Arbitration versus Litigation: Factors to Consider

Wednesday, February 25, 2015

How do they compare?   What factors might you consider if you have a choice whether to go to U.S. state or federal court or pursue arbitration? 

High.  Litigation is the most expensive dispute resolution process as a result of extensive pre-trial discovery, motion practice, and formal process.
Moderate.  Arbitration is generally less expensive than litigation, although unlike litigation, the arbitrator’s fees are paid by the parties (Judges are paid by taxpayers).  
Expansive. Ability to uncover vast amounts of information.
Limited.  Most arbitration rules favor limited discovery, so opportunities for depositions and subpoenas to third-parties are limited.
Dispositive Motions
Allowed.  Courts often dismiss claims prior to trial.
Limited.  Many arbitration rules limit or disfavor dispositive motions.
Slow.  Timing of resolution based on court’s schedule, cases may be set for hearing on short notice.
Faster.  Arbitration is usually faster, and a date certain for hearing is standard; greater  scheduling flexibility.
Unpredictable.  Juries can be unpredictable.   The parties cannot select the judge and have limited ability to select the jury. 
More predictable. Arbitrator is agreed upon by both parties and can be an expert in the subject matter.
Appeal Rights
Yes.  Full rights of appeal. Decisions by judges are explained.
Very limited.  Arbitration awards are subject to appeal only on very narrow grounds.  Decisions may not be explained, making it even more difficult to appeal.
Formal.  Rules of evidence apply.
Informal.  Rules of evidence do not apply.  Evidence can be introduced in arbitration that would be prohibited by a court. 
Public.  The Courts are public; information obtained through litigation is often public too.
Private.  Information disclosed and outcome can be confidential if agreed upon by both parties.
Forum Selection
Limited.  Limited by the events giving rise to the dispute and where the parties are located.
Flexible.  Parties can select where to hold the arbitration regardless of where they live or where the events giving rise to the action took place.

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