The huge growth in tech companies across Florida, and indeed across much of the United States and globally, is a massive boon for business. Yet as always, it’s also important to ensure that you are legally protected and that you provide for any eventualities that may arise in terms of potential business and contract disputes.
In the course of doing business, you may have come across an arbitration clause in a contract and questioned its advantages compared to more conventional litigation. While arbitration and litigation are formal methods of settling business disputes, they differ fundamentally.
Arbitration and litigation have significant differences. One of the problems in deciding on the appropriateness of arbitration or litigation relates to the various issues that can arise. The growth of tech is inspiring, but as general counsel to tech firms can testify, the range of disputes that can arise is remarkable. From basic disagreements concerning tech transactions to privacy and data issues to matters relating to websites and electronic communications, as well as marketing, advertising, and promotional matters, tech litigation comprises a wide range of matters.
It’s precisely for this reason that a tech company’s general counsel needs to be well versed in both the complexities of business disputes and the practical realities involved in choosing arbitration or litigation, in both the contract drafting process and the appropriate choice of process in relation to resolving specific business disputes.
Arbitration and Litigation: Key Differences
Arbitration and litigation differ with regard to who can hear the dispute, how the process functions, and whether or not it can be appealed. A company’s general counsel will be most familiar with its business and concerns, so they are best placed to advise on the right course of action.
The essence of litigation is that it is a court-based process used in dispute resolution, while arbitration is a dispute resolution process that aims to resolve issues without going to court and which the parties will have agreed to use in advance. There are a number of reasons you might prefer to use arbitration rather than litigation. For a start, it is not only less time-consuming, but it’s also generally less expensive. Other major benefits include the fact that generally, an arbitrator will reach a final determination more quickly than is achieved in litigation.
Certain rights can also be drafted into a contract’s arbitration clause. For example, the right to limited or specific discovery, while in litigation cases, the scope or right to discovery can be significantly broader than what is necessary, which may lead to further litigation cost and delays. A fundamental reason for the preference for arbitration clauses is that they allow disputes to continue with minimal interruption by pursuing a quicker and cheaper process than courtroom proceedings. In contrast to arbitration, courtroom-based legal proceedings are more formal and rigid, and they act to solidify the acrimony between the parties concerned rather than provide an amicable environment that is more conducive to amicable resolution.
Arbitration is a formal process overseen by a professional arbitrator. Arbitrators will often have extensive experience working as a business attorney or as outside general counsel to a company and be familiar with the business issues relevant to a dispute. As a neutral third party and arbitrator, the arbitrator’s judgment will be final, absent a contractual right to appeal an arbitrator’s ruling which is unusual.
If your company is looking to resolve disputes quietly and without all of the details of the dispute becoming public, then arbitration may be more appropriate in such circumstances. While litigation is conducted in a courtroom, and your business concerns are subject to be broadcast to the media, arbitration takes place between the parties privately, behind closed doors. This privacy certainly reduces the stress of proceedings, as does the greater informality.
The Choice Matters: Arbitration and Litigation Clauses in Business Contracts
When you choose a business lawyer to draft your contracts, you should consider that you are the person who knows your business the best. In the tech industry, this is crucial, given the breadth of disputes that can arise. This means that when a business attorney drafts a contract, it’s important to know that arbitration and litigation can be suited to different types of disputes. For complex tech disputes, especially in matters involving intellectual property rights, it’s crucial that an arbitrator is sufficiently knowledgeable in business and intellectual property rights. It’s highly unlikely that such expertise will be found in a courtroom.
In the fast-moving tech industry, arbitration provides a means for disputes to be resolved not only more amicably than is the case with litigation but also infinitely more quickly. Not only is this economically more beneficial for companies, but a legal battle causes huge disruption to ongoing business concerns. Such disruption results in huge business and financial losses. This was the case in the long patent battle between the smartphone giants Apple and Samsung. The 7-year legal war between these two business giants may finally have ended with Apple’s victory over Samsung, but whether it was truly a victory is questionable. Apple gained no competitive advantage, and the companies actually spent more on litigation than research and development. This is definitely a situation to avoid!
Yet despite the advantages of arbitration – the supposed neutrality and tech expertise of an arbitrator, the ability to maintain privacy, and in international arbitration to override the constraints of domestic litigation – litigation can actually be more appropriate in certain circumstances. This is the case where one party’s narrative may appeal more to a jury. This is especially the case in matters where the fundamental issue of fairness may be at stake. In litigation, judges must abide by the rules of evidence and comply with precedent – the judgments of previously decided cases and the principles enshrined within them. As arbitrators have no such constraints, their unchecked discretion means that their decisions can be unpredictable.
Making the Decision
Yet it is this lack of constraint and unpredictability that is also a benefit of arbitration. In discussion with an experienced business lawyer, you’d be well advised to closely examine your business and attempt, as far as you can, ahead of time to envisage the potential issues and related disputes that could arise in the future. In doing so, you will be in a more advantageous position when contracts are being drafted and discussing the appropriate inclusion of litigation and arbitration clauses.
Our firm can help your business draft contracts that are best suited for your company’s needs. If you are interested in receiving more information about how The Campbell Law Group can help your company, please call our office at 305-460-0145 or to schedule a consult here.
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The Campbell Law Group P.A.
Focuses its practice on corporate and family law matters.
While representing clients whether in civil, corporate or family law matters, our company’s primary goal is first to help clients minimize the need for unnecessary litigation and conflict where possible. If litigation is necessary, our company is more than capable of representing you or your business’ interest and helping you achieve a fair outcome, while guiding you, your family and your company through the difficulties involved in litigation.
Regina M. Campbell
Corporate and Family Law Attorney and
Collaborative Family Law Attorney
Hofstra University Maurice A. Deane School of Law – Hempstead, New York Juris Doctorate (2007)
Florida International University – Miami, Florida – Bachelor of Arts in Political Science (1998)
Florida Bar (2009)
United States District Court for the Southern District (2013), Middle (2015) and Northern Districts of Florida (2018)
United States Bankruptcy Court for the Middle and Southern Districts of Florida (2015)
Member of the Collaborative Family Law Institute, Inc. (2017)
Regina is the Managing Partner of The Campbell Law Group based in Coral Gables, Florida. She is recognized for her unique insight, resourceful problem-solving skills and understanding of how legal issues affect people and companies differently.
One of Regina’s biggest passions is litigation. Regina and The Campbell Law Group PA have seen a great deal of success in prosecuting and litigating business fraud and ponzi schemes, tortious interference with a business relationship cases, non-compete cases, shareholder actions, complex divorce and post-divorce actions, especially cases with recalcitrant parties with a talent at hiding assets and/or avoiding support obligations amongst others causes of action.
Regina is fluent in both English and Spanish and has assisted businesses and families from over twenty countries with their business and family legal needs.