Settling Legal Disputes Through Alternative Dispute Resolution

Resolving a Legal Conflict Without Litigation

When you have suffered a loss because of the wrongful act of another person or entity—personal injury in an accident, a business loss due to a breach of contract, or perhaps some interference with a property right—you typically have the right to file a lawsuit to recover your losses. The litigation process, though, is typically time-consuming and financially costly. Furthermore, taking a case to trial can be physically, mentally, and emotionally exhausting. For all those reasons, alternative dispute resolution, or ADR, may be a better way to resolve your legal issues.

What Is Alternative Dispute Resolution?

“Alternative dispute resolution” refers to a range of processes for settling legal disagreements without litigation. The approaches often enlist the aid of a third party, such as a mediator or arbitrator, to assist the parties in reaching agreement. The parties also may choose to use legal counsel to help negotiate a settlement, also a form of ADR.

A History of Alternative Dispute Resolution in the United States

The concept of alternative dispute resolution is believed to have its origins in England, where special magistrates or laypersons would be appointed by the king to resolve a dispute outside of the legal process. Some forms of alternative dispute resolution have been used in the United States since the days of the earliest settlers, when many colonists, distrustful of lawyers, developed and used their own community mediation processes. In fact, prior to the American Revolutionary War, informal arbitrations were more common than civil litigation proceedings.

With the formation of the new nation, formal civil justice systems began to take precedence, with most forms of ADR being put on the back burner. During the labor movements and accompanying unrest of the late 19th and early 20th centuries, though, mediation and arbitration saw a resurgence, as part of collective bargaining practices. The first modern laws establishing alternative dispute resolution as a viable option were enacted by states in the first two decades of the 20th century, and Congress passed the Federal Arbitration Act in 1925.

What Are the Different Types of Alternative Dispute Resolution?

Generally, ADR takes one of four forms:

• Negotiation—With negotiation, the parties—typically through their attorneys—seek to work out a solution without going to trial.
• Arbitration—In arbitration, the parties present their legal claims in front of a single arbitrator or an arbitration panel. The arbitrator is typically someone with specific knowledge in the subject matter of the dispute. The arbitrator will consider evidence, including witness testimony, and render a decision on the merits. The arbitrator’s decision may be binding or non-binding, depending on the prior agreement of the parties. In binding arbitration, the parties must accept the decision of the arbitrator and have no rights to appeal the decision.
• Mediation—In mediation, the parties work with a neutral third party whose primary task is to facilitate agreement. Mediators typically don’t take testimony and don’t consider or make rulings on legal issues. The mediator does not render an opinion or resolve the matter but encourages the parties to work directly with each other to find a mutually beneficial solution.
• Collaborative Law—This is a relatively recent development in ADR, where each party retains legal counsel, but both agree to try to resolve all matters without the intervention of the court. Attorneys and clients work together, along with a team of other professionals that might include accountants and therapists, to identify and implement mutually agreeable solutions. If the court needs to get involved, the parties must terminate their relationships with existing counsel and retain new counsel.

How ADR Works

Ideally, alternative dispute resolution takes the place of litigation, offering the parties a faster and less expensive method for resolving legal disputes. In most instances, ADR is voluntary, and must be agreed to by both parties. As a general rule, a party is not required to accept the results of an ADR proceeding unless he or she agrees in advance that the result will be binding.

Examples of Alternative Dispute Resolution

ADR can take a range of forms:

• An agreement to participate in binding arbitration after allegations of breach of contract
• Negotiation between plaintiff’s counsel and defense attorneys to find a mutually agreeable amount to resolve a personal injury claim
• The use of a third party neutral to mediate a dispute over custody and visitation in a divorce case
• Mediation to resolve disputes between the federal government and Native American tribes or between investors and stockbrokers
• The agreement of both parties to a divorce to use the collaborative law process to resolve all differences regarding custody, visitation, support, and property division—In working together, the parties will rely on the advice not only of legal counsel but also of other professionals, such as accountants, financial planners, and family counselors.

Advantages and Disadvantages of Alternative Dispute Resolution

ADR offers a number of attractive features for parties to a legal controversy:

• Disagreements can be resolved more expeditiously and with less expense to the parties.
• Because the proceedings are not on the public record, the subject matter can remain strictly confidential.
• The process has the potential to be more cooperative, minimizing stress and acrimony.
• Proceedings have more flexibility because they are not hampered or restricted by the rules of procedure or evidence that apply in court. Generally speaking, mediation and arbitration use simplified rules.
• The parties have more options with respect to the format of the process.

There are, however, situations where using alternative dispute resolution may not be helpful:

• Situations where there’s a need for precedent, or for some type of court order—Mediators and arbitrators cannot issue those types of rulings.
• Where there’s a clear power imbalance between the parties, such that one party will likely control the process to the detriment of the other party
• Where there’s a need for evidentiary rulings
• Where expert witnesses may be necessary to effectively resolve the dispute
• Where the case may be too complex for mediation or arbitration
• Where the amount of an individual claim is too small—While arbitration costs less than litigation, its cost may still greatly exceed the amount of an individual claim over an incorrect charge or fee on a credit card or phone bill. In such cases, class action litigation would make more sense. However, many consumer contracts, such as those for mobile phone service and credit cards, include clauses that require arbitration of any disputes. Such clauses hurt consumers and serve only to protect large companies from class action awards.

Factors That Contribute to the Potential Success of ADR

To maximize the potential for resolving a dispute through ADR:

• The parties must work with skilled practitioners.
• The parties must fully participate in the process.
• The parties may need to be willing to compromise, particularly with mediation, negotiation, and the collaborative process.

Factors That May Limit the Success of ADR

Alternative dispute resolution may be less than effective if:

• One or more of the parties is not committed to the process.
• One or more of the parties is unwilling to make any concessions to resolve the matter.
• The parties do not adequately prepare for the proceedings.

How Much Does the Alternative Dispute Resolution Process Cost?

Though the total costs of ADR will almost always be less than the costs of going to trial, identifying an exact cost can be virtually impossible. Mediators and arbitrators customarily charge by the hour, and all costs are generally split between the parties. Mediators and arbitrators can charge between $300 and $900 per hour. Some charge by a daily rate that can vary from $1,000 to $12,000 per day. Rates are higher for highly-regarded neutrals and also for cases that are complex or that include more parties. There are also filing fees, which can be between $900 and $4,000. In addition, parties sometimes will have their own legal counsel during arbitration, which is an additional expense. With negotiation and the collaborative law process, you’ll typically pay your attorney’s hourly fees for all time required to work out a settlement, as well as the fees for any other professionals involved.

Summary

In the American legal system, there are a number of alternative forms of dispute resolution, or ADR, with which you can resolve a legal dispute without taking your case before a judge and jury. Common forms of alternative dispute resolution include negotiation, arbitration, mediation, and the collaborative approach. ADR may or may not be binding, depending on the prior agreement of the parties. As a general rule, with a successful alternative dispute resolution, you’ll see results sooner and you’ll spend less money to settle your legal conflict.