Sunday, April 29, 2007
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.