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The pros and cons of alternative dispute resolution in business disputes

On Behalf of | Jan 5, 2021 | Business Law

Business owners who find themselves amidst a dispute often wonder how the matter is going to play out. They often envision tense negotiations and high confrontational litigation that leads to a jury verdict. While these situations can and do occur on a regular basis, many business owners in the San Diego and Los Angeles areas find themselves drawn to what is commonly referred to as alternative dispute resolution. This process seeks to avoid litigation by having the parties engage in mediation or arbitration.

But is alternative dispute resolution right for you and your business? Let’s take a closer look at some of the advantages and disadvantages.

The advantages of alternative dispute resolution

Alternative dispute resolution is enticing and popular for a reason. There are many benefits to engaging in the process. Here are some of them:

  • Selection: If your dispute heads to trial, you’re probably going to be stuck with the judge who is assigned to your case. In mediation and arbitration, though, you might be able to select the arbitrator or the mediator. This might allow you to select someone with expertise in the field, which can be advantageous.
  • Reduce the risk: Going to trial can be risky, especially if a jury is involved. Juries can be unpredictable, and they oftentimes make decisions based on emotions rather than the facts and the law. By engaging in alternative dispute resolution, you might be able to minimize the risks.
  • Lower costs: Alternative dispute resolution is often cheaper for a variety of reasons. You can avoid having to pay for expert witnesses, and the matter isn’t as drawn out as litigation can be.
  • It’s quicker: Mediation and arbitration can result in resolution much faster than litigation can. This can save costs and allow you to move on with your life, which is one of the big reasons why people are drawn to alternative dispute resolution.
  • Confidentiality: Unlike a trial, the proceedings in mediation and arbitration can be kept confidential, which might be key if you’re hoping to protect your business’s image.

These are just some of the many advantages of alternative dispute resolution. However, it’s not all rosy when it comes to this process. Let’s look at some of the disadvantages of alternative dispute resolution.

The disadvantages of alternative dispute resolution

Before agreeing to alternative dispute resolution, you need to be aware of some of its downsides. Here are a few of them:

  • No guarantee: There’s no guarantee that a final outcome will be reached through arbitration or mediation, which means you might end up sinking a lot of time and money into the process for nothing.
  • Lack of appellate options: If you disagree with a court’s judgment after litigating a case, you always have the option to appeal. That’s not always the case with binding arbitration.
  • Limitations on remedies: There may be some instances where the agreement that comes out of an arbitration or mediation falls short of what you could get in court. Injunctions, for example, can’t come out of alternative dispute resolution.
  • Payment: While arbitration or mediation may be cheaper in the long run, that might not be the case if it fails and you have to proceed to trial anyway. This is because the neutral arbitrator or mediator will probably charge a heft fee for their services.
  • Stalling: In far too many cases, alternative dispute resolution is merely used as a stall tactic that costs you time and money without any real movement with your case.
  • Lax discovery: While some of the information you might have in your possession may be protected in the event of litigation, this isn’t always the case with alternative dispute resolution. In other words, this process might put your business records and information at risk of being disclosed to those who you don’t want to have it.

Alternative dispute resolution is an option for you to resolve your business disputes, but you shouldn’t blindly accept it as your only option. Instead, carefully consider what legal avenue is best for you, your business, and your case. If you’d like assistance in conducting that analysis, then it might be time to reach out to a qualified business law professional.