Alternative Dispute Resolution
Litigation is not only expensive, but it is time-consuming and emotionally draining. Seldom is litigation the best option, especially when there are alternatives.
First and foremost, we believe that nearly every dispute should be negotiated before a legal action is filed. There is rarely a need to incur the costs, air your dirty laundry, and initiate a process that is slow and stress-inducing before at least attempting to resolve the issue informally.
However, if that does not work, there are an additional two options.
Mediation is a non-binding, efficient and low-cost alternative to litigation, though it is also frequently used during pending litigation. Esssentially, both parties prepare a short mediation brief explaining their position and they submit it to a mediator. The other side does not see the mediation brief and the contents of the brief, as well as any communication with the mediator, is kept confidential from the other side. The mediator then has both parties come to his or her office where he or she meets with them each individually to hear their side of the story. Based on the facts of the case and the legal support for each side, the mediator suggests settlement terms. Often the mediator will meet with each side multiple times over several hours, discussing the other side's offer and legal position. Mediators are typically excellent at explaining to each side where there strengths and weaknesses lie so that they don't proceed with a case based on false confidence.
Nothing that the mediator says or suggests is binding, meaning that if a party does not agree with their assesment they can reject the mediator's suggestion and walk away. Since mediation typically lasts half a day or less, it is generally fairly inexpensive. There are also free mediation programs through the court and other organizations.
Though they are not always succesful, mediations are succesful a large percentage of the time. If they aren't succesful, the parties have not really lost much by attempting informal resolution.
Arbitration is essentially a private alternative to the public court system. Generally, arbitrations are binding, meaning that the ruling of the judge is the equivalent of a court ruling and can't be turned into an actual court judgment via a simple and expedient process.
Arbitrators are usually retired court judges with years of judicial experience. The case is tried in front of them through the use of witnesses, documentary evidence and briefing. Some arbitrations are decided by a single judge, others are tried before a panel. Typically, evidentiary rules are relaxed during an arbitration hearing, rendering objections uncessesary and speeding up the process. Unlike public court trials, which often take 2 years, arbitrations are frequently finalized within 6-9 months of filing the action.
Arbitration comes with a steep price tag. Most arbitrators charge $400-$600 per hour during pre-trial hearings and the main hearing as well as in post-hearing briefing. I've seen arbitration bills creep upwards of $50,000 in very contentious cases. However, most are not that expensive and attorneys' fees are usually lower in arbitration because the process is shorter and more efficient. All in all, it can end up being the cheaper alternative if you are paying your attorney by the hour.
One drawback from arbitration is that the parties are generally not allowed to conduct as much discovery as they would be in court. However, this firm has tried five arbitrations and has never found the discovery limitations to have a negative effect on the outcome of the case. Heather Orr has won each of the five cases that she has arbitrated.
Another aspect of arbitration that differs from litigation is the fact that arbitration hearings are generally confidential. While this is normally a positive, as few companies want to air their dirty laundry, the party with the clean hands can lose settlement leverage via the fact that the bad acts of the other side can never be made public.
The biggest downside of arbitration is that if a party disagrees with the judge's ruling there is not an avenue for appeal, except in very narrow circumstances. You're usually stuck with the judge's ruling, good or bad. However, arbitrators tend to be the best of the former state and federal court judges so the chance of the arbitrator getting the law wrong is less than that of the average state court judge.
Many agreements contain mandatory arbitration provisions which prohibit the other party to the contract from filing an action in court. Arbitration clauses should be approached with caution as they are not in the best interest of every company. You should seek legal counsel before including an arbitration provision in your agreement or signing an agreement that contains an arbitration provision.
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