The Arbitration Debate

To arbitrate or to litigate?

If that’s the question, the answer is unlikely to emerge from a side-by-side comparison of the two dispute-resolution processes. Although arbitration still tends to be regarded as a lower-cost alternative to taking your case to court, some legal experts contend that arbitration’s primary appeal isn’t necessarily its potential price tag.

“When I’m consulting with a client, I tell them not to pick arbitration because you think you’re going to save money,” says Tom Shroyer, CEO of Moss & Barnett, a Minneapolis-based law firm. “You might, but you might not.”

Attorney Keith Broady, for example, recently prepared a client for an arbitration hearing involving a substantial sum of money. When the hearing was still three months out, the discovery process—in which plaintiff and defendant find evidence and build their cases—was assuming the appearance and expense of litigation.

“We have depositions going on on the East Coast, on the West Coast, and in the Midwest. There is a lot of money at stake, and I don’t think the discovery expense is any less than what a court proceeding would be,” says Broady, a partner in the Minneapolis firm Lommen Abdo Cole King & Stageberg.

Discovery typically is more streamlined in arbitration hearings, and the rules governing such things as the admission of evidence tend to be more relaxed, he explains. However, when the dollars involved in a dispute stack up, both sides tend to ramp up their efforts to secure a favorable decision, which runs counter to arbitration’s traditional function as a lower-cost, more time-compressed dispute-resolution tool. “This is a concern I have with arbitration—when larger dollar amounts are involved,” Broady says. “People want to make sure that their legal rights are being protected or asserted, depending on what side they’re on. There can be a substantial expense to doing that.”

For this and other reasons, some attorneys actively avoid arbitration for settling clients’ disputes. “I prefer to have a jury trial in almost all circumstances,” says Shannon McDonough, a partner with Fafinski Mark & Johnson, a law firm in Eden Prairie.

Unlike jury trials, arbitration cases typically are decided by a neutral arbitrator, either an attorney or a retired judge, who commonly has expertise in the subject matter from which the dispute stems. “In my experience, I’ve found that the jury system works and it’s generally fair,” McDonough says. “I like having a number of individuals making a decision. I like having a panel of my client’s neutral and impartial peers hearing the case.”