When you have a dispute, which is the best way to deal with it? Should you go through court or arbitration? Tisha breaks down the pros and cons of each for you in this week’s two-minute tip.
Should You Choose Arbitration or Court? Here’s What You Need to Know
Today, I’m tackling a question I hear often: “What’s better—going to court or using arbitration to settle a dispute?”
As a lawyer who has worked both in the courtroom and in arbitration, I’ve seen the pros and cons of each. I also draft contracts and work closely with startups, so I know how important it is to understand how dispute resolution choices can impact your business.
Let’s break it down.
Court: Paid by Your Tax Dollars
When you go to court, you’re using a public system funded by your tax dollars. That means the judge, the courtroom, the court reporter, and the bailiff are all already paid for. You typically pay a filing fee, usually a few hundred dollars, and then your legal fees. It’s not free, but it’s relatively affordable—especially for startups or small businesses.
Arbitration: Private—and Pricey
Arbitration is often pitched as a faster, more private way to resolve disputes. Unlike court proceedings, arbitration isn’t public record, and many transactional lawyers favor it for that reason. But here’s what they don’t always mention: arbitration is expensive.
Let’s take one of the biggest arbitration providers—the American Arbitration Association. Their lowest commercial arbitration filing fee is $925. That’s just to file the claim. If you’re selling t-shirts or low-cost products, that kind of fee doesn’t make sense. You could deter customers—or worse, lose money trying to enforce your rights. It doesn’t stop there. Arbitrators charge by the hour—anywhere from $250 to $1,500 per party. Yes, each side pays those rates. You even pay for the space where the arbitration takes place (think $300 a day), and court reporters ($1,500/day isn’t unusual). None of that is included like it is in court.
When Arbitration Works—and When It Doesn’t
Some people choose arbitration because it can deter frivolous claims. That’s valid. But what happens when you need to enforce your rights? Arbitration may become so cost prohibitive that you’re stuck. You might be better off leaving arbitration off the table and retaining the right to use traditional court or even small claims court for lower-value disputes.
A Smarter Alternative: A Solid Contract
Ideally, your contract should be strong enough that your customer’s lawyer looks at it and says, “You signed this. You agreed to these terms. You’re not getting your money back.” That’s why we focus on guaranteed payments and strong contract language in our programs—so you reduce the need to go to court or arbitration in the first place.
Until next time—stay empowered and well-informed!
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Tisha Dodge, Attorney & Social Entrepreneur
Helping you build businesses that do good and do well.
