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Alternate Dispute Resolution: Will it Replace Litigation?
During contract negotiations, your attorney asks whether you want to include a provision for Alternative Dispute Resolution (ADR) in the event of a dispute or breach of the agreement. Or, you have not been paid and want to sue but the contract contains a provision for mandatory arbitration. Or, the insurance adjuster in your personal injury case has requested arbitration rather than a jury trial. ADR is rapidly gaining favor as a replacement for the traditional litigation process. Arbitration and Mediation are the most common methods of settling legal conflicts outside the traditional litigation process.
Arbitration retains many of the adversarial aspects of the current judicial system but attempts to reduce overall costs, eliminate rules of evidence and expedite the final decision. Mediation brings the parties together through a neutral mediator who attempts to facilitate a negotiated settlement.
Arbitration
During contract formation, the parties should consider whether an arbitration clause should be included. Unlike general default provisions of a contract which require resolution in the courts pursuant to its laws and procedural rules, the contract can define the choice of forum, the rules (or alterations to standard rules), qualifications of arbitrators and even the types of remedies that can be awarded. Under Virginia Code §8.01-581.01, if a contract includes a provision for arbitration, the court will not proceed with the suit until the dispute is first arbitrated. There is a similar provision in the Federal Arbitration Act, 9 U.S.C. §3.
Some advantages over traditional litigation include convenience of hearing dates, ability to amend rules utilized and participation in selection of decision maker(s). Many cases result in decisions based upon the facts of the case as reviewed by experts in the field, rather than according to principles of law and legal procedure as defined by a judge with no prior experience in the matter under dispute. The proceeding is confidential and may allow for a continuation of a business relationship while reconciling a particular dispute. Furthermore, the parties can agree to a high-low figure whereby the decision cannot exceed or be less than a specified sum.
The cost of arbitration may be a hindrance, especially for small cases and collection matters against insolvent defendants who will use arbitration as a delay tactic. The largest arbitration organization, American Arbitration Association (AAA) charges a fee based upon the amount of the claim and the number of arbitrators plus other types of fees. Although the arbitration fee will be allocated by the arbitrators according to the merits of the respective parties' claims and defenses, most of AAA's fee must be paid in advance of the hearing. Nevertheless, the fees charged can be reasonable if the appropriate arbitration forum (see Sources for Arbitration listed below) is chosen and if the cost is offset by savings in attorney's fees and other litigation expenses.
Other concerns may be considered an advantage or disadvantage, depending on your point of view. Discovery is generally more limited, although this may result in less attorney's fees and may be modified by the arbitration agreement. Formal rules of evidence do not apply, but arbitrators who are lawyers or retired judges tend to give less weight to hearsay and other normally objectionable evidence. "Binding" arbitration, means that there is no appeal from the decision, which can be altered by making the arbitration "non-binding"; however, timeliness and finality of judgments is a favorable aspect of arbitration.
Mediation
In mediation, the parties meet with a neutral mediator who facilitates communication and problem solving in order to achieve a resolution of the problem. Attorneys may or may not be allowed to attend these sessions, although the parties wishes in this regard generally prevails. Sometimes, the mediator meets separately with the party's to assess the appropriateness of this process or to actually negotiate a settlement.
The mediator does not render an opinion on the merits of the case, but rather assists parties to communicate their positions and to evaluate their own cases by the exchange of information. In theory, the process permits parties to repair, rather than destroy relationships. Parties who reach their own solutions are more likely to be satisfied with the results. Furthermore, certain types of problems such as divorce disputes may be more adequately resolved by mediation than by the courts where parties receive an "all or nothing" verdict rather than an agreed solution. For example, a person who believes they may be the object of sex discrimination may not be seeking money damages or the loss of the offender's job; simply securing an appropriate work environment may be enough.
Experimental Programs
Based upon the multi-door courthouseconcept proposed by Harvard Professor Frank E.A. Sander, many court systems are attempting to diagnose and refer cases to the correct dispute resolution program. The Los Angeles County Bar Association's Dispute Resolution Services, Inc. was begun in 1978 and now has 1,500 volunteer mediators who handle about 650 business-related cases per year.
In 1985 the District of Columbia established an experimental program, which at the time of this writing, maintains a staff of 19 full-time employees processing 7,500 cases per year in a broad range of matters. ADR is now mandatory, but litigants generally can choose between mediation, case evaluation or non-binding arbitration. Arbitration can be non-binding, if the parties choose, which permits a new trial if either party is dissatisfied with the award.
Virginia Solutions
Virginia Code §8.01-576.6 authorizes judges to order appropriate cases to a dispute resolution evaluation session. Any party may object, but the evaluation session is free of charge. With the consent of all parties, a form of ADR may be employed by court order.
Fairfax County Circuit Court has established the Neutral Case Evaluation (NCE) program to resolve the high volume of cases being filed. Volunteer attorneys acting as mediators successfully settle approximately 50% of their cases with many more settling before trial because of their efforts. As this article is written, the program expedites cases involving certain types of personal injuries and contract cases with fixed damages, allowing judges to devote their time to more complex cases. The program will undoubtedly be expanded in the future.
While only the Richmond Circuit Court has a formal ADR program called Early Neutral Evaluation, other Virginia courts regularly utilize mediation especially for child custody and visitation cases. Loudoun County judges are now insisting on ADR in many cases.
Conclusion
When the time to enforce an agreement arrives, arbitration may be desirable and should be considered. In fact, the courts are moving toward requiring some form of ADR even if not required by contract. Do not sign a standard arbitration clause without considering whether you want to be forced into arbitration and what rules you want to apply.
Sources for Arbitration
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