Introduction to Alternative Dispute Resolution

Introduction to Alternative Dispute Resolution

Alternative Dispute Resolution (ADR) refers to an array of methods for resolving legal disputes without resorting to the court system.[1] ADR plays a pivotal role in the American legal process, but it is often overshadowed by Hollywood’s glamorous portrayal of jury trials. One might imagine that all legal disputes are battled out in large courtrooms filled with jurors and spectators. In reality, about five percent of civil cases ever make it to trial.[2] In some states, that rate has reached as low as 0.2 percent.[3] The same is true of criminal cases, with only 10 percent reaching trial.[4] The other 90 to 99.8 percent of legal disputes are resolved through some form of ADR.

ADR methods have gained substantial traction over the past 30 years.[5] They are increasingly popular with clients, attorneys, and judges alike. There are four primary reasons for their rise in popularity. First, ADR increases court efficiency.[6] The general public has never been more litigious. Court dockets are bursting at their seams, and there are only so many judges available to handle the ever-increasing caseload.[7] As a result, many judges now issue court orders requiring the parties to engage in some form of ADR before allowing a case to proceed to trial.[8]

Second, ADR is less costly than trial.[9] Trial is by far the most expensive stage of litigation.[10] It often involves the additional expense of expert witnesses, who can charge over $1000.00 per hour for their services.[11] In addition, most plaintiff’s attorneys charge a contingency fee that significantly increases if the case reaches the trial stage.[12] Attorneys often spend well over half of their billable hours in trial or in trial preparation.[13] At the end the day, clients are generally happy to avoid these trial-related expenses.

Third, ADR is generally less risky than trial.[14] At trial, a judge or a jury decides the case, which may lead to unintended outcomes.[15] Jury trials, in particular, are known to be a bit of a “coin toss”—sometimes literally.[16] In Kentucky, a man was convicted of murder when the jury flipped a coin after reaching a stalemate in deliberations.[17] Of course, when the judge discovered the true nature of the conviction, he ordered a new trial. Still, the point is well taken—trial offers no guarantee of a fair or favorable decision. Most forms of ADR reduce the amount of risk the parties undertake by leaving the outcome entirely in their hands.

Finally, ADR proceedings are private.[18] Court records and proceedings are open to the public, and by virtue of its adversarial nature, litigation tends to flush out cherished secrets or embarrassing facts and allegations.[19] Unfortunately for the parties, the media salivate over such “news worthy” information, which usually ends up making headlines. Parties engage in ADR in order to keep their reputations or trade secrets intact while they work toward a resolution.

Forms of ADR

ADR methods typically take one of three forms: 1) direct negotiation; 2) mediation; or 3) Arbitration.[20] These methods differ in the degree to which they involve a third-party. Deciding which form is most appropriate depends largely on how well the parties get along.[21]

Direct negotiation is generally defined as “two or more disputing parties meet[ing] together in good faith to identify and discuss the issues at hand, present facts and supporting data, arrive at mutual solutions, and abide by the outcome.”[22] As its definition suggests, negotiation covers a broad spectrum of avenues parties might take to reach a resolution. The setting can be as formal or informal as the parties want. Direct negotiation is distinguishable from the other two ADR methods in that it does not involve a third party. Rather, here, the disputing parties work together directly to reach an understanding. As negotiation requires the parties to work together, it is best suited for disputes between parties who tend to get along, or are at least willing to cooperate.[23] Negotiation occurs in criminal cases in the form of “plea bargaining,” in which defendants agree to plead guilty in return for the dismissal of additional charges or for the prosecutor’s recommendation for a reduced sentence.[24]

