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Questions Answered in this Section are:

What is mediation?

What is arbitration?

What is the difference between mediation and arbitration?

How is mediation different from litigation?

What are the "hidden costs" of litigation?

How can I initiate the mediation of a dispute?

How can I initiate the arbitration of a dispute?

Is mediation or arbitration on-line possible?

 

[Click on the Question or Scroll Down for the Answers to the above Questions:]

                                                                Copyright © 2001 Daniel Bent

Q:  What is mediation?

     A: Mediation is a confidential means of settling a dispute between two or more parties by reaching a result to which all parties are willing to agree. Mediation is completely voluntarily and can be suspended by any party at any time during the process. The parties can be individuals, organizations, family members, or groups of any combination of them. The mediator is a fair, neutral and impartial third party who does not participate as a judge, lawyer or decision maker but who works with the parties together and separately to: 1) define the issues, 2) avoid obstacles to communication, 3) find and explore alternatives, and 4) find the common ground on which a mutually acceptable settlement may be achieved. Decision making remains with the parties themselves. Parties have a right to consult with their own legal counsel, financial or other professionals as they deem necessary during the mediation. Participation in mediation does not waive or affect any claim or rights a party had prior to the mediation unless the parties involved agree to a settlement.

 

Q:  What is arbitration?

    A: Arbitration is a private process by which parties to a dispute that would otherwise be resolved by litigation agree that they want to avoid the formality, publicity and expense of full litigation by selecting an Arbitrator or panel of Arbitrators to hear the facts, legal arguments and positions of all of the parties and render a binding decision. After the Arbitrator's decision, it is then filed with the court by a party. It becomes the judgment of the court and can be enforced like any other judgment rendered by a court after full litigation as long as the arbitrator(s) were selected according to the agreement of the parties, the decision is within the scope of their agreement to arbitrate and meets the few other basic criteria set forth in the applicable statute.

 

Q:  What is the difference between mediation and arbitration?

     A: In Mediation, there is no resolution unless all the parties agree and the parties themselves make their own final decision. In Arbitration, the parties select an arbitrator or panel of arbitrators to hear and decide the case.

 

Q:  How is mediation different from litigation?

     A: The brief answer is that in Mediation the parties keep control of the outcome by entering an agreement only if each of them is satisfied that the final result is acceptable to them. In litigation, the dispute is resolved by processing the claim through the formal and legally required steps of the pre-trial and trial process to a final decision by a judge or jury.

 

Q:  What are the "hidden costs" of litigation?

     A: In addition to the costs of attorneys fees for the written discovery, depositions, motions, hearings, expert witnesses, trial and related activities, there are "hidden costs" of litigation which are not ordinarily understood and planned for by the parties until they actually experience them. They often include:

1) Getting to a Decision Costs. In a litigated dispute the ultimate decision-maker, the judge or jury, must be taught the facts at trial through a rigid set of rules of evidence. The evidence at trial is based on extensive formal discovery. Typically this is through depositions, written interrogatories, requests for production of documents, and requests for admissions. Each step in the discovery process must be done with care, otherwise an issue or opportunity may be foreclosed. For example, a lawyer's preparation for a deposition of a potentially hostile witness requires thorough preparation by, at a minimum, reviewing all the potentially relevant documents, and reviewing the theories of the case and how the deposition witness can help support or undermine each of them. It also requires reviewing all prior depositions or statements of other witnesses that might bear on what the deposition witness can testify about. Deposition preparation may also require interviewing available friendly witnesses about the areas of prospective testimony of the deposition witness. Often legal research on a point of law or evidence may be required as part of the preparation. Throughout the preparation, a plan of approach and an outline of areas of examination, often in considerable detail, must be prepared. This is all part of the "preparation that meets opportunity" that is the foundation for a deposition that will be as successful as possible. The preparation takes time and is, therefore, expensive.

There is more to decision costs than just the cost of the lawyers’ time. Often experts must be retained to study some portion of the facts and explain the significance of those facts in light of the complexities of a particular field. For example, this can be a field such as accounting, business valuation, damages, or a science or technology. Believe it or not, experts hourly rates often make the lawyers rates look modest.

The formal and rigid process of educating the judge and jury is expensive for both sides. Lawyers, whose fees comprise a significant part of the expense of educating the judge and jury, control the process. If there is an appeal, the decision costs include the cost of the trial transcript and protracted appellate litigation.

2) Distraction Costs. Individual parties and the executives and managers of businesses, labor and other organizations that are parties spend hundreds and sometimes thousands of person hours engaged in the production of documents, meetings with attorneys, preparation for depositions, attending depositions, testifying in depositions, strategy discussions, decision making, hearings and trial.

3) Self-education Costs. Rarely does a party in litigation see the case as the opponent will be attempting to have the third-party decision-maker see it. Therefore, each party will spend considerable time reading depositions, documents and expert reports generated by the opposition. This self-education on the opponent's case is necessary, inevitable and time consuming.

4) Emotional Wear and Tear Costs. All parties, including executives and managers of businesses, labor and other organizations involved in litigation often suffer emotional wear and tear from involvement in the process of litigation. It can occur throughout the litigation but peaks as they are subjected to vigorous cross-examination in what can be days of deposition and trial. For those not accustomed to facing the presumption of bad faith or the even worse, but nevertheless common, outright accusations of intentional wrongdoing and deceit, the experience of being cross-examined is at best distracting but more often it is difficult and sometimes traumatic.

