Alternative Dispute Resolution
Alternative Means of Resolving Disputes
Disputes do not have to be settled in court. No law requires parties who have a legal dispute to seek judicial resolution if they can resolve their disagreement privately or through some other public forum. In fact, the threat of a lawsuit can frequently motivate parties toward private negotiation. Filing a lawsuit may convince one party that the other party is serious. The parties may otherwise decide that they will come to terms privately rather than wait the three or four years it can frequently take for a case to move up on the court calendar.
Arbitration
Beginning around 1980, a movement toward alternative dispute resolution began to gain force throughout the United States. Bar associations, other private groups, and the courts themselves wanted to find quicker and cheaper ways for litigants and potential litigants to settle certain types of quarrels in ways other than through the courts. As a result, neighborhood justice centers and dispute resolution centers have sprung up in communities. These centers are places where people can come for help in settling disputes, of both civil and criminal nature, that should not consume the time and money of the parties or courts in lengthy proceedings.
These alternative forums use a variety of methods, including arbitration, mediation, and conciliation, to bring about agreement or at least closure of the dispute. These methods are not all alike, and their differences are worth noting.
Arbitration is a type of adjudication. The parties use a private decision maker, the arbitrator, and the rules of procedure are considerably more relaxed than those that apply in the courtroom. Arbitrators might be retired judges, lawyers, or anyone with the kind of specialized knowledge and training that would be useful in making a final, binding decision on the dispute. In a contractual relationship, the parties can decide even before a dispute arises to use arbitration when the time comes. Or parties can decide after a dispute arises to use arbitration instead of litigation. In a predispute arbitration agreement (often part of a larger contract), the parties can spell out the rules of procedure to be used and the method for choosing the arbitrator. For example, they may name the specific person or delegate the responsibility of choosing to some neutral person, or they may each designate a person and the two designees may jointly pick a third arbitrator.
Arbitration has two advantages over litigation. First, it is usually much faster because the arbitrator does not have a backlog of cases and because the procedures are simpler. Second, in complex cases, the quality of the decision may be higher, because the parties can select an arbitrator with specialized knowledge.
Under both federal and state law, arbitration is favored over litigation, and a decision rendered by an arbitrator is binding by law and may be enforced by the courts. The arbitrator’s decision is final, with very few exceptions (such as fraud or manifest disregard of the law by the arbitrator or panel of arbitrators). Saying that arbitration is favored means that if you have agreed to arbitration, you can no longer change your mind and go to court if the other party wants you to arbitrate. Under the Federal Arbitration Act, the other party can go to court and get a stay against your litigation and also get an order compelling you to go to arbitration.
In binding arbitration, the arbitration award is final; therefore, appealing an arbitration award to the judicial system is not available. In many states, an arbitration award is converted to a judgment by the court, thereby creating the legal mechanism through which the judgment holder can pursue collection activities.
In nonbinding arbitration, the parties may choose to resolve their dispute through litigation if the arbitration award is rejected by a party. However, some states have statutory requirements that, in practice, create a chilling effect on appealing an arbitration award. For example, in the state of Washington, if the appealing party from a nonbinding mandatory arbitration does not do better at trial than the original award issued by the arbitrator, then that party will incur liability not only for its own expenses but also for those of the opposing side. In nonbinding arbitration, this is a powerful incentive for parties to accept the arbitration award without appealing to the judicial system.
Mediation
Unlike adjudication, mediation gives the neutral party no power to impose a decision. The mediator is a go-between who attempts to help the parties negotiate a solution. The mediator will communicate the parties’ positions to each other, will facilitate the finding of common ground, and will suggest outcomes. But the parties have complete control; they may ignore the recommendations of the mediator entirely, settle in their own way, find another mediator, agree to binding arbitration, go to court, or forget the whole thing!
References and Resources
Listed below are the references and resources used to curate this module.
Lumen Learning (2020). Business and the Legal Environment. Lumen Learning. Retrieved from courses.lumenlearning.com/buslegalenv/.
Lumen Learning (2020). Business Law. Lumen Learning. Retrieved from courses.lumenlearning.com/masterybusinesslaw/.
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