Mediation and arbitration
Mediation and arbitration are two very different methods of alternative dispute resolution (ADR) that can help people resolve their disputes without having to go through a trial. Both methods have become increasingly popular over the past several years because they are potentially great time and expense savers in terms of avoiding the stress, time, costs and uncertainty of litigation. Mediation and arbitration each have drawbacks and are not good solutions for every case; but they also have significant advantages as compared to the litigation process.
While Jacobs & Barney utilizes both forms of ADR to resolve disputes suited to such methods, we usually discourage clients from agreeing to mandatory (as contrasted to voluntary) contractual clauses that prevent them from exercising their right to choose to engage in mediation or arbitration in the first instance; and their right to select a mediator or arbitrator by agreement of the parties once they have chosen to mediate or arbitrate.
Mediation may be ordered by a trial court in some instances for reasons of judicial economy; but the parties can usually object to such an order if they are not agreeable. Arbitration, on the other hand, cannot be ordered by a trial court absent an agreement between the parties to arbitrate.
The essential difference between mediation and arbitration involves the concept of self-determination. In mediation, the parties control the decision-making process; whereas in arbitration, the arbitrator is the final decision maker.
The Mediation and Conflict Resolution Office of the State of Maryland has published a “Consumer’s Guide – Alternative Dispute Resolution (ADR) Services in Maryland” and the “Maryland Program for Mediator Excellence Mediation Framework Descriptions“
For those reasons, we discourage clients from agreeing to mandatory arbitration provisions; and/or from agreeing to arbitrate their claims if they have a choice unless their claims are particularly suited to resolution by arbitration.
Resolution of a dispute through the process of mediation is entirely voluntary, the proceedings are confidential (unless otherwise agreed by the parties) and communications made during the mediation cannot be disclosed in later court proceedings.
All of the parties must agree to mediation and the selection of the mediator. The parties must also agree as to whether one or all of the parties will pay the fees of the mediator as well as administrative fees of any mediation organizations through which the services of the mediator are provided.
The mediator's job is to help the parties communicate so that they can develop options for solutions and reach an agreement. The mediator does not take sides, make recommendations or make decisions or determinations. The mediator does not and cannot force the parties to make an agreement. In other words, the dispute is not resolved unless all of the parties agree.
Mediation is usually attended by the parties, the mediator and their attorney. It often takes place in an office with at least two separate conference rooms so that the parties have privacy for their discussions. Mediators frequently move between the separate rooms after meeting briefly with all of the parties together. Agreements reached during mediation are often (but not always) reduced to writing at the conclusion of the mediation.
It is not uncommon that parties agree to mediate only after certain stages of litigation, such as the discovery phase, have been completed. That is because information regarding claims and defenses is exchanged during the discovery phase so that each side to a dispute is educated as to all of the facts and positions of the other side. Disputes are easier to resolve when both sides have that information.
Mediation usually requires compromise and an open mind in order to be successful. Many of our clients report a high degree of satisfaction with the mediation process. It provides both sides with some control over the manner in which their dispute is resolved. There is no such control in arbitration or litigation since the arbitrator or judge is the final decision maker.
Agreements reached during mediation However, in more complex cases, while essential terms may have been agreed upon at the mediation, the formal settlement documentation may be completed at a later date.
Resolution of a dispute by arbitration is voluntary only in the sense that the parties cannot be forced to arbitrate if they have not already agreed to submit their disputes to arbitration. However, once the parties have agreed to arbitration and it commences, it is the arbitrator – not the parties – who has the power to make the final decisions. However, it is also one of the most significant drawbacks to arbitration.
The arbitrator essentially acts as a judge in that he/she reviews evidence, listens to testimony and hears legal arguments. Arbitration usually -- but not always -- involves a hearing attended by the parties, their witnesses and attorneys. The proceedings are less formal than court proceedings but more formal than mediation proceedings. The arbitrator may announce a decision at the conclusion of the hearing or issue a later written decision within a limited time period established by contract or law. A complete written explanation as to the basis of the arbitrator’s decision is not usually required.
The grounds for appealing an arbitrator’s erroneous decision are extremely limited as contrasted to the more expansive grounds for appealing a court’s erroneous decision. The limited ability to appeal an arbitrator’s decision is one of the reasons that arbitration has the potential to save time and expenses. However, the limited grounds for appeal is also one of the most significant drawbacks to arbitration.
Relatively recently, contractual provisions for expanded judicial review in arbitration proceedings have been used; but the scope, effectiveness and enforceability is yet to be seen since such clauses have been limited by various courts.
Arbitration removes the protection of the long-standing and tested rules of evidence and procedure that are available in the court system. Additionally, in smaller cases, the administrative costs of arbitration may exceed the reasonably expected costs of litigation. For those reasons and the limited availability to appeal an erroneous decision, we discourage clients from agreeing to mandatory arbitration provisions and/or arbitrating their claims if they have a choice unless their claims are particularly suited to that method of dispute resolution.