by Joshua B. Rosenzweig (Summer 2018)
Since 2006, I have counseled numerous small businesses and individuals in various types of cases from simple contract disagreements to larger construction disputes to complicated trust matters. During my tenure as an attorney, I have tried to accomplish every client goal in a cost-effective, time-efficient manner. On many occasions, I will attempt settlement of a dispute prior to filing a lawsuit. Although settlements sometimes leave clients feeling as though they did not get the “pound of flesh” they desire for being wronged, clients often appreciate efforts at settlement because litigation can be time-consuming and very expensive.
If clients’ goals include the avoidance of lengthy delays and the significant expenses that are often attached to going to court, alternative dispute resolution (“ADR”) can be an effective substitute.
In most instances, ADR consists of mediation and arbitration. Mediation generally requires that parties to a dispute agree on a neutral third party to act as the intermediary between them, agree on a location to conduct the mediation, and sit in two separate conference rooms for a day or two, while the mediator runs back and forth between the rooms trying to bring the parties to an agreement. Arbitration requires that the parties agree on an arbitrator (sometimes three depending on the rules agreed to by the parties) to act as a judge who will preside over a quasi-trial wherein the arbitrator considers the parties’ evidence and arguments and eventually makes a ruling as to who wins and who loses.
ADR can be an effective means of resolving disputes for parties who seek to avoid going to court. And, depending on the nature of the dispute, such as in contract disputes where there can be a mandatory mediation and/or arbitration clause, the parties may be required to go to ADR before a lawsuit is filed.
There are several benefits to ADR that clients must consider. First, ADR can be a much more cost-effective means of resolving disputes. If mediation is agreed-upon or mandated, the parties, generally, have to prepare a single mediation binder to educate the mediator on their respective positions. Once that mediation binder is prepared and submitted, there are no additional court appearances to make, no depositions to take, and no oral arguments to prepare for leading up to the mediation. Instead, in mediation, the major event is the mediation itself.
If arbitration is agreed-upon or mandated, there are more formal guidelines than in mediation (i.e., there may be multiple telephone conferences with the arbitrator regarding the status of document exchanges, witness presentation, or evidentiary issues), but those events do not require an appearance in court (which generally would include travel time and time sitting in a courtroom waiting for a case to be called). Again, generally, the arbitration process provides a specified amount of time for the parties to produce their witnesses and evidence, and then a hearing takes place.
Second, because mediation and arbitration are more informal than a court proceeding and ultimate trial, the parties may be able to more freely identify for the mediators and/or arbitrators their respective positions without concerns of admissibility. For example, often times in mediation, mediators will attempt to appeal to the parties’ sensitivities to get the parties to reach a resolution. The mediators might tell one party how much better it will be for that party to not have a dispute hanging over its head, while at the same time telling the adverse party that it needs to get this dispute resolved because the dispute is impeding growth in other areas of that party’s business.
Moreover, the reasons for settling a case are not admissible in court and may often be found improper to discuss. However, the personalities, financial positions, and other events affecting the parties may be information that mediators can use to push parties to resolve a dispute, whereas none of those items would be considered by a judge in a court proceeding.
Third, mediation and/or arbitration can give the parties a sense of control over the process. Clients often do not feel as though they have any control over a dispute once a court case is filed. For instance, clients feel that if the judge rules against them once, the judge will always rule against them. In ADR, clients have a choice about who is the mediator and/or arbitrator.
Although there are significant benefits to ADR, some of which are outlined above, there are also factors weighing against ADR that parties must consider. As an initial point, most people do not know what ADR is, what mediation means, or how arbitration works. Clients also confuse mediation and arbitration. Therefore, simply not knowing what ADR involves can drive clients to file suit despite their counsel’s best efforts to explain why ADR might make sense in a particular situation.
Additionally, ADR procedures generally require that parties agree – first, to go to ADR; then, to choose a mediator or arbitrator. The parties have not agreed on anything, which is why one of the parties is sitting in a lawyer’s office, and now they are supposed to agree on multiple major factors relevant to resolving their dispute?
Finally, despite the parties’ intent that the mediation and/or arbitration bring their particular dispute to a final resolution, it is possible that the mediation and/or arbitration may be non-binding. Therefore, despite the parties’ initial intent that ADR bring the case to a final resolution, parties may change their minds, leading to an ADR proceeding being only one step in a longer resolution process.
ADR can be an effective means of resolving disputes between parties that seek to avoid the expenses and delay that come with a battle in court. However, there are drawbacks to ADR that clients must consider. Clients should speak to their attorneys about the pros and cons of ADR before filing suit.