Arbitration is an alternative to consider instead of litigation. Will arbitration save you money? What are the pros? What are the advantages and disadvantages? The answers are not always black and white. Here are several factors you should consider when determining whether to agree to arbitration as a form of dispute resolution.
Determining Arbitration Factors
A common misconception is that arbitration is less expensive than litigation, which is not necessarily the case. Arbitrators can charge anywhere between $1,000 – $12,500 for their services (or three times that amount if a panel of arbitrators is involved). In most instances, the parties involved will also hire a lawyer to represent them throughout the process, which adds on additional attorney’s fees and costs. The notion that arbitration is a cost-saving measure comes from the assumption that litigation is a longer, more drawn-out and complicated process. Arbitrations can usually be scheduled sooner because there is no need to plan around the availability of the courts and some arbitrators will even allow for cases to be heard on weekends and holidays.
Other factors such as confidentiality and governing law should also be taken into consideration prior to agreeing to arbitration as a method of dispute resolution. Arbitration allows each party to avoid the required court rules and procedures. Document requests and calling witnesses can be achieved by placing a simple phone call. Often times one or more of the parties are concerned that the subject matter of their dispute is personal, embarrassing and/or reveals private/confidential information. Court records are easily accessible to the public and arbitration can avoid the filing of a lawsuit altogether. If you are an employer in a state which is known to favor the employee, you probably want to avoid litigation in that state. Arbitration could be a better option in this instance.
One final factor to consider is that an arbitration ruling is binding, unlike litigation which allows for an appeal process. Regardless of your decision to require litigation/arbitration, most attorneys will recommend mediation as a condition precedent. Mediation can be a big cost, time and effort savings for all involved.
Just remember that, today, most of the contracts you come across will contain language requiring arbitration. Read through agreements before signing them to know exactly what you are agreeing to. If you are unsure, it is always best to contact an attorney for interpretation. At the very least, take it upon yourself to strike any language which you find unacceptable and query any other language you may not be familiar with.
Disclaimer: This article provides general information and materials related to legal services. This article does not provide legal advice. VPS is not a law firm, nor does it provide legal advice. You should contact an attorney to obtain advice with respect to any particular legal issue or question.