…Fees the parties pay to the courts cover part of the cost of litigation, but the remainder is funded by various levels of government, which ultimately comes from the taxpayer.
…It makes sense for government to fund the criminal justice system, since society as a whole benefits when criminals are punished. But how does society benefit when one company sues its supplier because of a contract dispute?…
…Other than for cases involving the indigent, civil rights, and other matters of general societal importance, it does not make sense for taxpayers to fund the resolution of private disputes in publicly funded courts — especially contract disputes between competent adults with some power of negotiation...
…These types of cases should be decided by arbitration rather than litigation…
You are vulnerable without an arbitration clause in your contracts and it could prove to be devastating. Contracts are relatively useless if you cannot enforce them without too much hassle; enforcing them through litigation may be too costly and time-consuming to be practical.
An “arbitration clause” is simply a provision in a contract that requires the parties to resolve disputes through private arbitration rather than litigating them in court. These clauses have become very popular of late since we live in a litigious society where often a breach of contract leads to one of the parties filing a lawsuit. Most people do not realize how costly and time-consuming it typically is to use the courts to enforce contracts.
Large companies like Verizon and AT&T that have lots of experience with litigation are painfully aware of the costs. That is why many now have arbitration clauses in their legal agreements. Look at the agreement you signed with your cellular provider or your internet service provider and you are likely to find an arbitration clause. You also might find one in your employment contract.
Suing someone in court seems like the obvious thing to do to force someone to fulfill their contract obligations. But if they have a lot more money to spend on high-priced attorneys and delay tactics, they are going to have you tied-up in hearings and motions and pre-trial discovery for so many months or possibly years that you will go broke before you ever get the chance to present your case.
Arbitration is usually a lot less expensive and a lot quicker than going to court – especially when you use an online arbitration service like eQuibbly.com. An arbitrator has more flexibility to move the process forward and thwart any attempts by one party to drain the other party of their resources. You can read about some of the other benefits in the article, “The Benefits of Arbitration”.
Where no arbitration clause exists, contracting parties can still agree to arbitrate a dispute after the fact. Even after litigation has commenced, a judge will usually agree to place a lawsuit on hold to allow the parties to resolve it by way of arbitration. But, these situations call for both parties to agree to arbitration at a time when it is less likely they will agree to anything. Where an arbitration clause exists in a contract, one party can compel the other party to arbitrate, and where the party refuses to participate, an arbitrator can make a binding and enforceable decision in their absence.
To avoid the costs and inconvenience of litigation, be prepared and insert the following clause into all of your contracts:
“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by final and binding arbitration administered by eQuibbly online under its Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof for enforcement purposes. “
There are probably a whole host of analogies that can be used to explain what it is like suing someone, or being sued, in a court of law, for those who have never had the pleasure. But I’m not sure that getting a prostate exam is the best analogy – litigation is not quite as pleasant and it’s a bit more invasive.
I am not sure that any one common experience can quite capture how inconvenient, time-consuming, difficult, intimidating, unpredictable, costly, invasive and often just plain painful, court can be – even small claims court – whether you’re doing the suing or someone is suing you.
If you have thousands, and sometimes tens of thousands, of dollars to hire an attorney to represent you and do most of the work for you, it’s not always a terrible experience. If you do not have that sort of money lying around and you’re considering a lawsuit, or worried about being served with one, you’re going to be in for quite a shock. Whether it is a ‘Small Claims’ or a ‘General’ civil suit it makes little difference in practice. You can read about the ‘Cost of Small Claims Court vs. Online Arbitration’ in another article I wrote if you’re interested in why it’s often not just a matter of a couple hundred dollars for filing fees – the costs add up.
The best way to describe the experience to the uninitiated is to ask you to imagine a few situations you are likely familiar with all rolled up into one. Litigation is like contesting a speeding ticket in front of a judge, completing your own tax return and then being audited, but instead of the auditors coming to you, you have to go to them.
Litigation is much more involved than fighting a speeding ticket. To contest a ticket all you have to do is check a box on the back of it and mail it in, or possibly go to the court-house to book a trial date. You do not have to file a plaintiff’s Statement of Claim with all the detailed information about yourself and the case you intend on presenting in court to the judge, you do not have to gather all the evidence from various sources to prove your case, you do not need to pay to get documents notarized and make copies of everything for the court and the defendant, you do not need to know the prescribed way to properly serve the statement of claim and copies of the evidence on the defendant so your case does not get adjourned on a technicality, nor do you have to file everything in person with the court, and you do not have to spend hours trying to figure out the often cryptic procedures and rules of the court that must be followed for any chance of success.
As frustrating as it can be trying to complete your own tax return and determining what you can legitimately claim and what you cannot, the rules and procedure of court can be equally frustrating to decipher. Even lawyers sometimes have a hard time with them, and often make fatal or near fatal mistakes.
As with a tax audit, you have to collect and present evidence to prove your claim is legitimate and possibly answer some probing questions into some personal aspects of your life. At least in a tax audit those answers are not public. With litigation that information is open for public consumption – documents filed in court are available for the public to search and read. So if you’re suing over some type of augmentation surgery gone horribly wrong, you might want to consider arbitration instead since it can be kept private and confidential.
