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People unfamiliar with the various forms of alternative dispute resolution often ask the difference between mediation and arbitration. In addition, they often want to know the difference between arbitration and a traditional lawsuit—meaning, going to court.
The difference between mediation, which has been addressed in earlier articles, and arbitration is straightforward: In mediation, a neutral mediator will facilitate a negotiation between the parties with the goal of assisting the parties to arrive at a settlement that is reasonably satisfactory to all of them. The mediator makes no decisions, legal or factual; if the parties do not agree to a settlement, the case goes forward and would be resolved, if the dispute remains, in either arbitration or in court.
In arbitration, an arbitrator (or panel of arbitrators) will manage the litigation of the dispute, take sworn testimony at a hearing, and render an award—much like what a judge and/or jury do in a lawsuit with a verdict and judgment. So, the question becomes, should I agree to arbitration or go to court?
The parties proceed to arbitration only if they agree to do so; they cannot be ordered by a court to resolve a case in arbitration. However, in many situations, the party may feel without a choice and, in reality, that may be true.
As I have discussed in previous articles, some service providers, and others, will require that a customer agree to arbitrate any dispute that may arise between them. If the customer does not agree to do so, the customer will not be provided the service. For example, most financial brokerages require a customer to agree at the outset to arbitrate any and all disputes. In many other instances, the parties may voluntarily agree to arbitration. This may often take place at the time the parties are negotiating an agreement, such as an employment agreement, or various kinds of commercial agreements. In other instances, the parties may not have a pre-existing arbitration agreement, but when a dispute arises, they may agree to arbitrate, rather than go to court.
The decision of whether to agree to arbitration often depends on the facts and circumstances particular to the relationship, the nature of the dispute, and the objectives of the parties. It should only be made by a client in consultation with her attorney. In those instances where the parties have a choice of whether to agree to arbitration—either when negotiating an agreement or after a dispute arises—they should be aware of some of the differences between arbitration and a traditional lawsuit, the benefits, and the potential risks.
Speed, Cost and Confidentiality: Many people will agree to arbitrate disputes because they think it will be quicker and less costly than traditional litigation. They also prefer being able to litigate their dispute confidentially, which they can in arbitration; lawsuits take place in open court, and except for special circumstances, are open to the public.
Generally speaking, arbitration should provide a speedier resolution to a dispute than would traditional litigation—even if a lawsuit was to proceed in federal court or before a judge known for his or her “rocket docket.” Part of the reason why arbitration may be quicker is because certain things that are available to a party in a lawsuit may not be available in an arbitration proceeding. This could be good or bad, depending upon the case and the needs of the parties, but should result in a dispute proceeding to a hearing in arbitration in less time than would be the case if it proceeded to trial in a traditional lawsuit. And, because there may be less for the attorneys to do, it may be less costly.
In Part Two, I will discuss discovery and motion practice, arbitration, and the finality of arbitration. Please contact me with questions or comments at bje@szslaw.com.
