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Going to court can be incredibly expensive. With legal fees, lost–work time, and court costs, the expense of preparing for a trial can be thousands of dollars. Fortunately, there are alternatives to litigation that an increasing number of companies take advantage of. Mediation and arbitration can allow you to avoid litigation while maintaining confidentiality for all parties.
While mediation and arbitration are both designed to resolve issues fairly, they are very different in practice. Mediation involves the use of a neutral third–party to help two conflicting parties negotiate, compromise, and reach a mutually agreeable solution. (Think of a mediator as a skilled person that helps both parties in a dispute remain calm, focused, and reasonable.) A mediator does not make decisions; his or her job is to help two parties reach a solution that they are both comfortable with. Mediation is also non–binding; parties who enter mediation are under no obligation to reach agreement.
Arbitration also involves a neutral third party, but the arbitrator's role is to listen to both sides, view any evidence, and make a decision. In effect the arbitrator acts as a judge or jury. The parties can agree in advance that the arbitrator's decision will be binding, or they can have a nonbinding arbitration.
Let's look more closely at both litigation alternatives.
In mediation, a mediator meets informally with the parties to a dispute and attempts to help them reach an agreement. The mediator does not judge the case but instead seeks to facilitate discussions, the flow of information, and eventually a resolution of the dispute in question. Mediation may be a first step in resolving a dispute, or the parties to a lawsuit may attempt to mediate a dispute after litigating it for several months, in hopes of avoiding a trial. In fact, mediation may be required in your jurisdiction as part of the pretrial process.
Mediation can be used for almost any type of dispute. ’Pre–suit’ mediation, or mediation that occurs before a lawsuit is filed, is a great way to resolve a dispute before litigation even begins.
Mediators are usually either chosen jointly by the parties to the dispute, or appointed by the court. Mediators do not give legal advice and do not offer legal judgments. Sometimes parties participate in mediation without hiring attorneys, and sometimes the parties bring attorneys with them. If the parties are able to reach an agreement, they will typically memorialize it in writing.
Mediation has several advantages and disadvantages:
While arbitration can be nonbinding, most people use arbitration as a binding form of dispute resolution. An arbitrator serves as a ’judge,’ hearing the arguments and evidence – evidence that is not limited by judicial rules of evidence – of both parties and then rendering a binding decision. Some cases are handled by a single arbitrator; another common approach is for each party to choose an arbitrator, with the two arbitrators then selecting a third arbitrator to serve on a three–person arbitration panel.
Once an arbitrator renders a decision in a binding arbitration, the parties are bound by it: there is no right to an appeal. And while it may not be true, some people feel that arbitrators are more likely to ’split’ a decision in order to at least partially satisfy both parties.
In a nonbinding arbitration, the parties are not bound by the arbitrator's decision. If either party is unhappy with it, they can proceed with filing a lawsuit.
Arbitration can dramatically decrease the cost of settling a dispute. Although the parties must pay the arbitrators, the hearing is typically shorter than a jury trial and arbitration rules restrict pretrial discovery and motions. That means the dispute can typically be settled more quickly and legal fees are not as high. Another advantage to arbitration is that the proceeding is private and avoids a public trial.
If you like the idea of using mediation or arbitration as an alternative to litigation, there are several ways to make that possible:
But before you choose mediation or arbitration, get the opinion of an experienced lawyer. In some cases it may be to your advantage to litigate a dispute in court rather than resolve it through alternative methods.