While the choice of forum depends largely on the type of matter, goals, size, and timing of a dispute, there are many benefits to choosing to arbitrate a business dispute rather than litigating one. Here are the Top 5 reasons to consider arbitrating your next dispute:
1. Choice of the Arbitrator(s).
In arbitration, the parties get to choose who will arbitrate their case. Because most arbitrators are attorneys, and many were judges, parties can choose an arbitrator with specific prior experience and solid understanding of the law and issues related to the subject dispute. Comparatively, the judge is chosen at random in the court system. The assigned judge may have no prior experience or dealings with specialized business or real estate disputes.
For larger matters, the parties can choose a panel of three or even five arbitrators. While this does greatly increase the cost of the arbitration, it also reduces the risk of one person making the decision. Larger arbitration panels can also be especially useful in complex, high risk and/or high dollar disputes.
Currently, in Denver, most cases are scheduled for trial to occur within 12 months of their initial filing. However, it is not uncommon for cases to be pushed down on a Court’s docket due to scheduling conflicts or otherwise continued, leading to a prolonged time in litigation. Court cases in other jurisdictions often take even longer to go to trial with some districts holding off on even scheduling trial until much later in the case, for instance, after all discovery has been completed. Arbitrations with AAA (the American Arbitration Association) usually go to hearing within seven months or less. Parties can decide to expedite the discovery process, particularly in lower dollar disputes, and can get a hearing in three to five months. This offers both certainty and finality to the process.
In the US court systems, parties have a right to appeal. From a practical standpoint, this can result in a dispute taking years to work its way through the trial court and the appellate court. Generally speaking, arbitration decisions are not appealable. Because of this, arbitration can offer a relatively quick, final resolution to a dispute.
3. Control over presiding rules.
The parties have significant control over the rules that will apply to their arbitration. While organizations like AAA do have specific rules for different types of disputes, the parties are able to decide which rules will apply and modify them. Similarly, if the parties decide not to use AAA, they can largely craft the arbitration rules that will apply. Most parties decide to arbitrate matters during their original contract negotiations through an arbitration clause. Such a clause can spell out the type of arbitration rules, or rules of civil procedure that are to apply, as well as the choice of law and specifics regarding discovery. Discovery, while a vital part of any dispute, can also be extremely time- consuming and expensive. In arbitration, parties are able to put specific limits on discovery and decrease the likelihood of document dumps and overly broad discovery requests, keeping discovery focused on the actual controversy in dispute.
4. Professional, Amiable Approach.
Rambo litigation tactics are rare in arbitrations. In many business disputes, the goal is not to totally bury or destroy the other side, but rather simply resolving the dispute. Though the parties may be in an adversarial position during the arbitration, it is understood to be a business relationship that may come up again in the future. It is in every party’s best interest to refrain from burning bridges. Arbitration is often less adversarial than litigation. The result, when well-implemented, is a professional, streamlined approach to resolving a disagreement between two parties without the same level of contention often found in litigation.
Arbitration can offer strategic advantages over an opponent with less money. Arbitrations are expensive and most arbitrators bill by the hour. In Denver, most arbitrators cost between $250-$450 per hour. In addition to the arbitrator’s time, the arbitration association will also have administrative and filing fees. Three and five-panel arbitrations are particularly expensive. While it seems counterintuitive, making the costs of dispute higher can actually present strategic advantages to a party. If arbitration is mandatory, it forces the other side to carefully consider their case prior to filing the arbitration and incurring the associated costs. From a practical standpoint, this means some smaller disputes won’t make it to arbitration.
There are also other positive aspects to paying a professional to hear your case. Courts are, unfortunately, notoriously busy, with many judges facing enormous caseloads with criminal cases taking precedence over civil matters. This can result in delayed hearings and court decisions. When trying your case in arbitration, you have the arbitrator’s full attention. You’ve hired the arbitrator to review, assess and decide on your case. He or she will be reading your documents, standing firm by deadlines, and providing their full attention to your dispute.
Mallon Lonnquist Morris & Watrous is a business, transactional and litigation law firm. Craig T. Watrous is a Colorado litigator and partner at MLMW, based in Denver, Colorado. Craig regularly arbitrates business disputes and drafts and enforces arbitration provisions. Craig can be reached at email@example.com.