THE LAWYER'S DESK
PROS AND CONS OF LITIGATION, MEDIATION AND ARBITRATION
Many contracts contain a Mediation or Mediation/Arbitration clause, yet people rarely understand what they are getting into when they sign an agreement to these methods of dispute resolution.
The biggest question to ask yourself is ,“Do I want to try to settle this dispute out of court or do I think the courtroom battle is the only way to go?” Most people are not equipped to answer this question based on personal experience or the experience of their friends and family. This article is designed to help you answer that question by identifying some of the issues to be considered in making this all-important decision.
It is important to understand that litigation (dispute resolution through court) is long, costly, emotionally draining, and risky.
A court case can take 3-4 years to get to trial, and the trial can be broken up into many different days, which may or may not be consecutive. If the decision is rendered by a judge rather than a jury, the judge the judge may take months after the end of trial to render a decision.
Although there is no such thing as a “typical” court case, the simplest of cases done right should be $20,000 or more and the most complicated, involving many witnesses, experts, and a long trial, could cost $100,000 or more. Many Honolulu law firms require 2 lawyers on each case, making the attorney's fees double.
Waiting years for an outcome, during which time you can only guess at the outcome, is terribly draining emotionally for the client, who must continue based on nothing but faith, and for the attorney(s), who must constantly reassure the client that they are doing everything possible for the client (which may be absolutely true even though there may be no visible results).
The outcome will be determined either by a judge, who will not indicate his/her leanings until the decision is handed down, or by a jury, who cannot speak to either side of the case until the verdict is read in open court. In any event, the case is a gamble from the beginning. Even if the outcome is favorable to you, there is no guarantee the losing party will not declare bankruptcy, making the judgment uncollectable, or simply not have enough money to pay. If you file a lien on the losing party's property to collect your judgment, you may be behind existing mortgage creditors and tax liens. Imagine all that money spent with nothing to show for it.
Finally, and most painfully, a verdict or judgment can be appealed. The appeal can take years and cost the same amount of money as paid for the trial, and the decision will again be unknown until the very end. So if you were the winning party at trial, your victory could be short lived. The losing party would have 30 days to file an appeal and then you would start all over again. Still, there may be no other choice if one side is not willing to arbitrate or mediate the dispute.
Arbitration is only different from litigation in one respect: The arbitrator's decision is binding. Although there is a statute allowing appeal of an arbitrator's award, in this attorney's opinion the arbitrator's award is never reversed. So the case ends at the end of the arbitration, which is the same as trial, and can go no further. A finite end of the case reduces stress and, probably, legal expenses. Preparation for and participation in an arbitration may be just as costly as for a trial, but much quicker. The great benefit of arbitration is that a case will probably take no more than one year from start to finish. However, the uncertainty of outcome and of recovering on a financial award remain the same.
Mediation is a voluntary process of negotiating the resolution of a conflict, where any agreement reached by the parties is put in writing and becomes a binding contract with legal consequences for failure to perform by either party. The agreement may also provide for a stipulated judgment against the party who does not comply so that no legal action is required if one party breaches the agreement. Mediation lets both sides/all sides propose the terms of their own agreement so that there is no uncertainty in the outcome, and although most people are less than satisfied because they had to compromise and meet halfway, the parties are in charge of their own fate. Mediation is not effective unless both parties reach agreement, and perform in accordance with the terms of their agreement. This is a gamble, but one many people are willing to take to avoid the stress, cost, and uncertainty of litigation. The down side of mediation is that many people don't stick to their agreement, making arbitration or litigation required.
Hopefully you are now better able to make an informed choice when faced with any of the above dispute resolution alternatives. Please feel free to contact this office for your legal needs before your disputes arise! This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.