Differences between Litigation, Arbitration and Mediation

Litigation

Litigation is broadly defined as “to carry on a legal contest by judicial process” (Webster’s Ninth New Collegiate Dictionary, p. 698 (Merriam Webster 1988.) The typical process under which disputes are resolved is through a lawsuit, and while every lawsuit will have its own special characteristics, most lawsuits have a similar general roadmap involving pleadings, discovery, pre-trial motions, settlement efforts, and trial.

If one side loses too severely at trial, the case may go on to appeal. Many trial lawyers define an appeal as “a process by which the opposing side tries to take away all that was earned at trial.” Think about this when you are dead set on having your day in court against the proverbial intransigent defendant or unreasonable plaintiff.

Similarly, a party that cannot pay a judgment might consider bankruptcy to frustrate the judgment creditor.

All this litigating usually costs a lot of money. Collection cases typically involve pre-judgment attachment or restraining orders; business disputes between former business partners or shareholders often seek an accounting by appointment of a special master, and real estate and personal injury cases almost always involve retention of experts to opine on the cause and amount of damages. I often advise clients who are considering litigation to try vigorously to settle the matter before suing, and try vigorously to make a fair settlement offer as soon as being sued.

Arbitration

Contractual arbitration is just like litigation, only it is done before a private fact finder who usually is an experienced attorney or retired judge who charges from $350 to $600 per hour to hear your case. The touted advantages are speed, confidentiality and finality. This is because some courts are clogged with criminal matters, which take priority over civil disputes (speed), because arbitrations are conducted not in “open court” but in conference rooms (confidentiality), and because there are very few grounds on which an arbitration award can be overturned (finality).

Detractors argue that many state and federal courts in California can bring a case to trial nearly as quickly under “fast track” laws, that an open court trial and the possibility of appeal creates a fairer hearing, and even many defendants would rather trust their chances to twelve jurors or a judge who must follow the law than an arbitrator who doesn’t have to.

While arbitration clauses used to be strongly favored, they have come under increasing scrutiny. For example, arbitration agreements between employers and employees have been strictly construed and invalidated in many cases where they are deemed to be unfair or in derogation of public rights (such as the right to resort to the DFEH or EEOC). Also, where arbitration of only part of a multi-party dispute will disrupt the remainder of the proceeding and does not involve interstate commerce, the California Arbitration Act allows a court to refuse to enforce it.

Mediation

Mediation is one tool in the arsenal of alternative dispute resolution (“ADR”) procedures utilized by courts and attorneys to try to get the parties to agree to resolve their differences without going all the way to trial. Mediation (similar to settlement conferences) is a non-binding conciliatory process in which the mediator hears all sides, discusses the pros and cons of each party’s case with that party (sometimes confidentially) and then tries to get each party to adopt a less strident stance in the hope that if each party gives a little, a resolution can be reached. Many attorneys will agree that if the parties reach a settlement no one is happy with, it is a good resolution. This is because the cost to go to trial often is higher and less predictable or enforceable even if one wins. Mediation is not, however, a process by which a party can be forced to agree to anything.

Other tools of ADR include non-binding judicial arbitration and early neutral evaluation in which the parties put on a “light” version of their evidence to an independent fact finder who may issue a non-binding award in favor of one or another party and the party who has had unrealistic expectations gets a proverbial “wake-up call” to be a little more reasonable in settlement discussions.