Mediation vs. Arbitration

What differentiates them and how can both help businesses avoid costly legal battles?

The notion that a legal dispute could be resolved anywhere besides a courtroom is surprisingly new.

Over the past three decades, the legal profession has evolved with the idea that not all conflicts require a courtroom to reach a settlement. Sometimes a simple negotiation monitored by a neutral third party is enough to help two parties resolve their problem.

This is called mediation.

In the mediation process, both parties are present with their lawyers. Unlike a judge or an arbitrator, the mediator does not determine the outcome of the case, but they aid communication.

Gregg Collins, an attorney who runs his own mediation firm — Gregg Collins Mediation Arbitration — has worked as a mediator since 1992 and has been practicing law since 1979. He says that it can be useful in a variety of contexts such as personal injury cases, business disputes and family law cases. As a mediator, Collins says he must play devil’s advocate.

“I find that sometimes lawyers can have a difficult time telling their clients the flaws in their cases. A neutral third party can step in and help people identify those problems,” he said.

He said that lawyers see it as a beneficial process because it means significant cost savings and time savings.
“I will see cases that have been filed in court that won’t be tried for three to five years,” he said. “As a mediator, I have been able to resolve a case in three to five hours.”

The preparation process can also be very time-consuming. Collins said that parties involved in a dispute can set up so that their case can be mediated and end up saving a lot of money.

“The satisfaction level of people involved in mediation is significantly higher,” he said.  

If the case requires more than a neutral third party to resolve the issue, cases will land in what is called arbitration. This form of alternate dispute resolution is so commonly used that arbitration is a requirement for many construction deals.

“Arbitrators decide, mediators facilitate,” Collins explains.

In the arbitration process a neutral third party, called an arbitrator, hears arguments and evidence from both sides of the dispute to discuss the outcome. The process is less formal than a trial. The arbitrator would still present the case like they would in court.  

“Mediation is a step to see if you are going to settle the case on the way to either arbitration or the court. It is a voluntary process. Arbitration can be costly,” said Bruce Shreves, the head of the construction and surety group for Simon, Peragine, Smith Redfearn law firm in New Orleans. Shreves has 43 years of experience working in construction law.

In the case of a binding arbitration the parties would accept the arbitrator’s decision as final. In a nonbinding arbitration where the decision is not accepted, the case can be taken to trial.

“Arbitration certainly takes the burden off the courts. The process settles cases where it would otherwise take courts days and weeks or sometimes months in litigation. If you have an arbitration panel that is familiar with the process it can move along a lot quicker,” said Shreves.

Sometimes clients are faced with no other choice than going to arbitration if there is a business dispute and their contract requires it.  

“If your contract says you must arbitrate then you don’t have to go to court,” he said.

Of course, there are certain cases that require more than a neutral party to reach a settlement.

“There are times where there is so much animosity among the parties that negotiation and mediation cannot be done,” said Shreves. “The process can take months to settle. However, maybe I am optimistic, but I don’t think there is any case that can’t be settled.”
 

The Origins of ADR
 

The notion of “fitting the forum to the fuss” is widely credited to Frank Sander, a Harvard University law professor. In 1976, he spoke about “The Causes of Popular Dissatisfaction with the Administration of Justice,” which many in the legal field say was a turning point in the development of alternative dispute resolution.

Sander felt that the traditional litigation system was only suitable for resolving certain types of disputes effectively. He questioned whether there wasn’t the possibility of developing a method to screen complaints with the aim of matching the case to the most appropriate form of resolution. The aim of this would be to take the burden off the court system and result in cost savings for clients.

The development of alternative dispute resolution (ADR) techniques was based on Sander’s conclusion that not all disputes have to end up at court, which ends up being both costly and time consuming, according to Trippe Hawthorne, a partner with the Baton Rouge office of Kean Miller. Hawthorne’s practice focuses on construction law, ADR and business litigation.

“He (Sander) saw that we had ended up with a one-size-fits-all method for dispute resolution,” Hawthorne says. “It was around that time that the concept of mediation and adapting arbitration came to more prominence.”

Breaking it Down

Mediation — the use of a neutral third party to assist with negotiations between two parties. Both sides must agree in order to reach a resolution.

Arbitration — similar to a court process but less formal. Parties provide testimony and give evidence that ends with an arbitrator handing down a judgment. Arbitrators are not required to have any formal legal training.
 

Did you know?

What’s In a Name?

Alternative dispute resolution (ADR) can be applied to a variety of dispute resolution processes that help people resolve issues without having to land in court. Common ADR techniques include neutral evaluation, where a third party with expertise in the matter can review the strengths and weaknesses of each side of the case to help the parties reach a settlement. Negotiation is another frequently used method in ADR, where two people sit down and work out a problem without the need of a neutral third party.
 

Benefits for Employers

Alternative dispute resolution can also apply to a variety of different settings and is by no means exclusively used in the legal field. Employers are increasingly turning to ADR as a solution to resolve employee conflicts, labor disputes and discrimination complaints in the workplace. This method can be used to quickly resolve disagreements and common workplace issues to avoid relying on attorneys and the courts.

“Alternative methods of dispute resolution are being used in more and more contexts in the public,” said Gregg Collins, an attorney who runs his own mediation firm called Gregg Collins Mediation Arbitration. The firm was founded in April 2016. “Mediation and arbitration are now part of the core curriculum for any law student.”