HOW TO DECIDE WHICH TO USE
PART ONE: MEDIATION
Obviously, when a business dispute arises between or among individuals and/or entities and cannot be resolved by negotiation, one alternative is to file a law suit and resolve the dispute through a court proceeding. That is not the only alternative, however. The most often used alternative dispute resolution (“ADR”) methods are mediation and arbitration or some combination of the two. Another method that is gaining some traction especially in Georgia is litigation with the use of a special master, instead of a judge and/or jury, to resolve some or all issues in the dispute. Most business disputes arise out of, or are related in some way to, a written agreement.
If an agreement out of which a dispute arises is silent on the method of dispute resolution the parties will use, any party may insist on resolution through traditional litigation in a court. Agreements to use ADR, however, are generally considered by most courts to be in the public interest, and most state jurisdictions and the federal courts eagerly enforce properly drafted ADR provisions. Therefore, a critically important element of every business agreement is whether to include a provision regarding ADR, and if so, which method or methods should be proposed to the other side. To make this decision, one needs to know what the pros and cons are of the various alternatives. In this article, we will lay out the advantages and disadvantages of mediation versus arbitration, litigation, or special master assisted litigation. In following articles, we will do the same for arbitration, special master assisted litigation, and various combinations of all three of these ADR methods.
MEDIATION: Mediation is sometimes ordered by a court when litigation has begun, but more often it is attempted by mutual consent of the parties as an alternative to litigation or arbitration. Many people think mediation is just negotiation dressed up in another name, but that impression is not accurate. Mediation is a structured dispute resolution method that is controlled and brokered by a highly trained and experienced professional mediator. Generally speaking, mediation is an indirect negotiation that goes through, and is guided by, the mediator.
The parties to the mediation and their respective attorneys are free to convey information to the mediator that the mediator is not allowed to share with the other party or parties. Nothing that is said or otherwise disclosed in mediation may be used by any party in any way in any subsequent litigation or arbitration. So the parties and their attorneys can freely share information with the mediator and with the opposing party. The mediator “caucuses” with the parties and their attorneys in alternating sessions in a type of “shuttle diplomacy.”
As a consequence of the structure of mediation, the brokerage of a skilled mediator, and experienced legal counsel, the mediation process is much less likely than direct negotiations to break down due to perceived insults, disrespect, or the need to project strength or resolve. The lawyers at Ichter Thomas have had numerous experiences in which the parties, going into mediation, believed the process was pointless and a totally futile waste of time and money, but, through the process, eventually resolved the dispute on a mutually acceptable basis.
If the mediator allows the parties to vent their frustrations and then focuses on the benefits of resolving the dispute, the parties often slowly and gradually work toward a resolution that, while not ideal, is better than not resolving the dispute. The mediator will also react to the respective positions and arguments of the parties providing a preview of how a neutral judge or jury might react to those positions and arguments. Mediation is concluded only when: (a) any party decides to end the mediation or (b) the parties sign a written and binding settlement agreement in front of the mediator.
Advantages versus litigation or arbitration:
- Mediation usually can be scheduled within a relatively short period of time and usually lasts for one or two days.
- Mediation is controlled by the parties; there is no compulsion to reach an agreement, and any party is free to terminate the mediation at any time.
- Mediation offers an opportunity to resolve a dispute relatively quickly and inexpensively, with relatively little risk.
Disadvantages versus litigation or arbitration:
- The mediator needs to be paid in advance, the attorneys need to prepare for the mediation, the parties must give up at least a few hours of their time, and there is no certainty that the mediation will resolve the dispute
If you have any questions or comments about this or any other legal issue don’t hesitate to contact me at any time. I would be happy to talk with you.