ADR is an alternative way to settle a dispute outside of the judicial process. Therefore, you do not go to court and you do not have a public record concerning the matter. Using ADR, as opposed to the judicial process, resolves the matter in a quicker, less formal and less expensive way. Where in the judicial process a judge will normally rule one way or another, with ADR a common ground is found and the outcome is normally overall better for both parties then it would be in the judicial process. The three main types of ADR are negotiation, mediation, and arbitration.

Negotiation is the most common method of ADR and is used every day in conducting business transactions. It is a form of communication used as a method of persuasion. You may have experienced negotiations when buying a car, or when dealing with a landlord for a space you wish to lease. The negotiation process is the most successful when you try to understand a party’s objectives and motives, and then use that to negotiate with the other party to achieve those objectives along with your own. Negotiation is also used during the litigation process to settle a case.

Mediation is essentially negotiations with the assistance of a third party. This third party is neutral, his job is not to decide right or wrong, it is simply to help the two parties reach a settlement. Mediation is a very informal process that occurs in a prearranged location. Mediation is the best way to resolve a dispute where you have an ongoing relationship with the other party. The goal of mediation is to find a common ground between the parties to resolve the dispute. Instead of the two parties negotiating with each other to settle a dispute, there is a mediator who facilitates the discussions and settlements between the parties. During the mediation each party will explain to the mediator their side of the situation. In order to have a successful mediation, both parties need to come to the mediation willing to settle.

There are two main types of mediation, facilitative and evaluative. In a facilitative mediation, the mediator is present to help the parties overcome any communication problems they might have. The mediator helps the parties to discover and explore multiple options for the settlement of the case, without imposing any particular opinion about which option is best. The evaluative mediator identifies the advantages and risks of each party’s position and then he predicts an outcome if the dispute were to go to trial.

Both negotiation and mediation conclude with nonbinding outcomes. This means that they will not be upheld in court. In order for the parties to have a legally binding outcome, for example, where you can enforce payment in court, a contract is needed. At the end of the negotiation or mediation, it is best to have a signed contract stating the terms of the agreements and include in the contract the amount each party is supposed to pay or the services the party is to perform.

There are various businesses that offer mediation services. The American Arbitration Association (“AAA”) is a worldwide service that offers a popular choice for mediation and arbitration services. While AAA is one of the more well known, it has expensive filing fees compared to other mediation services. While mediation has costs involved, they are far less than the costs involved with the judicial process.

Arbitration is a binding private dispute resolution procedure and both parties must agree to have their dispute decided using the arbitration process. Many contracts you may encounter, such as with credit card companies or when you buy a computer, may have arbitration clauses in them. Courts will uphold these arbitration clauses as binding and will enforce them; therefore, you will be required to have your dispute resolved using the arbitration process that is found in the dispute resolution clause of the contract. Arbitration decisions are rarely overturned and therefore you are bound by the arbitrator’s decision.

The arbitration process and rules depend on the service handling the arbitration and the arbitration agreement. For example, the AAA has its own rules for the arbitration and mediation process. Generally, in arbitration the rules of civil procedure are not followed and discovery is very limited. The process begins by filing the dispute with an ADR service. I recommend the Legal Resolution Center (“LRC”) as a great and inexpensive source for arbitration. The LRC’s arbitrators are all former judges with years of experience. Next, the parties must choose and agree on an arbitrator(s). The arbitrator will then set a hearing date. At the arbitration hearing each party is entitled to be heard, present evidence, and cross examine witnesses. In arbitration the arbitrator must consider material evidence, however, discovery is not mandatory and often is very limited. Therefore, the arbitrator does not have to allow full discovery, unless the parties have previously agreed to it (which normally occurs in the governing contract’s ADR clause). At the end of the arbitration the arbitrator will make a decision, normally within thirty days. The arbitrator does not have to give a reason for his decision, for example he can simply state the amount a party will receive. If you want a written decision, you can request one, but it is important to keep in mind that the arbitrators are paid by an hourly fee.

If you are interested in the ADR process and would rather use it then litigation, there are ways to draft ADR clauses into your contracts so that the arbitration process will occur the way you desire it to. In the contracts you may draft or enter into you can include your own ADR clause. You can make this clause as broad or as narrow as you want. Some options to consider for what you can include in your ADR clauses are as follows:

• whether you want the dispute to first go to mediation and if not successful then to go to arbitration, or have the dispute decided using only mediation or arbitration;
• the types of disputes you would want to submit to mediation/arbitration;
• the type of ADR service you would like to use;
• where you would like the mediation/arbitration to take place;
• the number of arbitrators (one or three) and how they will be chosen;
• the amount of discovery you would like and whether you want prehearing discovery;
• whether you want the arbitrator to give a written decision for his award; and
• a damages clause that would govern the arbitrator when deciding an award and whether you want to allow for punitive damages.

The above list includes items that you can include in an ADR clause. When an ADR clause becomes narrower (by including details of how you want the arbitration to proceed) you can foresee exactly how your arbitration will proceed and there are fewer decisions to be made if a dispute arises.

We hope that you find the above information helpful. Should you have any questions or if you need any further information, please feel free to contact our office at 303-800-5160.