Mediation, Arbitration or Trial? Information to Make Your Decision With.
If you’re going through a divorce or have a business issue, no matter what the legal dispute, you can mediate, arbitrate or litigate to come to a resolution -- it’s your choice. “Alternative dispute resolution encompasses arbitration, mediation, and settlement conferences -- everything but trial,” says Randy Kessler, founding partner of Kessler & Solomiany in Atlanta.
Yet there are pros and cons to each option. And, if both parties can't agree, you may be unable to avoid litigation and the trial route after all.
Trial vs. mediation vs. arbitration
In a trial, either a judge or jury will decide how to resolve your dispute after examining the evidence and hearing testimony. Mediation, meanwhile, is a private, controlled negotiation between two parties, facilitated through a third party to resolve a dispute. Arbitration is like a mini-trial, but with the privacy of mediation.
While mediation and arbitration allow you to resolve your case on your own time, you’ll have to hire the mediator or arbitrators.
You can mediate anything you can take to court, though state laws dictate what you can arbitrate. Some states require that parties mediate prior to a trial; otherwise, the parties have to agree to both mediation and the terms for settlement. Unless it's stipulated in a contract, both parties must agree to arbitration.
You need not choose just one method, though. You can mediate a portion of a dispute, then arbitrate the rest, or let the courts decide your path, or else use both arbitration and litigation, depending on state laws.
For example, if business partners have a buy-sell agreement and one wants to buy out another partner, in spite of a non-compete clause, they can mediate the price but leave the non-compete to a court or arbitration to decide. “There is benefit whether you do it by arbitration/trial and mediation because the court will have to deal with less issues when you mediate a portion of your dispute,” says Atlanta-based attorney James Holmes.
As you decide what option will work best for you, you should make sure you understand how each works and how they can best resolve a dispute.
Mediators help two parties who may be emotional make a decision in a logical manner. “The mediator goes back and forth and tries to get the gap bridged,” says Alan Fertel, partner at Weiss Serota Helfman Cole & Bierman, P.L., in Miami.
Mediators don’t decide the matter; rather, they use shuttle diplomacy to get both sides to "yes." The process starts with a joint meeting. The parties then break into private sections, or a caucus, and the mediator goes back and forth between the two parties until they reach an agreement.
Cost can be a factor when deciding which alternative to use to resolve your dispute. Lawyers are paid by the hour for most cases, as are mediators and arbitrators, while there’s no cost for a courtroom and a judge’s time. Mediation can be cheaper than arbitration and litigation since less time is spent on discovery, which is the process of gathering evidence.
The benefit of resolving disputes through mediation (and also arbitration) is that the proceedings and resolution are private, which may be important to the parties depending on what’s discussed.
Mediation helps the parties maintain a relationship, which may be important to you. “If you want any semblance of a relationship after the case, or if you just want to be able to have a normal conversation with your opponent afterwards, do not litigate; mediate,” Kessler advises. Forgetting what’s said at a trial, in contrast, can be a challenge."
“At mediation, resolution helps make it easier to converse in the future, especially since much of what is said is delivered privately to the mediator and not in front of the other side,” says Kessler.
A trial by a jury of one’s peers is a constitutional protected right. Litigation is a court trial, and trials can be messy. “You go to trial because you can’t settle it any other way,” says Kessler.
The problem is, you have very little control in a trial. You don’t choose the judge, and if either side requests a jury, he or she gets it. You can’t decide when you’ll resolve your case, either. Your case will be put on a judge’s docket, and because there’s such a backlog, you may not reach a resolution for several years. “[Trials] take a long time,” says Fertel. “They are uncertain -- you’re putting your life and case in the hands of a judge or a jury.”
While there’s no charge for the courtroom or judge, litigation can still be quite expensive because of the amount of time lawyers need to spend preparing for a case. “It’s all about the bottom line,” says Kessler. “Trials are at least twice as long [as mediation], and sometimes five to ten times as costly.”
There’s no privacy in a court, as well. Poor conduct, spousal abuse, drug use and finances may be discussed during a divorce, which can affect someone’s professional reputation. In a business context, financial records may be exposed in court, as may proprietary interests, bad behavior, employee disputes and trade secrets.
The good news, according to Holmes, is that, “The information disclosed at trial will only be readily available to the public if someone’s listening to it or there’s a court reporter there.” The bad news: “All the filings are discoverable by going to the website.”
And there's more bad news: Getting court records sealed is very difficult, Kessler points out. “There are people who sit in the courtroom to watch a trial,” he says. “You can’t do that at mediation [and arbitration].”
Arbitration is a less formal trial, with witness testimony and evidence that’s decided by as many as three arbitrators. You have the same privacy as you do in mediation. “An arbitrator is hired by both sides to adjudicate the situation privately,” says Tim Fry, a New York-based attorney. “The arbitrator makes a decision and that decision is final and non-appealable. It’s only appealable in certain circumstances.”
Arbitration can cost the same as a trial, though. While less time is spent preparing for arbitration, paying for arbitrators can add up. as they charge by the day or hour. Each association for alternative dispute resolution has its own fee schedule for arbitrators, and fees vary depending on the settlement amount.
If you have a panel of arbitrators who are also subject-matter experts, though, arbitration can take less time since you won’t have to explain terms or other concepts as you would in court. “It’s always better to control your own destiny,” says Kessler. “In arbitration, you’re at least controlling your own environment -- you choose your judge and when and where your case will be heard. You don’t choose the judge in a court trial.”
Andrea Murad is a New York-based writer. Having worked on both Wall Street and Main Street, she now pursues her passion for words and covers careers, investing and money.