In fact, when it comes to construction disputes and other complex cases, arbitration can cost just as much and often more than litigation, especially if you’re paying a third-party administrative service as is required by some arbitration clauses, says Zelma Murray Frederick, an attorney with McGlinchey Stafford whose practice focuses on commercial, construction, complex commercial litigation, and collection disputes.
One of the main selling points of choosing arbitration over the courtroom to settle business disputes is the ability to save money, but arbitration isn’t necessarily cheaper.
Cost: The parties will pay for the arbitrator(s), including their time and expenses. But discovery is usually narrower in arbitration, which can help keep costs down, “if the parties are reasonable about this.”
Timing: Arbitration can proceed more quickly, which can be an advantage when state courts are backed up as they are now, and the parties can dictate the schedule.
Right to an appeal: You generally give up that right with arbitration, absent misconduct by the arbitrator. The right to appeal can be very important with complex legal issues. If the case is largely about the scope of damages, the appeal issue is less of a concern, Frederick says.
Confidentiality: Arbitration is confidential, while litigation generally is public record.
Rules of evidence: Arbitration is less formal and the rules of evidence are relaxed. If the parties limit depositions, they can introduce an affidavit or statement to support the claim, but in litigation affidavits are only admissible in connection with certain limited motions.
Choice: You can’t be forced to go into arbitration if you did not agree to it, whereas anyone can sue anyone else.
Triers of fact: You can select arbitrator(s) with subject-specific expertise. Judges may be inexperienced or dealing with a huge docket, while juries bring many unknowns, which might be seen as risky.
Frederick says factors to consider when deciding which route to take include: