Lawsuits are expensive; and because most court dockets are
terribly overcrowded, it can take years to resolve the smallest
of disputes. Is it any wonder, then, that even winning
parties frequently find litigation less than satisfying?
Different, effective and economical ways of resolving disputes are
needed. This is where various forms of alternative dispute
resolution (“ADR”) like mediation and arbitration come in.
Mediation has no fixed form or rules. It is most often a non-binding
informal process in which the parties to a dispute work together, with
the help of a neutral facilitator (the “mediator”), to voluntarily
settle their dispute. The mediator does not determine who is at
fault or what the proper value of a claim may be, but does help the
parties reach a resolution by helping them define issues, identify
needs, and eliminate communication obstacles. While lawyers can
participate, it is really the parties themselves and the mediator who
carry the laboring oar. Ultimately, if a mutually acceptable
accord is not reached, no settlement is consummated and the parties are
free to pursue arbitration or litigation.
Sometimes people believe that mediation is not useful because it
does not force the parties to resolve their dispute. We disagree.
We believe that creating a process that requires the parties to
attempt to settle their differences before initiating litigation
gives them an opportunity to negotiate with one another without
being concerned that such negotiations will indicate to the other
side that they lack confidence in the strength of their own positions.
Importantly, requiring mediation should not relieve the parties
of the obligation to analyze their own case in an honest and
critical fashion. Some mediators feel that they blur their role if
they provide such a “neutral evaluation” to the
parties, even if it is given confidentially to each party
separately. However, neutral evaluation could still be built
into the mediation process. For example, the mediator could
require the parties to obtain a “second opinion”
of their own case as part of the process. The second opinion would
help to ensure that the parties approach the mediation process with a
realistic view of the strengths and weaknesses of their
own cases.
For years, arbitration has been the ADR method of choice for resolving
commercial disputes. While the use of mediation has experienced
greater growth in recent years, arbitration is still used quite often.
Arbitration is a process in which two or more parties to a dispute
agree to submit the dispute to one or more neutral decision makers
(“arbitrators”) for the entry of a decision. While arbitration
more closely resembles litigation
than does mediation, there are a number of important distinctions.
First, the parties themselves have substantial input in drafting the
ground rules. Hence, the process can be as formal or informal as
the parties desire. Moreover, the outcome can be binding or
non-binding.; As a result, the parties can arbitrate their dispute,
and then use the non-binding decision to foster a settlement.
Benefits common to both arbitration and mediation are:
¨
Confidentiality - the parties can choose to keep their dispute private¨
Expense
- the parties are better able to control the cost of resolving their
dispute
¨
Timing
- the parties can receive their arbitration decision in days or
weeks, not years
While there are many benefits to mediation and arbitration,
there are a number of drawbacks and not every dispute is
appropriate for ADR. For instance, mediation only works if both
parties want to resolve the dispute. If one party “wins”
by dragging out the dispute, mediation will not be successful.
Similarly, if settling a dispute is likely to lead to additional
claims being filed, litigation is likely
preferable to ADR.
While there are other forms of ADR, such as mini-trials and summary jury
trials, mediation and arbitration remain the most commonly used methods.
In fact, even the IRS is in the process of expanding the types of cases
in which it will agree to mediate.
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