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Avoid The Time And Expense Of Litigation Using Arbitration

Business law attorneys presenting arguments on behalf of their clients during arbitration.

Mandatory arbitration is a very common clause in business contracts across a variety of industries. Usually, the logic behind such arbitration clauses is that the practice of arbitration stands to save both parties considerable time and expense over the uncertainties of a court case. Even when arbitration is not required by contract, however, parties to a business dispute will often agree to pursue a resolution through arbitration in an attempt to avoid the time and expense of traditional litigation. To learn more about your options for pursuing arbitration as a path to business dispute resolution, schedule a consultation with one of the experienced business law attorneys with Schwab & Gasparini. You can reach us at one of our conveniently located New York State offices by calling (315) 422-133 in Syracuse, (518) 591-4664 in Albany, or (914) 304-4353 in White Plains or Hudson Valley. 

What Is Arbitration? 

According to Cornell Law School's Legal Information Institute, arbitration is a form of alternative dispute resolution, with "alternative" positioned in contrast to traditional litigation through the civil courts. Arbitration may be mandatory or arbitrary. In either case, in arbitration the parties to a dispute agree to have their case heard, and its outcome determined, by a third party, outside of the court system. The limitations arbitration imposes on further recourse can lead to justified skepticism in some quarters, and mandatory arbitration clauses between parties enjoying unequal leverage have sometimes drawn public criticism – but between well-matched "peer" businesses, arbitration can often offer a path to dispute resolution that is cheaper, easier, and less disruptive to daily operations than traditional litigation is apt to be.

What Is the Difference Between Arbitration and Dispute Resolution?

Arbitration is only one form of alternative dispute resolution. Arbitration as an approach differs from another popular method of alternative dispute resolution, mediation, in that decisions made through arbitration are usually binding on both parties, and arbitration typically means that the parties give up the right to pursue remedy through filing a legal action in court. 

Role of Neutral Third Party in Arbitration vs. Mediation

Arbitration also differs from mediation in the role played by the arbitrator vs. mediator. Both mediation and arbitration typically involve the services of a neutral third party. In mediation, however, this third party steers discussions and negotiations between the disputants to help the parties to the dispute to find their own, mutually acceptable solution; the mediator does not issue a decision, but rather supports the parties in coming to their own agreement. 

Right to Legal Action After Arbitration vs. Mediation

If the parties are unable to reach an agreement during mediation, they typically retain the option to pursue legal remedy through the civil courts. In arbitration, by contrast, the parties present their cases before the arbitrator in a manner similar to arguments before a court, and the arbitrator – like the judge in a bench trial – issues a decision that, again, is typically binding on both parties. 

Differences Between Arbitration and Litigation

The most obvious difference between arbitration and litigation is that litigation takes place in a courtroom, before a judge. In the context of action related to business disputes, this will typically mean filing in a state's civil court system – but in certain contexts, such as intellectual property disputes over which the United States government has jurisdiction, disputes between businesses may be filed in federal courts. 

Litigation will follow a very precise protocol, based on either the Federal Rules of Civil Procedure or the (usually similar) Rules of Civil Procedure pertaining to the state in which the initial claim is filed. Arbitration offers greater flexibility than litigation – as well as greater confidentiality, since unlike court filings the discussions undertaken during arbitration are not inherently part of the public record as a matter of law. 

Advantages of Arbitration

When arbitration is mandated by a contract clause, there is of course little need to "choose" arbitration over litigation. In other instances, however, businesses may still prefer to pursue arbitration over litigation even where the latter remains an option. 

Some of the key advantages offered by arbitration vs. litigation include: 

  • Speed: The potential for a swift resolution, not dependent on the scheduling of a court docket, can be a powerful incentive for businesses looking to handle their disputes quickly to minimize downtime and possible disruptions to their workflows. 
  • Confidentiality: The need for confidentiality can vary widely depending on the nature of the dispute. In cases where potentially sensitive information is at stake, however, arbitration may offer significantly greater protection against exposure risks, as compared to traditional litigation.
  • Flexibility: Because the arbitration process is controlled by the parties and their designated arbitrator, the parties and neutral arbitrator can often exert significantly greater control over the procedures involved throughout each stage of arbitration than they would be able to expect via litigation, in which even the judge presiding is bound by the Rules of Civil Procedure as well as established precedent. 
  • Cost: In large part due to the relative speed of arbitration compared to a court case, this method of alternative dispute resolution can offer companies significant savings in attorney fees and related expenses. 

An experienced business law attorney with Schwab & Gasparini may be able to help you determine whether arbitration makes sense for your situation. 

When To Choose Litigation Over Arbitration

Although arbitration offers businesses a number of compelling advantages over litigation in many cases, there are some instances in which litigation may be the optimal approach. Reasons for choosing litigation over arbitration include: 

  • Cost: While arbitration is often cheaper than litigation in complex matters, for the simplest business contract disputes the reverse can be true. As a result, when the facts are undisputed and the point of contention is relatively straightforward, litigation may actually offer a cost savings over the expenses involved in paying the administrative costs, potential attorney fees, and of course the compensation for the arbitrator's services. 
  • Discovery: Traditional litigation may be less flexible in its protocols than court proceedings – but it also offers the opportunity to compel the disclosures of key documents and other forms of critical information during the discovery process. In some instances, particularly when one or both parties suspect the other of concealing information important to the case, the motions to compel available within the context of a court case may outweigh the more streamlined processes of arbitration.
  • Appeal: In contentious matters, parties to a business dispute may be reluctant to relinquish their right to an appeal by agreeing to a binding arbitration. Traditional litigation, while it is frequently more expensive, is also more "open-ended," in the sense that even after the judge presiding has issued a decision, a civil case can usually be appealed by either party.

Work With an Experienced Arbitration and Litigation Attorney 

Even the most carefully-worded business contract may sometimes come into dispute. Many contracts include a clause requiring the parties involved to submit such disputes to binding arbitration by a neutral third party. Even when arbitration is not required by the terms of the business contract, however, in many cases this method of alternative dispute resolution may offer significant savings in both time and money when compared to pursuing legal remedy through traditional litigation. Learn more and schedule a consultation to help determine whether choosing arbitration over litigation may be useful in your situation by calling the experienced New York business law attorneys with Schwab & Gasparini at one of our conveniently located offices. Dial (315) 422-133 in Syracuse, (518) 591-4664 in Albany, or (914) 304-4353 in White Plains or Hudson Valley to speak with a member of our team today. 

Sun Jun 2 2024, 12:00am