Over the past 15 years, Alternative Dispute Resolution (ADR) has become all the rage as parties try to limit the time and expenses they might expend if forced to litigate disputes in court. One of the ADR mechanisms whose use has exploded in growth is mediation. Indeed, it seems that every month or two I see an announcement that a recently retired judge is joining one of the big mediation firms, such as JAMS, or is starting his or her own mediation practice.
While I often engage in mediation as a way to try to resolve my clients’ disputes, it is important to understand what mediation is, and what mediation is not, so that you can evaluate whether it might be an appropriate vehicle to use in an effort to settle a particular dispute that you or your business might have.
Although people often confuse mediation with arbitration, the only real similarity is that parties generally cannot be forced to either mediate or arbitrate a dispute; they must voluntarily agree to engage in either process. Substantively, however, mediation could not be more different than arbitration.
At its core, mediation is nothing more than a process by which an independent, third party (the mediator) tries to help parties settle their dispute. Mediation is a completely non-binding process. Thus, when a party agrees to mediate, the only real commitment is to meet with its adversary and a mediator to explore settlement options. Any party is free at any time and for any reason to terminate the mediation.
Arbitration, on the other hand, involves litigating your case to the end. While arbitration is not undertaken in a court, arbitration involves a process that is similar to court litigation (albeit truncated) and culminates in a decision being issued by the arbitrator(s). Further, once invoked, a party has no right to terminate arbitration, and the ultimate decision rendered is just as binding as one issued by a judge or jury.
There is another ADR mechanism called “binding mediation,” which purports to marry the best aspects of mediation and arbitration into one process. Essentially, binding mediation involves going through a mediation-like process, but if no settlement is reached, the mediator will issue a binding decision. While this might sound nice in theory, binding mediation simply has not caught on. Additionally, if parties are interested in such a hybrid process, they need to be careful how they structure it, as at least one court invalidated a binding mediation mechanism.
In the coming weeks, I will discuss how mediation works and when it is likely to be a fruitful exercise.