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In my practice, clients often ask about mediation and arbitration, which are methods of resolving a case without a trial to a judge or jury.  Alternative dispute resolution is touted as a way to amicably, quickly, confidentially, or inexpensively resolve disputes, in lieu of taking a case through the court system. These touted reasons sound good, but are they accurate?

Mediation and arbitration are very different processes. Each has its benefits and drawbacks.

Mediation is an informal settlement process conducted by a neutral third party called a mediator. The mediator is not supposed to give the parties legal advice and cannot decide cases. The mediator’s job is to facilitate settlement.  The parties to a dispute meet with their mediator one-on-one, usually at the mediator’s office. The mediator will get each side’s account of what happened, find out what they want, and why they should (or shouldn’t) get it. The mediator will then go back and forth between the parties in an effort to get them to reach a resolution.

Mediation is relatively inexpensive when compared to trying a case. Mediation can also be used to obtain results that the court may not be able to provide. For example, in cases where owners of a business have had a falling out, are engaged in litigation, and will no longer work together, the ideal solution is for one to buy the other out. However, courts may only be able to stop any unlawful conduct and award money, they cannot force one party to sell.

Mediation is most effective when the parties are ready to go, willing to give up something, and have the right mediator. The parties should have enough information about their case to make an informed settlement decision or should otherwise be motivated to get their case resolved. In some cases, the parties are ready to mediate before a lawsuit is filed. Other times, years are spent developing a case before the parties are ready to mediate. Another important factor to consider, is the parties and the mediator’s personalities and preferences. If the parties don’t like or don’t trust their mediator, they are unlikely to feel comfortable settling their case in that environment. If a case does not settle, it will ultimately be decided by a judge, jury, or arbitrator.

Arbitration is a binding dispute resolution process where cases are presented to an arbitrator or panel of arbitrators who hear and decide the parties’ dispute, instead of a judge or jury.  The parties must have agreed to arbitrate. Usually, arbitration agreements are contained in contracts that later become disputed, but parties can agree to arbitrate after a dispute arises. Arbitration is not ideal in every case but does have its niche.

Arbitration may allow for a quicker resolution to a case, if the parties are so motivated. Often arbitrators are able to make themselves available to the parties and can streamline the process by changing or eliminating rules of procedure that courts follow. Parties to arbitration almost never have the right to appeal an arbitrator’s decision, which means a case is not drawn out for years and the parties save money on appellate costs. Having no right to appeal is not ideal when the arbitrator reaches an unjust decision. Also, from a public policy view, in arbitration no precedent is set that will inform the public of how courts interpret laws.

Although arbitration is billed as a less expensive option to the court system, that is often not the case. In addition to parties paying their lawyers, they also have to pay the arbitrator, who may charge for any time spent working on the case (e.g. reviewing documents, conducting hearings, etc.) These fees can be tens of thousands of dollars.  By comparison, court costs are usually a few hundred dollars.

Arbitration can be a good fit for cases involving extremely or technical matters, where there is no good way or not enough time to educate a jury on all the complex factors that must be considered. Under those circumstances, the parties may benefit from an arbitrator with applicable knowledge.  Arbitration is also confidential, so the allegations made, evidence offered, and outcome of a case will not be made public.

If you find yourself in a dispute that may end up being litigated, it is wise to seek advice from an experienced attorney who can recommend options for resolving your dispute.

 

Ryan Webster is an associate attorney with Alagood Cartwright Burke PC.  Please contact Ryan at rwebster@dentonlaw.com or www.dentonlaw.com.