About Business Litigation Information Center
Alternative Dispute Resolution
In some instances, a business may want to avoid a complicated and expensive courtroom battle by using instead an alternative dispute resolution (ADR) method. ADR is a way to resolve legal issues without going to court. The two most frequently used forms of ADR, described below, are arbitration and mediation.
If your business is facing a legal battle, you may want to consult a trial attorney about using ADR as an alternative to a traditional lawsuit.
Arbitration employs a neutral third party (an arbitrator) or an arbitration panel to listen to both sides and makes a decision, which is usually binding. The general purpose of arbitration is to provide a forum to resolve issues without having to go to court. The arbitrator acts in a capacity similar to that of a judge.
When two parties enter into a contract, there will often be an arbitration provision requiring that any legal issues arising from the agreement will be resolved in a binding arbitration proceeding rather than litigated in court. These arbitration agreements commonly appear in a variety of contracts, including sales contracts and employment contracts.
Once the arbitrator makes a decision, the parties ordinarily cannot appeal to a higher judicial body. On some occasions, an appeals process may take place if the parties have agreed upon it in the initial arbitration agreement. However, the lack of an appeals process is generally seen as an attractive aspect of binding arbitration.
Arbitration can be either binding or nonbinding. Binding arbitration means that the result has the same legal effect as a court judgment – it is final and legally binding. Nonbinding arbitration means that the results are merely advisory opinions that might aid in the settlement negotiation process. After nonbinding arbitration, each party could still choose to pursue action in court.
Mediation is another alternative to resolving civil disputes outside of traditional litigation. The mediation process is less formal than arbitration proceedings or trials. The process of mediation is attractive to businesses because they can avoid court and are able to discuss issues without the procedural constraints of litigation. Mediation functions through dialogue, facilitated by a neutral mediator. The process begins with opening statements and progresses through discussions and private caucuses. At the end of the proceeding, joint negotiations take place, with the mediator offering his or her opinion on the best way to resolve the issues. The opinion, unlike that of the arbitrator, is not legally binding.
Most mediation sessions last no longer than a day. The cost is limited to any charges for the mediator’s service. Many cities have mediation centers, which typically deal with personal and business disputes and provide low-cost services.
Rising court costs and time management make alternatives to court attractive for many companies. Through arbitration and mediation agreements, a business can require that issues arising out of a contractual relationship be resolved by an alternative dispute resolution method.
If you are involved in a dispute regarding a business transaction or any aspect of your business, it is best to consult an experienced business attorney to address your particular situation. A trial lawyer is an excellent resource for information regarding business litigation and can explain your legal options.
DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.