Litigation

How to Solve Your Legal Troubles Without Setting Foot in a Courtroom

June 23, 2021

Everyone knows you can solve a legal dispute by taking someone to court. But are there any other ways? Yes, most definitely. In addition to litigation (what goes on in a courtroom), there are two alternative dispute resolution (ADR) methods commonly used to solve legal disputes: arbitration and mediation.

  • Mediation is the safest option.
  • Unlike mediation, arbitration and litigation have winners and losers.
  • Arbitration is faster than litigation but is not always better.
  • Arbitration is a better choice for parties that value privacy.

Mediation and arbitration tend to be sequential rather than mutually exclusive. In fact, many contract dispute resolution clauses require the parties to first attempt to resolve their differences through mediation and only if / when that fails, can they proceed with either arbitration or litigation.

Mediation is almost risk free

Mediation is always encouraged as the first step in dispute resolution because it has no downside. If mediation is successful, the parties are all satisfied, and everyone is saved from the riskier processes of arbitration or litigation. If mediation is unsuccessful, then the parties move on to arbitration or litigation, which they would have done anyway.

In mediation, a third-party mediator is chosen by the two conflicting parties to facilitate an agreement that resolves the conflict. The mediator cannot decide the dispute, nor can the mediator force a settlement. He or she, as mediator, performs “shuttle diplomacy,” encouraging each side to move away from their position and compromise with the other.

In addition to the freedom to resolve their own dispute, mediation gives the parties the opportunity to listen to each other’s arguments. This allows everyone to compare the strength of their arguments. If one party discovers that their opponent has a much stronger argument than they realized, they can work harder to find a compromise in mediation, saving themselves from losing to that better argument during arbitration or litigation.

After mediation, whatever agreement the parties come to becomes legally enforceable. They can hold each other to their agreement in court, should one of them try to break it.

If the mediation is unsuccessful, and the parties decide to escalate the conflict, they will move from mediation to either arbitration or litigation. Both of these processes are binding, meaning that a decision will be made which both parties must respect. There will be a winner and a loser, unlike mediation. The two processes are also frequently mutually exclusive. Most binding arbitration clauses state that the arbitrator’s decision will be final, and the only way to overrule a court’s decision is to appeal to a higher court.

Fortunately, at any point before judgment is made in either arbitration or litigation, the parties can “settle” the dispute by coming up with and agreeing to their own binding settlement agreement. This means that if either process becomes unappealing to both parties, they have a way out if they can compromise.

Arbitration can be quick, but risky

Arbitration is different from mediation in a couple of important ways. First, in arbitration, the third party’s job is to decide how to settle the dispute without the parties’ agreement. The arbitrator’s obligation is not to find a resolution that satisfies both parties but rather to decide who wins and who loses the dispute. The arbitrator will then decide on an award amount that the losing party must pay to the winning party. If unpaid, this award can be enrolled as a judgment of the court and the losing party will be legally required to pay.

An arbitrator’s decisions are not appealable unless the arbitrator commits fraud. This means that it is riskier for the parties. Perfect cases are rare, and there is always a chance that the arbitrator will decide against you, a risk not present in mediation.

So why opt for arbitration instead of litigation?

Litigation can drag on for months or even years without a definitive resolution, and a losing party’s ability to appeal a decision means that even a definitive ruling may not be the end of the process. Arbitration is a much faster process, which means it is also a cheaper alternative to litigation. The faster a dispute is resolved the less time lawyers spend working on the case.

Unfortunately, arbitration’s efficiency makes it a double-edged sword

It will yield a faster conclusion to the conflict, but if the arbitrator decides against a party, there usually is not any option but to accept the decision. Additionally, many dispute mediation clauses dictate that the losing party is responsible for paying the arbitrator as well as the winning party’s expenses and attorney’s fees, potentially raising the costs for the loser.

Further, arbitration’s speed comes as a result of reducing or skipping discovery, the phase of litigation where attorneys are able to gather all the evidence they need to make their arguments. While arbitration is quicker and less painful, the parties will not be able to get all of the facts that they may need to prove their case. The slow speed of litigation, and especially discovery, can sometimes reveal case-winning facts that otherwise never would have become apparent. For this reason, arbitration’s speed may seem too costly to many disputing parties.

Arbitration has a single clear advantage over litigation: privacy

Litigation leaves a clear paper trail. The dispute becomes a matter of public record, which can be found by anyone who knows where to look. For businesses with a national reputation or those dealing with highly sensitive disputes, they may prefer arbitration over litigation because then the dispute will remain private.

Conclusion

It is best to attempt mediation before either arbitration or litigation because mediation is the only avenue where compromise is an option. However, if that avenue turns out to be a dead-end, whether arbitration or litigation is the better choice will depend upon the nature of the anticipated dispute and the parties’ priorities.