Alternative Dispute Resolution FAQ
ALTERNATIVE DISPUTE RESOLUTION
Frequently Asked Questions
Q: WHAT IS ALTERNATIVE DISPUTE RESOLUTION?
The term “alternative dispute resolution,” also referred to as “ADR”, encompasses a variety of dispute resolution tactics that do not rely on an official court system or government body. The idea behind ADR is to reach a resolution of the dispute without resorting to litigation. In some ways the use of the word “alternative” can be a bit dubious, since ADR is really just dispute resolution.
Q: HOW DOES ALTERNATIVE DISPUTE RESOLUTION DIFFER FROM LITIGATION?
ADR differs from litigation in several ways.
First, ADR is not generally sponsored or directly enforced by any governmental body. When two parties submit a dispute to ADR, they are both effectively entering into a contract, whereby the two parties are agreeing to engage in the ADR process and agreeing to whatever the outcome of that process may be. Depending on the context, the mediator or arbitrator is typically an employee or volunteer with certain legal training, working for a private company or organization. For instance, in the United States, many arbitrations are submitted to the American Arbitration Association, a private company that administers the arbitration process.
However, there are some exceptions, where the ADR process may be administered by the government or even be part of the litigation process. For instance many court systems have established arbitration or mediation as a preliminary step in the litigation process. In those instance, the ADR process is sanctioned by, and sometimes even directly carried out by, the court of jurisdiction. For instance, in Nevada’s Eighth Judicial District Court, which serves as the district court for Las Vegas and all of Clark County, the Court imposes mandatory arbitration on certain cases. There, the Arbitrator is typically a local attorney appointed by the Court to oversee the arbitration proceedings.
Another key difference between litigation and ADR is in the procedure of the case. In litigation, the parties are bound by a set of strict court rules governing the process and progression of the case. However, each arbitral body and mediator will typically use its own set of rules, which often are far less stringent than those of the traditional court system. Also, the process is typically much faster than traditional litigation forums.
Q: WHAT IS THE DIFFERENCE BETWEEN ARBITRATION AND MEDIATION?
Arbitration is a form of dispute resolution where a third party hears arguments from both sides then renders a decision, similar to the way a judge might render his/her decision in any given case. Meanwhile, in mediation, a third party works with the disputants to attempt a mutually agreed resolution to the dispute. The key distinction here is that in mediation, the third party does not render a decision and does not assess liability or blame. In fact, in some instances, the mediator may not provide any input as to which party is right and which is wrong. The goal of the mediator is to bring the parties together, encourage dialogue and coax the parties into achieving some mutually agreed resolution of their dispute.
Q: HOW MUCH DOES ADR COST?
The price for ADR can vary wildly depending on the forum and the complexity of the case. For instance, an arbitration submitted with the American Arbitration Association will typically generate thousands of dollars in arbitrator fees, while some neighborhood mediation programs may be free.
Also, the cost of attorney representation depends heavily on the complexity of the case. While a simple dispute submitted to mediation may only generate a few hundred dollars in legal fees, a large scale arbitration can cost tens of thousands (or even hundreds of thousands) of dollars in legal fees.
Q: DO I NEED AN ATTORNEY TO REPRESENT ME IN AN ARBITRATION OR MEDIATION?
Whether you need the assistance of attorney representation in an ADR setting really depends on the specifics of your situation. Generally, in large scale arbitration, the advice and counsel of an attorney is essential. In some instances, an arbitration can even prove more complex than most litigation. Meanwhile, in cases involving small-scale mediation, you may not want to bother with the expense (and possible inconvenience) of an attorney.
In deciding whether to hire an attorney, you should ask yourself a few key questions:
- (1)How much money is at stake? If the stakes are high, than it may justify the expense of hiring an attorney
- (2)Is the opposing side represented by an attorney? If the other side has hired legal counsel, while you are unrepresented, than you may be at a substantial disadvantage during the proceedings.
- (3)How complicated is this case? If your case is very simple and the evidence is clear, you may be able to make a convincing case without the benefit of a lawyer. However, if there is any room to confuse the issues of the case, you may need the expertise of a lawyer to effectively argue the matter.
Q: IS THERE ANY WAY TO GET BACK MY ATTORNEY’S FEES IF I WIN IN ARBITRATION?
Yes, in some cases. An arbitrator may include as party of its decision an award of attorney’s fees to the prevailing party. However, you shouldn’t enter into the case expecting an award of attorney’s fees.
Q: IF I WIN IN AN ARBITRATION, HOW DO I ENFORCE THE ARBITRATOR’S DECISION?
Typically, you can file a motion to confirm the arbitrator’s award with the court of jurisdiction that sits in the same locale as where the arbitration was held. The courts will generally confirm the award as a matter of course, unless the opposing side files a motion or counter-motion to vacate the arbitrator’s award.
Q: IF WE REACH A SETTLEMENT IN MEDIATION, HOW DO I ENFORCE THE TERMS OF THAT SETTLEMENT?
At the end of the mediation, if the parties ultimately come to an agreement, then the mediator will provide the parties with a written contract memorializing the terms of their agreement. This agreement, if signed by the parties, should establish a legally enforceable contract. In the event that the other party fails to uphold its obligations under the contract, then that party is in breach. Once a party has breached the agreement, then the non-breaching party has grounds to file suit against the breaching party for breach of contract.
Q: IS THERE ANY WAY TO APPEAL AN ARBITRATOR’S DECISION WHEN MADE IN BINDING ARBITRATION?
Yes. In most cases, you can file a motion with the proper court of jurisdiction to vacate the arbitrator’s award. However, be forewarned, that the courts are often quite deferential to the arbitrator’s decision. The courts have generally taken the position that arbitration is a positive force, since it relieves some of the burden imposed upon our court system. As a result, courts are loathe to strike down an arbitrator’s decision, unless the decision is obviously contrary to law. It is safe to assume that a court will typically err on the side of caution and choose to confirm the arbitrator’s award, rather than disrupt the arbitral system by overturning the arbitrator’s decision and vacating the award.
Q: WHAT IS AN “ARBITRATION CLAUSE” IN A CONTRACT AND HOW DOES IT WORK?
An arbitration clause is a contract provision that requires the parties to the contract to submit any dispute arising out of that contract to an arbitrator, rather then to a court of law. Some arbitration clauses require “binding” arbitration, wherein the parties must submit their claim to the arbitrator and accept the arbitrator’s award as final. Whereas, some arbitration clauses merely require “non-binding” arbitration, in which either party can simply file a law suit after the arbitration, regardless of the arbitrator’s decision.
The general idea behind these provisions is to reduce the potential cost of any dispute that might arise between the parties. However, as peculiar as it may sound, in some cases, the arbitration clause can actually increase the costs of a dispute. For instance, a non-binding arbitration clause is virtually useless when you have two parties locked in a highly contentious dispute. If both parties are convinced that they are correct, then it is nearly a foregone conclusion that whatever the arbitrator’s award is, one of the parties will ignore the award and move on to litigation. In those cases, the arbitration is merely an added cost to the litigation. Another factor to consider is that arbitrators are not cheap. Often contracts compel the parties to use the American Arbitration Association (“AAA”) or some similar arbitral body. However, the fees associated with AAA are far more costly than court fees, sometimes totaling in the tens of thousands of dollars. In cases where a small amount of money is in dispute, referring the matter to arbitration simply is not cost effective.
For further information, please take a look at our Overview of this subject.