Arbitration v. Civil Litigation
The general trend in contract drafting and the legal industry today is to include a clause that may force parties to resolve their disputes in arbitration. Arbitration is presented as a more efficient alternative dispute resolution as compared to the court system. Most people don't know how this can affect their claims, as well as their wallets.
Arbitration, mediation, and civil litigation are standard terms raised in civil disputes between parties. However, these terms must be more commonly understood, leading parties down unknown and potentially misleading paths. A basic understanding of the difference between arbitration, mediation, and civil litigation is critical when someone finds themselves involved in a civil dispute or staring down the barrel of a lawsuit.
What is Civil Litigation?
The court system, in most cases, is divided into two general categories: criminal and civil cases. The civil court is the forum where parties can file suit against one another, seeking monetary damages or other available remedies. These are the courts where a breach of contract and personal injury cases are decided before a judge or jury.
In Colorado, the civil courts are divided into different levels. With some exceptions, the amount of money at issue or that you may be able to recover will determine the level to which your case belongs. The various levels include small claims court, county court, and district court.
At any of those levels, your case will be assigned to a judge who will oversee your litigation and finalize the resolution of your case, whether decided by the judge or a jury. In this system, your case is governed by a set of rules applicable to each respective level which have been developed to move cases of different types and sizes toward resolution efficiently and
cost-effectively.
What is Arbitration?
Arbitration can be very similar to civil litigation but is unique in some important ways. Where the civil court system is public, arbitration is private and paid for by the parties. Arbitration is also a confidential proceeding.
In arbitration, the parties will generally pick their arbiter (the equivalent of a judge) by agreement and pay them for their time to oversee the litigation and determine the case's outcome. Ideally, arbitration should lead to a faster resolution of your case than district and even county court cases.
It may sound enticing to submit your case to a private court system, where you can pick your judge and resolve your case more quickly. However, the costs of paying for the arbiter, on top of attorney fees and expenses, can create a situation where you are spending more money than you hope to get back in the end.
Many people probably need to be made aware that they may be forced into arbitration by the terms of a contract. In Colorado, parties who entered into an agreement or written contract can include a provision that waives their right to have a lawsuit heard in the civil court system and requires the parties to submit their dispute arbitration and pay the costs of an arbiter.
The Pros And Cons Of Arbitration
The daunting reality of arbitration is that it does not afford the parties the same rights and protections offered by the state court system. In arbitration, the parties waive certain rights. You waive your right to a jury that might otherwise be available to you and most appellate rights you would otherwise retain in civil litigation. In other words, you can be forever bound by a bad decision by one arbiter without much, if any, recourse.
An example of a common arbitration clause may state something like this:
Any dispute relating to or arising out of this contract shall be resolved by arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
The specific language of these types of provisions requires a contract case to be heard in arbitration. In Colorado, if a contract contains a valid and enforceable arbitration clause, a party who files a lawsuit in the state court system may have their case dismissed or stayed by the other
party and forced into arbitration. In some situations, both parties may agree to waive the arbitration clause.
In Colorado, the outcome determined by an arbiter is generally binding and cannot be appealed to overturn the outcome. You can only appeal an arbiter decision in court in limited and rare circumstances.
Arbitration does have its benefits and, if appropriately applied, can be an effective tool in any civil dispute between the parties.
One of the main deterrents to arbitration is the added expense of paying the hourly rate for your judge. The costs of an arbiter can range but can easily reach as high as $500 per hour just for the arbiter alone.
A primary argument against arbitration is the exclusionary effect the costs can have on parties with smaller dollar cases or parties who do not have the extra money to spend on a private forum. Often, a larger company with retained lawyers can force a less financially capable party into arbitration, forcing that party to give up the pursuit of their claims because they can't afford to pay to pursue them.
In some cases, however, choosing a skilled judge knowledgeable in your dispute areas may lead to solid reasoning and favorable resolution. As a public sector, choosing your court and judge may also lead to quicker and less drawn-out resolutions than in the civil court system.
In the private sector, the parties can modify the rules of procedure and limit aspects of the litigation, saving time and possibly money. In Colorado, the state court system is still recovering from the shutdowns caused by the Pandemic. This has caused a backlog of cases and trials, which can still affect trial timelines. Even without the added backlog, cases in the civil court system generally take a year or longer to be heard at a jury or bench trial. If speed is an important factor in your case, then arbitration may be a forum to consider.
If you're in a position where arbitration is a possibility or a requirement, knowing the differences between these two court forums is imperative. This article is just a brief overview of the issues and considerations involved in these issues.
Where do I go From Here?
If you're in a position where arbitration is a possibility or a requirement, knowing the differences between these two types of dispute resolution forums is imperative. This blog is just a brief overview of the issues and considerations involved in the arbitration. If your dispute is subject to an arbitration provision, it's important to know that you may have other options. A skilled lawyer who thinks outside the box can be a powerful strategic tool.
If you want to talk with an attorney about your case, contact local attorneys and ask for a consultation. Our attorneys practice at all levels of the civil court system and are well-versed in arbitration. Feel free to contact our firm for a consult. Sullenberger Roskamp, PLLC is founded on the principle of giving upfront and honest case evaluations, which include frank conversations regarding the costs and benefits of pursuing your case.