Fighting Fair: The Benefits of Alternative Dispute Resolution

Fighting Fair: The Benefits of Alternative Dispute Resolution

In nearly every litigated case there is a benefit to engaging in early alternative dispute resolution (“ADR”). Although there may be some tactical advantages of delaying the scheduling of a mediation session, such as the filing of a dispositive motion to make unreasonable offers more narrowly tailored to the facts of the case, in the end you may find yourself at the edge of the cliff with limited resources before you even reach the courthouse steps.

Many clients embarking on the battle that is litigation find that costs surmount quickly and energy is rapidly drained. This article attempts to describe the several types of alternative dispute resolution to be considered at the onset your case.

Although many people conceive ADR to be a new age concept its roots are ancient, with commercial arbitration agreements dating back to Phoenician and Greek Traders. (See Kellor, F., American Arbitration: Its History, Functions, and Achievements, 3 (Port Washington, N.Y.: Kennikat Press 1948).) In the United States, ADR predates both the Declaration of Independence and the Constitution.  The right to privately settle claims outside of the courtroom was known in the time of our forefathers, but it was not until 1922 that ADR became institutionalized in the United States. Presently, clients are faced with a plethora of choices for ADR. The benefit of ADR is it can be more efficient and cost effective than litigation.  It is crucial for parties to understand which form of ADR is most compatible with their dispute. Therefore a review of the various forms of ADR is instructive.

Arbitration allows a party to pursue its own goals, much like litigation, without the necessity of meeting the opposing party in the middle.  Arbitration is generally supported by a state’s statutes, which provide for the enforcement of future agreements to arbitrate, and stipulate that a trial court can enforce an award rendered by an arbitrator. Parties using arbitration give up the possibility of an appeal for the benefit of an efficient, economical, and certain final and binding award. Arbitration itself varies depending on the specific nature of the dispute. One should note that arbitration is now regularly accompanied by the same discovery and motion practice that is typical of litigation however it is still more expeditious than trial.  In order to initiate litigation, the prerequisite of ripeness applies so that only an actual controversy makes it to court rather than a mere hypothetical dispute.  Recently the Court of Appeal held that the ripeness requirement does not apply to arbitration unless the parties’ agreement contains such a requirement as arbitration is foremost a creature of contract. (See Bunker Hill Park Limited v. U.S. Bank National Association (2014) 231 Cal.App.4th 1315, 1326-1327.)  An expansive arbitration provision as in the Bunker Hill case did not on its face limit the universe of arbitrable disagreements to those that are “ripe.” (Id. at 1327.)

A dispute review board (“DRB”) is a product of the construction industry that may be applicable to other projects as well. A DRB consists of a panel of each party’s representatives and a neutral chairperson. Unlike arbitration, the DRB’s recommendations are generally not binding. Furthermore, a DRB is formed at the start of the project and meets periodically throughout the life of the project. A newer form of ADR called partnering is also being used in the construction industry which may be applicable to other industries. In partnering, the dispute resolution process takes place during the life of the project, and does not wait until completion of the project before initiating the resolution process. Partnering agreements generally provide for chief executives to resolve disputes through higher levels of meeting and discussion if not resolved at the lowest level.

Mediation is generally viewed as an extension of negotiation.  In mediation confidentiality can be a concern as it requires the disclosure of the parties’ positions, even the negative portions, in order to be effective. Generally in mediation the parties do not pursue their own goals but rather they meet in the middle and “split the baby”.   Med-arb is a hybrid form of ADR which promotes the benefits of both mediation and arbitration in one forum, where the same neutral acts as both the mediator and the arbitrator.

Another form of ADR is a Mini-trial.  Mini-trials allow lawyers to make abbreviated presentations of a dispute to a panel of decision-makers made up of senior executives of the two disputing organizations that do not have direct responsibility for the project giving rise to the dispute. Mini-trials are voluntary and nonbinding. Private judging is another form of ADR that allows for a private judge to render a report that the court can adopt as the judgment or render the judgment depending on the type of private judge.  This form of ADR allows for appellate review of the decision rendered by the private judge.  A newer form of ADR is the collaborative law process where litigation counsel for each side of the dispute agrees to settle the matter without threats of litigation. Counsel must take a stand on every issue and cooperate to negotiate in good faith and work together in informal discovery.  If either side seeks court intervention both attorneys working in the process must withdraw from representing the parties.

The undeniable benefit of ADR is its effectiveness, efficiency, and the willingness of the parties to voluntarily invest time in resolving disputes. It is critical to assess your individual case prior to selecting the form of ADR that is right for you.

By: Mariel Covarrubias, Esq.

The information presented in this article is intended for general educational purposes. It is not intended to be legal advice. Every company or person’s situation is different and requires individual analysis by competent counsel before legal advice can be rendered. If you are confronted by a legal issue retain competent legal counsel to advise you immediately. This article is not a substitute for legal advice from an attorney licensed to practice in your jurisdiction.

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