It is becoming more and more common for companies to require their customers to arbitrate — rather than litigate — disputes.  What is the difference? In case you were afraid to ask, here’s a brief explanation.

In a regular lawsuit, the complaining party is entitled to state its case to the court using any legal theory available. In some situations, it may be in the plaintiff’s best interest to state multiple legal grounds for obtaining relief against the defendant. Once the case is file, the parties are entitled to engage in the full range of fact “discovery” available under the civil litigation rules in the jurisdiction where the case is filed. Ultimately, the case may be heard by either the judge or a jury. Absent extraordinary circumstances, all records of the lawsuit, as well as the in-court proceedings, are accessible by the public. Each party to the lawsuit is typically responsible for its own legal fees in connection with the lawsuit.

By comparison, arbitration is a private process to which the parties contractually agree in advance. There is no public record of the proceedings or the result.  The rules of the arbitration are those rules to which the parties have also agreed in advance, and may be significantly different from the civil rules that govern civil lawsuits. For example, by agreeing to arbitration, the parties may limit the extent to which they can gather evidence from the other party (or from third parties) regarding their case.  The decisionmaker in an arbitration is the arbitrator (or in some cases, multiple arbitrators) whose fees are paid by the parties (in addition to each parties’  legal fees). The parties typically agree in advance that the decision of the arbitrator is binding — i.e., there is no appeal in the event that the losing party is dissatisfied with the result.