Alternative dispute resolution: What are my options?
What is alternative dispute resolution (ADR)?
Whenever there is a business dispute, the first action many leaders demand is that the legal team file a lawsuit as soon as possible. If you’ve ever been involved in litigation, you know that it is — and should be — an action of last resort. Litigation is messy, intrusive, and expensive — and those are all the good points.
Smart in-house counsel know there are better ways to resolve disputes and should advise their internal clients about their options to resolve problems without resorting to litigation. However, not all in-house lawyers know the full range of alternative dispute resolution options and what they each entail. Fortunately, if you have Practical Law, you can get a fast leg up on all the forms of ADR.(See Practical Law: ADR Mechanisms in the US: Overview)
The problem with litigation in resolving disputes
As noted, business disputes are common. Using litigation as your only tool to resolve such problems can lead to big expense, mixed results, and acrimony both with the other side — who may also be an important customer or vendor — and internally, especially when things do not turn out as expected. And adverse results are always possible when your fate is put into the hands of a jury. There are times when you have no choice but to litigate, but there are many forms of ADR available that can lead to faster, less expensive resolution and better results. (See Practical Law: Before You Litigate in the US: Practical Considerations Checklist)
Types of alternative dispute resolution
As a former general counsel and head of litigation, I was always looking for better ways to resolve business disputes. Over the course of many years, I’ve discovered many ways to avoid litigation. That said, if I had subscribed to Practical Law sooner, I may have saved myself a lot of time and money!
Here are the ADR options available to in-house lawyers in ascending order from least expensive and complicated to the most.
Have a conversation with counsel
I know this sounds odd, but a lot of business disputes can be resolved by in-house counsel picking up the phone and calling their counterpart on the other side and just having a conversation. This can frequently clear up misunderstandings or find a quick solution in cases where both sides want to get the matter behind them quickly. It is almost always worth taking a shot.
Discuss the matter
While parties in litigation are often directed to a settlement conference by the court, there is no need to wait for litigation to take this step. A settlement conference is simply a meeting of business executives from both sides — along with counsel — to see if there is a way to hash out their differences between themselves; without the need for a third party to assist them. Many contracts require these types of meetings before either party can file litigation. (See Practical Law: General Contract Clauses: Alternative Dispute Resolution (Muli-Tiered)
Mediation is basically a settlement conference facilitated by a third party, usually a retired judge or attorney trained in mediation. Having a neutral third party listen to both sides and weigh in with their thoughts and suggestions can take a lot of the emotion out of the equation and get business leaders to see things as a jury might see them, versus being recalcitrant.
A good mediator never dictates a resolution, unless the parties ask them to do so. Rather, they help bring the sides together to find a resolution that works for both sides and, hopefully, one that can preserve the relationship between the parties if that is the goal. Both sides typically split the cost of the mediator and submit pre-mediation briefs with their version of the dispute, their arguments, and potential acceptable settlement options. (See Practical Law: Mediation Tool Kit)
This is somewhat like mediation in that the parties engage a neutral third party to hear their dispute. The difference is that in a neutral evaluation, each side presents his or her “case” to the neutral party who, after hearing both sides out on all points, gives a written opinion about the strengths and weaknesses of each side’s case and — more importantly — gives their opinion on how the dispute should settle.
While not binding on either side, the parties usually use the opinion to come to a resolution. A neutral evaluation is particularly effective when the situation calls for an expert in the field to deal with critical technical issues and neither side is overly emotional about the dispute. (See Practical Law: Using a Dispute Resolution Board for Construction Disputes)
Summary Jury Trial
Sometimes called a “mini trial,” this process is very similar to litigation in that both parties argue their case before a neutral jury or panel of representatives selected by the parties. However, it differs from litigation in that this proceeding is private. The jury/panel hears the evidence and then renders a binding decision.
While more involved and expensive than mediation, it is a way for both sides to feel “heard” and present their cases while having their dispute resolved confidentially — for significantly less expense than a trial or arbitration — and obtain a decision from a neutral body.
Along with mediation, arbitration is the form of alternative dispute resolution most in-house counsel are familiar with. For all practical purposes, it is a private court with procedures and rules agreed to by the parties via contract. Usually, the agreement to arbitrate is part of the contract that exists between the parties at the time the dispute arises, but nothing prevents two sides from agreeing to arbitration after a dispute has arisen. Of all the types of alternative dispute resolution discussed above, this is the closest to litigation — usually involving discovery, motion practice, and multi-day hearings before a single arbitrator, usually a retired judge or a panel of three.
It can be quite expensive and, sometimes, almost as painful as litigation. But if the parties are locked hard into their positions and settlement unlikely, arbitration can be a path to a faster resolution than trial and it is typically confidential, something both sides may want, especially if there are sensitive trade secrets or other documents at issue.
There is a final decision on the merits and, generally, little option to appeal. And, since most countries are signatories to the New York Convention, the prevailing party can enforce their award in almost any country in the world. (See Practical Law: Arbitration Tool Kit and Enforceability of Arbitration Awards Tool Kit)
Forms of ADR that give you options beyond litigation
As you can see, litigation is not the only path to resolve business disputes. There are many types of alternative dispute resolution, from an inexpensive phone call to the formal processes of binding arbitration. As in-house counsel, you are adding value when you’re able to advise the leaders of the business on the full range of dispute resolution mechanisms and to draft the necessary documents.
It’s likely that one of the ADR options will get the business where it wants to be with less cost, less time, and less damage to important customer or vendor relationships than litigation. Take advantage of all that Practical Law has to offer when it comes to understanding how best to proceed when working to resolve business disputes.