The United States is estimated to be the 5th most litigious country in the world per capita. More than 100 million cases are filed annually in state courts, and approximately 400,000 cases are filed annually in federal courts, according to the Institute for the Advancement of the American Legal System (IAALS). Despite the high number of lawsuits filed in the United States each year, only a small percentage of them make it before a judge or jury. While the exact percentage is debatable, recent statistics suggest that the vast majority of lawsuits, perhaps up to 95%, settle outside of court before going to trial. How does one determine if their case will be resolved in or out of a courtroom? Understanding the differences between litigation and arbitration can be helpful when it comes to knowing your options for navigating legal disputes.
Main Differences Between Arbitration and Trial
Arbitration vs. Trial: What are the main differences, and which course of action makes the most sense for your situation?
Arbitration is an approach used to resolve legal disputes outside of a courtroom, sometimes referred to as a form of alternative dispute resolution, or ADR. Under this method, parties involved in a legal disagreement consent to having their cases heard by an impartial third party, known as the arbitrator. No judge, jury, or courtroom need be involved in the arbitration.
Trial is the ultimate event in making or defending a legal complaint or claims in public court. When two or more parties need to resolve a legal dispute, and one or both of them refuse to go through arbitration, litigation and potentially trial is the necessary course of action.
Both forms of action have benefits and drawbacks, as outlined below.
Generally speaking, arbitration is less expensive than trial, though this is not guaranteed. Where the parties are particularly acrimonious, the costs of arbitration and trial can be comparable. Litigation before a trial court will involve multiple filing fees and other court expenses, as well as potentially costly attorney’s fees, depending on the fee rate structure agreed upon with your attorney and the length of time it takes to resolve the case. Arbitration may also involve attorney’s fees, but they are often less than trial.
Differences in "Convenience"
The time and effort needed to prepare for arbitration is typically less than the time and effort needed to prepare for trial. Preparation for trial requires a discovery period, time spent gathering and presenting evidence, and possibly time spent interviewing witnesses and taking their affidavits or depositions. Much more work may go into the trial preparation process than arbitration preparation. Since both processes can be stressful and anxiety-inducing, the longer the process, the more stress and anxiety that result.. While the amount of labor involved may be a deterrent for some, and cause them to seek the more convenient route offered by arbitration, the thoroughness of trial may put others at ease about the potential outcome of their case.
Speed of Resolution
One of the main draws to arbitration is that it typically takes less time than proceeding through trial. This is due, in part, to some of the reasons mentioned above. As less time and labor are needed to prepare the case, it stands to reason that less time overall will be spent throughout the entire process. Since many procedural issues are agreed to by the parties to arbitration, there can be fewer decisions that are required of the arbitrator. This makes it easier for arbitrators to review the facts of a case and reach a decision. Arbitration cases may take weeks or months to resolve, while litigation through trial usually takes a year or more to reach a resolution.
Amount of Privacy
Arbitration is a private matter. Hearings are held privately, and no public records are filed with the courts. Whereas with litigation, even if a case settles outside of court before going to trial, records filed with the court throughout the litigation process are public. If the case does go to trial, court proceedings may be open to the public and the press, and privacy goes out the window. It is worth noting that while arbitration offers more privacy, confidentiality may not always be guaranteed.
Binding Resolutions vs. Ability to Appeal
With arbitration, the parties can agree that all decisions made by the arbitrator are binding, barring instances of extreme bias or fraud on the part of the arbitrator. This lets both parties put matters behind them in a timely manner, but it can be disappointing if one of the parties is unhappy with the arbitrator’s decision. After trial, the decision of a jury or judge may be appealed, first to the applicable court of appeals and then to the applicable Supreme Court if the losing party remains dissatisfied with the outcome. This allows parties to seek further justice if they feel it has not been appropriately served. It can also draw matters out, potentially leading to more stress and heartache and becoming more costly for everyone involved.
What’s the Difference Between Mediation and Arbitration
Another form of ADR that is sometimes confused with arbitration is mediation. As with arbitration, mediation involves the consultation of an unbiased third party. Unlike arbitration, however, the third party does not have the power to control the outcome of the case. With arbitration, the ultimate decision about how a dispute will be resolved is in the hands of the arbitrator. The arbitrator acts as the judge. Once their decision is made, there is no going back. Mediation is much less formal or stringent, and is entirely voluntary. The mediator will work directly with both parties to try to come up with a resolution that suits everyone, but ultimately, the mediator has no control over whether the case is resolved. The parties either agree to a negotiated compromise facilitated by the mediator or they continue to arbitration or trial. According to the U.S. Bureau of Labor Statistics, arbitrators are typically lawyers, business professionals, or former judges. A mediator may have legal credentials, but they act more in the capacity of an impartial counselor when it comes to problem resolution in legal disputes.
Can I Use the Same Lawyer for Arbitration, Litigation, and Trial?
As arbitration is handled by a neutral third party, your attorney will not be your arbitrator. In fact, for arbitration, a lawyer is not officially required. The arbitration process can be quite contentious, but the ultimate outcome is directly tied to whatever justice you seek—as such, working with a qualified attorney to prepare your case before it goes before an arbitrator is advisable. If you are in the middle of a legal dispute and aren’t sure how best to move forward with your case, speak with one of our dedicated litigators or qualified arbitrators today.
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Jacqueline S. VinacciaReviewer
Jacqueline S. Vinaccia is the litigation and trial partner at Vanst Law LLP a boutique law firm in San Diego handling the full gamut of its business clients’ needs. Ms. Vinaccia is also a nationally recognized attorneys’ fees expert providing expert witness testimony through out the United States.