Attorneys may not always consider whether their clients, and in fact all the parties, would be better off arbitrating their disputes rather than litigating them in traditional courts of law. Once traditional litigation has started, court deadlines approach. Then, no matter how long and drawn out the proceedings get, attorneys often do not take a step back and assess whether their matters might be better handled in arbitration. They would, however, be well served to think about whether traditional litigation is truly in their clients’ best interests.
Arbitration is an underused alternative to traditional courtroom litigation for commercial disputes that can be highly valuable for a number of reasons.
1. Arbitrations Are Generally Faster
In fact, arbitrations are generally far faster than traditional trials. Consider the 2017 study “Efficiency and Economic Benefits of Dispute Resolution through Arbitration Compared with U.S. District Court Proceedings,” by Roy Weinstein, Cullen Edes, Joe Hale, and Nels Pearsall of the economic research firm Micronomics. They found that U.S. district court cases took far longer to get to trial than cases decided by arbitration by the American Arbitration Association (the “AAA”). According to the study, “[t]hese differences are systematic across almost all states and sections of the country.”
The study found that, as compared to arbitrations through the AAA, which on average took under a year (11.6 months) to be fully resolved, federal district court cases took an average of a little over two years (24.2 months) just to get to trial, and federal court cases that underwent appellate review took an average of nearly three years (33.6 months) to conclude. Thus, lawyers who choose arbitration can generally expect to save their clients about a year of pretrial litigation. For cases that go through appellate review, they can expect to save their clients another ten months or so in appeals.
This study was undertaken of matters before the AAA on whose Commercial Disputes Panel I serve, in addition to handling arbitrations privately, upon direct retention by parties. I am not aware of an entity that would have more data about the length of arbitrations than the AAA, and the Micronomics’ team’s findings align with my experience. During the over thirty years I spent representing parties in litigation, I have never seen matters get to trial faster than I have seen them reach final hearings in arbitration.
2. Arbitrations Are Generally Less Costly
The longer cases drag on through the court system, the more expensive they become. The aforementioned Micronomics team calculated the economic impact of the parties not being able to use the resources that were dedicated to their disputes between 2011 and 2015. The team examined what it referred to as the “direct losses associated with additional time to trial,” i.e., the lost opportunity cost associated with litigating the cases in district courts rather than arbitrating them. These costs were estimated to total a stunning $10.9–13.6 billion, or more than $180 million per month, and that was just for federal court cases that were not appealed. For federal court cases that were appealed during this time period, the estimated direct losses associated with the additional time required were higher: a staggering $20.0–22.9 billion, or more than $330 million per month.
The data included in the Micronomics study ended in 2015. The costs saved from arbitrating cases are probably even greater today. Law firms, particularly large firms, have generally been implementing substantial increases in their billing rates. According to a Wolters Kluwer report on late 2024 billing data reviewed in the Law360 article “Attorney Billing Rates Continue To Climb In 2024,” the average billing rates for litigation partners at law firms with over 750 attorneys exceeded $1,122 per hour in 2024, while the average rates for associates reached $726 per hour. Partner rates in such law firms rose by 7.5 percent and associate rates by 10.8 percent, and these rates are projected to continue rising. Moreover, the trend of increasing attorney rates is not limited to large law firms. According to LawVision’s 2024 Strategic Pricing Survey, approximately 60 percent of respondent law firms raised rates by 6 percent or more in 2024, with the trend expected to continue in 2025.
While skilled commercial litigation lawyers may charge the same rates for handling arbitrations as handling traditional litigation, higher rates impact the cost differential between the two, since arbitrations generally take so much less time. As reported by the United States Courts in “The Need for Additional Judgeships: Litigants Suffer When Cases Linger”:
Nationally, the average time between filing a [federal court] civil case and trial is a little over two years. In many of these overworked courts, the average time between filing and trial is much longer, often three to four years. The delays increase costs for civil litigants, who have to spend more on attorneys’ fees, expert witnesses, and depositions, often with no clear end in sight.
3. Discovery Is Generally Far More Streamlined
In traditional courtroom litigation, it is common for parties in commercial cases to get mired in discovery disputes. It is not uncommon for there to be so many discovery disputes that a special master / court-appointed neutral must be appointed.
In arbitrations, in contrast, discovery is limited. The parties seeking discovery must request it. The arbitrator will normally hold a conference, speak with the parties about their discovery needs, and, based on what they hear, restrict discovery accordingly. In arbitrations, special masters may be appointed, but that is rare. When they are appointed, it is most often to determine whether the arbitrators should see certain documents or whether the documents have been properly marked as privileged.
4. The Parties May Seek Privacy
In courts of law, the public and press generally have the right to access the proceedings. Some companies have been embroiled in commercial litigation disputes that garnered nightmarish media attention. Such coverage can harm their operations, reputation, revenues, and even viability.
