Understanding Alternative Dispute Resolution: Arbitration vs Mediation

Arbitration and Mediation - What's The Difference?

Alternative Dispute Resolution ("ADR") is becoming an increasingly important option in many jurisdictions. ADR refers to efforts to find methods that are outside the court system to resolve civil disputes. These methods may be advantageous to the courts and to the parties involved since they may resolve a dispute in a faster, more cost-effective manner and reduce or eliminate the need for participation by the court system.

In many states, and within the federal court system, the number of civil cases continues to grow annually. However, the resources necessary to handle the increasing caseload - primarily judges and court staff - are not keeping pace. The result is a heavier workload for existing personnel and longer waiting periods between the time a civil lawsuit is filed and the trial of that case.

The criminal caseload continues to grow in most jurisdictions. Since criminal cases generally have priority, based in part on a constitutional right to a speedy trial, the effect on civil cases (such as personal injury claims arising from auto accidents) is to delay them even longer.

The courts have tried employing various methods of ADR. The most common types of ADR are arbitration and mediation. In addition, various private companies have sprung up over the last few years in many areas with active ADR policies to provide these necessary services.

Arbitration

Arbitration is a process by which one or three individuals, often lawyers, serve as "judges" to decide a case. It is a mini-trial, often held in a conference room or other neutral location, in which evidence is presented to the arbitrator(s) much as if in a courtroom. There are many different types of arbitration procedures.

Arbitration can be binding or non-binding. Binding arbitration is one in which the ruling of the arbitrator is final, and often can become a judgment, just as if the case were tried before a judge or jury. For example, many contracts have a provision requiring binding arbitration, so that if a dispute arises between the parties to the contract which cannot be worked out voluntarily, they have agreed in advance to have it decided by arbitration, rather than through a lawsuit.

Non-binding arbitration goes through the same mini-trial procedure, but the ruling of the arbitrator(s) does not eliminate the losing party's right to go to court and have the case decided by a judge or jury. For example, some courts now have a procedure in which "smaller" civil cases (such as cases involving less than a dollar amount, like $25,000) are required to go to non-binding arbitration. Although the losing side can still go to court, in practice the vast majority of cases are resolved by non-binding arbitration do not re-enter the court system.

The number and selection of arbiters differ considerably. Sometimes the parties to an arbitration are required to agree on a single arbitrator. Frequently, however, such agreement is difficult, and so procedures have been established to select a three arbiter panel. For example, in a civil case, the plaintiff might select one arbitrator and the defendant would select a second. The two arbiters selected would then get together and pick a third, or "swing," arbiter. Three arbiter panels typically decide cases by a majority vote.

It is important to note that most insurance policies in which PIP or no-fault benefits are provided have provisions that disputes be subject to binding arbitration. Similarly, uninsured and underinsured motorist disputes arising under auto policies are frequently arbitrated. However, some recent court decisions question whether an individual or an insurance company can be deprived of the constitutional right to a jury trial and forced to arbitrate these issues.

Mediation

Mediation involves the use of a neutral third party to assist in bringing about a voluntary resolution of a dispute. The mediator does not "decide" the case. Instead, a good mediator tries to find common ground in a dispute and encourages both sides to reach that common ground.

Because the nature of mediation is to sit down face to face to try to reach a voluntary agreement, it is usually necessary that everyone involved be present - individuals, attorneys, insurance adjusters, etc. However, it is usually not required that a defendant who has insurance be present if the insurance company has full authority to settle the claim.

For example, in an auto accident case, the plaintiff may be asking for $30,000 for her injuries, but the insurance company is only willing to offer $20,000. The mediator may talk to the insurance adjuster and the insurance attorney and point out the strengths of the plaintiff's case, the risks and costs associated with the insurance company going to trial, and the advantages of settling the particular case. Similarly, a good mediator will talk to the plaintiff and her attorney about the risks and costs of trial and the weaknesses in the case. When parties are open to discussion, often a settlement can be reached on some middle ground which all sides find acceptable.

Because any resolution as a result of mediation is voluntary among the parties, it will be a binding settlement.