The choice to arbitrate or litigate is not often clear-cut. Instead, it takes careful consideration of many factors that affect your business’s time, money, reputation and more. While numerous factors will arise in any given dispute, consideration of the following provides important insights into the best forum for resolving a dispute.
1. Timeliness
The arbitration process is often a stripped down, streamlined method of getting your matter before a decision-making entity. It usually involves less discovery and a less-formal approach to the rules surrounding the entire process. Plus, most arbitrators control the rate at which they take cases. Consequently, they can typically keep to an aggressive and party-established time schedule.
If your situation requires a faster resolution, then you should seriously consider arbitration. If you can afford to wait out your opponent or a slower pace offers greater benefits, then trial may work better for you.
2. Discovery
Typically, parties to a traditional court case may obtain any material that they reasonably calculate will lead to the discovery of admissible evidence. But discovery is costly and easily becomes one of the most unpredictable aspects regarding the budget and litigation timetable. If your case requires extensive discovery to assess and inform strategy, then you may find it worthwhile. If not, and all other things are equal, then you may find arbitration a better, more economical alternative.1
3. Logic vs. emotion
The ability to prevail in a dispute is only as good as the skill of your lawyer and the evidence in your case. This is true whether you find yourself in arbitration or at trial. How you approach your case, however, depends on whether you are presenting before an arbitrator or a jury.
In general, your evidence or narrative must persuade the decision maker on three levels:
- Ethos, which requires an appeal to ethics
- Logos, which requires an appeal to logic
- Pathos, which requires an appeal to emotion
While arbitrators and juries will both attend to ethics, the process can differ somewhat with regard to emotion and logic.
Arbitration, particularly commercial arbitration, typically promises a decision maker who possesses a degree of business acumen. Such individuals often tend more toward logic.
Jury trials, on the other hand, focus more on the expectation of fundamental fairness. This expectation stems from the notion that the decision maker represents a cross section of the populace. As a result, emotions may play a larger role in the outcome.
So when you are considering arbitration versus trial, ensure you consider whether your narrative appeals more to logic or emotion. You will most likely find yourself on the right path.
4. Legal precedent and appealability
Recently, Thomas Stipanowich and Zachary Ulrich of Pepperdine University School of Law conducted a survey of 134 highly experienced arbitrators.2 Two findings from this survey inform how arbitrators actually work:
- 87 percent of subjects reported that they always tried to follow applicable law in rendering an award
- 70 percent confirmed that they “readily” rule on dispositive motions
The desire to attend to the rules likely has an iterative relationship with the likelihood of appeal. Under the U.S. Federal Arbitration Act, for example, a court can vacate or modify an arbitration award only if:
- The record does not support the arbitrator’s findings of fact, or
- The arbitrator has made erroneous conclusions of law.
Arbitration may not fit your needs if you find you may require a greater chance for appeal. Take time to review the grounds for appeal in your jurisdiction or under the rules of the private provider. Your research will inform which route will likely work better for you.
5. Existing legal agreements
This last consideration may seem like the most obvious. You will need to identify whether you have an existing arbitration agreement in place. If your agreement covers your current dispute, you really have little choice in the matter. Public policy favors using and abiding by arbitration agreements. Should you choose to fight the agreement and head to court, you face spending extensive resources on a battle that you have little chance of winning.
Conclusion
In some cases, you may find making your choice regarding which legal recourse to pursue quite clear. One common reason to choose arbitration, for example, is when you desire confidentiality to protect your business’s reputation. In many other cases, however, the choice is not so clear.
If you are not sure whether arbitration or trial is the right option, your first step is to weigh the factors above. If you require further guidance, your next best bet is to reach out to your business lawyer. Your lawyer can answer your questions, from “how does arbitration work” to “will a jury better understand my point of view,” and provide you with knowledgeable guidance for moving forward.
1 One recent study on arbitration shows that 91 percent of arbitrators surveyed “always” or “usually” limit discovery by working with the attorneys in the case, and 94 percent of arbitrators surveyed “always” or “usually” encouraged the parties involved to limit the scope of discovery.
2 Thomas Stipanowich and Zachary P Ulrich, Arbitration in Evolution: Current Practices and Perspectives of Experienced Commercial Arbitrators (2014), found at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2519196.
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