In contrast, both mediation and arbitration involve a neutral third-party (someone who has no stake in the outcome) and occur primarily in civil cases.[25] Mediation is, essentially, negotiation facilitated by a middle-man, known as a mediator.[26] Mediators are usually legal professionals, either attorneys or judges, who understand how the law relates to the facts of the case.[27] The mediator provides a fresh pair of eyes and helps the parties understand the strengths and weaknesses of their positions. The mediator is simply a facilitator, a conduit for negotiations. She does not decide facts or make any legal rulings.[28] As a result, the parties are not legally bound by the outcome.[29] Still, successful mediation usually concludes with the parties signing a settlement agreement binding them to their agreed-upon terms.[30] Mediation is particularly helpful when the case involves complicated issues, when the parties cannot agree on certain facts, or when the parties’ own negotiations have broken down.[31] The courts favor mediation and often require parties to engage in mediation before trial.[32]

Arbitration is the most structured of the ADR methods.[33] In arbitration, the neutral third-party (the arbitrator) conducts formal hearings, makes findings of fact, and renders a final decision in the matter.[34] Unlike in mediation, her decision is legally binding, unless the parties have entered into a prior agreement stating otherwise.[35] The arbitrator is often a retired judge or a panel of retired judges, given their experience handling legal disputes.[36] Procedurally, arbitration is much like trial.[37] The only meaningful distinctions are: 1) it is conducted in a private forum; and 2) the parties cannot appeal the arbitrator’s decision—it is absolutely final.[38] Arbitration is most appropriate when one or more of the parties is hostile or uncooperative. It is a common forum in contract law because most commercial contracts require arbitration in the event a dispute ever arises, which it often does.[39]

There are a few other recognized forms of ADR, such as Early Neutral Evaluation and Mini-Trials.[40] These are basically alternate forms of mediation. Early on in litigation, parties have different views of how the law should apply to their facts.[41] They will inevitably disagree on how a court or jury might rule on certain issues.[42] At this stage of litigation, clients have usually heard only their attorney’s arguments and optimistic assurances of success.[43] In these instances, the parties may invite a neutral third-party (essentially a mediator) to provide some clarity.[44] In an Early Neutral Evaluation, the mediator provides guidance on which theories of law and legal precedents apply to the case.[45] Mini-Trials take Early Neutral Evaluations a step farther—the parties gather together and present their respective arguments openly in front of the mediator, who then advises the parties on their chances of success at trial.[46]

Whatever the form of ADR, the ultimate goal is the same—a lasting resolution to the dispute.

ADR is Not for Everyone

Although ADR methods continue to grow in popularity, they are not the best solution for every dispute.[47] Mediators and arbitrators generally charge a fee for their services, and if the parties know in advance that there is no chance of settling the case, ADR only wastes time and resources.[48] In negotiation, one party might have an unfair advantage and can strong-arm the other into an unbalanced settlement.[49] ADR may be a faster alternative to trial, but some violent or dangerous circumstances require even more immediate court action, such as a restraining order.[50] In these instances, the courts are the more appropriate venue.

Some parties avoid ADR because they want to set legal precedent for future disputes.[51] ADR provides a one-time solution that is only binding, if at all, on the current parties for the current dispute. In contrast, court decisions become law, which controls, or prevents, future disputes regardless of the parties involved.[52] Take the airline industry for example. Landowners once owned all of the airspace above their property, from the ground up to the “heavens.”[53] Then came the invention of the airplane. As flights became more common, residents near airports became frustrated with airplanes flying low over their property.[54] During WWII, one landowner sued the U.S. Government for allowing military aircraft to cross his airspace.[55] The Supreme Court of the United States heard the case and declared that landowners own only the immediate airspace above their land.[56] That decision changed the longstanding law and cleared the skies for commercial aviation. Had the Government simply settled the matter, the door to litigation would have remained open for thousands of other disgruntled landowners.

Conclusion

Despite the few exceptions, ADR remains the solution of choice for most legal disputes. Even as the number of pending civil cases continues to rise, ADR methods have helped reduce the total number of cases ending in trial by more than 60 percent since the 1980s.[57] ADR saves parties time and money. It keeps court staff from burning out. Barring some fundamental economic or social shift, ADR’s popularity will likely continue to grow, and the Hollywood notion of “trial” may become a thing of the past.