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Course: MGMT- 520-11534 Legal, Political, Ethical Dimensions of Business

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1).What is the difference between arbitration and litigation? What steps in the litigation
process are missing in arbitration?
Answer:
Arbitration is defined as a dispute resolution method whereby the disputing parties
submit their disagreement to a mutually agreed-upon neutral decision maker or one provided for
by statute. The arbitration hearing is similar to a trial, but there is no prehearing discovery phase,
although in some cases an arbitrator may allow limited amounts of discovery. In addition, the
stringent rules of evidence applicable in a trial are generally relaxed. Each side presents its
witnesses and evidence and has the opportunity to cross-examine its opponents witnesses. The
arbitrator frequently takes a much more active role in questioning the witness than would a
judge. If the arbitrator wants more information, he or she generally does not hesitate to ask for
that information from witnesses.
Litigation defined as an action brought in court to enforce a particular right. The act or
process of bringing a lawsuit in and of itself a judicial contest any dispute. When a person begins
a civil lawsuit, the person enters into a process called litigation. Under the various rules of Civil
Procedure that govern actions in state and federal courts, litigation involves a series of steps that
may lead to a court trial and ultimately a resolution of the matter.
The step which is missing in arbitration is selecting the arbitrator because when we use
the method of litigation our lawyer gives all the evidences in the court on behalf of us. When we
go through from the process of arbitration we have to select a third neutral party for our dispute
and we have to present evidences in our own to the third party for decision.

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2). If the parties to arbitration instead went to court, discuss the steps that the parties
would have to take in order to go to trial.
Going to trial to have a judge hear evidence and make a decision is sometimes the most
effective way of resolving a difficult legal dispute. However, it is also one of the slowest and
most expensive ways of resolving a dispute. Therefore, we may want to consider other methods
of dispute resolution which are as follow.

Negotiation and Settlement

Mediation
Neutral Evaluation
Arbitration

These methods are often called alternative dispute resolution or ADR.

Negotiation and Settlement:
An Alternative dispute resolution method in which the disputant parties come together
informally to try to resolve their differences, either with or without their lawyers, and attempt to
resolve their dispute. No independent or neutral third party is involved. To successfully negotiate
a settlement, each party must, in most cases, give up something in exchange for getting
something from the other side. Almost all lawyers will attempt to negotiate a settlement before
taking a case to trial or before adopting a more formal type of dispute resolution method.
Attempts at negotiation and settlement are so common that we often do not even consider
negotiation as an alternative to litigation.
Mediation:

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An alternative dispute resolution method in which the disputant parties select a neutral
party to help them reconcile their differences by facilitating communication and suggesting ways
to solve their problems. Mediation is a process in which the two disputants select a party, usually
one with expertise in the disputed area, to help them reconcile their differences. It is sometimes
characterized as a creative and collaborative process involving joint efforts of the mediator and
the disputants. Mediation primarily differs from litigation and arbitration the mediator makes no
final decision. He or she is simply a facilitator of communication between disputing parties.
Neutral Evaluation:
A neutral evaluation is a process in which parties obtain a non-binding, independent
evaluation of their case from a neutral third party, jointly selected by the parties. Depending on
the nature of the dispute, the neutral third party could be an expert in a certain field, a lawyer
experienced in the type of case, or a retired judge. The evaluation could also be made by a panel
of two or three persons. The opinion or assessment of a neutral legal professional is often
persuasive enough to convince the parties to adopt it as their settlement.
Arbitration:
A dispute resolution method whereby the disputing parties submit their disagreement to a
mutually agreed-upon neutral decision maker or one provided for by statute. The arbitration
hearing is similar to a trial, but there is no prehearing discovery phase, although in some cases an
arbitrator may allow limited amounts of discovery. In addition, the stringent rules of evidence
applicable in a trial are generally relaxed. Each side presents its witnesses and evidence and has
the opportunity to cross-examine its opponents witnesses. The arbitrator frequently takes a much

