Alternative Dispute Resolution is not new. What is new is the rapid shift to private mediation and arbitration of cases that traditionally went to trial. If you have an employment or commercial dispute, the odds are increasing daily that you’ll find the courtroom doors closed to your case.
This article will provide some basic description of the Alternative Dispute Resolution process, and its costs, and also describe the trend toward using mediation and arbitration.
First, some clarifying descriptions: mediation is a voluntary submission of a case to a neutral, paid “deal broker” whose goal is not justice but closure. The parties to the mediation are not bound by the result, and agree that the discussions in the mediation will be kept confidential. There is no evidence taken in the mediation. The mediator is not an adjudicator of the facts, and reaches no decisions. He or she is certainly no dispenser of justice. Mediators have said to my clients in the opening session, “This will sound strange, but in this process today we will not be focused on either the truth or justice. Today, we have only one goal: to settle your case.”
The second major “Alternative Dispute Resolution” tool is arbitration. Arbitration is the private resolution of a dispute compelled by a contract between the parties, and requires the submission of evidence. The arbitrator acts as a judge of the facts and decides the issues of law. His or her decision is often final, with very limited rights of appeal to a court. The arbitration agreement often specifies the arbitration service that will provide the arbitrator. That arbitration service often has already developed a set of procedures and rules that will guide the arbitrator and parties on how the arbitration will be conducted. However, the parties can agree to different guidelines in their contract.
“Alternative Dispute Resolution” can be expensive. Successful, entrepreneurial mediators in Southern California in employment disputes, for example, command fees between $4,000 to $10,000 per day of service, the parties often splitting the cost of the mediation. Most employment law mediations require one full day. Complex cases, and certainly class action mediations, require multiple days.
Arbitration costs are also quite high. An Arbitrator may charge “per diem,” meaning a flat fee per day, or by the hour, but fees of $4,000 per day of arbitration would be considered normal in Southern California employment law disputes. An arbitration, like a trial, involves witness testimony, demonstrative evidence [charts, pictures, videos] and documentary evidence [often emails, data reports, memos, business records]. The result is that arbitration can consume a week of time or longer, and the expense can be substantial. The parties are also paying for their attorney’s time and any expert witness time as well.
Compare these costs to taxpayer supported access to the courts, and you see that the costs of justice has been shifted, and shifted generally to the disadvantage of the individual challenging misconduct by a corporation or other wealthy opponent. California courts have mitigated this burden on the employee by holding that in discrimination cases, the cost of arbitration will be no greater than what the employee would have occurred at a traditional court trial. Also, the California courts have held that they will not enforce arbitration agreements that are not basically fair and balanced in allowing the employee the benefits of preparing and submitting the case for arbitration. That includes access to evidence and basic “due process” in the conduct of the arbitration.
The general rule is that the winner recovers the “costs” of arbitration, which would include the cost of the arbitrator. However, unless there is a statute or written agreement between the parties for recovery of attorney’s fees, each side must pay his own attorney. In employment discrimination cases, there are just such “fee shifting” statutes favoring the employee. Also, employees often enter contingency fee agreements with their lawyer.
Mediation is an informal process. The parties usually meet in the mediator’s offices, and each occupies as separate conference room. It has become customary in my mediations in Southern California that the parties do not even see each other during the day. Instead, the mediator shuttles between them, stating to each the weaknesses [and occasionally the strengths] of their positions. However, the mediator is the voice of reason and dispassionate analysis. The mediator is not there to rubber stamp a party’s advocacy of why his case is so great, but to point out how badly things might turn out for that party if the case proceeded to trial. The goal is to provide a dose of caution and prudence, thereby inducing a party to avoid the risks of litigation by a written settlement, often that same day.
Arbitration is a formal process, but in my experience, not as formal as a courtroom, and with a refreshing degree of flexibility in fashioning the way the case is presented. Much of that flexibility depends on the individual arbitrator. Rules of evidence still apply, but arbitrators are more likely to allow evidence, subject to assessing its weight and credibility. However, the arbitrator is hired by the parties to conduct the arbitration according to the terms of the arbitration agreement, which may set forth strict procedural requirements. The place of arbitration is also often in the facility provided by the arbitration service, but without the usual pomp and gravity associated with a courtroom.
Most significantly, the arbitrator is accessible before the arbitration, often by conference call, to manage the case as it proceeds to hearing. The arbitrator in this way can quickly hear the arguments and decide a motion or resolve a discovery dispute, thereby keeping the case on track. Often, the timing of key events in the arbitration, such as when depositions will be completed, or a key motion will be heard, is arranged by consultation with the arbitrator followed by a stipulation of the parties. Thus, the process is more efficient because the parties have more access to the decision maker. Finally, arbitration often are concluded more quickly than trials. This is because there is no jury, and because court judges, unlike arbitrators, have hundreds, often thousands, of other cases to manage at the same time, and so must interrupt the trial calendar to attend to them.
The United States Supreme Court has taken a clear stand supporting the right of parties to agree to arbitration under the Federal Arbitration Act. The Court has given approval to often one sided agreements favoring the more financially dominate party who drafted the agreement, such as large financial institutions. The California Supreme Court has tried valiantly to fit notions of fairness within the sweeping mandate of the U.S. Supreme Court. The California Courts have held that under basic common law contract principles, an arbitration agreement must not be so one-sided in favor of the employer as to be “unconscionable.” This State-Federal battle continues, but the obvious ultimate victor will be a conservative U.S. Supreme Court, and the trend is already toward greater enforcement of arbitration agreements meeting the minimal requirements of federal law.
In conclusion, “Alternative Dispute Resolution” is the trend of the 21st century unless the State and Federal Judiciaries take measures to make the courts more accessible through the use of internet filing and service of process, video conferencing, and expedited jury trials. Also, repeal or amendment of the Federal Arbitration Act is indicated if the general population is to continue to believe in the American concept of equal access to justice.