When Might Arbitration Be The Right Choice to Resolve Your Dispute?

I have posted prior articles detailing the differences between arbitration and mediation here and here, with the main difference being who is charged with deciding the outcome. Mediation allows the parties to create a settlement on their own terms with the help of the neutral mediator whereas arbitration involves a decision being made for the parties by the neutral arbitrator after hearing evidence and testimony.

As a trained and experienced practitioner of both arbitration and mediation, I do not hesitate to disclose my bias toward mediation as opposed to arbitration as the best method to resolve most disputes. However, I have seen the benefits of arbitration in some circumstances and will discuss these circumstances below.

I am not reluctant to make decisions for people in order to help them resolve their dispute in arbitration because I am interested in general in helping people resolve disputes. However, I am generally convinced that a better solution for everyone involved could be reached if the parties and their counsel put their heads together with a skilled mediator to widen the pool of options and get creative in figuring out how to meet the needs of all parties. A solution that comes from the parties themselves (i.e., mediation) usually feels more acceptable and satisfying to the parties because it has not been imposed - it has been mutually reached by the parties. There is no winner or loser in mediation since the goal is to create win-win situations every time. This is not the case in arbitration - in which there is typically a winner and a loser.

Although I have seen phenomenal results from mediation, it is true that mediation does not solve every dispute on the day of mediation. This may be due to many factors which are not controlled by the mediator: lack of key information, lack of settlement authority, unrealistic parties and/or attorneys, parties who refuse to actively engage in the mediation process, or other emotional obstacles to decision-making by the parties. Often mediation helps get the parties closer to where they need to be and they settle after mediation as a result of the mediation itself or the follow up calls made by the mediator.

Because mediation is not 100% guaranteed to settle the matter on the day of mediation, parties seeking finality regardless of the outcome may prefer arbitration just to have a set ending point. Many parties start with mediation because it is faster and less expensive than any other dispute resolution method and results in the most satisfaction to the parties. Arbitration or litigation is still the backup method to solve the dispute in case a settlement cannot be reached at mediation. However, some parties or attorneys choose to skip mediation and dive right into arbitration to have a guaranteed result to end the dispute one way or the other. I have three recent examples of this phenomenon in action:

1. In a personal injury car accident, the plaintiff's counsel prepared a detailed settlement demand to the insurance carrier for the defendant. The response from the carrier indicated the parties were nowhere close to seeing eye-to-eye on issues of liability and damages. Plaintiff's counsel made a strategic decision to demand arbitration right away based on the attorney's experience with the particular carrier involved. Had it been a different carrier involved, the attorney may have recommended mediation first knowing the likelihood of settlement is typically high, just not so with this carrier.

2. In the case of neighbors in a property/land use dispute, the parties were warring for so long that they refused to consider even sitting down to a mediation. This was despite the fact that the case was ideal for mediation in needing a creative and collaborative outcome and despite the fact that they all needed the dispute to be over because of the financial loss and turmoil the dispute caused the parties and their families. Instead, the parties wanted someone qualified to "choose" the winner for them. The parties were satisfied with an outside neutral person making the decision and putting the dispute to rest at last through a binding arbitration award.

3. Finally, there are times as a mediator when I recognize that decision-making itself is simply a difficult task for some people. Although I sometimes see this in neighbor disputes, I more often see this in family law matters. I often have family mediation clients ask me to serve as their arbitrator in the event that they cannot reach their own agreements. I have not had to do this as the parties have surprised themselves (if not me) by reaching agreements and making tough decisions that will affect them for the next 10, 20 or more years. And they have done this through mediation despite the fact that they were unable to do this privately without a mediator.

Although my own preference would be to stay in control of the outcome if it was my dispute, I recognize that arbitration might be the more desirable option in some cases for some people. There are situations in which arbitration is the wise choice - whether to get a guaranteed end to the dispute through binding arbitration by a date certain or to alleviate the difficult burden of having to make tough decisions and leaving it in someone else's capable hands to resolve the dispute for you. It is precisely because of these situations that I offer arbitration services despite my championing the great results that are achieved through mediation every day.

Property Disputes Solved With Mediation

Property disputes can be resolved with less time and money through the use of mediation instead of drawn-out and expensive litigation. While some property disputes arise out of real estate purchase deals, other property disputes have more to do with property use. I mediate (and arbitrate) all types of property disputes and am called on about half of the time to mediate purchase-related disputes and half the time to mediate these other "property use" disputes.

Property use issues can include: adverse possession, boundary disputes, construction disputes, environmental contamination issues, landlord and tenant matters, and other "use" issues which can arise between a homeowner/landowner and neighboring landowners, a city, or a homeowner's association.

While real estate purchase agreements generally require mediation of any disputes (see prior post on that issue here), other property use disputes typically find their way to mediation or arbitration because of the financial cost and risks associated with court litigation.

Experienced attorneys as well as landowners, landlords, tenants, cities and HOAs also understand that there is often much more to property disputes than just who owes what to whom. Money might be a central issue in certain disputes, but there is usually much more to it than just money. More creativity is generally required to find solutions that will work for the parties' unique circumstances and disputes or that will improve the parties' ability to communicate and work productively together to find workable solutions.

Mediated solutions are not limited to the current dispute but also include figuring out how the parties can prevent and/or resolve future problems to avoid having to start down this path again. Such proactive solutions help the parties to reduce stress and monies spent in future disputes and therefore provide long-term cost savings to the parties as well as the mental health benefit!

These types of issues are not touched on - much less resolved - through the use of adversarial and contentious litigation. Mediation allows for the exploration of creative solutions that are more tailored to meet the specific needs of the parties than litigation allows for. And having the dispute resolved within weeks with mediation versus months or years with litigation is yet another great benefit!

