Mediation Is the Best Means of Dispute Resolution

By Robert D. Taichert

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Four Methods

The 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.

Negotiation. 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.

Mediation. 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.

When 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. 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.

Litigation. 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.

Mediation Works

It 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.