This article is the second in a series pertaining to Alternative Dispute Resolution.

Is mediation a faster and more cost effective means of settling disputes than going to court and how do I get ready for mediation?

GmilesIn most cases, mediation is relatively quick and relatively inexpensive. If the mediation is required by court rule or statute, generally the court provides the mediator and you’re not required to pay the mediator. Most mediations can be scheduled within 30 to 90 days after the dispute arises, or in some cases even faster if the parties agree. I have found mediations to be quick and relatively inexpensive. If the mediator is a paid professional, in most uncomplicated matters, the mediator’s fees are likely to run from about $2500-$7500. This a small price to pay when the mediation brings a quick resolution to an important dispute. Usually each one of the parties pay their pro rata share. If there are two parties to the mediation you each will pay one half of the cost.

Unless the parties agree to a settlement in the mediation, the mediator generally does not have any power to decide the dispute. The mediator’s job is to help the parties to come to an agreed-upon settlement. Consequently, not all mediations result in solving the dispute between the parties. When you properly prepare for the mediation, and have hired a quality mediator, better than 50% of the cases will settle in mediation.

However, the fact that mediation does not resolve disputes creates an opportunity in favor of one or both of the parties to delay solving the problem. Thus, one party may agree to participate in mediation, or may be compelled to participate mediation by court order or otherwise, knowing that it has no intention under any circumstances of settling the dispute. In effect, this allows that party to delay the entire process of going to court, arbitration or whatever will be the final binding solution. I have seen parties act in bad faith and use mediation to delay progress for as long as six months.

Finally, mediation is only effective if the proper groundwork is laid to resolve the dispute. The respective parties need to collect enough information such as documents, statements of witnesses, and in some cases legal principles so that they have a relatively good understanding of the strengths and weaknesses of each party’s case. This is necessary, because settlements occur only when both parties see the “need to settle.” If all the participants don’t see the benefit of settling the case, they are not likely to act in good faith to resolve the dispute. Inexperienced lawyers and parties fail to recognize the importance of proper preparation and collection of information so that a meaningful dialogue can occur between the parties. In other words, there’s no way to decide what is a fair solution unless you have a pretty good idea of what information is available, and who has the strongest position.

One other important consideration is to select a mediator with proper experience and temperament to help the parties reach a settlement. In one case some years ago I was representing a major national business entity in a real property dispute. There were hundreds of thousands of dollars involved, and it was apparent that the other side was simply “unreasonable.” The mediator walked into the room and said “Why don’t you pay them a quarter of a million?. You can afford it and we can get this resolved very quickly.” I almost burst out laughing. Quite frankly, the other side was going to end up paying our client’s money. The mediator was obviously inexperienced, and frankly quite foolish. However, I’ve been in cases where qualified, knowledgeable lawyers are engaged as mediators and they take the time to prepare and understand the case. They can look both parties square in the eye and point out problems and reasons they should settle. When the parties are properly prepared and have a quality mediator there is a pretty good chance that settlement will occur in the mediation and it will be to everybody’s benefit.

When is arbitration a cost effective and fast way to settle disputes?

In some cases, where arbitration is required by law you really don’t have any choice but to participate. However, in a lot of cases the arbitration is subject to appeal. This means that if you’re not satisfied with the arbitrator’s decision you can proceed to trial. In some states, such as Arizona, if you proceed to trial and elect not to accept the arbitrator’s decision, and don’t win more money at the trial, you may face penalties such as having attorney’s fees or costs assessed against you.

Arbitrations are frequently pushed upon parties under the idea they are “quick” and “inexpensive. That is not always the case. Many arbitrators recognize that their future success as a paid arbitrator will be dependent on not pushing one side or the other. They know that the attorneys involved in the dispute are likely to talk about how effective the arbitrator was. This can often result in an arbitrator who refuses to force the parties to move along to a quick resolution of the case. This can be very frustrating. In one major arbitration I participated in, the arbitrator ordered all the parties to produce all of the records so that everybody would have a fair opportunity to prepare for the arbitration. Months and months passed without production of the documents and no action from the arbitrator to force the other side to cooperate. The arbitrator simply did not have the courage to stand up and require the right thing. As a consequence, the other party was allowed to delay the arbitration for many months, never provide all the required information, and effectively run up the attorney’s fees on both sides.

There are other serious problems with arbitration. One problem is the cost. In most court matters, a lawsuit can be filed for a relatively small amount of money. The cost of filing a lawsuit can be just a few hundred dollars. Arbitrations may require payment of thousands of dollars to the arbitration organization, and thousands of dollars to the arbitrator for fees. Considering the cost of the arbitration, and the cost of the arbitrator, some matters could be handled for tens of thousands of dollars less in a court of law.

Are there any cases when arbitration is useful?

The answer is of course yes. Examples are disputes involve highly technical questions about science, engineering, accounting or technical matters. A quality arbitrator who is extremely knowledgeable about the underlying technical issues, can cut through some of the baloney and get right to the issue. A qualified arbitrator can also push the matter to resolution since he/she will know, how strong each parties case is.

When the attorneys and the arbitrator properly handle arbitration, the process can move quite swiftly. For example, the arbitrator can compel parties to exchange information quickly. Many of the lengthy and costly proceedings such as depositions often are not really necessary to the resolution of the questions involved, and the arbitrator can therefore sidestep those problems.

At the actual arbitration, there are opportunities to speed the process along. For example, under most arbitration rules the rules of evidence such as “hearsay” and other laborious rules found in court, do not apply. This means that the arbitrator can have the witnesses quickly get to the point and tell the story. Lawyers tend to be comfortable with going to court and will try to turn arbitration into a court battle by making objections and taking other steps that are involved in litigation but not arbitration. The arbitrator has to be strong enough to enforce the rules of the arbitration and push it to a conclusion.

One of the most important benefits of arbitration is the issue of confidentiality. Almost all court proceedings are public record. We’ve all seen trials on television and see people sitting in the spectator section of the courtroom. This can be a major problem when personal matters are involved such as wills, trusts, family circumstances and so forth. It can also be an especially serious problem when business trade secrets are involved, personal secrets and confidential financial information are involved, or other matters which need to be kept private and confidential.

Closely related to the benefits of confidentiality, are the benefits of having the “unemotional” arbitrator deciding a case rather than having a judge or jury deciding the case. For example, in employment matters, juries can become very angry at an employer and overcompensate an employee for alleged damages. The same problem can arise in some contexts where one party is the “big guy” and the others party is the “little guy.” In America we are very pro little guy. Consequently, many employers require arbitration provisions so that a less emotional person is making the decision – – a professional arbitrator rather than a jury who may wish to punish the “big guy” without carefully considering the evidence.

In arbitration, like mediation, one of the keys to a successful arbitration is proper preparation, and selection of the arbitrator. You should be represented by attorneys familiar with the process, and that know how to move things along quickly.

So what do I do?

I will give you a few suggestions in deciding whether to mediate, arbitrate or litigate in the next installment of this article series.

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Gregory L. Miles, an AV Preeminent attorney and co-founder of Davis Miles McGuire Gardner, does business, commercial litigation and real estate.  In future articles, Mr. Miles will discuss how to use ADR to your advantage. If you have questions feel free to contact Mr. Miles or call 480-344-4589.  Remember contacting Davis Miles McGuire Gardner PLLC does not mean that you have retained their attorneys or their services.