Advantages and Disadvantages of Arbitration for Arizona Business Disputes

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Advantages and Disadvantages of Arbitration for Arizona Business Disputes

There is a reason that more than 90% of civil lawsuits are settled before trial: trials are expensive and uncertain! The primary reason that trials in America are so expensive is the prolonged discovery phase of litigation where before trial, each party has the right to depositions and to compel the other party to produce documents and divulge facts.

Depending on the complexity of the case, pretrial maneuvering and discovery can last up to a year or more—which often makes settlement of a matter much more attractive to the parties who just want to end the expense and uncertainty.

Avoiding this uncertainty and expense may lead parties to opt for arbitration, a form of alternative dispute resolution that is essentially a private trial decided by an impartial judge and is legally binding on both parties.

However, before making a decision on whether arbitration is a good dispute resolution option for your particular case, you should discuss it with your business litigation attorney and consider the following advantages and disadvantages of arbitration:

Advantages of arbitration

Ability to choose a judge. When disputes are litigated, neither party has a voice in choosing the judge to preside over the case. When it comes to arbitration, both parties can participate in the selection of an arbitrator or panel of arbitrators with the benefit of background information on candidates provided in advance. From a strategic standpoint, it can be advantageous to be able to discern an arbitrator’s approach to the process beforehand — a benefit that is not available with traditional litigation.

Faster process. The rules of civil procedure inside a courtroom are vastly different than those in arbitration, so arbitration is often more expedient. The discovery process in litigation can be very time consuming; discovery in arbitration may be limited by the arbitrator, arbitration rules, or even by the parties themselves if spelled out beforehand in the arbitration agreement. The arbitrator may also impose limitations on motion practice, further compressing the timeline.

Speed/cost. Arbitrations can be less costly simply because they typically proceed faster. However, the parties also have to pay arbitration fees and pay the arbitrator’s hourly rate, which can easily eclipse any savings from a speedier process.

Private. Arbitration hearings are held in private with only the parties to the agreement in attendance. If a confidentiality provision is included in the agreement, the results of the arbitration can also remain private.

Disadvantages of arbitration

Process limitations. When discovery is limited—as it usually is in arbitration—it can prevent attorneys from either side from obtaining what may be helpful evidence supporting their case.

No appeals process. Once the arbitrator renders a decision, there are very limited grounds on which to appeal that decision. A court may vacate an arbitration award only if (1) the award was procured by corruption, fraud, or other undue means; (2) the arbitrator was partial, corrupt, or engaged in conduct that prejudiced the rights of one party; (3) the hearing was conducted contrary to Arizona Revised Statutes section 12-3015 so as to prejudice the rights of a party to the arbitration proceeding; (4) an arbitrator exceeded his or her powers; (5) there was no agreement to arbitrate; or (6) the arbitration was conducted without proper notice.

Not bound by law. Unlike litigation, a party to arbitration may not appeal an award based on errors of law by the arbitrator. Therefore, recourse is limited if one party believes the arbitrator deviated from the language of the contract.

Williams Commercial Law Group, L.L.P., has the experience and reputation that you want when you are dealing with a business-related lawsuit. We are here to obtain the best possible outcome for your situation. Do not hesitate to contact Williams Commercial Law Group, L.L.P., at (602) 256-9400, and see how we can help you resolve your legal matter.


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