Out-of-court or In-court? Understanding the pros and cons of arbitration and litigation.

• Author: Marshall, Romaine
• Position: Legal Brief

Handling legal matters is a necessary responsibility for any successful business, but few businesses relish the idea of being involved in litigation. Deciding beforehand whether lawsuits should be resolved through litigation or arbitration methods can make a difference. Although thousands of cases nationwide are still tried by a jury, arbitrations are on the rise. Close to 160,000 cases are handled annually by the American Arbitration Association, which administers out-of-court cases.

Making the Choice

Businesses typically encounter the need to make a decision regarding arbitration on two occasions. The first is when a contract is being negotiated. Often provisions can be inserted in a contract making arbitration either an option or a requirement, should the parties be unable to resolve a dispute.

The second situation is when a dispute reaches a point where litigation is being pursued. Lacking a contract provision for alternative dispute resolution, the parties must choose a method to resolve their dispute. The choice often comes down to arbitration or litigation.

In either circumstance, businesses must weigh the pros and cons of arbitration versus litigation. Although the jury is still out on how arbitration compares with actual jury trials, recent studies shed light on how verdict results differ between the two methods.

Holland and Hart's litigation support division, Persuasion Strategies, teamed with Inside Counsel magazine to conduct the fifth annual national juror survey in concert with a national arbitrator survey. As part of its research regarding the outcome of cases decided by a jury or an arbitrator, Persuasion Strategies simultaneously conducted a mock trial and mock arbitration, presenting the same live case to a panel of 10 jurors and, via closed-circuit television, to two experienced arbitrators.

The nationwide survey results, combined with various mock trial decisions and 18 years of research, shows jurors tend to favor a common-sense outcome while arbitrators are more likely to return a more-legally sound decision. Jurors are more likely to be less educated than arbitrators, many of whom are retired judges and, therefore, usually view issues more simplistically. Also, jurors tend to be pro-plaintiff and have anti-corporate biases. Additionally, the decisions reached in Persuasion Strategies' simultaneous mock trial and mock arbitration--and the path to those decisions--revealed some important similarities and differences.

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