Arbitration vs. Civil Litigation: How is Arbitration Different from Civil Litigation?

Arbitration v. Civil Litigation

The general trend in contract drafting and the legal industry today is to include a clause that may require parties to resolve disputes through arbitration. Arbitration is presented as a more efficient alternative dispute resolution method than the court system. Most people don't know how this can affect their claims or their wallets.

Arbitration, mediation, and civil litigation are standard terms raised in civil disputes between parties. However, people often misunderstand these terms, which can lead them down unfamiliar 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?

In most cases, the court system 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 courts decide breach-of-contract and personal injury cases 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, a set of rules at each level governs your case and is designed to move cases of different types and sizes toward resolution efficiently and cost-effectively.

What is Arbitration?

Arbitration can be similar to civil litigation but differs 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 arbitrator (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 arbitrator, 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 need to know that contract terms may force them into arbitration. In Colorado, parties can agree in a written contract to waive their right to have a lawsuit heard in the civil court system and instead submit their dispute to arbitration, paying the arbitrator's costs.

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 state court may have the other party move to dismiss or stay the case and force it into arbitration. In some situations, both parties may agree to waive the arbitration clause.

In Colorado, an arbitrator's decision is generally binding and cannot be appealed. You can only appeal an arbitrator's decision in court in limited and rare circumstances.

Arbitration has benefits and, if applied appropriately, 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 an arbitrator's hourly rate. Arbiter costs can vary but can easily reach $500 per hour for the arbiter alone.

A primary argument against arbitration is the exclusionary effect costs can have on parties with smaller-dollar cases or those who don't have the extra money to pay for 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. In the public sector, choosing your court and judge may also lead to quicker, less drawn-out resolutions than in the civil court system.

In the private sector, parties can modify procedural rules and limit aspects of 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, civil cases 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 arbitration is possible or required, understanding the differences between these two forums is essential. This article offers a brief overview of the issues and considerations involved.

Where do I go From Here?

If arbitration is an option or a requirement, understanding the differences between these two dispute-resolution forums is essential. This blog is just a brief overview of the issues and considerations involved in 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. Sullenberger Roskamp, PLLC is founded on the principle of providing upfront, honest case evaluations, including frank conversations about the costs and benefits of pursuing your case.