08 / 25 / 2010

To Mediate and/or Arbitrate? That is the Question.

Alternative Dispute Resolution (“ADR”) is sometimes viewed as the latest, “trendy” way to resolve your case. ADR is generally a process that takes place outside the courthouse, although many courts now require parties to utilize ADR at some point before trial during a lawsuit. However, many parties are now leaving the courthouse completely out of the picture, and deciding to solely use some type of ADR, such as mediation or arbitration, to resolve or litigate their claims.
ADR consists of several types of processes, but I am only focusing here on mediation and arbitration. A mediation consists of the parties and their counsel, and a neutral third party known as the mediator. The mediator is not a decision maker, but assists the parties in amicably resolving the dispute. The mediator helps parties in developing settlement options, and may offer his or her opinion as to the strengths and weaknesses of a party’s case. Parties can agree to mediate their claims, or may be ordered by the court to mediate the case prior to trial or arbitration.
 
Mediation is the ADR process in which the parties have the most control of their outcome, versus going to arbitration or court where an arbitrator, judge or jury makes the decisions. Parties often favor mediation because parties are able to mold unique settlements that may not be available in court or arbitration, Furthermore, the costs of mediation are typically less than the costs of litigating a claim in court or in arbitration.

Arbitration is a form of dispute resolution based on an agreement by the parties to arbitrate their claims, rather than utilize the courts. An arbitration consists of the parties and their counsel, and at least one arbitrator who acts as the judge and jury or decision-maker. Whether to use one arbitrator, or a three-person panel, is a decision made by the parties in their arbitration agreement.

Arbitration is conducted similarly to a trial, but is more informal and may not utilize the rules of evidence and procedure utilized in a trial. Generally, parties are able to mutually agree on an arbitrator, or at least strike potential arbitrators, whereas in a Texas court, you are assigned a specific judge. Parties also must give up their right to a jury trial in arbitration. Arbitration is typically binding and unappealable, although there are a few exceptions that allow arbitration to be non-binding or appealable. Once the arbitrator issues a final ruling, the prevailing party files it in court to effectuate a collectable, enforceable judgment.

The costs of mediation and arbitration are generally split between the parties, making it an attractive option for parties. However, in arbitration, unlike a judicial proceeding, all costs, including the cost of the arbitrator(s), are incurred by the parties. Arbitration decisions are typically reached much more quickly than a judicial proceeding, and are generally final. Both mediation and arbitration allow parties to reach decisions and judgments more narrowly tailored toward the parties than a judicial proceeding can allow.

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