Recently we took a bit of a deep dive into litigation, covering the process in general and then taking an expanded look on why you probably want to avoid it in most instances. One of the ways you do that? By engaging in alternative dispute resolution.
What exactly is ADR? We touched on this a bit in the expanded litigation post, but here we’re going to explore it more thoroughly, looking at the different types of alternative dispute resolution options available and some pros and cons to ADR.
An Overview of Alternative Dispute Resolution
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Hi, thanks for tuning in for another dose of Bite-Sized Bits of Knowledge, where we give you meaningful information in a short amount of time. In my last video, we talked about litigation, finally, and the parties, the pleadings, discovery, vehicles, trial, and a couple of extra little things on top of that.
In this video, I want to talk about alternatives to litigation. There are a few. First, I would say it would be mediation. Mediation usually is an obligation in litigation. Judges are typically saying, “Go to mediation. There’s a court ordered mediation. Let’s try to see if the parties can settle outside of court privately.” Mediation is one thing. I’ll get into that in a second.
The alternative is arbitration. Arbitration is a little bit more of a formal venue. It’s like a court, there’s a judge or a panel of judges, and they hear the case and they rule. So we’ll talk about that as well in a minute.
Mediation usually has a retired judge or a certified mediator who’s been a lawyer, and they know how that works. And both parties go to mediation, they sit at the table, they make angry faces at each other, and everybody’s angry usually. And the mediator does their spiel where they say how it works and the likelihood of litigation. It’s expensive. And all the things I just told you in my prior video, they’ll give you the riot act, and then they’ll let usually each party present the case, and then they’ll break up into caucuses separately.
And the mediator will run back and forth between the rooms or in Zoom meetings. They’ll run back and forth between the rooms, meeting with each of these different parties separately and beating them up to make it clear that their case is not as meritorious as they may think it is. And just keep doing that back and forth until there’s maybe some talks of settlement.
And it could take a while, but it’s a very meaningful process. I would highly recommend building them into your contracts as a requirement in good faith before proceeding to arbitration and before proceeding to litigation. It’s just a cost-benefit no brainer in my opinion.
On the other hand, arbitration – some lawyers love it, some lawyers hate it. Arbitration is where you’re submitting your case to a panel of one or more judges and they hear your case, you get to put on your case and your evidence and you have discovery process, but it’s just not the same as court. It’s not as comprehensive as court.
And so most litigators that I know prefer the court system. It’s just if you want to have access to information and bubble facts at the top, you want to use the court. Sometimes it might make sense to have a more cost effective, quicker process in arbitration.
And so you’ll do your case, you’ll get some information, and then the panel will ultimately decide in a binding way. There is non-binding arbitration, but then that leads you back down to litigation. So that’s okay, too. Some contracts have provision that says mediation first. If there’s conflict, then arbitration or litigation, depending on what the parties can agree.
So this is something called ADR, alternative dispute resolution. It’s a big area. Given how backlogged the court system is, alternatives are needed and desired. And again, some lawyers like it, some lawyers don’t. They all have good arguments in both directions.
As a planner, someone who’s trying to keep you out of court and save you money and eliminate conflict, our contracts have things like this in them to try to mitigate the blow up – and try to see if parties can really come together and make a resolution so that there’s not a grenade going off. And then ultimately a resolution later after everybody’s tired and has less money in their wallet.
So I hope you found this particular video helpful. Thank you for tuning in and stay tuned for more.
Should You Use ADR? Pros and Cons
It can be somewhat hard to discuss the benefits and drawbacks to alternative dispute resolution since – as illustrated in the above video and transcript – there are various types of ADR, and each has its own strengths and weaknesses. That being said, there are still general positives and negatives associated with all types of ADR.
Benefits of Alternative Dispute Resolution
It’s typically cheaper. As we’ve pointed out elsewhere, trials are expensive. You will likely need a team of legal professionals working on the case, and those hours add up quickly. It’s not uncommon for the monthly bill of a case going through litigation to be $10k+. ADR is almost always significantly less expensive.
You’re likely to reach a resolution faster. Trials are slow. Court dates often have to be scheduled weeks or months in advance. Moreover, each side is allowed to request additional time, which can add literal months to the proceedings. With ADR, there is way less of that. Often, conflicts utilizing ADR are resolved in a matter of weeks rather than months – or even years. That means you can get back to business faster.
ADR is simpler. Litigation is complex and formal, with lots of very specific rules. In contrast, ADR keeps things simple and often allows parties the flexibility to come up with their own dispute resolution process.
Parties can focus on the realities of the situation. Litigation creates an Us vs. Them mentality in which each side has a dug-in position. Unfortunately, this can lead to a skewed view of the reality of the situation – even amongst legal professionals. ADR, however, frequently utilizes neutral third parties. These individuals come in with no vested interests and can speak truth to the parties on each side. This can also serve to de-escalate hostilities and encourage those involved to work together in good faith to reach a resolution.
Drawbacks of Alternative Dispute Resolution
Cheaper doesn’t mean cheap. While ADR is almost always less expensive than court litigation, it still comes with costs. Both parties will have to pay for things such as the neutral third party, meeting space, legal counsel, and so on. It’s less money – just don’t expect it to be no money.
Decisions aren’t always binding. Remember, there are many kinds of ADR. Mediation is not binding. Neither are settlement negotiations. Arbitration, however, is binding. If you want to make sure that the neither party can decide to renege on the decision, make sure you utilize a binding process.
You can’t appeal decisions. If you lose a court case and disagree with the decision, you can always appeal and hope for a different one. Not so in ADR – unless an appeals process is written into your ADR agreement itself.
Mediators and arbitrators are not created equal. There’s a lot to unpack here. Firstly, “neutral” parties aren’t always so neutral. In fact, it is fairly common in instances where there are, say, two arbitrators that each side will choose someone who is likely to favor their position. Moreover, they may just be more predisposed to one side’s position than the other – and unlike with court cases, there is no pressure to decide cases based on past precedent; neutral parties can pretty much decide based on whatever they think is fair.
You will be expected to compromise. In court cases, there is almost always a winner and a loser. Sometimes both sides may be asked to give a bit, but even in those situations one party tends to be favored over the other. Not so in ADR, where the name of the game is compromise. The expectation is that both parties will give a bit in the name of reaching a resolution. If you believe you are in the right, and the other party is completely wrong, this can be a tough pill to swallow.
It may just be a delaying tactic. While ADR is frequently used to save time and money, sometimes parties with bad intentions can use the process to drag out the dispute. Why? It varies. Sometimes, parties wish to continue to engage in practices they otherwise might be forced to end. In other instances, they may use the additional time ADR brings to further develop their case for an all-out assault in court.
Is alternative dispute resolution right for you? It depends. At Haimo Law, our opinion on the matter is that it is generally better to solve all but the most serious disputes without litigation. However, it always comes back to your specific situation. Before making any decisions, get in touch with our office and we’ll tell you what we think.