As an EMS services provider, we offer assembly services to OEMs; we review their build-to-print designs, building them, and bringing them to life. We rely on our customer’s products to grow our business. To ensure long term relationships, many EMS companies enter into short- or long-term manufacturing agreements or contracts. Like many of you, I’ve had to review a contract or two in my lifetime.
As you know, there are many types of contracts, also referred to as agreements. There are confidentiality agreements, non-disclosure agreements, letters of intent, manufacturing agreements, etc. Many of these agreements have sub-sections defining things like territory, payments, terms and conditions, warranty, indemnity, assignments, governing law, and more. Contracts and agreements are usually written with the purpose of minimizing disputes. The more clarity you have in a contract the less likely a dispute could arise.
As a business owner—and I’m sure anyone else in business will attest to this—it’s inevitable that at some point in time, you will be faced with a dispute in spite of having a contract in place and in spite of the clarity of the wording. With this in mind, one area of the contract that I’ve found to be essential is the paragraph regarding dispute remedies and governing law. This section defines how a dispute will be handled. It usually includes either an arbitration clause or the right to jury clause and it identifies the location in which the dispute will be heard, meaning which state will hear the dispute and what state law will apply.
Over the past 20 years and after guidance by many different attorneys, some insisting that arbitration is acceptable, I have learned to lean toward keeping the right to a jury hearing option and I generally don’t accept the arbitration clause. Now that’s a big statement and I’ll be the first to tell you that I’m no attorney, but in general, my experience has taught me to never, ever give up your rights and, when you agree to arbitration, you are giving up your right to be heard by your peers in court. I’ve learned that both of these options have their place, depending on the situation, but the advice I can give you is to never give up these rights if you can help it.
With most disputes, if you can’t resolve them yourself, a good attorney can help get to a resolution without going to court and without an arbitrator. Even if going to court is an option, many times the dispute is resolved prior to court. With arbitration, the arbitrator makes the final judgment. With this, I have found that there is no real winner except the arbitrator, who is paid a lot of money. The longer the arbitration takes, the more money the arbitrator makes. The parties in dispute are generally both losers with both parties taking concessions.
My first-hand experience with arbitration began one morning, when I woke up with a slight head cold (which I passed off as allergies), so my day started with me not feeling the best. Arbitration had been scheduled months in advance, and there was no way I could reschedule. My attorney picked me up early for the three-hour drive ahead of us. The arbitration was scheduled to start at 8 a.m. and the location was downtown St. Louis, by the river. We found the building and headed to the 10th floor. Our meeting room was a large corner office with floor-to-ceiling windows overlooking the river. The Arch was fully visible, and we could see a portion of Busch Stadium; it was a truly beautiful view.
Our opponents were camped out in another meeting room on the same floor. By the time the meeting started, my head cold had painfully settled in and around my left ear. The arbitrator started the meeting in our room. We presented our case; they presented theirs. The arbitrator asked a few questions, we answered, they answered, we both argued a bit, and then everyone adjourned to their respective meeting rooms. For the next hour or so, my attorney—a young man, not yet partner—and I sat in our meeting room and looked at the view. He was wearing a red sweater and we carried on chit chat. He told me about his career and how difficult it was to get a date being so busy and all, and I gave him some advice. It was the typical attorney/client talk as we waited for the arbitrator to return.
This situation repeated itself, hour after hour as the arbitrator would come back in and ask more questions. For about 15 minutes, we would answer, they would answer, we pleaded more of our case, they pleaded more of theirs, we both argued, and he would leave. As the day progressed, so did my allergy symptoms. The discomfort I was feeling that morning was still painful in my left ear and, by lunch, my left jaw was swollen, making it difficult to eat. I couldn’t tell if I had an ear ache or just a swollen gland from allergies.
The day continued at a very slow pace while the pain in my jaw slowly increased each hour. By 4 p.m., I was thinking, “Is this ever going to end?” I had given my attorney all the dating advice that I could, as we had finally come to the conclusion that it was his red sweater causing all his problems. About 5 p.m., the arbitrator finally came in for the last time. Although our position seemed legally tight, the arbitrator went right down the middle, and made both of us take concessions—meaning we both had to pay. Of course, the arbitrator won; he was paid by the hour.
As it turned out, I didn’t have allergies. Instead, I ended up at my dentist’s office the next day getting a root canal. So, my lesson learned is to never give up your right to a jury hearing, but if you have to choose between arbitration or getting a root canal, I’d chose root canal—at least they give you Novocain.
“At the end of the day, we can endure much more than we think we can.” – Frida Kahlo, 20th-century Mexican painter
Christine Davis is a leader in today's electronics industry. She founded and successfully ran CAMtek for 20 years before selling to Zentech, where she is now an executive vice president and general manager of Zentech Bloomington.