Arbitration and Mediation: A Guide to Alternative Dispute Resolution

Courtrooms are formal, intimidating places. Most court systems have somewhat complicated rules of procedure that are strictly followed. Failure to follow the procedure can result in your case being thrown out of court and wasting your time, effort, and money. The evidence a court can consider in its decisions is limited. 

Most people who go to formal trials hire attorneys who are experts in procedure and evidence rules, but these attorneys typically charge by the hour. Trial and preparation can last weeks, months, or even years, making going to court an expensive endeavor.

Although long trials are sometimes necessary to resolve a case, there are alternatives to a trial. Many people negotiate directly with the opposing party to reach an out-of-court agreement. 

This article explains how alternative dispute resolution (ADR) works. The two most common methods of ADR are mediation and arbitration. Keep reading to learn about these processes, how they differ, and the pros and cons of each. 

ADR can be used for many civil, family, or business disputes. Still, it’s not the best fit for all legal issues. An ADR attorney near you can review your situation and recommend the most efficient way to move forward.

What Is Alternative Dispute Resolution?

Alternative dispute resolution (ADR) is a branch of law that offers a viable alternative to traditional court litigation. ADR typically happens outside of a courtroom, with the aid of a neutral third party. But the decision or agreement formed can be just as binding (legally enforceable) as a court order.

Tensions between the two parties might make direct negotiations difficult, if not impossible. Parties who do not think they should talk directly to the opposing party but still wish to avoid a trial may consider other options, such as:

• Arbitration
• Mediation
• Collaborative divorce

In some cases, you might be contractually obligated to participate in ADR if a dispute arises. For example, your employment contract might require any workplace disputes to be resolved through binding arbitration. 

Overall, the ADR process can save you time and money. While you don’t have to hire an attorney, consulting a lawyer may be beneficial.

How Arbitration Works

Arbitration is a quicker, more streamlined version of a trial. In arbitration, both parties pick a neutral third person to serve as a judge and decide their case. Usually, this third party, called an arbitrator, is an expert in the legal field at issue. They may be a retired judge or an attorney experienced in that type of case.

Each party has a chance to tell their story, and the rules of evidence are more relaxed. The arbitrator then considers the case and decides based on the applicable law.

Arbitration is considered “binding.” This means it usually cannot be reviewed or changed later unless the parties agree beforehand that the decision will not be binding. 

If the arbitration is not binding, the parties can still go to court if they disagree with the decision, or they can follow the arbitrator’s ruling. The arbitration award is enforced in the same manner as a court judgment.

One benefit of arbitration is that the process and decision are kept confidential. Court proceedings, on the other hand, are public record. Arbitration can feel less intimidating than court, and an issue is resolved faster.

How Mediation Resolves Legal Issues

In mediation, a mediator does not decide for the parties. Instead, they help facilitate the agreement process. The parties decide on their outcome. 

Mediators are experts in the field and use their expertise to discuss each party’s legal rights and liabilities. The mediator cannot tell you what to do. They keep the parties on task and help move the deliberations forward.

If the parties reach an agreement, the mediator will help them put it in writing. Many mediation agreements are simply contracts between the parties and don’t require judicial approval.

In some cases, such as divorce or child custody matters, they might need to get it approved by a judge. That agreement becomes a binding order of the court. The parties may have an attorney review the agreement before signing it and presenting it to the judge.

Mediation is a popular choice in legal issues like property disputes between neighbors, which are often fraught with high emotions. It can also help resolve divorce and child custody. 

Mediation can help the parties reach unique and creative agreements that a court might not be able to reach.

What Cases Are Eligible for ADR?

Many different types of legal disputes can benefit from ADR. Some examples include, but aren’t limited to:

• HOA or neighbor disputes
• Contract disputes
• Labor and employment issues
• Landlord/tenant disputes
• Family law
• Personal injury
• Tort cases

However, ADR only works if there is cooperation. Both parties must work together to reach an agreement. If the parties are unwilling to compromise and cooperate with the ADR process, attempting an ADR settlement will waste time and money, and you may have to go to court anyway.

ADR is not appropriate in cases where a serious power imbalance exists. This includes cases where a history of violence or harassment is present, such as sexual assault or sexual harassment cases. Or where there is a significant difference in financial resources between the two sides. ADR should not be used in cases involving fraud or crimes of violence, like assault.

Is ADR Confidential?

Yes, ADR is confidential in all phases of the process, including the settlement agreement. Confidentiality is an extra benefit if your case involves sensitive information, such as trade secrets or family information.

You may have the parties sign confidentiality agreements to secure the privacy of the proceedings.

Which Forms of ADR Are Binding?

An arbitration decision is binding on the parties unless they agree beforehand that it will not be binding.

Mediation is not binding until a judge signs an agreement.

How Much Does ADR Cost?

Alternative dispute resolution is generally less expensive than going to court, but it’s not free. Costs can vary by the type of case and where you live, but here’s what you can typically expect:

• Arbitration: Arbitrator fees range from $200-$500+ per hour, with total costs often between $5,000-$25,000 for simpler cases.
• Mediation: Mediator fees typically cost $150-$400 per hour, with most cases resolving in 4-8 hours over 1-2 sessions.
• Administrative fees: Filing and case management fees usually range from $200-$2,000.

​For traditional litigation, you can expect attorney fees from around $200 to more than $600 per hour. The number of hours depends on how long it takes to resolve your case. 

If you have to go to trial, it can easily require 50 to more than 200 hours of work. Add in filing fees, discovery costs, expert witnesses, and other expenses, and you’re looking at thousands more. Even a simple dispute can cost from $15,000-$50,000, while complex litigation can reach six figures. 

Ultimately, the faster resolution offered by ADR generally means fewer billable hours. There’s no lengthy discovery process or multiple court appearances. Costs are also shared — the parties will typically split arbitrator/mediator fees. 

What Happens if ADR Fails?

Not every dispute can be resolved through alternative dispute resolution. Here’s what typically happens when ADR doesn’t work:

When Mediation Fails

If parties can’t reach an agreement in mediation, they retain all their legal rights and can pursue other options, including:

• Filing a lawsuit in court
• Trying a different form of ADR (such as arbitration)
• Attempting direct negotiation
• Walking away from the dispute (if legally possible)

If a court orders the parties to try ADR, you’ll need to report back that the process was unsuccessful before proceeding with litigation. You’ll have invested time and money in the ADR process, but this isn’t necessarily wasted—information gathered often helps in subsequent litigation.

When Arbitration Fails

Since arbitration is typically binding, “failure” is rare. Unlike a court decision, arbitration decisions generally can’t be appealed on the merits of the case.

However, arbitration might be challenged in very limited circumstances, such as

• Arbitrator fraud or misconduct
• The arbitrator exceeded their authority
• Violation of due process rights
• Evidence of corruption or bias

Many attorneys recommend trying ADR before litigation because even when it doesn’t fully resolve a dispute, it often narrows the issues and can lead to partial settlements. This helps make any subsequent court case shorter and less expensive. 

Do I Need a Lawyer for ADR?

No, you do not have to have an attorney to resolve your dispute via ADR. However, consulting an attorney with experience related to your legal issue can be helpful. An attorney can review your agreement before signing to ensure your interests are protected. Your attorney can also attend the proceeding and act as an advisor.

If you are facing a legal dispute and are thinking of using mediation or arbitration to resolve the issue, consider speaking to an attorney who works on cases like yours. They can review your case and provide legal advice and insight.