Quash Cases via Arbitration or Pay the Price

When filing or defending a lawsuit with an arbitration clause, it can often work out to your client's advantage to utilize that arbitration provision, or to try to get around it.

Sometimes though, cases will get filed before a contractually required demand for arbitration is made. In those cases, defense counsel will have an important decision to make: whether to invoke the arbitration provision and quash the case, or simply continue on with the litigation, and waive that clause. In the end, the question boils down to the age old question of costs versus justice, and whether your client is willing to sacrifice one for the other.

Controlling Costs

While arbitration can frequently be more economical than full bore litigation, sometimes, it can be just as costly, if not more so. Particularly for low value claims, paying the costs of arbitration could dwarf any actual judgment. For example, if a lawsuit would normally be a limited jurisdiction or small claims case, requiring arbitration could create costs in excess of jurisdictional limits. This can be used to one party's advantage if the arbitration provision requires the other party to cover the costs.

However, once a case is filed, it may be a costly fight to have the case stayed, or dismissed, pending arbitration, particularly as compelling arbitration is a hot appellate issue. And, then, if successful, the costs of arbitration will need to paid as well.

Getting Out of the Public Eye

If your client wants to keep the drama of litigation out of the public's prying eyes, then invoking arbitration is clearly something to consider. However, depending on the nature of the matter, sweeping it out of the public's eye after an initial complaint is filed could cause more damage than it might control. Although, in some cases, like the ones that come out of Hollywood, it might be advisable to stop the damage from getting any worse.

If the case has already been filed, you may be able to seek protective orders and other judicially imposed limits on disclosing facts and information, like keeping certain confidential or trade secret matters under seal, as a potential alternative to arbitration confidentiality. But if the case is a real life drama, getting into arbitration might be the only way to keep the court of public opinion out of it.

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