EIGHT WAYS FOR BUSINESS OWNERS TO AVOID LITIGATION

Tip No. 3: UTILIZE ARBITRATION AND MEDIATION

Business transactions are no longer done on a handshake.  The business world is complex, and the more complex transactions become, the more potential exists for litigation to ensue.  The cost of litigation is so high that one small lawsuit can virtually bankrupt a business.  While business owners are afraid of litigation, they often know very little about how to prevent it.

Based on our decades of experience, we have developed a list of suggestions for avoiding litigation.  In past issues, we talked about the proper use of contracts and the importance of employment policies.  This month, arbitration and mediation.

Statistics have shown that awards against defendants are significantly smaller if the matter is submitted to arbitration rather than the court system.  In order for any person to be required to submit their claim to arbitration you must have a written agreement with them providing for such.

Arbitration is not necessarily a cheap process, but in some areas it is critical.  The most important one being employment disputes.  Statistics have shown that the ultimate amount employers must pay is significantly less through arbitration than through the court system.

If you decide you want to resolve disputes through arbitration, you need to be familiar with the various organizations that offer arbitration and determine which one is best for you.  The American Arbitration Association is probably the largest and most well established.  Other organizations have formed which utilize the services of retired judges, which AAA does not.  A lot of people feel more comfortable having a judge decide their case as opposed to a lawyer or a lay person.  Keep in mind, however, that with arbitration you are giving up your right to a jury trial and the right to appeal a bad decision.

Another form of dispute resolution is mediation.  Mediation is simply a meeting between the parties, with or without attorneys, with a facilitator (mediator) to help settle the dispute.  The process is usually quite successful in resolving disputes in an amicable fashion.  While neither party can be forced to mediate a dispute (absent a written agreement to do so), most people are agreeable since they can end discussions at any time and it does not jeopardize their legal position to participate.

Our office can assist you in incorporating an arbitration or mediation provision in your contracts and even help you through the process.  Next month, we continue with tips for avoiding litigation.