Unit 2: Litigation vs. Alternative Dispute Resolution
In general, legal problems between private parties can be addressed in two basic ways: through the courts, or through less formal alternatives. In this unit, we will look at both the litigation process, which involves the courts, and these less formal alternatives to handling conflicts, known as Alternative Dispute Resolution or ADR.
Going to court is usually an expensive and time-consuming prospect. Businesses, which are always looking for ways to more effectively manage costs and other resources, can conserve both by first considering other ways to resolve disputes. For example, before going to court over the failure of a third party to properly install equipment, a business might first consider entering into informal negotiations with the installer to reach a conclusion that is satisfactory to both sides. If this fails, the business might propose the use of a mediator to reach a mutually beneficial result. Often, contracts contain a provision requiring issues be submitted to arbitration with a non-governmental official or organization that acts, in essence, as judge and jury in the matter. If these efforts fail, or it is apparent that ADR would be unworkable from the beginning, then businesses need to consider whether a dispute is best resolved in court, with all of its formal requirements and protections.
This unit will begin by looking at the process by which businesses litigate disputes, who is involved in litigation, and what procedural requirements must be met in order to successfully litigate a dispute. It will then cover various methods of ADR available to businesses, and consider how they can be effectively used to deal with disputes.
Completing this unit should take you approximately 7 hours.
Upon successful completion of this unit, you will be able to:
- describe the process of litigation from trial through appeal;
- identify methods of alternative dispute resolution and explain how they differ from each other; and
- explain the relative benefits and drawbacks of litigation and alternative dispute resolution.
2.1: Litigation
Read this introduction to Chapter 3, which discusses the concept of litigation and its role in the business world. The litigation process is important, since it helps businesses resolve their disputes through the application of the law. Business professionals should have a firm understanding of how litigation can impact rights and obligations.
2.1.1: The Parties
Read this section. Litigation involves the bringing of a legal claim in court by one party or a group of parties against another party or parties. Several actors are key to the litigation process; be sure you understand the role of litigants, attorneys, and others involved in the trial process. Be sure to do the exercises at the end of the section.
2.1.2: Standing and Jurisdiction
Read this section. Earlier, we explored the jurisdiction of various courts within the American system. However, before a party to a lawsuit can even get into court, the suit must meet certain requirements. Who has the authority to bring a claim in court? How does a court determine this? The United States has 51 court systems. How does a court decide how much contact with the jurisdiction is required to bring a claim? These important considerations must be addressed before litigation begins.
2.1.3: Pretrial Procedures
Read this section. Litigation is a complex and time-consuming activity. Before the parties even get to trial, there is a great deal of preparation that must take place in order to have one's day in court. This section discusses the preparation of documents and exchange of information that must take place in order bring a lawsuit, and covers class-action lawsuits and the process of discovery, which is an investigative process through which the parties request and produce evidence. The discovery process is important, because it allows a party to ascertain their case's strong and weak points. Did you know that 54% of corporations were charged with a class-action lawsuit in 2014? According to the Manhattan Institute, "more than one in three such companies faced multiple lawsuits". With this in mind, you'll want to learn more about class action lawsuits and how they work.
2.1.4: Trials and Appeals
Read this section. When the parties reach the trial stage of a lawsuit, important decisions must be made about the selection of a jury, opening and closing statements, and the examination of witnesses. This section covers these processes, the burden of proof in civil litigation, and the process of appeal when a party challenges a decision of the trial court.
2.2: Alternative Dispute Resolution (ADR)
Read this introductory material to Chapter 4. ADR encompasses a range of methods that do not involve formal litigation. Study Figure 4.1, which discusses the formality and consensual nature of each method.
2.2.1: Negotiation
Read this section. Negotiation is the most informal and consensual of the main ADR methods. While negotiation helps avoid the costs of litigation, it also has certain drawbacks. This will become apparent in this section. Pay attention to the concepts of BATNA and WATNA and how they fit into the "bargaining zone". Finally, remember to do the exercises at the end of the section.
2.2.2: Mediation
Read this section. Mediation is somewhat more adjudicative and formal than negotiation. With mediation, we introduce a neutral third party. Litigation also has a neutral third party: the judge. However, a mediator's authority is much more limited, and the parties still need to agree on a resolution. The voluntary nature of mediation can be both a strength and a weakness. Be sure to do the exercises at the end of the section.
2.2.3: Arbitration
Read this section. Arbitration is the method of ADR that looks most like litigation. While initial submission to arbitration may be voluntary, parties are generally bound by the decision of the arbitrator or arbitrators. Federal and state governments in the United States often have a preference for arbitration, particularly as a way of resolving contract disputes. Try to identify the relative strengths and weaknesses of arbitration. Don't forget to complete the exercises at the end of the section.
Unit 2 Assessment
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Take this assessment to see how well you understood this unit.
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