Most business relationships start out with positive feelings and goodwill.
Unfortunately, there are times when disputes arise -- when one party feels the other hasn’t lived up to an agreement. Sometimes these disputes can be resolved by direct negotiation between the parties. Other times, negotiations break down, or one party refuses to negotiate, and other ways of resolving the dispute are needed.
In general, business disputes can be resolved either in court (litigation) or outside of court, using what’s known as “Alternative Dispute Resolution” (ADR).
There are two main forms of ADR: mediation and arbitration.
Mediation uses a mediator (typically an attorney, sometimes a former judge) to help the parties reach an agreement. The mediator tries to help the parties find a compromise solution that is acceptable to both. Mediation is not binding – neither party is forced to accept a solution recommended by the mediator.
Arbitration is very similar to litigation, except it takes place outside the court system. An arbitrator, or a panel of arbitrators, hears the case. Procedures may be similar to those used in court. The arbitrator or arbitrators have powers similar to the those of a judge and are often former judges.
Sometimes business agreements or contracts contain an arbitration clause, which requires the parties to submit to binding arbitration. Arbitration clauses generally specify what rules are to be followed and where the arbitration is to be held. When there is binding arbitration, the arbitrator’s decision usually cannot be appealed to a court.
Arbitration can be a more expensive option than litigation in the long term since the parties have to pay the fees of the arbitrator(s) as well as those of the lawyers. However, arbitration often resolves disputes faster than litigation and thus can be less expensive for disputes that might drag on.
Sometimes, arbitration may be required by the courts. In Philadelphia County, for example, all disputes for $50,000 or less (excluding “equitable actions,” which are matters that can’t be settled financially, and real estate claims) must first go to a compulsory arbitration hearing. If either party is not happy with the outcome of the arbitration, they may appeal and go to court.
“Litigation” means a lawsuit, which may be tried in either state or federal court. Most cases are heard in the state court system; about 30 million cases a year are heard in state court systems, versus only one million in the federal court system.
Cases that may be tried in federal court include ones where the US government is a party, the parties are from different states and the amount in dispute is over $75,000, and cases involving federal law such as wrongful termination and discrimination, copyright, patent, or maritime law. Some cases may be litigated in either state or federal court, in which case the party filing the lawsuit can choose where to file.
Litigation may be in front of an arbitration panel, a judge alone or before a judge and a jury.
We are licensed in both Pennsylvania and New Jersey and represent clients in mediation, arbitration, and litigation matters in both federal and state courts in Pennsylvania, New Jersey and across the country with the assistance of local counsel.