Effective Alternatives to Litigation

Effective Alternatives to Litigation

Going to court can be incredibly expensive. With legal fees, lost-work time, and court costs, the expense of preparing for a trial can run into the thousands of dollars.

Fortunately, there are alternatives to litigation that an increasing number of companies take advantage of. Mediation and arbitration can allow you to avoid litigation while maintaining confidentiality for all parties.

While mediation and arbitration are both designed to resolve issues fairly, they are very different in practice. Mediation involves the use of a neutral third-party to help two conflicting parties negotiate, compromise, and hopefully reach a mutually-agreeable solution. (Think of a mediator as a skilled person that helps both parties in a dispute remain calm, focused, and reasonable.) A mediator does not offer input or make decisions; his or her job is to help two parties reach a solution that they are both comfortable with. Mediation is also non-binding; parties who enter mediation are under no obligation to reach agreement.

Arbitration also involves a neutral third party, but the arbitrator's role is to listen to both sides, view any evidence, and make a legally binding decision that the two parties must honor. (In effect the arbitrator acts as a judge or jury; in fact, many arbitrators are retired judges or attorneys.) Entering into arbitration binds both parties to accept the decision rendered.

A key advantage to mediation or arbitration is that both can resolve disputes more quickly and at a lower cost than conventional litigation. In both instances seeking attorney representation is usually not necessary, although if you choose to mediate a dispute, you may wish to have your attorney review a draft of your agreement before you commit to its terms by signing.

Let's look more closely at both litigation alternatives.

Mediation

Mediation almost always occurs before a single mediator (although mediation teams do exist). The mediator does not judge the case but instead seeks to facilitate discussions, the flow of information, and eventually a resolution of the dispute in question. In some states, like Florida, attempted mediation is required before a lawsuit will be placed on a trial calendar. Almost three-fourths of those cases are settled in mediation. The success of mediation is often based on an open discussion of the situation in a neutral setting in front of a person trained to help two conflicting parties stay on track.

Mediation can be used for almost any type of dispute. "Pre-suit" mediation, or mediation that occurs before a lawsuit is filed, is a great way to resolve a dispute before litigation even begins.

Mediators do not give legal advice and do not offer legal judgments. In most cases the two parties will create a written version of the agreement they reach; not the mediator.

If you choose to enter mediation, create a simple contract ahead of time. Specify that mediation is confidential and non-binding. Determine who will serve as the mediator and who is responsible for paying the mediator. Set a deadline for when mediation should be completed; if you fail to reach an agreement, a lawsuit may be the next step.

Arbitration

While both mediation and arbitration can be binding, most people use mediation when they wish to enter into a non-binding form of dispute resolution and arbitration when they agree to enter into a binding form of dispute resolution. An arbitrator serves as a "judge," hearing the arguments and evidence – evidence that is not limited by judicial rules of evidence – of both parties and then rendering a binding decision. (Keep in mind arbitration can be non-binding if both parties agree, but neither party is then required to accept the arbitrator's decision – which could make the exercise a moot point.) Some cases are handled by a single arbitrator; another common approach is for each party to choose an arbitrator, with the two arbitrators then selecting a third arbitrator to serve on the arbitration panel. The majority decision of the three arbitrators is the decision the two parties must accept.

Arbitration can dramatically decrease the cost of settling a dispute, since the average hearing length is generally shorter than a court hearing, and time-consuming legal processes like discovery, depositions, and motions are not necessary.

There are disadvantages to arbitration, though. If you lose the dispute or disagree with the terms of the judgment made by the arbitrator, you do not have the right to appeal. An arbitrator's decision is final and binding. And while it may not be true, some people feel that arbitrators are more likely to "split" a decision in order to at least partially satisfy both parties.

If you like the idea of using mediation or arbitration as an alternative to litigation, there are several ways to make that possible:

  • Include language in your policies and procedures requiring unresolved employee complaints to be subject to mediation or arbitration.
  • Include similar language in contracts and customer, vendor, and supplier agreements.
  • But before you choose mediation or arbitration, get the opinion of an experienced lawyer. In some cases it may be to your advantage to skip alternatives to litigation and proceed with a trial.
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