Are there alternatives to going to court to resolve business disputes?
In general, parties involved in a business dispute have three alternatives to going to court. They are as follows:
First, the parties can resolve the dispute themselves through traditional negotiation. The parties can, but need not be, assisted by lawyers in this process. As with any negotiation, however, it usually takes two sides willing to compromise to find a solution. At the beginning of many disputes, when the parties are often emotional and locked into their positions, this process of voluntary negotiation often fails. (Several years later — after both sides have spent considerable sums on attorneys’ fees –they often wish they had tried harder to resolve the dispute themselves).
Second, the parties can agree to a voluntary mediation. A mediation is a meeting between the parties, usually with their lawyers. The meeting is conducted by a mediator, who is a person trained and knowledgeable in helping people resolve disputes. The mediation usually begins with an opening statement by the mediator extolling the virtues of settlement and warning the parties of the dangers and expenses of litigation. Each side then makes a brief opening statement, usually through their lawyer, about the merits of their respective positions. The two sides then break out into different rooms, and the mediator spends the rest of the mediation shuttling back and forth between the two rooms with offers, counter-offers, arguments and counter-arguments.
Mediation can be an extremely successful process, especially when it takes place before a lawsuit is filed. A neutral mediator can speak candidly with the parties about the strengths and weaknesses of their various positions and can often make both sides see reason and the value of compromise.
One drawback to mediation, of course, is that it is a voluntary process. A party locked in a business dispute cannot force another party to attend a pre-suit mediation, unless the parties have a contract between them that requires pre-suit mediation.
Third, the parties can agree to a voluntary arbitration. Arbitration is not mediation. While mediation consists of a meeting to help the parties voluntarily resolve their dispute, arbitration is a process by which parties empower a third-party, i.e., the arbitrator or a panel of arbitrators, to decide their dispute for them. The process works much like a court-filed lawsuit. Instead of a judge or jury, the dispute is decided by the arbitrator(s). The arbitrators are selected and paid for by the parties to the dispute.
Arbitration can be a very successful process, and many parties prefer it because it is a confidential proceeding. There are several drawbacks however. Like mediation, it is a voluntary process. Therefore, Party A cannot force Part B into arbitration, without Party B’s consent or a contract between the two parties that requires arbitration. Also, arbitration can be just as expensive — or more expensive — than court. Also, appeal rights are usually very limited in arbitration.
Please Note: McCabe Rabin, P.A. provides these FAQs for informational purposes only, and you should not interpret this information as legal advice. If you want advice as to how the law might apply to the specific facts and circumstances of your case, please contact one of our attorneys.