Alternative Dispute Resolution (“ADR”), Arbitration and Mediation
Arbitration and mediation are forms of ADR, which is short for “alternative dispute resolution.”
Traditionally, legal disputes were resolved by a trial which took place in court. A judge presided over the trial and a jury decided what the true facts were and how much money (if any) should be paid to the complaining party (usually called the “plaintiff”). The jury trial system was a great achievement in law, and is a constitutional right under many circumstances. Nevertheless, it has its drawbacks:
- A trial is in a public courtroom, requires formal presentation of evidence and witnesses, often is decided by a jury, and the outcome can be appealed by any aggrieved party.
- Trials are time consuming, taking place when directed by the court even when inconvenient for the parties.
- Trials require a great deal of preparation by way of expensive and time-consuming depositions of the parties, witnesses, doctors and expert witnesses.
- It is especially difficult to obtain the cooperation of doctors, and always expensive to do so.
- It is very emotionally taxing for a victim to testify in a public courtroom, in front of a jury. It is equally difficult to have to listen to the testimony of defense witnesses, the arguments of the defense attorney, and to be cross-examined.
- The trial of a dog bite case costs the victim anywhere from $15,000.00 to $30,000.00 or more. Delays can double or triple the costs.
- The decisions of juries cannot be predicted. Jurors are selected at random and usually have no knowledge of law and no practical experience that would make them great “judges.” They have no reason to be fair other than civic responsibility.
- A win for one side is an appeal for the other, extending the process by years and further increasing its costs.
- If a plaintiff wins, he might not collect his winnings. Defendants can declare bankruptcy, some states make it nearly impossible to collect on a judgment, and insurance companies can “go under.”
Alternative dispute resolution simply means ways of solving disputes without having to go to trial. The goals of ADR include resolving the case faster, more efficiently, at more convenient times, with mild impact on the victim, at a lower cost, and with greater predictability. The rules of many courts require the parties to arbitrate or mediate prior to a case being scheduled for trial. Such a proceeding is referred to as “court ordered,” and may or may not be binding.
The differences between arbitration and mediation have to do with formality and finality. Arbitration results in a final decision and therefore the rules of evidence must be observed to a certain extent. Mediation is much less formal because the parties are there to hammer out an agreement rather than to fight over the true facts, so the rules of evidence are not observed unless there is a special reason to follow them. Additionally, mediation usually is not binding and therefore is not final if the parties do not reach a settlement.
The most common form of ADR is mediation. It essentially is a non-confrontational, private conference with the opposing side and a mediator, where both sides attempt to arrive at a mutually acceptable settlement agreement. In a personal injury case, mediation is often used to settle prior to trial; judges commonly order a case into mediation as part of the litigation process. Sometimes the parties stipulate in advance that the mediator’s opinion of the value of the plaintiff’s case will be binding on the participants if they cannot settle the case by themselves. The latter type of proceeding is called a “binding mediation” or in some states a “med-arb” (pronounced “meed-arb,” short for “mediation arbitration”).
50 or 60 years ago, wealthy people started hiring retired judges to conduct private mediations instead of public trials. Essentially the participants agreed to resolve their differences through a third party whom they could agree upon, at a short proceeding held at their convenience and conducted under their own rules. By giving up their right to a trial, they eliminated the other side’s right to endless appeals. The process and the results it achieved were so satisfactory that mediation and other forms of “alternate dispute resolution” have become the preferred method of resolving lawsuits and insurance claims.
One of the many advantages of mediation over trial is the ease of introducing evidence as well as the lower cost of doing so. In the mediation of a dog bite case, for example, we can use medical reports to establish the extent of an injury, while in a trial we have to pay all the doctors whatever they ask so that they will testify there in person. This means that we also have to pay them to prepare them for their testimony and for the time they “pre-testify” in depositions. As a practical matter we also have to pay the defense doctors for deposition testimony so that we will know what they are going to say at the trial. This becomes very expensive. We also need to make sure all of the other witnesses are present in court, ready to testify, which again means we need to take their depositions ahead of time. Similarly, we have to pay graphic artists to prepare exhibits, and pay for the services of the court reporters and jurors. None of this is necessary in a mediation.
