Mediation and arbitration are useful tools to resolve civil disputes. While they are used to accomplish the same goal (i.e. resolve a dispute), they have very different procedures. Despite these differences, they are often confused with each other. This article will explain their differences and how each is used.
What is Mediation?
Mediation is a formal settlement conference between parties to a civil dispute. The parties are typically represented by counsel during the mediation process. The distinguishing characteristic of mediation is that the parties are in control of the terms of a resolution. Stated another way, unless both parties agree to the terms of a settlement, no resolution is reached. This control is what makes mediation so appealing and less intimidating than other forms of dispute resolution.
Mediation can take place either before or after a lawsuit is filed. One advantage of mediating a dispute before a lawsuit (called pre-suit mediation), is the savings realized in attorney fees and costs. One disadvantage to pre-suit mediation is that the parties may not have exchanged sufficient information to allow them to make sound, informed decisions about a settlement.
A mediator presides over the mediation. The mediator is typically, but not always, someone who has experience with the type of dispute being mediated. For example, in my practice, I use attorneys who have experience in the personal injury field when I am mediating an injury claim.
The mediator first meets with all the parties and their counsel in a general (sometimes called joint) session. In this session, the mediator explains the process and rules governing the mediation.
One very important rule is the rule of confidentiality, which prohibits participants from disclosing the mediation discussions to third parties.
Frequently, after the general session, the parties and their respective attorneys split into separate groups and meet with the mediator privately. These private sessions are called caucuses. The mediator will go back and forth relaying offers and counteroffers.
If the parties reach a resolution, a formal settlement agreement is signed by the parties and their counsel. The settlement agreement is a binding contract which can be enforced like any other contract.
Statistically, most cases that are mediated after a lawsuit is filed settle at mediation. If no settlement is reached, the mediation "impasses". This means no settlement was achieved and the parties are free to pursue another resolution to the dispute.
What is Arbitration?
Arbitration is similar to a trial. An arbitrator (or panel of arbitrators) considers the evidence presented by the parties and makes a decision on the merits of the case. In this way, the arbitrator acts like the judge or jury in a trial.
Arbitration is typically conducted before a lawsuit. Often, arbitration is required before a party can file a lawsuit. For example, many condominium disputes must be arbitrated before a lawsuit is filed.
The parties to an arbitration present evidence much the same way evidence is presented at a trial (e.g. witness testimony and the introduction of documents), although the rules regarding the admissibility of evidence may be relaxed.
The distinguishing feature of arbitration, as compared to mediation, is that the parties do not control the outcome. A decision is made for the parties by the arbitrator. The decision of the arbitrator may be binding or non-binding. If the decision is binding, the parties must abide by the decision. If the decision is non-binding, the parties are free to pursue another resolution to the dispute, a lawsuit. This is called a trial de-novo ("anew").
Advantages to arbitration include cost savings, ease of scheduling to accommodate the parties and their counsel, speedy resolution, and the ability to select an arbitrator who has special knowledge about the issues involved in the dispute. Disadvantages include increased costs if one of the parties to a non-binding arbitration pursues a trial de-novo and the general lack of a right to appeal a binding arbitration decision.
In summary, both mediation and arbitration are useful tools to resolve disputes. However, there is no "one size fits all" approach when deciding when and if they should be used. Every case is different and requires a thoughtful analysis of the advantages and disadvantages of each.