Mediation, Arbitration or Litigation: Choosing the Best Option for Protecting Your Company’s Legal Rights

If your company is facing a commercial dispute that cannot be resolved through informal negotiations, you have three primary options available: mediation, arbitration, and litigation. These options are very different, offering different benefits and limitations in different circumstances.

So, which options should you choose?

This is a complex question, and making an informed decision requires careful consideration of several factors. Here is a brief introduction to what you need to know if your company is facing a commercial dispute in New York City:

Is Your Dispute Subject to Mandatory ADR?

The first factor you need to consider is whether your company’s dispute is subject to mandatory alternative dispute resolution (ADR). Many commercial leases and other commercial contracts include provisions that require the parties to use mediation or arbitration to resolve any disputes that may arise.

In the commercial context, these clauses are generally enforceable. So, if your company’s contract contains a mandatory ADR clause, then you will most likely need to follow the dispute resolution procedures set forth in the contract. However, commercial contracts will often include exceptions for certain types of disputes, and, in some cases, commercial disputes can involve extra-contractual issues that aren’t subject to mandatory ADR.

3 Options for Resolving Commercial Disputes

Whether your company is required to pursue ADR or you have some flexibility, it will be helpful to understand the basics of the options that are available. With this in mind, here is an introduction to what you can expect when seeking to resolve a commercial dispute through mediation, arbitration, or litigation in New York City:

1. Resolving Commercial Disputes Through Mediation

Mediation is a form of ADR that doesn’t necessarily result in a binding resolution—though settlement is the goal. In mediation, the parties and their counsel work with a neutral third party (the mediator). The mediator is a facilitator, not a decision-maker. As a result, choosing a qualified mediator is extremely important. In most cases, this will involve choosing a retired judge or an attorney who has decades of experience handling disputes similar to the one at issue.

During mediation, the mediator’s role is to help the parties find a way to come to terms. This can involve helping each party understand the other’s point of view and/or offering solutions that the parties haven’t yet considered on their own. For mediation to work, both parties need to participate in good faith, and both need to be willing to compromise in order to achieve a resolution that allows them to move forward.

But, while good faith participation and cooperation are essential, neither party is required to agree to a settlement through the mediation process. If the parties cannot come to terms through mediation, then pursuing arbitration or litigation will be the next step.

2. Resolving Commercial Disputes Through Arbitration

Arbitration is also a form of ADR, but it is different from mediation in almost every way. In arbitration, the neutral third party (either an arbitrator or a panel of arbitrators) is a decision-maker. The arbitrator or arbitration panel hears arguments and evidence from both parties, and then it renders a binding decision that is only subject to appeal on limited grounds.

An arbitration hearing is somewhat comparable to a mini-trial. Prior to the scheduled hearing date, the parties will take discovery (though typically much less discovery than they would take in litigation), and they will work with the arbitrator or arbitration panel to clarify and narrow the scope of the issues to be addressed. During the arbitration hearing, the parties can present evidence in various formats (including testimony from company executives, experts, and others), and the arbitrator or arbitrators may play a more active role than a judge would typically play during a trial.

Arbitration is a common method of resolving commercial disputes, as it provides a certain outcome and is generally quicker and less costly than litigation. However, in some cases arbitration isn’t necessary, and in others, the expanded discovery and additional procedures available in litigation will be advantageous to one or both parties. In any event, both parties must agree to submit to the arbitration process.

3. Resolving Commercial Disputes Through Litigation

Litigating a commercial dispute involves going to court. Litigation begins with one party filing a complaint, though it is not uncommon for defendants in litigation to assert counterclaims as well. Discovery can be voluminous, and pre-trial practice can play a critical role in setting the stage for a favorable verdict.

While mediation and arbitration are effective tools for resolving commercial disputes in many cases, sometimes litigating will be the best approach. Going to court can also be essential in some cases, such as when emergency relief is needed to prevent (or enjoin) conduct causing ongoing—and potentially irrecoverable—losses. For example, in intellectual property disputes, seeking temporary injunctive relief in court can be essential for protecting a company’s exclusive rights during the dispute resolution process.

Litigating a commercial dispute through trial will result in a final decision on each of the claims asserted (subject to appeal), and the judge will award appropriate relief for each claim that is proven. Depending on the circumstances involved, this can include injunctive relief, specific performance, damages, or other remedies.

Settlement Remains an Option in All Cases

When considering your options, it is important to remember that settlement remains an option in all cases. Whether a commercial dispute leads to mediation, arbitration, or litigation, the parties can agree to settle their dispute at any time. Settling disputes prior to arbitration hearings and trials is common, and parties can also agree to settle during (or even after) arbitration hearings and trials.

Discuss Your Company’s Commercial Dispute with Attorney Daniel Knox in NYC

If your company is facing a commercial dispute in New York City and you have questions about the options available, we invite you to contact us. To schedule a confidential consultation with attorney Daniel Knox, give us a call or tell us how we can reach you online today.