5) Lost Opportunity Costs. When a company's executives and mangers are tied up by litigation, not only are they being distracted as discussed above, they aren't creating and executing their business plan. Opportunities are passing them by. Worse, and also likely, their business competition is taking advantage of the open field.

6) Business Relationship Costs. Where the parties in commercial litigation are ongoing business partners the integrity of the ongoing relationship is inevitably affected. Loss of the value of the ongoing relationship is often a cost to both parties.

7) Pending Litigation Costs. This cost is often confused with the Lost Opportunity and Distraction Costs described above but it is decidedly different. This is the cost of the avoidance by other potential investors, customers or strategic alliance partners as a consequence of an organization or enterprise having the litigation pending. In short, this is the cost of others staying clear of your organization or business until the litigation is over. This may be a result of the uncertainty of the outcome, or a desire by others not to be embroiled in the conflict by having their records subject to discovery, or similar motivations. While the motivations can be varied, the result is the same. Your organization is being avoided because the litigation is pending.

8) Gamesmanship Costs. Litigation is often full of opportunities for exploitation by the opposition. Even if not, the better a case is, the more likely the opposition will make the process difficult, complicated and expensive because this often-used "defense" is almost always available and often used. In addition, lawyers often posture to attempt to set the stage for seeking a later court order barring certain evidence, for example, because certain information was not produced earlier. This requires defensive lawyering, often requiring that the opposing lawyer go overboard to avoid it and to be certain to make a record to protect against it. All of this adds to the expense and aggravation of litigation. In a perfect world, gamesmanship costs would not exist. It is not a perfect world.

9) Risk of Loss Costs. In litigation there is always the risk of loss. For a plaintiff there is the risk that its claim will not be vindicated or the risk of loss on a defendant's counterclaim. Lawsuits typically take years to get to trial when many key employee witnesses can be gone and memories have faded. A party may have to call a troublesome ex-employee as a key witness. Defendants face analogous risks of loss. No matter how good a case looks, even on the eve of trial, a key witness might turn sour, a juror who turns out to be very persuasive with other jurors may harbor an undisclosed prejudice, or some other destructive form of ‘lightning' may strike. Courthouse lore is full of examples of great cases tried by great trial lawyers that were lost for a reason that no one could have anticipated or that no one can fathom. But even then, most cases aren't that good. There are other more subtle and more frequently encountered risks. There are many ways a judge and jury can make incorrect decisions that nevertheless cannot be overturned on appeal.

10. Public Record Costs: In litigation a written record is created and it is public. Many businesses, labor unions and other organizations hire professionals to put their best face forward as part of its public relations plan. The process of litigation is the opposite. Each side's opponent is hiring professionals to dig up negative facts, put the worst plausible spin on them, grind noses into them and make both part of an indelible public record. Often, in spite of efforts to keep trade secret information confidential, the public record will contain commercial information of value to competitors. Forever, others desiring to exploit such information, or discredit one of the parties, will have that record, the result of perhaps thousands of hours of expensive digging, made conveniently available in the public records of the courthouse for future use.

In any given case there are other hidden costs unique to it. The controversy often spreads via counterclaims that exacerbate each of the above costs in a sideshow only tangentially related to the real dispute. Decisions to litigate or counterclaim made in the heat of the moment can have lasting effects. Each of the above costs can become "tar babies" that grow and become stickier as the litigation evolves.

The above list of costs is from: "Game Theory Explains How Mediation Can Trump Litigation" by Dan Bent.

Q:  How can I initiate the mediation of a dispute?

 

     A: If the dispute arises out of an existing agreement between or among the parties, check the text of the agreement. Typically modern written contracts have mediation clauses. 

 

     If there is no prior agreement to mediate, parties often agree to mediate a dispute when it arises in an attempt to prevent such disputes from growing and to avoid litigation. Without a prior agreement, mediations are typically initiated by a party simply contacting a mediator or mediation service briefly describing the dispute, identifying the parties to the dispute and requesting that the mediator or service attempt to set up the mediation. This gives the other parties the opportunity to consider the proposed mediation without the pressure of having to discuss the dispute that would exist if the other party made the contact to propose mediation. See the page "How do I initiate a mediation." on this web site.

 

 

Q:  How can I initiate the arbitration of a dispute?

 

     A: If the dispute arises out of an existing agreement between or among the parties, check the text of the agreement. Typically modern written contracts have arbitration as well as mediation clauses.

 

If the agreement does not contain an arbitration clause, or if there is no prior written agreement at all between or among the parties, then arbitrations are often the result of a prior mediation. While mediation is likely to be successful, in those cases where it is not the parties can often agree to proceed to arbitration. Arbitration is often a desirable "common ground" for both parties because there are considerable benefits to all from avoiding litigation. (See "The Hidden Costs of Litigation" above on this page.) A mediation or arbitration service can explain these options to a party who contacts them seeking to resolve an existing dispute. See the page "How do I initiate an arbitration" on this web site.

 

Q:  Is mediation or arbitration on-line possible?

     A: Yes.  However, experience to date suggests that it is most used and perhaps most appropriate for disputes that arise from transactions in which the parties have principally interacted on-line.

     If there are other questions you would like considered for this page, please contact Mediator and Arbitrator Dan Bent through: Dan Bent, Dispute Prevention and Resolution, Inc., Suite 1155 Pauahi Tower, 1001 Bishop St., Honolulu, Hawaii 96813, Direct line: 808-548-0080, Fax: 808-524-2798, DanBent@FairMediation.com.

                                                 Copyright © 2001 Daniel Bent