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To Sue or Not to Sue?

Going to court to settle a dispute is sometimes necessary, but it can take time and money, destroy valuable business relationships and reveal details that you may prefer to keep secret.

Of course, court isn’t your only option. You can try an alternative dispute resolution, which gives two options:

The Courts and the Law

The Federal Arbitration Act and federal court decisions govern arbitration involving interstate commerce, which, in effect, covers all arbitration. Supreme Court and federal appeals court decisions regarding arbitration generally have held the following: 

  • Arbitration clauses in all contracts are enforceable.
  • The Federal Arbitration Act preempts conflicting state laws or antiarbitration statutes, decisions, or rules adopted by states.
  • Antiarbitration state statutes aren’t enforceable in interstate commerce arbitration proceedings.
  • There are only two limitations on the enforceability of arbitration agreements under the Federal Arbitration Act. The arbitration provisions must be part of a contract involving interstate commerce, and the clause may only be revoked on grounds that exist for the revocation of any contract under applicable state law.
  • All types of disputes can be arbitrated, including commercial, consumer, employment, health care, contract, financial, tort, antitrust, brokerage accounts, and construction.
  • An arbitration agreement is a proper and legitimate waiver of a bench or trial jury.
  • An arbitrator may grant the same relief or remedy as a judge, including money damages and injunctive relief.
  • Arbitration agreements that may effectively preclude class actions are enforceable.

1. Mediation. A mediator meets with both parties together and then separately. The mediator analyzes the merits of each position and suggests a reasonable compromise.

2. Arbitration, where a trained arbitrator hears the evidence, witnesses and arguments and comes to a decision that is usually final and enforceable unless you have included a contract clause stating that an arbitration decision is not binding unless both parties accept it.

Your attorney can help draft the arbitration clause in a contract or assist in preparing a case for arbitration. Of course, arbitration isn’t always the best choice. Litigation might be a better course if, for example:

  • You wish to pursue an extensive discovery,
  • The dispute involves questions of law and there is a large body of precedent in your favor, and
  • You prefer presenting your case to a well-qualified judge; for example, taking corporate disputes to Delaware Chancery Court rather than an arbitrator.

However, if you and your attorney do opt for arbitration, the process should be approached in a manner similar to that of a trial with steps like these:

Outline your argument to ensure all salient points are made.

List questions you want to ask the other party — you will be able to add to the list based on the other party’s testimony.

List chronologically any actions you took to resolve the dispute, including names of people you spoke with, what they said or did, and other individuals involved in the dispute.

Collect all available documents related to your dispute. Make copies for the arbitrator and the other party. The arbitrator generally does not accept any evidence after the hearing that could have been included during the process.

List potential witnesses, try to contact them and ask them to testify or sign written statements.

Prepare a written summary of your position to present to the arbitrator. Be ready to let the arbitrator know what you think the decision should be and why. It’s your job to convince the arbitrator that your position is right.