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Conflict Resolution: Litigation vs. Arbitration vs. Mediation

Conflict Resolution: Litigation vs. Arbitration vs. Mediation

Litigation vs. Arbitration vs. Mediation

Written by Gregory L. Phillips, Founding Partner

Written by Gregory L. Phillips, Founding Partner

Written by Gregory L. Phillips, Founding Partner

Litigation vs. Arbitration vs. Mediation


Litigation is expensive and time-consuming and pits conflicting parties against each other. In the world of business, it is rarely useful or financially smart to resolve business conflicts with contentious litigation. Business owners and entrepreneurs should understand that there are alternatives to litigation.

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Conflict Resolution: Litigation vs Arbitration vs. Mediation

What is Litigation?

To litigate means "to carry on a legal contest by judicial process." Litigation is quite simply a lawsuit that is brought before a court of law for resolution. For business owners and entrepreneurs, this often takes the form of commercial litigation in order to resolve disputes with other businesses or clients. However, the business world has long viewed litigation as not ideal and reserved it as a method of last resort.

Rather than engaging in zero-sum litigation, business owners should be aware that they have other options for resolving disputes, namely, arbitration and mediation. These two popular approaches are known as alternative dispute resolution (ADR) procedures.

Cartoon on conflict resolution - litigation - mediation - arbitration

What is Alternative Dispute Resolution (ADR Dispute)?

Litigation is often the dispute resolution strategy of last resort. For most small and mid-market companies and commercial legal disputes, it simply doesn’t make business sense to pursue litigation. Commercial litigation is costly, slow, contentious, and worst of all, unpredictable.

Commercial disputes, such as disputes over intellectual property ownership, may require in-depth technical knowledge that most people and practitioners of the law, including judges, do not possess. You can never be certain that the judges will rule correctly and with a full understanding of the technical evidence at hand and the business implications of their decisions.

Finally, many businesses may opt to avoid litigation in order to avoid tarnishing their reputations. For many businesses, winning a case in a court of law comes in second to maintaining their public or client-facing images.

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Alternative Dispute Resolution

Alternative dispute resolution techniques have become popular over the last 20 years. The basic idea behind alternative dispute resolution is to skip litigation in the interest of all parties involved. Many business contracts are written to require a form of dispute resolution, typically mediation, prior to engaging in litigation. In this sense, alternative dispute resolution procedures are used in conjunction with litigation to provide a comprehensive path towards resolving conflicts.

What is Mediation?

Mediation, unlike arbitration, is non-binding. Concerned parties come together to work out their differences confidentially and in a relaxed atmosphere that is more conducive for compromise.

A professional mediator, typically selected by the parties involved in the dispute, acts as a neutral third party. By putting adversaries into a non-adversarial environment and shifting their perspectives from a zero-sum mindset where one party “wins” the dispute and the other party necessarily “loses”, mediation is able to produce results that are fair for both sides.

Perhaps more importantly, engaging in mediation to resolve disputes allows those involved to maintain amicable business relationships going forward. In many ways, Mediation is similar to relationship counseling for companies. By tackling issues honestly and head-on, before they get out of hand, companies can resolve their issues without engaging in expensive and potentially acrimonious arbitration or litigation.

Mediation as a practice for resolving disputes and is so useful, in fact, that many companies specify in their contracts with one another that they must undergo mediation prior to litigation for all disputes. Of course, the ultimate benefit of opting for mediation is that it is much more economical than litigation or arbitration. Unlike the in-depth pre-trial and discovery work needed for litigation, mediation can occur with little preliminary legal preparations. Mediation sessions don’t even require the presence of expensive lawyers, although bringing legal counsel (see General Counsel Services) with you is always a good idea.

Arbitration vs. Mediation

Mediation does have some flaws. Namely, because mediation is not binding, even if an agreement or compromise is arrived at, the parties may not be legally bound to comply going forward. However, this can be easily remedied by having the conflicting parties sign their mutually accepted terms into a new contract at the end of the mediation session. Again, it is a good idea to have legal counsel involved.

When Should Litigation Be Pursued?

Sometimes companies have no choice but to resort to litigation to resolve their differences. However, as a savvy business owner, it is important to consider the alternatives first.

Never directly engage in litigation without pursuing other resolution strategies first.

Litigation can also be preferred if the other party is either uncooperative and unwilling to engage in an alternative dispute resolution process. It can also be a good idea when expert witness testimony is necessary, if public exposure of the facts involved is desired, or if a formal discovery process is required.

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General Counsel Services, also known as GC, outsourced or part-time General Counsel Services, involve a private practitioner who performs the services of a General Counsel for a number of companies on a contract basis, and not as an employee. Unlike retaining a traditional law firm, the fees and hourly rates for such legal services are much lower than those of comparable outside leveraged law firms.

Some estimates put the savings at as much as 40 to 60 percent in otherwise lost attorney fees. This money can, as most entrepreneurs and business owners would agree, be better spent in other areas of the business.

Retaining legal counsel is essential for the long-term success of every startup and new business. Unfortunately obtaining legal counsel from conventional leveraged firms can be expensive. General Counseling Services by Phillips Kaiser offers a new way for businesses to get legal help, protection, and advice without breaking the bank or burdening their bottom line.


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