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ADR: How Do I Get Rid of this Dispute Without Going to Trial?
Alternative Dispute Resolution. What Is It?
Businesses are continuously looking for ways to improve the bottom
line. As litigation costs increase, businesses of all sizes are
considering a wider range of strategic dispute resolution strategies. The
term alternative dispute resolution (ADR) refers to various processes,
other than conventional litigation, by which all types of disputes may be
resolved. ADR mechanisms vary from adversarial procedures which closely
mirror traditional adjudication on a simplified scale to localized
services, such as those provided by mediations centers, which frequently
resolve disputes that are not appropriate for litigation. Since 1987, with
the passage of the Texas Alternative Dispute Resolution Procedures Act,
numerous ADR mechanisms have been encouraged by Texas courts. While these
ADR mechanisms take many forms, the most common are arbitration,
mediation, moderated settlement conference, mini-trials, and summary jury
trials. Operating with a basic understanding of what these ADR options
entail may help expand your company's utilization of alternative dispute
resolution strategies.
Arbitration: The Popular Choice
Arbitration is a procedure, voluntary or court-ordered, in which a
dispute is submitted by the parties to one or more arbitrators who make a
decision and render a specific award. The decision of the arbitrator may
be either binding – the award is enforceable in the same manner as any
contract obligation – or non-binding – in which case it serves only as a
basis for the parties' further settlement negotiations. Generally
arbitration provides the following benefits: (1) faster resolution of
disputes; (2) the ability to select the arbitrator(s) and benefit from
arbitrators with relevant expertise; (3) control over the applicable law,
evidentiary rules, and venue of the arbitration (especially in the case of
international or complex disputes); (4) confidentiality of the process,
including the amount of the arbitration award; and (5) easier
enforceability. After binding arbitration, if the parties execute a
written settlement agreement, the agreement is enforceable as a contract.
Further, the terms of a written settlement agreement may be incorporated
in a final decree of the referring court. Arbitration is often used
because it provides a relatively lower cost to parties who want to avoid
the expense of a full trial.
Mediation: For Those Relationships You Want to Repair and Keep
In mediation, an impartial neutral mediator facilitates communication
between parties to promote reconciliation, settlement, or understanding
which helps the parties reach a mutually satisfactory settlement of their
dispute. Although mediation may be appropriate to resolve any dispute,
mediation is most advantageous in disputes between parties who have a
continuing business relationship. Mediation is an efficient and
cost-effective way of achieving settlement, and at times even enhancing,
the relationship of the parties.
The process of mediation consists of a series of meetings or sessions
conducted by the mediator where the parties explore various options for
resolving their dispute. It is not an adversarial process and the parties
have a primary responsibility to work together toward a successful
resolution. Mediators often focus on the needs and goals of the parties
rather than on the relative legal strength of each party's position.
However, mediators may not impose his or her own judgment on the issues
for that of the parties.
In court litigation or arbitration, the outcome of a case is determined
by the facts of the dispute and the applicable law. In mediation, the
parties may also be guided by their business interests. As such, the
parties are free to choose an outcome that is oriented as much to the
future of their business relationship as to their past conduct. When the
parties refer to their interests and engage in dialogue, mediation often
results in a settlement that creates more value than would have been
created if the underlying dispute had not occurred.
Mediation is usually a non-binding procedure controlled at all times by
the parties. Indeed, even when the parties have agreed to submit a dispute
to mediation, they are free to abandon the process unilaterally at any
time after the first meeting if they find that its continuation does not
meet their interests. Further, a party to mediation cannot be forced to
accept an outcome that it does not like. Unlike an arbitrator or a judge,
the mediator is not a decision-maker and therefore is not forced to issue
an opinion or award. If the parties enter into a written settlement
agreement, it will be enforced as a written contract. Indeed, parties may
be more willing to comply with the terms of a written agreement since they
assumed a larger role in its formation.
