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Making Peace

Alternative dispute resolution could help your business avoid costly lawsuits.

I'll sue your socks off!"

"Oh yeah? See you in court!"

Those are fighting words. And whoever carries them out dooms everyone involved to months or years of legal wrangling, rancor, bitterness and staggering expenses. America's court system promises justice for those who've been wronged, but resorting to the courts can turn everyday disputes into legal nightmares.

That's why a growing number of businesses are turning to alternative dispute resolution (ADR), a concept that includes mediation, arbitration and various hybrid forms of resolving disputes. Although the forms of ADR differ considerably, their goal is the same: to allow disputing parties to work out their differences more quickly, more amicably and less expensively than they could through the courts. Whether for contracts between businesses or agreements between employers and employees, people are consenting ahead of time to submit any future disputes to mediation, arbitration or both.

"Working out a solution can be educational and constructive instead of confrontational and destructive," says Bill Corbett of the University of Montana School of Law in Missoula, who teaches ADR and serves as an arbitrator for business disputes. "Business owners learn that instead of litigating disputes, it's in their best interests to work it [through]. If they can't mediate, it makes sense to arbitrate."

One reason is the sheer cost of litigation. A minor lawsuit is still likely to cost $10,000--even if you win. And the risk of getting hit with a large judgment is greater if it's an employment case that falls into the hands of a jury because jurors are typically unsympathetic to employers. Add to that the time involved in preparing for trial, plus the time and stress of slugging it out in the courtroom, and it's no wonder businesses are seeking a better way.

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This article was originally published in the August 1997 print edition of Entrepreneur with the headline: Making Peace.

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