It’s no secret… lawsuits are expensive, there’s no guarantee of success, and even if you win a monetary award, there’s no guarantee the award will ever be collected. For these and other reasons, the notion of resolving disputes without lawsuits can seem attractive. Consider the following…
What is ADR? Alternate Dispute Resolution…
Simply stated, ADR is any means of resolving a dispute without litigation. Probably the most commonly used form of ADR is—negotiation. Parties are always free to resolve disputes themselves—without any formal process whatsoever. However, the most widely recognized forms of ADR are mediation and arbitration. Mediation is usually non-binding, i.e., the parties are not required to settle and the dispute need not be resolved at all. Instead, a neutral third party (i.e., a mediator) attempts to facilitate an agreement between the disputing parties themselves. Conversely, arbitration is usually binding. In arbitration, a neutral third party (i.e., an arbitrator) examines documentary evidence, considers testimony, applies the law, and renders a decision resolving the dispute. In fact, arbitration is much like a lawsuit—except it is not conducted in a court, the arbitrator is not a judge (although former judges may serve as arbitrators), and no juries are used.
Is ADR always “better”?
While ADR offers many advantages, it is not always the optimal solution. Here are a few thoughts…
- If the parties are so deeply divided, negotiation or mediation may merely delay the inevitable… a lawsuit.
- ADR may not be appropriate when immediate relief (e.g., an injunction) is needed.
- Arbitration may be just as expensive and time consuming as a lawsuit.
- An arbitration clause in a contract that merely says the will arbitrate disputes is likely to be insufficient… the clause should address many issues, including arbitration rules to be used, the location of the arbitration proceedings, the number of arbitrators, and much more.
- Commercial arbitration rules can be quite complex.
- If your adversary refuses to honor its promise to arbitrate or refuses to abide by the arbitrator’s decision, you may need to file a lawsuit to compel arbitration and/or enforce the award.
- Arbitration can be cumbersome when other parties—who have not agreed to arbitrate—must be part of the dispute resolution.
Would you like more information?
While ADR can be an attractive alternative to lawsuits, the nature of the parties, the dispute or the needed relief may render it inappropriate or ineffective. Please feel free to contact me for more information.
DISCLAIMER: This BLOG post is provided solely for the general interest of the reader. It is not legal advice or opinion. Legal advice and opinion are provided by the firm only upon engagement with respect to specific factual situations.