Litigation vs. Arbitration: What are the Differences?

disputeIf your Miami-based business is facing a dispute with a client, vendor, or competitor, you can either settle your dispute in a courtroom or take it into arbitration. Either option can also help settle disputes between business partners or a conflict between you and an employee. However, there are pros and cons to either process, which should be weighed and considered before inserting either choice as the go-to for dispute resolution into your contractual agreements.

Once your operating agreements and contractual agreements contain a clause directing disputes into arbitration or litigation, both parties will most likely be bound to follow that course of action (barring certain circumstances). That said, you will want to carefully consider whether you want disputes settled in the courtroom or in the boardroom.

Litigation essentially means taking a case to court, where both sides will present their side of the case to a judge. Arbitration means both parties get together to meet with a lawyer, industry specialist, or other such mutually-agreed upon person or persons to discuss the case privately and work out a resolution, as arbitrated by the selected third party. What follows is a detailed analysis of litigation vs. arbitration and the pros and cons of each.

Litigation is public, while arbitration is private

In most states, a court case is public knowledge once it is filed, and verdicts are often made public information as well. In some cases, parties can ask for a limitation to full public disclosure in order to preserve trade secrets—but most judges prefer keeping filings open, barring a compelling reason.

By contrast, arbitration can be performed in private, in front of whoever both parties agree to settle the dispute. This can be anyone really, including a lawyer selected from among Miami business litigators. The documents, filings, and arbitration process will remain private, which allows everyone to avoid the annoyance of the press or competitors and clients monitoring the situation. To that end, arbitration is a great choice for businesses that do not want their public image to be impacted by court proceedings.

Litigation is formal, while arbitration is flexible.

The Plaintiff, Defendant, and their Miami business litigation attorneys must adhere to the policies and procedures of the court, which in most cases—for small to medium sized businesses—will be local. This means that certain rules and formalities will be applied to the case, especially if it goes to a jury trial.

By contrast, arbitration is informal (though not necessarily friendly). The arbitration can be held anywhere that both parties agree, though most likely they will both want that place to be one that offers privacy. The policies and procedures of arbitration are more informal, and both parties have more say in the process.

Litigation may take longer—but cost less than arbitration.

Time is money, as they say—and both are factors to consider. Litigation can become a lengthy process, especially if there are technicalities or cumbersome procedures that must be followed—such as waiting for evidence or a jury to deliberate a case (where applicable). Of course, a courtroom also has a docket of cases, so it may be awhile before your commercial litigation attorney even steps into the courthouse.

By contrast, arbitration can move much more quickly. The parties can agree on a timetable to complete the arbitration, and there is no schedule to adhere to that is impacted by other cases. However, despite this improvement in time, arbitration is not necessarily more cost effective. Filing fees will often be higher, and the parties will have to compensate their private arbitrator—whereas a judge is paid by taxpayers.

Arbitration allows you to select the decision-maker—litigation does not.

Parties to an arbitration process can work together to pick a decision maker or decision makers. They can choose their arbitrator from among business litigation attorneys or someone who has expertise in this particular dispute (for example, an arbitrator with industry-specific knowledge).

By contrast, parties to a dispute in litigation cannot choose their judge. And while their respective lawyers can attempt to put together a favorable jury, the jury members are selected at random from among their peers—a loose term denoting American citizens who may or may not know anything about the business issues under dispute.

Arbitration tends to be final—litigation can be appealed.

One benefit to litigation in a courtroom is that the decision of the judge can be appealed and contested in a higher court—if necessary, all the way to the Supreme Court (though this will not happen for the vast majority of cases). This means that in the event of an unfavorable judgement, a party can contest the ruling and keep the case going—though that will accrue some costs.

By contrast, decisions made in arbitration are binding and final in most cases. This is the case even if the decision of the arbitrator is contrary to a legal precedent or if they have made some mistake in rendering judgement. Of course, at the same time, the informality of arbitration makes it easier for parties at a potential loss to interject, especially if they are accompanied by their attorney.

Choose whatever is best for your business.

At Manos Schenk, we can consult with a business to determine whether litigation or arbitration is in their best interests, and apply that dispute resolution strategy into their contractual agreements. Among Miami business litigators, we offer attentive, thorough, and competent legal counsel, whether you choose to settle your disputes in the courtroom or the boardroom.

We handle business disputes with clients, customers, and suppliers, such as torts and contract disputes—especially in the areas of commercial litigation, construction litigation, real estate matters, and sports/entertainment law cases.

If you feel your business faces unfair competition, breaches of contract, intellectual property disputes, or has been subject to defamation, libel, slander, invasion of privacy, we can help you rectify your losses and protect your business and its assets.

A business’ internal disputes can be particularly onerous, but we are well-equipped to assist you through employment issues such as discrimination and sexual harassment claims.

Some types of cases such as a civil RICO action, appeals, class action lawsuits, insurance disputes, replevin, and post-judgment enforcement require a higher degree of care and skill than might be found with the typical commercial litigation attorney in Miami. Rest assured that at Manos and Schenk we are well equipped to handle these cases.