Mediation and other methods of alternate dispute resolution are much kinder and gentler on the clients. A hearing takes a half day or a day; a trial takes a week. The date is at everyone’s convenience; a trial date is set when the court has time, no matter how inconvenient for the parties (with limitations for serious illness, etc.). In most mediations, the client does not have to testify (nor do the witnesses), whereas at a trial we not only have to produce live testimony but we have submit to cross-examination and also sit through the testimony of defense witnesses. This can be emotionally draining and in some cases even devastating.
The mediation session takes place in an office suite with the plaintiff (or a child-victim’s parents) and the plaintiff’s lawyer in one room, and the insurance company representative and lawyer in a separate room. If agreement is reached as to a child’s case, the mediation is followed up with obtaining an annuity for the child, and then a short court hearing at some point in the future.
Getting back to the economic side of this, one of the most significant problems with a trial date is that, after spending all the money to book the doctors and witnesses for certain days, we frequently arrive on the first day and are told to come back in a week or month because the judge’s calendar has been overbooked. This means that the anticipated cost of our trial can jump by 50%, 100% or more.
The person who is mediating or arbitrating is an experienced professional, frequently a retired judge, who is selected by mutual agreement and depends on maintaining a good reputation in order to obtain future business. In the mediation, he simply is trying to get the parties to agree to a settlement; in an arbitration or binding mediation, he will make a decision based on his learning and experience, with a view toward maintaining that good reputation. On the other hand, the decision-makers at a trial are jurors, members of the community who are selected randomly. None can be counted on for having any particular expertise which would make them a great judge, and none have a stake in the process. Looking back on the decisions made by mediators and arbitrators, I can tell you that almost all of their decisions have been helpful and fair, and that there have been few mistakes. After a trial, however, either side can point to minor or even major errors that can send the case off to an appeal which will take years to resolve. This almost always happens when an injured party wins big. It extends the process and increases our costs.
Finally and perhaps most important, 9 out of 10 mediations result in a fair and adequate settlement. Remember, a mediation is a process where the parties attempt to agree as to the amount that the defendants will pay to the plaintiff. If one does not agree, one can go to trial afterwards. Almost all the time, the mediator gets the parties to accept a fair number. That in and of itself is one of the best reasons to mediate. We can’t count on a jury to do the right thing, but we can count on a retired judge who works as a mediator.
A less common form of ADR is arbitration. Arbitration is similar to a trial, but more convenient, streamlined and economically feasible. It is preferable to mediation when there are factual disputes that must be resolved by evaulating the testimony of witnesses or the parties.
- Arbitration takes place in a conference room, presided over by a hand-picked, mutually agreeable, professional mediator or retired judge, without a jury. The arbitrator’s living depends on his education, experience and reputation for fairness.
- The date and time are agreed to by the parties, not dictated as they would be if there were a trial. There are no delays unless the parties so agree.
- Witnesses do not necessarily have to be present, and doctors can testify through written reports.
- The hearing usually takes one day, not a week.
- The judge makes a decision which usually is binding upon the parties. When it is intended to be binding, it is called a “binding arbitration.”
- Creativity is possible. For example, an arbitration agreement might provide for a certain range of recovery for the victim, no matter what the arbitrator rules (i.e., the parties might stipulate in advance that the victim will receive not less than $10,000.00 or more than $25,000.00).
- An arbitration in a dog bite case often costs the victim about $3,000.00, so there would be a savings that, especially in a small case, would be significant.
- The arbitrator’s decision is usually final and cannot be appealed.
ADR should always be considered in every case. It is the modern way of resolving disputes, especially good for injured persons because the litigation will cost less and will produce faster results. ADR can be done before or after the filing of a lawsuit, depending on the judgment of the parties’ representatives.