Need To Resolve a Problem: Which Way Should You Go, Arbitration or Litigation?
The road to Dispute Resolution can be navigated through many different routes, all of which have their own benefits and drawbacks. Choosing which route to take requires a detailed analysis of multiple factors.
Often times, especially in the cannabis industry, making the right choice stands at the crossroads between binding Arbitration or Civil Litigation.
Arbitration
Arbitration is an out of court resolution process where an impartial third party (the arbitrator) listens to both sides and makes a conclusive decision. That decision is binding and cannot be appealed. The most popular arbitrator is the American Arbitration Association (AAA).
One seeking to use arbitration must have a written agreement that both parties elect binding arbitration. If an agreement has not been made beforehand, and both parties want to resolve their dispute through arbitration, it is still possible to agree immediately to filing.
The AAA will not permit a filing without an express agreement between the parties.
The arbitration process can be faster, and often cheaper, than civil litigation which may result in lower attorney fees (although the filing fees are generally more expensive than court filing fees).
The default rules for arbitration are not as strict as they are in civil litigation. For example, the AAA will give parties numerous changes to participate; meaning there may not be precise time restrictions like there are in civil litigation.
Arbatrating smaller cases may also eliminate the discovery process; meaning one party cannot demand they discover the other side’s case evidence.
Interestingly, collecting an arbitration award may require going to court to get a judgment.
Civil Litigation
Civil litigation is essentially taking someone or company to court – In Michigan, that could be a district court (disputes less than $25,000) or circuit court (over $25,000).
Filing a lawsuit in your local courthouse will be less expensive but will generally take a longer time.
This is especially true in circuit court where a regular case may not see a trial date for 18 months. And before a trial the court will usually order mediation that is non-binding, but makes the parties get together and try to settle with the use of a three-attorney panel.
Judges in both circuit court and district court will also use Facilitation.
Facilitation is a non-binding dispute resolution tactic involving a third-party facilitator that will try and enable a resolution. Then there are also four appointed receivers, whom the court will order to take control of the assets. This is another form of dispute resolution.
Most notably in litigation, the parties do not get to mutually choose their judge, like the parties can do in arbitration.
You are forever stuck with the judge which is assigned (blind drawn) to the case.
Conclusion
Due to the federal illegality of cannabis, many contractual agreements use arbitration for fear that a court may find the subject matter of the contract, being cannabis, as unenforceable. That would be an argument of either party seeking to get out of the agreement. You cannot agree to an unlawful act.
Therefore, parties often agree to settle their disputes through arbitration.
"Having done both arbitration and civil litigation dozens, if not tens of dozens of times, states principal attorney and founder of Cannabis Legal Group, Barton Morris, "I tend to prefer civil litigation. This type of resolution may be more formal, but the rules are very concise and objective. However, I also like arbitration when a quick resolution is required. Both can work well and often do."