Definition: A civil action brought in court of law in which a plaintiff seeks a
legal remedy, such as damages
No matter how you look at it, lawsuits tend to be costly for
both parties involved. Even the prevailing party, if attorney's
fees are paid and judgment received, loses a lot in terms of
emotional energy and actual time spent on various aspects of the
litigation. As a result, alternatives such as arbitration and small
claims court have become popular ways of resolving these
situations.
The difference between arbitration and a lawsuit is primarily in
formality. For example, in arbitration the formal rules of evidence
do not apply. Each side can go on and on with narrative
discussions, drawings, and charts, and the arbitrator will take in
all of it and make a decision. There are no juries in arbitration.
Instead, usually one to three people specially trained in the
subject matter of the arbitration hear the case. Arbitrations are
heard much sooner than lawsuits can be scheduled. This can be
either good or bad, depending on which side you're on.
Unless specified as such in a contract's arbitration clause,
arbitrations are not final and binding. Either party can decide
that they do not like the outcome. Once an arbitration award is
made and a binding clause is in the contract, a court will make the
arbitration award an enforceable judgment.
Mediation is never final or binding and is heard in front of a
person who is an expert on the subject matter in question. The
mediator can share the law in a way that allows both parties to
have their day in court, vent their position, and work toward a
resolution, so that the relationship is not lost over the threat of
a lawsuit. Mediation is very effective in situations where there's
an ongoing relationship between two companies.
The type of lawsuit that most small businesses will have to deal
with--if any--would be those brought to bear in small claims court.
Small claims court can resolve differences quickly and efficiently.
Attorneys aren't permitted to be present until the appeal stage.
Cases are usually heard within 30 days, and in some states the
amount you can sue for has been raised to $5,000 under certain
conditions. Each state--and often each county--has different rules
about the allowable sum.
The following list outlines three steps you'll need to take if
you're filing a small claims action:
- You must determine the jurisdiction's dollar limit on small
claims actions.
- Next, you'll have to determine in which jurisdiction the
defendant resides or does business. This is the jurisdiction in
which you'll generally bring the action.
- Finally, you need to visit the court clerk for the above
jurisdiction. The clerk will give you the appropriate forms for
filing the claim.