Facing a legal dispute is a significant hurdle for businesses of any size to overcome.
Resolving the issue costs time and money that most companies would rather spend elsewhere.
The dispute can distract employees and detract from a business’s core mission. To make matters worse, there is often a risk that the dispute will not be resolved in the company’s favor.
An unfavorable judgment can lead to an existential crisis.
These factors make choosing between litigation and arbitration a critical decision. It is vital to understand the differences between litigation and arbitration and make an informed choice.
Below, the Austin business lawyers at Massingill will go over those differences. If you have questions, please contact us today.
What Are Litigation and Arbitration?
Litigation and arbitration are two different ways to settle legal disputes.
These dispute resolution mechanisms differ in their processes, the forum that hears the argument, and the party’s ability to appeal a decision.
Litigation
Litigation is the official process of settling disputes through the court system.
When litigating disputes, there are specific procedures that everyone must follow, and the results of the process are legally binding on every party involved.
Litigation is often a slow process in which each party must complete defined tasks, such as discovery and arguments in court.
During litigation, a judge or jury decides the outcome, and decisions can be appealed to a higher court.
Arbitration
Arbitration is an alternative dispute resolution mechanism. During arbitration, both parties agree to have a neutral third party decide the outcome through a private process.
The procedures used during the arbitration process are up for negotiation. The arbitrator’s decision is legally enforceable in Texas and cannot be appealed in most cases.
Further, contractual agreements that force parties into arbitration are legally binding in Texas.
Arbitration vs. Litigation
Arbitration and litigation each carry advantages and disadvantages. Though most parties use arbitration when given a choice, in some situations, litigation is preferable.
Advantages and Disadvantages of Arbitration
Arbitration carries several advantages over litigation. Arbitration can be a much more flexible process and gives the two parties control over how disputes are handled.
Additionally, arbitration is often a much quicker process than litigation and can cost each party significantly less money.
Parties engaged in arbitration usually face more straightforward rules of evidence and procedure. The process is also more private than litigation.
On the other hand, arbitration can be less fair than litigation. Further, arbitration can lead to a lack of transparency.
Aggrieved parties will also find it harder to appeal an arbitrator’s decision and might be stuck with the outcome.
Advantages and Disadvantages of Litigation
Litigation is the official process for dispute resolution and always carries the weight of law.
Further, parties involved in litigation must comply with court orders and all the legal rules of evidence. Litigants also can appeal an unfavorable decision.
The higher costs and slower speed of litigation are two significant disadvantages. Litigation is also a matter of public record, so litigants cannot keep the dispute private.
How to Choose the Best Path Forward
Performing a cost-benefit analysis with an experienced Austin business litigation attorney is the best way to choose between litigation and arbitration.
At Massingill, we have extensive experience with both litigation and arbitration. Our skilled attorneys can help you understand how your situation might play out under both circumstances.
Whatever avenue you choose, we can provide exceptional representation throughout the process. Contact Massingill today to schedule a consultation.
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Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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