What’s the Difference Between Litigation and Arbitration?

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.

Arbitration and Litigation | Main Differences

Arbitration vs. Litigation: 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. 

Litigation is the act of 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 is the necessary course of action. 

Both forms of action have benefits and drawbacks, as outlined below.

Cost

Generally speaking, arbitration is less expensive than litigation, though this is not guaranteed. Litigation 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 likely to be less. 

Convenience/Inconvenience

The time and effort needed to prepare for arbitration will typically be considerably less than the time and effort needed to prepare for litigation. Litigation will require a discovery period, time spent gathering and presenting evidence, and possibly time spent interviewing witnesses and taking their affidavits. In civil cases, the burden of proof lies with the plaintiff in the case. This can cause a fair amount of stress. Much more work may go into the litigation process, which can be more anxiety-inducing. 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 the litigation process 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 litigation. 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. Additionally, jurisdiction is neither a factor in arbitration nor court calendars. 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 can take 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 a guarantee. 

Binding Resolutions v Ability to Appeal

With arbitration, 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. With litigation, the final decision of a jury or judge may be appealed. 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. They are essentially acting as the judge. Once their decision is made, there is no going back. Mediation is much less formal or stringent. The mediator will work directly with both parties to try to come up with a resolution that suits everyone, but ultimately, they have no control over how things play out. 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 and Litigation?

As arbitration is handled by a neutral third party, your litigator 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 lawyer 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.