Arbitration proceedings, in contrast to court proceedings, are generally not open to the public. Arbitrations are generally private, and the parties can seek to use arbitration rules that require confidentiality to ensure it. Thus, another benefit of arbitrating commercial disputes is that the parties can keep sensitive information shared in the proceedings confidential.
5. Arbitrators Can Be Far More Flexible
While it is rare to find a commercial litigation lawyer who has not received a notice scheduling a court conference on an inconvenient date, arbitration offers the parties greater scheduling control. For instance, in traditional litigation, the initial case conference is generally set by an autogenerated scheduling order. The parties are rarely consulted before it is issued. In arbitrations, in contrast, the parties generally get the chance to confer and propose the conference dates.
Likewise, in traditional courts of law, case deadlines are generally issued with little to no party input. That is not the case with arbitrations. In arbitrations, before deadlines are set, the parties can typically confer and propose the deadlines they would like. The parties may even propose the final hearing dates. This is not the case in traditional courts of law, in which trial dates are set by the court, often with the parties having little to no real opportunity to check their witnesses’ schedules. Courts of law can also put parties into trial pools in which they are on call for trial upon short, even twenty-four-hour, notice.
Arbitration’s additional flexibility goes beyond choosing deadlines and dates. In arbitration proceedings, the parties may propose whether there will be pre-hearing briefs and if so, how long they may be. The parties may also propose such things as how many witnesses may be deposed and how long the depositions may be.
In traditional courts of law, trials take place in the courthouse in which the matter is being litigated. In arbitrations, the parties can choose where the final hearings will be held. In arbitrations, unlike traditional court proceedings, the parties may also propose their desired trial schedule. They may have their final hearing days start earlier than 9 a.m., go past 5 p.m., have specified breaks during the day, and/or have scheduled days off in between. There are countless ways in which arbitrators can offer the parties flexibility that is unheard of in traditional litigation.
6. The Parties Can Choose Their Judges
Another advantage to choosing to arbitrate commercial disputes is the ability to select the decision-makers, the arbitrators. In particular, the parties may select arbitrators with a deep understanding of the issues in their dispute.
Commercial disputes may be quite complex. For example, a case with a breach of contract claim by a law firm seeking to recover legal fees and counterclaims by its former client-company for legal malpractice may seem straightforward. However, the underlying case could involve claims and counterclaims worth millions of dollars, and extensive fact and expert witness discovery. There could be complex issues of fact and law to mull over to decide the dispute.
If such a case is arbitrated, the parties may select arbitrators with experience deciding fee and legal malpractice disputes. They may select arbitrators with experience in the area of law at issue in the parties’ underlying dispute. Whatever the claims, in an arbitration, the parties may select the arbitrators who have the very experience they seek.
In traditional courts of law, that is not the case. The judge is selected for the parties in federal court, often by a random drawing or rotation in order. The judge may have little to no experience with the issues in the case.
7. Arbitration Offers Immediate Finality
In traditional litigation, if a case goes to trial, after the jury or judge in a non-jury case issues the verdict, the verdict is not initially binding. There is a time period during which the losing side can appeal the decision, and appeals can take years to resolve.
In arbitrations, the parties get finality with virtually no risk of appellate review. After the final hearing, the arbitrator makes their final decision, the arbitration award, and it is immediately binding. With limited exceptions (such as for fraud or corruption), arbitration awards generally may not be vacated or overturned. Thus, once the award is issued, it becomes final, and after the losing party’s time to satisfy the award has passed, the parties can enforce it and move on.
8. Arbitrating Cases Lessens Court Congestion
According to the Administrative Office of the U.S. Courts’ report Federal Judicial Caseload Statistics 2024, the number of civil cases filed in U.S. district courts has risen from 281,608 in 2015 to 347,991 in 2024. That represents an increase of approximately 23.6 percent, meaning that the number of cases filed between 2015 and 2024 has risen by nearly a quarter. Over the same nine-year period, the number of cases pending has risen from 340,925 to 633,066, an increase of 85.69 percent, or over three-quarters.
Our courts are clogged. The reason arbitrations are generally far quicker than traditional litigation is in large part because of that congestion. When attorneys choose to arbitrate cases, rather than litigating them, they remove cases from our courts’ overcrowded dockets and help minimize the amount of disputes our courts have to manage.
Conclusion
Attorneys would be wise to consider whether their clients and adversaries might be better off arbitrating their commercial disputes. Doing so can generally save them over a year in litigation and thousands of dollars per case. They can avoid protracted discovery and the risk of having their internal business affairs made public. They can offer the scheduling and final hearing dates they wish, as well as select arbitrators with the very experience they want. When their arbitration awards are issued, there is little to no chance they will be subject to review, and arbitrating their cases helps minimize court congestion.
