In the dynamic world of business, where collaborations and transactions propel enterprises to new heights, disputes are inevitable. Traditionally, businesses have turned to litigation as the default for dispute resolution. But savvy business owners understand that litigation is not the only way to resolve a dispute. In addition to litigation, mediation and arbitration are possible dispute resolution methods that can be utilized to resolve conflicts for your business. Each has its own advantages and disadvantages, and below is brief summary of the highlights for each.
Mediation
Mediation, the most common alternative dispute resolution method, is the reason that most cases settle prior to litigation. In fact, more than 90% of all cases settle before trial. While litigation is notorious for its exorbitant costs—including legal fees, court expenses, expert fees, and the opportunity cost of time spent in court—mediation offers a cost-effective solution. By requiring mediation and specifying the procedures in your contracts (e.g., mediator fees, procedure etc.), you can resolve disputes efficiently, sparing you from draining financial resources better invested in growth and innovation. However, one glaring disadvantage to mediation, it is not binding. Therefore, you may still find yourself in litigation or arbitration if you and the other party cannot reach a compromised settlement in mediation.
Arbitration
Like mediation, arbitration can be quicker, cheaper, and more discreet than litigation, which can drag on for years, causing operational halts and diverting management’s focus. This alternative dispute resolution method enables parties to resolve conflicts behind closed doors, preserving business reputation while still fostering a more cooperative environment for future dealings. However, the biggest disadvantage to arbitration is the limitation in discovery (production of evidence, depositions of witness, etc.). This limitation is the primary reason arbitration moves quickly. However, the tradeoff for speed is that you will likely have to prove or defend your case with less evidence than you would have access to if the case was being litigated in court. Also, while limited discovery should reduce your attorney fees, you and the other party will have to pay for the arbitrator for his or her time, which can offset some of the cost savings.
Litigation
Litigation can be described in one word: thorough. The access to information via discovery through depositions and requests for production of documents from the other party is very broad. Consequently, this is also what makes litigation slower and more expensive. Basically, litigation provides a thorough presentation of the facts versus a quick and less expensive resolution to a dispute. If public opinion weighs heavily on your business’s success, then it may be best to stay out of a public process and use one of the alternative dispute resolutions methods.
In the unpredictable world of business, disputes are not a matter of “if’ but “when.” Long-term-oriented business owners understand that preparation is the key to success. By actively determining which dispute resolution methods work best for your business and its relationship and incorporating well-crafted dispute resolution provisions into your contracts, your business will have more control over its disputes and their resolutions.
If you would like assistance with the preparation or review of your business agreements or find yourself in a dispute, please contact us at 305-222-7282 or [email protected].
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