News

MEDIATION OR ARBITRATION; THEY’RE PRETTY MUCH THE SAME THING, RIGHT?

March 5, 2020 • by Wiener & Lambka

These procedures do have many things in common, but they are most certainly NOT the “same thing”.

Both mediation and arbitration are forms of what is known as “ADR” or “Alternative Dispute Resolution”, and both are devices by which lengthy and expensive litigation and/or trial can be avoided. Both have far less formality than litigating in court and far fewer rules that must be followed. If successful, both resolve the dispute, and both are usually much faster and far cheaper than resolving disputes through the court system. One of the other will almost always be required before trial, as judges wish to be sure every form of compromise and resolution has been explored before a courtroom is tied up and public resources committed to a full-blown trial. But that is where the similarity ends.

Here are a few questions we frequently receive from our clients which will help you understand a few of the key differences.

1. Will I be required to agree to mediate or arbitrate?

Yes. However, mediation is usually a voluntary program, with both parties desiring a more private and prompter resolution. Arbitration can also be “voluntary” (many contracts today contain provisions which, if signed, require arbitration. Examples of these include stock brokerage agreements, bank accounts, and credit cards, uninsured motorist insurance, residential leases, and pretty much anything purchased through the internet. However, it is more common that arbitration is court-ordered if a lawsuit has been filed in a matter with a value below $100,000. Mediation and arbitration are not mutually exclusive, and it is not uncommon for both procedures to be undertaken during the course of the same lawsuit.

2. If I agree to mediate or arbitrate my case, do I give up my right to trial by judge and/or jury?

With mediation, no. If the mediator fails to bring the parties together on a mutually acceptable compromise of the dispute, the parties can proceed to file a lawsuit or continue the lawsuit if one has already been filed. The same is true for court-ordered arbitration in matters with a value below $100,000. This is called “non-binding arbitration”. However, arbitration by contractual agreement, such as with the examples listed above, is final and binding, and the parties must accept the arbitration award whether they like it or not…with a few rare exceptions, there is no right to appeal.

3. Are both mediation and arbitration equally informal?

No. While both are far less formal than a trial in a courtroom, arbitration usually loosely follows the same format as a trial, with both sides taking turns making arguments, introducing evidence and examining witnesses. Mediation is more of an informal negotiation, with the parties in separate rooms and the mediator shuttling back and forth with the arguments and offers of the other side, together with his/her suggestions and counterpoints to help narrow the gap between their respective positions. The arbitrator will render an award; the mediator is merely trying to guide the parties to a point where they can achieve their own mutually acceptable compromise.

4. Do both mediation and arbitration resolve the case?

Not necessarily. As discussed herein, if the mediator fails in his or her efforts to bring the parties to a mutually acceptable middle ground, the session ends with no resolution, and the parties are free to pursue litigation and trial as an alternative. The mediator will not render an award of any kind. The parties must achieve, and agree to, the resolution themselves. Arbitrators, on the other hand, will listen to the evidence and then render an award, either at the conclusion of the presentation of evidence or within a short time thereafter (20 days is common). If the parties have agreed to binding arbitration, the case ends there, and the parties must accept the award, whatever it may be. If the arbitration is not binding, then each side (or both) may reject the arbitrator’s award and request a “trial de novo” (from the beginning) and have their day in court. However, rejecting the arbitrator’s award carries some risk, for if the party who rejects the award does not do better in court, they could be liable for the other side’s costs in proceeding to trial. If neither side rejects the arbitrator’s decision within the time period, then the award becomes final, and the case ends with no right to continue the dispute in court (so watch those time limits!!)

5. Are both mediations and arbitrations conducted by an attorney or retired judge?

Arbitrators are almost always attorneys or retired judges. Because arbitrations tend to be more formal than mediation, someone familiar with the rules of evidence and how to conduct a legal proceeding is necessary, to say nothing of someone with the background to resolve a legal dispute and craft an award. However, since mediations are voluntary, the two sides can pick pretty much anyone that both can agree would be appropriate to hear the dispute. While most mediations are also conducted by current or retired members of the legal profession, due to their expertise in resolving legal conflicts, the parties are free to agree on anyone they please to serve as the mediator. There are professional mediation services that have a broad spectrum of professionals with experience in many fields as well as having a legal background to help the parties see and appreciate points and issues they may not have fully considered.

6. Are all arbitrations and all mediations alike?

No. While mediations do generally follow the same format described herein, arbitrations can vary widely in their adherence to the rules of evidence and degree of formality, depending on the preferences of the arbitrator and, to a lesser extent, the parties. In addition, there are several different types of arbitrations. While the standard arbitration simply involves the arbitrator listening to the evidence and making a decision, much as a judge would, sometimes the parties give the arbitrator a range within which they agree the matter should resolve, called “high-low” or “bracketed” arbitration. Another type of arbitration with which many sports fans are familiar is “baseball arbitration” where the parties agree that the arbitrator has no discretion to pick his or her own value of the case, but rather must hear the arguments and then agree with either the plaintiff’s number or the defendant’s number, but nothing in between or outside of those two figures.

There are, of course, other differences between these two methods of resolving disputes without going to court, and both have advantages and disadvantages. Selecting which method would be best for your individual

Leave a Reply

Call us today for a free consultation:

ALL AREAS OF PRACTICE