ARBITRATION, MEDIATION, OR LITIGATION?

Arbitration

The Benefits:

Arbitration is basically an agreement between the parties to resolve a dispute outside of the court system. The parties agree upon a third party to act as the “judge and jury.” After giving the parties the opportunity to present their side of the story and to present any relevant documents or other evidence, the arbitrator decides who wins and who loses. The rules as to how arbitration is conducted is typically left to the agreement of the parties.

Arbitration proceedings are private (although the courts sometime require non binding judicial arbitration of cases). Private arbitration is initiated by the parties and paid for by the parties. They are voluntary. The parties do not have to wait until a lawsuit is filed and can initiate arbitration at any time. The process can be tailored o fit the parties' specific needs and the demands of the case.

There can be binding and non-binding arbitration. A “binding” arbitration generally means that the winning party can take an arbitration award to a court of law and enforce it if the losing party does not comply with the terms of the decision. “Non-binding” arbitration refers to a situation where the parties agree to use arbitration as a forum to try to resolve their differences, but neither party is bound to comply with any decision by the arbitrator.

The Risks:

Arbitration is not a panacea. There are many downsides to arbitration also. Reduced costs might encourage persons to bring an action which might never have been brought to court. And, the informality of the system lets plaintiffs proceed without legal counsel, removing another impediment to conflict. The rules of evidence don't apply, so hearsay and even irrelevant facts can be brought to the attention of the person helping to resolve the dispute. This could potentially color his or her thinking. Neither side has the right to appeal. And, the verdicts of arbitrators are too often perceived by observers as a compromise resolution. Formal written opinions are rare and are not required. Further, there are no guarantees that arbitration will be a fair process. Without the right to appeal, there is always the risk of being subject to the whims and prejudices of the arbitrator. And, in the absence of an arbitration clause, the parties may be more inclined to compromise rather than pursue an expensive lawsuit. If arbitration is an option, though, there may not be the same deterrents and the parties may simply elect to fight about something rather than try to work out their differences more informally. The judicial system affords greater discovery and the right to a jury trial. And, the losing party in a trial has a wide range of appellate rights and can challenge, for example, the sufficiency of evidence or the application of law.

There are usually no set rules as to how arbitration is conducted. It is typically left to the agreement of the parties. To facilitate the process, though, the parties will oftentimes agree to use the rules of an established organization like the American Arbitration Association.

Mediation

"'Mediation' means a process in which a neutral person or persons facilitate communication between the parties having the dispute to assist them in reaching a mutually acceptable agreement. Mediation is entirely voluntary. A Mediator helps the parties reach an agreement to resolve the dispute by a combination of information exchange and dialogue. Arbitration is adjudicatory, meaning that the arbitrator hears each parties case and renders a decision. Arbitration is usually binding while mediation is not. Mediation is relatively speedy, procedurally simple, inexpensive and private. The mediator acts as an intermediary in helping the parties resolve business and legal issues while explaining the relative strengths and weaknesses of the positions. At the conclusion of a successful mediation, all parties agree and the matter is resolved. If all parties do not agree, the matter can proceed to arbitration or traditional court channels.

The parties choose the mediator and can seek out a person who has had experience resolving similar disputes; or, where technical issues are involved, they can choose someone with appropriate expertise. This tends to result in having greater confidence in any recommendations the mediator may make. The major benefit of mediation is that the process brings the parties to a mutually satisfactory resolution and can preserve the relationship of the parties. It is a very flexible process and can be conducted in whatever form the parties wish. The initial decision to attempt mediation and any subsequent decision to continue the process is completely up to the participants. Mediators usually do not make findings or decisions. But even if they do, their findings are not binding unless the parties agree otherwise. Thus, the parties know the mediator cannot force anyone to compromise his or her position. Litigation is always still available.

Mediation may be used at any stage of a dispute. The parties can agree to mediate before or even after a lawsuit has been filed. Mediation can be used to solve disputes that have not yet risen to the point that a lawsuit could be filed. Mediation may also be used to develop information to enable each side to evaluate litigation outcomes and settlement potential.
Hearing the other side's version may provide a clearer focus on the problem. Also, by actively participating, the parties are able to vent their emotions and to feel they have "had their day in court." Placing the power to settle directly in the hands of the parties gives them a personal stake in the outcome. Settlements reached through mediation are less likely to unravel because they are not imposed upon the parties by someone else.

Mediation encourages settlement at a much earlier stage than litigation. It can be scheduled as soon as the parties agree to it and choose a mediator. The parties usually pay an hourly or per diem charge for the mediator's time. Moreover, the mediator's fee is usually shared so that the cost to each party, even if mediation fails, is quite moderate. Confidentiality is absolutely essential to mediation. Otherwise, parties would be reluctant to make the kinds of concessions and admissions that pave the way to settlement.
Mediation also permits creative resolutions. Lawsuits involve legal issues and can be resolved only by predefined legal remedies: e.g., money damages, or an injunction, rescission, restitution, etc. The parties are forced to define their positions in light of legal doctrines, causes of action and defenses. In contrast, mediation allows the parties to look beyond the legal issues and determine their underlying interests in the dispute. The possibility that mediation can result in a "win-win" solution for both parties is one of its most attractive aspects.

The animosity and distrust engendered by litigation usually destroys any chance for the disputants to resume a normal relationship. Mediation, on the other hand, is a cooperative process. The parties, with the help of the mediator, work together to fashion a mutually acceptable resolution. The process of mediation fosters an atmosphere conducive to maintaining and furthering relationships rather than destroying them. Even where a settlement is not reached, mediation can be useful in narrowing the dispute and sometimes in narrowing the settlement gap.

Mediation in Family Law Cases:

In family law, spouses can choose to mediate all of the financial, visitation and custody issues which accompany any divorce. Mediation offers those clients who are willing to sit down face-to-face with their spouses an opportunity to create their own settlement within the limits of the law. If two people wish to divorce amicably and simply need some help in understanding the laws governing distribution of marital assets, custody or visitation issues, mediation can quickly identify the issues and result in a negotiated settlement without the upset and significant costs associated with court action. Also where children are involved, mediation is usually less confrontational and provides a setting for both parents to voice their concerns which often results in a more fine-tuned and agreeable joint parenting agreement. In fact, in California, before the Court adjudicates custody and visitation issues, it requires the parties to engage in a mediation service through “conciliation court”, where the parties try, without the help of lawyers to resolve the dispute so that the Judge does not have to make a decision that one or both parties may not be happy with.