Unfortunately, despite best efforts, some agreements and other business arrangements do not go as planned and disputes arise between the parties that cannot be resolved through normal business discussions. In those instances, the parties turn to dispute resolution. Business partnership dispute resolution takes various forms, with litigation being the most recognized.
Partnership Dispute Resolution through Litigation
Administered by the justice system (state or federal) litigation is a trial with a judge or jury deciding who is right or wrong – where someone wins and someone loses. While it does provide for finality, it places resolution of the matter outside the hands of the parties and allows a judge or jury to decide the outcome. In addition to a trial, the judicial system also allows for appeals to higher courts to determine if the lower court erred in some manner. While this process allows for a second bite of the apple on legal grounds, it is time consuming and expensive. Appeals could take up to a year or two to obtain a decision from the appellate court.
Alternative Dispute Resolution
In addition to litigation there are several other types of methods for resolution of disputes commonly called alternative dispute resolution or ADR. ADR are good options in dealing with controversy allowing the parties to reach resolution earlier and with less expense than traditional litigation.
One ADR method is mediation. Mediation is a non-binding process where an impartial individual serves as mediation and assists with communication and potential reconciliation to allow them to reach a mutually agreeable resolution. The mediator merely serves a facilitator and does not have the power to force an agreement or decide who is right or wrong. Typical mediation involves both joint meetings with the parties and individual break-out meetings between the mediator and each party. The benefits of mediation is that it is for the most part controlled by the parties and each has the opportunity to agree to a resolution. Depending on the dispute it is important to select the appropriate mediator to facilitate potential resolution, with each mediator having a different style in working towards resolution. Another benefit of mediation is that it is private and confidential avoiding public disclosure of problems.
Another alternative dispute resolution process is arbitration. Arbitration is the submission of a dispute to an impartial third person who listens to each party’s evidence and makes a decision. Generally, each party has some say in the selection of the arbitrator. This selection process allows the ability to potentially select an arbitrator who has a background in the type of dispute, unlike in litigation where a jury is typically individuals off the street with little or no knowledge of the underlying subject matter. In some instances, when the dispute involves large sums of money, there may be a panel of three arbitrators who decide the outcome of the dispute. Each can be impartial, or each party may pick a partial arbitrator who then selects a third impartial arbitrator. Once the evidence is presented the partial arbitrators selected by the parties have the ability to persuade the impartial arbitrator to decide in their favor. Whether one arbitrator or a panel, like litigation, one party will prevail. Unlike litigation, a party’s ability to appeal the decision is very limited. While the parties generally pay the fees of the arbitrator, the entire process is generally faster and less expensive than litigation as well as private.
Choosing a Business Partnership Dispute Resolution Process
Which process should be utilized in a particular dispute? Many times the parties’ agreements already set forth the type of business partnership dispute resolution. The first step is to read any agreement between the parties to determine whether a particular dispute resolution process has been selected. Notwithstanding what an agreement states, the parties are always able to select a particular process if they both agree on that process. If no dispute resolution process is set forth in the agreement, the fall back is litigation.
What business partnership dispute resolution process should I select or include in my agreement? There are many factors that go into determining the most advantageous dispute resolution process for your particular situation. Contact MBM Law and speak with a partnership dispute lawyer to discuss the advantages and disadvantages of each of the potential processes.