Parties in disputes have several options to try to resolve their disagreements (short of resorting to fisticuffs). In broad terms, they can either file a lawsuit in court, or they can pursue an alternative dispute resolution (“ADR”) method such as arbitration or mediation. Below is an overview of these options:
- Litigation refers to the use of state or federal (depending on the claims asserted, the amount at issue, and where the parties reside) court processes to resolve a dispute according to the rules in place in that jurisdiction. The court procedures governing litigation are highly formalized. Cases in litigation are heard by a judge and/or jury. This is the sort of the dispute resolution process that most people are familiar with from television and movies.
- Arbitration is a private method of dispute resolution in which the parties select the individual or individuals (“arbitrators”) who will decide the matters at issue following a process agreed upon by the parties. Arbitration is generally faster, less expensive, and more confidential than litigation. Compared to litigation, however, parties in arbitration have fewer options to appeal an arbitration award if they disagree with it. There are a number of private organizations that provide arbitration services, including the Financial Industry Regulatory Authority, Inc. (“FINRA”), the National Futures Association (“NFA”), the American Arbitration Association (“AAA”), and JAMS. Although most people don’t realize it, reality court shows like “Judge Judy” are in fact arbitrations.
- Mediation is an informal and confidential way for parties to resolve their disputes with the help of a neutral third party — a “mediator” — who is trained to help people discuss their differences. The mediator does not decide who is right or wrong, nor does he (or she) issue a decision. Instead, the mediator helps the parties work out their own solutions to their problems. If parties are unable to resolve their dispute through mediation, they are still free to seek recourse through litigation or arbitration.
Regardless of which method you choose to try to resolve your dispute, you are always free to settle your dispute with the other side; and the party who initiates the complaint is free to withdraw his or her complaint at any time prior to — or even during — a formal trial, arbitration, or mediation.