Mediation Tips for Attorneys

The primary goal of mediation is to help the parties resolve their disputes. As a mediator, I do not represent any of the parties or their individual interests; instead, I am neutral, meaning I am not biased toward the interests of any one party over another. That is the job of the attorneys in the case.

Although it is the job of the attorneys to promote and protect the interests of their clients, there are certain things attorneys can do to help the mediation process (and to help their own clients) which may differ from the strategies attorneys typically employ in litigation. These are my "tips" for a successful mediation.

Preparing For Mediation: I often see attorneys who spend considerable time preparing their clients for depositions but almost no time preparing their clients for mediation. As attorneys, we are so familiar with mediation and the distinctions between trial, arbitration and mediation, that we often forget that part of the job of the attorney is to "translate" the legal world for our clients and to prepare them for what to expect at each stage of the case, including mediation. Clients need to be prepared for the mediation process, including the environment, the level of formality/informality, who will be present, who will be making decisions, how long the mediation might take, what the role of the attorney is and what the client's role is and how the client should prepare for the mediation.

One of the best ways I know to prepare a client for mediation is to explain how litigation works in the real world. This means explaining that although offers and demands may be exchanged, each side must constantly re-evaluate the merits and challenges of their case during litigation based on new facts or information that comes to light or is viewed in a new light. Each side continually determines the potential value of the case and what the merits and challenges are of the alternatives to settlement. The case value and alternatives are not static - they are constantly changing in often unexpected ways. Trial attorneys understand this phenomenon but we need to be sure our clients understand this as well. The more the client understands the constant re-evaluation required in litigation, the more the client will be thinking realistically about a fair resolution at mediation under the unique circumstances of the case because, just like other proceedings or stages of a case, mediation often results in the discovery of new factual or legal information that significantly impacts the case; attorneys and clients must be prepared for this in order to re-evaluate their case and reach a fair settlement.

This does not mean the client must sacrifice his or her needs or interests in mediation - quite the contrary actually. Clients are frequently "stuck" at a certain mindset or settlement value based on what they have heard from their attorneys (or their friends who are not involved in the case) instead of thinking about their own interests, motivations and needs. The more realistic the attorney is up front about the value of the case and the challenges and costs involved and the constant re-evaluation that is needed, the more prepared the client will be to enter into a fair and reasonable settlement at mediation based on all of the information.

The Mediation Process: Whether your mediation is required by contract or court order or is completely voluntary, the mediation process is different from a court hearing or trial and has unique benefits for your individual client. Your clients are paying not only for the mediator's time but for the mediator's skill and experience in resolving disputes. Trust the instincts of your chosen mediator to do the job for which she or he has been entrusted to perform and to guide the process in a way that satisfies the needs of the parties on multiple levels and allows a settlement to be reached.

The mediator can use all the insights and information the attorney has to offer which can help illuminate the underlying interests of the parties, bridge gaps between the parties and arrive at an agreeable resolution. The more information you can provide your mediator, the more tools the mediator will have to work with. Feel free to talk to the mediator one-on-one with any information you think might be helpful. You can do this before or during the mediation and attorneys should prepare their clients for the possibility of this happening. As a mediator, I always let parties and their clients know that I may use private meetings with each side or just with their attorneys on occasion, and that the confidentiality of these meetings can be enormously productive in helping to get the case resolved.

Think Holistically: Your client came to you not because he or she enjoys litigation (if so, you have larger issues to deal with!). Your client came to you so that you could solve a problem for them. The question for the attorney is whether a proposed settlement is in the best interests of your client. Your client may or may not know what is in his/her best interest and relies on your legal knowledge and recommendations. The best interests of the client are not always met with discussions focused only on money. Although money-focused discussions are often a central discussion point, frequently, it is the non-financial discussions which help seal the deal.

As the attorney, you want what is best for your client and you want a settlement you can feel good about. I want the same thing; the only difference is that I want all parties and their attorneys walking away feeling good about the mediation process and the settlement that was reached based on the unique facts and circumstances of each particular case.

Mediation of Transactional "Disputes" - Contract Negotiation

About a quarter of the mediations I conduct are not mediations to resolve litigated disputes but are instead mediations of contract negotiations. In these transactional mediations, there is no actual dispute. In fact, the purpose of the mediation is to prevent an actual dispute from arising, causing the negotiations to break down entirely or to result in litigation.

As a mediator, I am hired to help parties work toward and arrive at agreeable terms and specific language for their contract while preserving the professional and personal relationships of the parties.

As in any mediation or contract negotiation, whether it is for a business or real estate deal, an employment agreement or a prenuptial agreement, one of the purposes of transactional mediation is to help the parties communicate productively. I work to make sure the communications do not devolve the negotiation process into an adversarial contest that damages the relationship of the parties.

One of the ways I do this is by posing some of the most difficult questions to each party myself rather than having the parties appear to be attacking each other by asking the difficult questions necessary in most contract negotiations. Using this method of communication allows me to deflect some of the tension and defensiveness away from the parties and to minimize the adversarialness between the parties which ultimately helps the parties reach a well-thought out and durable agreement.

There is a real sense of team-work in transactional mediations that is not always present in mediated litigation disputes despite the best efforts of the mediator to foster such a sense of working together. Transactional mediation is not just contract negotiation, it is also relationship preservation and, often, improves the parties' ability to communicate productively with each other in the future.

Mediator Move in Progress....

I am in the process of moving to a new suite of offices in my building. My regular weekly posts will resume shortly and I plan on posting some pictures of the new mediation space I'm so excited about!! Stay tuned.....