A Cost-Efficient Alternative to Litigation Alternative Dispute Resolution can be a better solution to legal conflicts.
By Denise Farris
You’re faced with a business dispute. For one reason or another, one or both parties are dissatisfied and are making demands the other party believes are unfair or unjustified. The parties are in a stalemate where it appears the only options are either letting it go, or litigating.
Litigation is scary and comes with a lot of unknowns. How can you estimate the litigation costs? What impact could it have on your business and your reputation? What (horror!) if you lose? All of these are valid questions that apply to any business dispute in litigation. So is there any other choice?
Alternative to Litigation Most people are not aware that they can submit their disputes to voluntary ADR, or “Alternative Dispute Resolution.” ADR is a dispute resolution mechanism that has been widely and successfully used for centuries. Remember the famous Bible story of Solomon presiding over the two women claiming one baby? Solomon’s role in resolving the dispute essentially involved elements of ADR.
In modern practice, ADR has not only been employed successfully over the past 30 years or so, but now is required by most courts as part of the litigation process in an effort to clear clogged litigation dockets. ADR is particularly well suited for small business disputes where a legitimate dispute exists but litigation costs could quickly outstrip any possible recovery.
In considering ADR methods, recognize that there are distinct differences between the two ADR mechanisms: arbitration and mediation.
In both arbitration and mediation, all parties must voluntarily consent to submit the matter to the arbitration or mediation process. Such consent is required in writing in the arbitration process but can be verbal in the mediation process. The key is that neither party can force the other to submit to arbitration or mediation against their will. Arbitration In arbitration, the parties agree to submit the matter for consideration to a neutral, independent arbitrator who typically has received formal training in the field. The parties have the ability to choose, through mutual consent, their arbitrator or mediator. This factor alone can be beneficial in business cases, as it allows the parties to seek someone familiar with industry practices, a benefit not always available in the judicial process.
The process can be informal, or the parties can agree to submit the dispute to arbitration under set rules established by the American Arbitration Association. The process can be conducted through association offices or through private arbitrators.
In arbitration, the parties jointly decide how to manage discovery, witness depositions (if needed) and the time and manner for the arbitration hearing. In most instances, the parties agree beforehand to a mutual exchange of documents for use at arbitration, and a date prior to the hearing to exchange the documents.
The arbitrator hears the evidence, much as a judge would, but can interrupt at any time to ask questions or request clarifications. The arbitrator then issues his or her decision, which can be detailed or simply a summary disposition of the case, depending on the level of detail requested by the parties.
The arbitrator’s decision is then registered with the local court as a “final decision,” which typically cannot be challenged legally or appealed except in limited circumstances involving evidence of arbitrator bias, which affected the final judgment, or evidence that the arbitrator exceeded his or her authority. Unlike litigation, an arbitration decision may not be legally challenged due to errors of law or misjudgments of fact.
Mediation As a more informal dispute resolution mechanism, mediation does not involve a quasi-judicial person, but instead employs a neutral third-party facilitator who listens to the claims of both sides, then typically splits the sides into separate rooms and talks to each, discussing the facts and the law of the dispute in an attempt to facilitate a settlement.
The statements and opinions of the mediator, while non-binding, can be helpful in allowing both sides to consider the strengths and weaknesses of their case to determine whether compromise and settlement may be the best alternative. Statements made by either party during the mediation process are deemed confidential and cannot later be used against the party in court.
Contrary to arbitration, mediation is non-binding and either party may elect to terminate the mediation at any time, or agree to continue settlement discussions even if settlement is not achieved at the time of the mediation. Even where the mediation is not successful, both parties receive a more impartial review of their case, which can be beneficial in moving to litigation, if necessary.
If you currently have a case that is heading toward litigation, consider asking your lawyer if arbitration or mediation might be a better and more cost-effective alternative for dispute resolution. Your local bar association can provide you with the names and addresses of locally trained mediators and arbitrators, or you can contact the American Arbitration Association.
Denise Farris practices commercial construction, business and equine law. She has served as the past chairperson of the Missouri Bar Construction Law Committee and the Kansas City Metropolitan Bar Committee. She is a member of the national steering committee of the American Bar Association’s Forum on the Construction Industry. She can be reached at (913) 685-3192 or .
