If your business is facing a dispute, you have several options to settle the matter. Two of the most popular options are to settle the dispute in a courtroom or to take the matter into arbitration. Each process has its pros and cons that should be carefully considered before deciding which route to pursue.
Arbitration vs. Litigation
Essentially, litigation means taking a dispute to court. Both sides present their case before a judge or jury, who will then render a decision.
Arbitration, on the other hand, is a private process in which both parties agree that an arbitrator (a neutral third party) will render a binding decision. There are three primary providers of arbitration services in the United States: The American Arbitration Association (AAA), Judicial Arbitration and Mediation Services (JAMS), and American Health Law Association (AHLA). Like litigation, both sides have a lawyer in arbitration, and both make arguments and present evidence to support their case.
What are the Key Differences between Arbitration and Litigation?
There are several differences between arbitration and litigation. The most significant difference is that litigation is handled in the court and must adhere to the strict laws and statutes that govern court proceedings. Arbitration is handled outside of the courts and can be a much speedier and informal process. However, arbitration can only take place if it is provided for in a contract or agreed upon by the parties.
Other ways that arbitration differs from litigation:
|Litigation is a legal process in which the court decides the outcome for the dispute.||Arbitration resolves disputes by appointing a neutral third party to study the case, receive the evidence, and then make a binding decision.|
|Litigation is a public procedure with established Rules of Procedure and Rules of Evidence, which govern how a trial is conducted and resolved.||In arbitration, resolving issues between parties are confidential and private, making it a smart choice for businesses that want to keep their private matters away from the public and press.|
|Litigation typically takes longer due to the formal Rules of Procedure and Rules of Evidence and the backlog of the courts (which has been exacerbated by COVID-19).||Arbitration typically provides a speedier resolution than litigation since the parties and the arbitrator agree on a schedule once the arbitrator is appointed.|
|Either party may appeal the court’s decision in a civil trial based on an alleged material error in the trial.||Unless otherwise agreed, the arbitrator’s decision is final and binding and cannot be appealed, except in limited circumstances.|
|In litigation, parties may be compelled to participate in court proceedings.||You cannot compel the other party to participate in arbitration unless you have a contract that requires it. Otherwise, both parties must consent to participate in the proceedings.|
|In litigation, the trial judge is assigned by the court without input from the parties involved.||In the arbitration process, the parties choose the arbitrator, often based on expertise in a related field of law or industry.|
|Litigation can be more expensive than arbitration due to the lengthy pre-trial discovery process and the appeals process.||Arbitration can be less costly, primarily due to the compressed schedule. However, both the arbitration association and the arbitrator charge discretionary fees, which are borne by both parties in the dispute.|
What Is the Difference Between Mediation and Arbitration?
Like arbitration, mediation is an alternative to litigation. However, mediation is merely a negotiation, and there is no guarantee that the parties will come to a resolution. The mediation process is facilitated by a mediator trained in dispute resolution and often takes place while parties await a court date (or arbitration conference) with the goal of reaching a “win-win” solution to the dispute.
In fact, many judges – especially in larger metropolitan areas – will not let a case go to trial without mediation and automatically include a mediation deadline in the docket control order (or scheduling order) which is issued shortly after a lawsuit is filed. If not ordered by the judge, either party may file a motion to compel mediation, but it is unlikely that the compelled party will participate in the negotiations in good faith.
If a settlement is reached, it is then recorded in a written agreement that is legally binding. If the parties fail to come to a resolution, then litigation or arbitration is often the next step.
We Are Here to Help You Through Complex Legal Hurdles
At Hendershot Cowart P.C., our team can review the details of your case to determine whether litigation or arbitration (or mediation) is most appropriate for your matter. Whether you choose to settle your dispute in or out of the courtroom, our Texas business attorneys are well-equipped to assist you. We will always provide you with attentive, thorough, and competent legal counsel to protect your business and its assets throughout the dispute resolution process.