Originally from Alternatives to the High Cost of Litigation

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Arbitration may end sooner and more efficiently than litigation, but it is slower to begin. A courthouse is just sitting there waiting for a complaint to be filed. An arbitrator, by contrast, has to be appointed, and it can take time for the process to get going. And when a case does not present issues that must be resolved immediately, that may not be a problem.

But where a case has emergency features— the dissemination of trade secrets, the raiding of a party’s customers, the destruction of its facilities—arbitration can be particularly ill-suited. Parties who need relief now cannot tolerate being imprisoned in the cage of a drawn-out arbitrator-selection process.

For precisely this reason, the common law has long recognized an exception to the general rule in favor of enforcing the exclusive nature of arbitration clauses. Even when parties state that “any and all issues under this contract shall be resolved by arbitration,” courts have found that a party can seek injunctive relief to prevent irreparable injury, so long as the court is not deciding
the core issue committed by the parties to arbitration. Merrill Lynch, Pierce, Fenner & Smith Inc. v. Bradley, 756 F.2d 1048, 1053 (4th Cir. 1985)(“where a dispute is subject to mandatory arbitration under the Federal Arbitration Act, a district court has the discretion to grant a preliminary injunction to preserve the status quo pending the arbitration of the parties’ dispute if the enjoined conduct would render that process a ‘hollow formality.’”); Alliance Consulting Inc. v. Warrior Energy Res. LLC, No. 5:2017-cv-03541, 2017 BL 283376 (S.D. W. Va. Aug. 14, 2017)(addressing a preliminary injunction when the dispute resolution clause did not specifically provide a court with jurisdiction to hear such a dispute).