigrant-friendly political policies would mean that legal actions against unauthorized workers would decline. However, Susan says this doesn’t appear to be the case. There are still many complications when dealing with companies that have workforces made up of people who aren't all authorized to work in the United States.

[22:30] Civil and criminal fines for Form I-9 mistakes are ghastly: People don’t always realize how serious the civil and criminal fines for mistakes on Form I-9 can be. If a company makes an unknowing mistake when its employees fill out these forms, it will likely face civil fines. But if leaders at the company knowingly hired unauthorized workers, the business may face criminal charges.

[34:00] Look closely at your representations and warranties insurance (RWI) policy: Jodie says that RWI policies often have exclusions that you don’t know about, and yours may not cover everything you think. It’s worth hiring someone to look at the fine print, so your insurance won’t deny you coverage.

🎙️ About Deal Us In 🎙️

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.