The Pros and Cons: Arbitration or Litigation. JAMS or AAA?

By: Steven G. Kaplan and Patrick Bowers

Disputes happen all the time.  Most disputes are minor and resolved between parties without involving a third party.  But where parties cannot resolve their disputes--and because we live in an alleged civilized society in which we strongly discourage private resolution of conflict by means labeled “anti-social” (e.g., dueling)—a third party is called in to assist in resolving the dispute.  You pay your taxes (probably) so why not get your money’s worth and take your dispute to court.  If dueling is frowned upon, what’s left other than rushing to court?  Let’s consider binding arbitration.

Arbitration pro:  Speedier resolution, however, this is not always the case due to numerous parties, arbitrators, lawyers, and litigation strategies. 

Litigation pro:  There is a large body of substantive law and procedure which automatically organizes the lawsuit and the parties don’t have to create the rules that will govern the dispute.

Arbitration pro:  Less costly, however, this might not always be the case due to numerous parties, arbitrators, lawyers, and litigation strategies.   

Litigation pro:  The judge, by law, must be impartial and the judge’s salary does not depend upon whether the parties ever use that particular judge in a future matter.  The judge is not personally affected by the outcome of the dispute. 

Arbitration pro:  Exclusionary rules of evidence don’t apply.  Everything can be admitted into evidence so long as relevant and non-cumulative. 

Litigation pro:  Trial takes place in the courthouse and therefore neutral territory.

Arbitration pro:  Not a public hearing.  There is no public record of the proceedings. 

Litigation pro:  If a litigant is unhappy with the court’s decision an appeal might be possible.

Arbitration pro:  From a defense point of view, there is reduced risk of punitive damages and run away juries.

Once the parties choose binding arbitration over litigation, either in the contract or after the dispute arises, they must then choose an arbitration body, the most prominent being JAMS and the American Arbitration Association (AAA). 

Yippee!  You won an award in binding arbitration.  Well, don’t pop the champagne cork just yet.  With JAMS, even if you win an award, it will not give you your award until you pay the arbitrator fees.  So you have racked up quite the tab for arbitrator fees.  No problem; I can pay with part of my award, right?  Nope.  You must pay the arbitrator fees with money apart from the award. 

On the other hand, AAA will release your award without full payment of the arbitrator fees.  That way you can pay the arbitrator fees with part of your award, pop the champagne cork, and move on with your life.  Cheers!