Litigation vs. Arbitration vs. Mediation vs. Negotiation

You are about to engage in a legal dispute with an adversary. You know that legal disputes are typically resolved at a court trial before a judge or jury. But you remember glancing over the contract for the last appliance you purchased, and it included an arbitration clause, according to which legal disputes relating to the contract would be resolved by arbitration. You are also aware that some disputes are resolved through a process known as mediation. Most of all, you would rather resolve your dispute quickly and efficiently by directly negotiating with your adversary. Which option is best for you? How do you proceed?

It is true that litigation is the default and the most prevalent mechanism for resolving legal disputes. The litigation process starts with the filing a complaint in court and usually takes 18-24 months through trial, which can be before a jury or a judge. Despite its reputation for being long, most litigations are resolved fairly early in the process. In fact, fewer than 2% of lawsuits get to the trial stage.

Arbitration refers to the process of adjudicating a legal dispute before an “arbitrator.” Arbitrators are typically retired judges or experienced attorneys and are selected by the parties to the dispute. Arbitration can be binding or non-binding on the parties. Binding arbitration is conducted much like a court trial and includes gathering of evidence, cross examination of witnesses and written requests (motions) to the arbitrator, who, at the end, will issue a ruling called an “award.” The advantages of Arbitration over litigation include shorter time to conclusion and less costs and expenses. In addition, arbitration awards are essentially final and, absent unusual circumstances, not subject to post trial review by a court or appeal. This is true even if the arbitrator fails to apply the correct law to the dispute. The finality of an award is also a disadvantage of Arbitration, because the losing party has little or no recourse. Another disadvantage of Arbitration is unavailability of a jury trial; juries maybe advantageous to defendants in certain disputes where equitable considerations dominate, and to plaintiffs who seek high damages.

Mediation is similar to Arbitration in some respects, but different in others. Both employ a neutral third party to conduct the process, and they both can be binding. However, unlike litigation or arbitration, which determines “winners” and “losers,” the focus of mediation is to find common ground between the parties and to resolve the matter in a “win-win” outcome. Mediation is most utilized in disputes between parties who contemplate future business or have a personal relationship. Mediation is also frequently utilized in litigation as an effort to get the case resolved at the early stages.

Direct negotiation is another method of settling legal disputes and is one of the tools that, if used effectively, can lead to early resolution of disputes. Direct negotiation typically starts during the “quiet phase” of litigation, which refers to the period between the filing of the complaint and the start of discovery. During that time, attorneys evaluate and analyze the case legally and factually to get a sense for the “settlement value” of the case. Armed with that information, they engage the opposing side’s counsel in one or more rounds of negotiations to try to get the case resolved.

Each dispute resolution method has advantages and disadvantages relative to the others. The proper course for each case depends on the particular facts and circumstances of the case, as well as on the client’s goals and risk tolerance.


© 2017 Dr. Dariush Adli