Since the mediation process is relatively brief and informal, the cost
is usually less than arbitration. Additionally, because mediation is
non-binding and confidential, it involves minimal risk for the parties. If
the mediation ends without an agreement, or if the agreement does not
completely resolve all issues of a dispute, the parties may proceed with
litigation. A mediation that does not completely resolve the dispute may
nonetheless have been beneficial in resolving some issues, narrowing the
conflict, illuminating underlying differences, and preparing the parties
for trial or another ADR procedure. Even when a settlement is not
achieved, mediation never fails, as it causes the parties to work
together.
Moderated Settlement Conferences: Receiving an Evaluation of
Your Case
The moderated settlement conference (MSC) is designed to aid settlement
negotiations by providing a forum for effective case evaluation. At the
MSC, each party and their counsel present their position before a panel of
impartial third parties and the panel then issues a non-binding advisory
opinion regarding the liability or damages of the parties. A MSC panel
commonly consists of three attorneys. The panel does not review any case
file or documents and is only given an opportunity to hear the parties'
position and ask questions. After some deliberation, the panel issues its
opinion. This objective evaluation of the case may provide a basis for
further negotiations and the parties may eventually reach a written
settlement agreement. MSCs are conducted in confidence and the results may
not be disclosed in subsequent litigation proceedings. Because the
procedure is designed to aid the parties in reaching a settlement, MSCs
are most effective when the parties are open to settlement but have not
been able to resolve their dispute through ordinary negotiations.
Mini-Trials: Advocacy Without a Full-Blown Trial
The mini-trial has often been used in complex business litigation
involving multiple parties and factually complex disputes. The mini-trial
enables each party to hear the arguments of the other party as well as the
opinion of an impartial neutral party, who may be selected because of his
or her expertise in the subject matter of the dispute. Because the
procedure is non-binding, a party does not give up control over the
dispute or forfeit the right to proceed with litigation. A mini-trial
(which if successful will save the parties considerable time and
litigation expenses), typically follows these steps: (1) if not
court-ordered, the parties agree to a mini-trial; (2) the parties also
agree on selected representatives for each party or a neutral third-party
who will hear the case; (3) to the extent the parties agree, there may be
limited discovery and exchange of information; (4) at the mini-trial,
counsel for each party make informal, summary presentations of their side
of case, aided by experts or witnesses if necessary; (5) the one or two
day "trial" may include question and answer sessions between the parties
and the neutral third-party; and (6) the neutral third-party may then
issue an advisory opinion regarding the merits of the case. The advisory
opinion is not binding on the parties unless the parties agree that it is
binding and enter into a written settlement agreement. The mini-trial is
most effective when normal negotiations have broken down. This procedure
allows parties to dispute the matter in an adversarial context, but
without the binding consequences of litigation or arbitration.
Summary Jury Trial: A Test-Run to Predict the Outcome at Trial
In a summary jury trial, the parties and their counsel present their
positions before a panel of jurors who may issue a non-binding advisory
opinion. This ADR procedure is designed to aid in settlement negotiations
by providing a reasonable prediction of the outcome of a full jury trial.
Summary jury trials are appropriate when a dispute turns on factual
disagreements, and are comparable to a summary judgment procedure that
only addresses questions of law. Through summary jury trials, the parties
may get a sense of how a jury would perceive a certain fact or apply a
legal standard.
Summary jury trials are conducted in court in one or two days,
generally in the same manner as a full trial, but they are shorter and
less formal. The number of jurors on the panel is six unless the parties
agree otherwise. Initially, the jurors are not told that the verdict is
merely advisory. The jurors are presented with admissible evidence, but no
witnesses are called. After rendering a verdict, the jury is informed of
the advisory nature of the proceedings, and the parties and their counsel
discuss the verdict with the jury in order to determine the jury members'
views on the facts of the case. The parties then proceed to settlement
negotiations and may eventually execute a written settlement agreement or
proceed with litigation.
BOTTOM LINE: While there are still instances in which disputes have to
be resolved via traditional "in court" litigation, there are a number of
alternatives that provide the potential for faster, and more economical,
dispute resolution. By understanding the ADR alternatives you can utilize
them not only after a dispute has arisen, but also establish them as the
default mechanism to be used in the event a dispute arises with an
existing (or prospective) business relationship.
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