Video Case Study

more active role in questioning the witness than would a judge. If the arbitrator wants more
information, he or she generally does not hesitate to ask for that information from witnesses.
Ordinarily, no official record of the arbitration hearing is made. Rather, the arbitrator and each of
the parties usually take their own notes of what happens.
3) The story talked about repeat playerscompanies that end up in arbitration repeatedly
over time. Because arbitrators are selected by a negotiation between the two parties in the
arbitration, this story indicates they are more likely to find for these repeat players. Discuss
the ethics of this conflict of interest and what might be done to overcome the problem.
There are few people who want to go to court for their cases, but there are times when it
is necessary to preserve your rights and to fight unfair or illegal treatment like we watched in the
case video. You should watch out for mandatory arbitration clauses in your credit card
agreements, which can prevent you from having your day in court. As you read through your
credit card terms and conditions, beyond the usual definitions of rates, late fees, annual charges,
etc., youll find some interesting things and probably learn some new phrases: such as universal
default clause and binding or mandatory arbitration.
Binding arbitration sounds intimidating, and it can be. By including a binding arbitration
clause, the credit card issuer is giving notice that if the cardholder has a dispute with the
company (including identity theft, fines, penalty or late fee disputes, interest rate guarantees,
etc.) you cant sue the card issuer in court. Instead, they must take the case to a private arbitrator
or judge. If binding arbitration applies to your credit card terms, and it probably does, then you
have waived your right to a jury trial. If there is a dispute you must use arbitrators to resolve the
issue.

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How We Can Overcome the Problem:
Dont settle for mandatory arbitration. The best defense against all [disagreeable] bank
actions is to pick another bank. We must use our power as consumers to reward good
companies and punish the bad ones because the law may not be on our side when we
need it.
Dont ignore changes in terms. If you receive a change in terms in the mail, dont treat it
as junk mail and ignore them. Read them or call the issuer and ask that the change in
terms be verbalized. If you havent already, create a file for your credit cards for the
original terms and any changes in terms that you receive. This is a small effort that will
go a long way to keeping yourself educated and up-to-date. If the change in terms is
disagreeable dont accept them, meaning: dont use your credit card anymore. Start
shopping for one that has more satisfactory conditions- the "Card Reports" section of
CardRatings.com is a great place to comparison shop for a credit card.
Educate ourselves, if your credit card terms and conditions have the binding arbitration
agreement. So, consider switching to a card that does not have such clause.
Because once you get stuck in this disputes than the cost and time required to proceed
through the U.S. court system to resolve any type of dispute, as outlined below, has led to the
rapid growth in the development of alternative dispute resolution (ADR). The average time to
proceed through the typical state court system to resolve a civil business dispute is about 3
years. In comparison, the average time to resolve such a dispute through arbitration is about 2
months. Obviously, the cost associated with arbitration reflects the much shorter timeline
versus the court process. Some legal scholars are concerned about whether a dispute
resolution firm can be truly unbiased when one of the parties to the dispute is a major client
of the dispute resolution provider. For example, our case of major credit card companies

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includes a binding arbitration clause in all its contracts and specifies that will provide the
arbitrator, which favors the credit card companies to try to ensure that it will continue to
benefit from the firms business in the future. The more intense the competition among ADR
providers, the more tempted the providers may be to favor large firms.

References

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Litigation. (n.d.) West's Encyclopedia of American Law, edition 2. (2008). Retrieved February 21
2016 from http://legal-dictionary.thefreedictionary.com/litigation
Kubasek N. K. & Brennan, B.A. & Browne, M. N. (2015). The Legal Environment of Business.
(7th Ed.). Upper Saddle River. NJ. Pearson Education Inc.
Justice Education Society: Alternatives to Going to Court, (July, 2010). Retrieved on 2/22/2016
from http://www.supremecourtbc.ca/sites/default/files/web/Alternatives-to-Going-to-Court.pdf