One nice aspect of a tax audit is that the inquisition comes to you. You don’t get that perk with a lawsuit. You often have to make multiple trips to the court-house, wait in lines, and sit in court room for hours until you’re called by the judge to present your case.
Does anyone have a better way to describe their experience with litigation? If so, please share it here in a ‘comment’ to this post. Horror stories welcome.
There is a common misconception that using small claims court is an easy, quick and cheap way of resolving a dispute. The reality is that it is not easy, nor quick, nor cheap.
Although there are many other compelling reasons to use online dispute resolution rather than small claims court, one of the most significant is the cost savings. Even when attorneys are not used, there are simply more costs associated with trying to resolve your dispute in small claims court. It should be noted, however, that it is extremely difficult to provide an accurate cost of going to court since many costs depend on the actions and decisions of the other party and the judge. It also depends on how “cost” is defined. It should be noted that rules and procedures vary by State and specific jurisdiction where your case is heard.
To file a suit in small claims court, both the plaintiff and the defendant will need to pay a filing fee. The amount varies from about $15 to $200 depending on the jurisdiction as well as the dollar value being claimed. The plaintiff pays to file the statement of claim and the defendant pays to file the statement of defense.
Some jurisdictions do not allow attorneys in small claims court. Even so, since failure to adhere to the court’s complicated procedures and technical rules could leave one at a disadvantage, to have the best chance of winning, consulting with an attorney beforehand would be prudent. For a decent attorney you should expect to pay at least $250 per hour and often more. Assuming a two-hour consult, that is at least $500.
Time is money. Reading and understanding the rules and procedures, and completing all the forms correctly, often takes longer than one might expect. One example is the requirement in most jurisdictions that certain documents be notarized or signed in front of a person authorized to take oaths and affirmations—typically a lawyer, a court clerk, or a licensed Notary. Assuming you value your time at $40 per hour, disregarding all other out-of-pocket expenses, the cost of your time alone can be seen below:
(travel to court to file suit and for trial, waiting in line, filling out forms, signing forms in front of a notary)
|Supporting Your Case
(collecting evidence, finding witnesses, serving defendant)
|Reviewing claim closer to trial
(since the trial will be months after the incident and months after you filed the claim you won’t remember the details)
(You’re not given a specific time – you’re given a window of time where you must be in court waiting for your case to be heard)
These costs above do not take in to consideration the additional time that will be required if the defendant does not show up in court on the scheduled day and later asks the court to re-open the case for trial. Nor if the defendant does show up but asks for an adjournment to a later date. In some jurisdictions there also is a mandatory pre-trial hearing or mediation where the parties must meet with a representative of the court to discuss the case and determine whether the issue can be settled without a trial.
Time Off Work
In most instances it will be necessary to attend court during the work week, both to file the initial paperwork and for the trial, and possibly to attend a pre-trial hearing. This requires time off work on two or three days–this could be anywhere from five hours to ten hours. Assuming an hourly wage of $40, that is between $200 and $400 of lost wages.
When a lawsuit is filed, the defendant must be given formal notice in writing that they are being sued along with all the paperwork and supporting evidence. In most jurisdictions, the plaintiff will have to bear this cost which could be upwards of $30 to $100 for a courier or licensed process server.
Total Cost of Small Claims Court
Based on the assumptions above and depending on the circumstances and the value a person places on their time, litigating a case in small claims court could cost anywhere from $100 to $2,000, if that person is self-represented. If an attorney is retained, it will probably cost at least $2,000 more since it is unlikely an attorney would accept a case for less given the responsibilities and liabilities.
Other Possible Costs and Points of Note
There are other possible costs. They are not typical, but circumstances may dictate they be incurred. For instance, since written witness statements are not usually acceptable in court, if the testimony of a witness is needed, he or she will have to attend the trial and their expenses and a small fee will have to be paid. The other party may also bring a ‘motion’ for one reason or another that may require another day in court at a later time. In some jurisdictions there is also the slight possibility that at the end of the trial the judge may grant the defendant an appeal which would mean another attendance in court for both parties. It should also be noted that small claims judgments are public information and could appear on your credit report, affecting your credit rating.
eQuibbly offers an alternative to small claims court litigation. eQuibbly offers a simple, private, and cost-effective way for individuals and companies to resolve disputes without the aggravation and expense of litigating in small claims court. A former trial Judge will conduct an arbitration online and after hearing the case, hand down a legally-binding decision that is enforceable in a court of law.
An Investment News article recently reported that a former Barclays financial advisor participated in a FINRA (Financial Industry Regulatory Authority) arbitration where it was decided that he must repay the firm $3.25 million.
This is part of the signing bonus he was paid when he was hired by Barclays. The deal was $928,571 per year for seven years. Barclays was seeking to recoup $4.6 million in the arbitration after terminating his employment.
It is unusual for arbitration results to be disclosed to the public. Typically a benefit of using arbitration rather than litigation is that it can remain confidential. But since FINRA is a regulatory body for the securities industry, their rules state that all of their awards are made publicly available.
This article can be read in full on the Investment News website.