Is the Best Means of Dispute Resolution
Robert D. Taichert
2006 - Most people live by the rules, and parties agree
to contracts and fulfill their legal obligations to act
in good faith and fair dealing. Misunderstandings, however,
do happen, agreements are sometimes incomplete or one-sided,
unforeseen circumstances arise, and conflict is inevitable.
The question is how to solve problems when they arise.
United States has four recognized means of dispute resolution.
It is important to have this range in mind and to differentiate
when one is in dealing with a given disagreement or dispute.
The key is good-faith negotiation. People
who negotiate recognize that they have to give something
to get something. The parties control both the process and
the outcome. When the parties have achieved a meeting of
the minds, they craft an agreement to reflect the deal they
made. The matter is resolved on terms developed by the parties
and acceptable to both sides. When parties are unable to
negotiate a satisfactory resolution, they may need help.
A mediator’s job is to separate the
people and their emotions from the problem, to get the parties
to address the problem, and to find an accommodation of
the conflicting interests that all the parties can accept.
Sometimes the problem is solved and relationships are restored
and improved. Sometimes all parties breathe a sigh of relief
when the episode is at an end.
negotiation fails, mediation is by a wide margin the best
mechanism to resolve disputes. In mediation, the parties
can craft their own solution with the help of a mediator,
which is a far better solution than letting a third party
decide, whether it be an arbitrator, judge, or jury. The
key to the success of mediation is that the parties control
the process and the outcome. The only commitment that parties
make in a mediation is that they will negotiate in good
faith to try to reach an agreement acceptable to both sides.
The difference between negotiation and mediation is that
in mediation a disinterested third person, the mediator,
participates in the process with the parties’ permission.
The key to a mediator’s success in helping the parties
reach an agreement is to separate the people from the problem.
In other words, a mediator helps the parties look at their
economic interests, not their positions. Mediators
do reality checks, communicating to the parties that the
dispute will end someday. The question for the parties is
whether they prefer to craft their own solution, or whether
they think a third party or entity is more likely to come
up with a desirable solution. Mediation is entirely voluntary.
No one is bound to anything, except to negotiate in good
faith until an agreement can be reached. The agreement is
put in writing, and both parties sign this binding, enforceable
contract. The parties know the facts and where their economic
interests lie far better than any decision-making tribunal
would. The solution crafted by the parties clearly spells
out their respective rights and obligations, binds both
sides, and is enforceable in court.
Arbitration is not nearly as effective as
mediation, but it is far better than litigation. In exchange
for privacy, relative simplicity, lower expense, and a more
rapid result, the parties to the dispute agree that an arbitrator’s
decision will be binding, and give up the right to appeal.
The parties submit the dispute to a neutral third party
for a final decision that will terminate the dispute and
determine the rights of the parties. In arbitration, the
parties can influence the process, but have no control over
the outcome. An arbitrator makes a final decision, which
binds both parties and is enforceable in court. There is
no appeal from an arbitrator’s award, except in very
narrow circumstances, such as fraud by an arbitrator, a
decision by an arbitrator that goes beyond the scope of
the dispute submitted, or a failure to grant reasonable
requests by the parties for postponement. Arbitration is
a creature of contract, and the scope of an arbitration
is clearly defined and limited by the terms of the agreement
between the parties to submit the dispute to arbitration.
An arbitrator’s mandate is to conduct a fair hearing
in accordance with whatever rules the parties have chosen—frequently
the commercial arbitration rules of the American Arbitration
Association, although there are others—to fairly and
impartially hear the facts, and to decide the issue or issues
presented in the form of an award, which then becomes enforceable
against the loser in court, if necessary.
The fourth and least desirable way to resolve disputes is
litigation. The parties completely lose control of both
the process and the outcome. The dispute is resolved by
a judge or jury after a substantial expenditure of time,
money, and expense in trial preparation, and the result
is not necessarily final until the last appeal has been
determined by an appellate court. The time, expense, emotional
costs, and opportunity costs of litigation are hard to exaggerate.
Furthermore, while the American justice system is excellent
compared to those of many other countries, the courts are
overburdened, the trial judges are too busy (especially
in state courts, where a law clerk is a rarity), and often
the litigation outcome is determined more by factors such
as the showmanship of a lawyer, emotion, redistribution
of the wealth, and the vagaries of what a jury decides is
fair. It is difficult to overstate the psychic and opportunity
costs involved in the uncertainty of time delays, the uncertainty
of the outcome, and the possibility of multiple layers of
appeals such that the parties may not know the answer, decided
by someone else, for years.
is estimated that 85% of mediated cases are settled, while
90% of litigated cases are settled before a judgment or
jury award. Lawyers and accountants do a great service when
they persuade their clients to try mediation before filing
suit or demanding arbitration.
D. Taichert is a practicing attorney, mediator, and
arbitrator with the firm of Miller Stratvert in Albuquerque,
N.M. He is a member of the American Arbitration Association’s
Commercial, Large Complex Case, Construction, and Mediation
Panels. He is a fellow of the American College of Civil Trial
Mediators and a fellow and former regent of the American College
of Tax Counsel.