When facing a business dispute, the thought of going to trial may add more stress to your already-full plate. However, there is an alternative.
Aptly named, alternative dispute resolution (ADR) refers to ways people can resolve disputes without jumping into litigation. Mediation and arbitration are two of the most common ADR processes to resolve business disputes.
ADR provides numerous advantages to disputing parties, including more flexibility and more control over the process, resulting in the parties playing a significant role in resolving their own disputes while creating higher satisfaction levels. Additionally, ADR is cost-effective, time-efficient, and often less stressful than formal litigation.
Keep reading to learn more about the ADR processes of mediation and arbitration.
Mediation is a process where the parties meet with a mutually-elected, partial person (“neutral”) who assists them in resolving their disputes. In other words, the neutral acts as an intermediary between the disputing parties, helping them facilitate civil communications and, ultimately (and hopefully), a resolution.
Depending on your location, you may have a choice between different types of mediation. These often include:
- Facilitative mediation: Here, the mediator helps to facilitate communication and negotiation between the parties, allowing them to understand the other party’s point of view. In this type of mediation, the mediator does not provide their own assessment of the issues, but instead, encourages the parties to develop a solution voluntarily.
- Evaluative meditation: Here, the mediator analyzes the dispute and then provides a non-binding assessment and recommendation of how the dispute should be resolved. The parties may accept or reject this assessment. This type of mediation is often used in court-mandated mediation, described below.
- Transformative mediation: This type of mediation is an off-shoot of facilitative mediation, where the mediator encourages the parties to recognize each others’ needs, concerns, and interests. Where facilitative mediation “nudges” the parties toward an outcome, transformative mediation focuses on the parties’ relationship when deciding how to effect beneficial change.
- Court-mandated mediation: This type of mediation is not considered a voluntary process, as the above three types of mediation. Instead, here, the court may require the parties to submit to mediation as a more cost- and time-efficient way to solve the parties’ issues.
Unlike other types of legal resolution, mediation is a non-binding process. This means that even if the parties agree to mediation, they are not obligated to continue with the mediation. Instead, they can simply walk away.
Additionally, if the parties continue with mediation to resolution, the parties must voluntarily agree to the mediation’s outcome. In this way, the parties are in control of whether the mediation process is successful or not.
Unlike an arbitrator or judge, a mediator is not a decision-maker. Their role is to assist the parties in reaching a settlement to their dispute.
Mediation is not a one-size-fits-all dispute solution. For example, because mediation requires the parties’ cooperation, disputes over deliberate, bad-faith actions, such as fraud, may not be appropriate. Additionally, mediation may not be an appropriate dispute resolution method if the parties need a neutral opinion to decide a disputed fact.
However, certain disputes are appropriate for mediation. Here are some examples:
- The parties want to solve the dispute quickly and confidentially while minimizing costs.
- The parties wish to have control over the process and results.
- The parties wish to preserve their business relationship.
Understanding the benefits of mediation can be significant for your business. Not only is it an ideal way to stay out of more formal court proceedings, but it’s less adversarial, allowing you to maintain business relationships and prevent the same issues from occurring down the road.
Arbitration is the most formal type of alternative dispute resolution, and this process takes any decision-making away from the parties involved. Instead, the arbitrator (either a single arbitrator or a panel of arbitrators) hears both sides’ arguments and evidence and then decides the dispute’s outcome.
Often, arbitration can be either binding or non-binding. Binding arbitration means that the parties have waived all rights to go to trial and agree to accept (or be bound to) the arbitrator’s decision. There is no right to appeal the arbitrator’s decision.
Non-binding arbitration, on the other hand, means that the parties can request a trial if they don’t agree with the arbitrator’s decision.
Binding arbitration continues to be the more common type of arbitration in the U.S., as non-binding arbitration is becoming increasingly rare.
Although more formal than mediation, arbitration is often faster and more cost-effective than traditional litigation. But, like mediation, arbitration may not be the best option for all business disputes.
Commonly, arbitration is preferred when the parties seek an objective, measured decision as opposed to collaborative communication. However, it also depends on what dispute you’re trying to resolve. For example, binding arbitration is often the only option for consumer and employee agreements. So, it’s critical to understand any legal documents governing the dispute before choosing the appropriate ADR process.
Hansen Reynolds LLC is available to provide mediation and arbitration services between parties in the Milwaukee, Madison, Minneapolis, and Chicago areas.
Equipped with experience as a Milwaukee County Circuit Judge, experience in private practice, and a Certificate in Mediation from Northwestern University, the Hansen Reynolds LLC Team is here to help you reach a fair conclusion to your case and function as a neutral arbitrator or mediator.
Contact us today for more information on how we can help!