By Brett Callahan
People often want to know what the difference is between mediation and arbitration. It all comes down to who makes the final decision on how to resolve the issue, you or someone else. “Traditional” litigation often presents the same two options: do you want to settle the case, giving you some control over how things come out or do you want to go before a judge or jury and let them decide?
There are benefits and risks to each approach. In situations like mediation and settlement negotiations, you have control over the outcome, but so does the opposing party, since they also have to agree. You would not be in a dispute with the other side if both were 100% in agreement, so to come up with something you will both agree on, neither of you are going to get 100% of what you want. Also, there are often times when coming up with a compromise does not seem to be an option. Perhaps the other party isn’t willing to consider a compromise or is being nonresponsive. Perhaps they say they are willing to compromise, but mostly they just seem to be asking you to compromise. Perhaps there simply doesn’t appear to be any room to compromise, because there are only two options.
If the parties cannot come up with a solution themselves, they have to turn to a third party to make the decision for them, which is where lawsuits and arbitration come in. Because both parties do not have to agree with whatever decision the judge, jury, or arbitrator makes, there is a chance you might get everything you ask for. However, there is also a chance you get nothing you ask for. That is where the risk comes in for both sides. There is no such thing as a “slam dunk” case, no matter how much the facts and law appear to be on your side and no matter how brilliant and qualified you and your litigation team may be. Any experienced litigator will tell you there is always a risk for you when someone else makes the decisions.
So if mediation and arbitration are the same as settlement or going to trial, why are they called “alternative dispute resolution”? The goal of mediation and arbitration is to speed up and reduce the cost of reaching a resolution. Additionally, you generally have to agree to participate in arbitration or mediation, unlike in litigation where you can find yourself a party before a court without wanting to be there. You also usually have to pay the mediation/arbitration company and mediator or arbitrator hourly out of pocket yourself or split the costs between the parties. Courts usually have some set fees, but they also receive governmental funds, and you aren’t directly paying the judge hourly for their time. That variability in mediation and arbitration costs means that there are times when mediation and arbitration are not necessarily going to be a less expensive option than more traditional litigation.
Deciding what path to take to resolve your dispute is complicated as there are usually a number of options in any case. Additionally, as the matter evolves, that analysis can change, so it is important to be prepared to revisit these decisions regularly to make sure you are still on the best path to reach your goal outcome. The exact wording and use can vary, but below is a very basic glossary of “dispute resolution” terminology, which will hopefully help you have those discussions with your attorney.
Arbitration – In arbitration, the parties present their dispute to an arbitrator, who decides the resolution. The parties must agree to arbitrate before arbitration, but most often this agreement is found in a contract the parties entered into before the dispute arose. Arbitration is generally faster and less formal than proceeding before the courts. However, because arbitrators’ decisions are legally binding, there are also appeals processes, in the event, that one party wants to contest the outcome.
Demand Letter – A demand letter is often the first “formal” action in a dispute. One party or their attorney will generally summarize in writing the dispute, from that party’s perspective, and make a “demand” of what they want the other party to do to resolve the matter. A demand letter may be a legal prerequisite under a contract or statute to taking further legal action, in some cases. If a demand letter is a legal prerequisite, there are usually other specific requirements of what the demand letter must contain or how the demand must be made to qualify as that legal prerequisite. If the other party complies with whatever is demanded in the letter, that may be the end of the matter, or, if not, the parties may move into pre-litigation settlement negotiations, file a lawsuit, or seek arbitration or mediation.
Dispositive Motion – Not all contested lawsuits go all the way to trial. Sometimes there are legal reasons why the court can “dispose” of the case, or parts of the case, before a full trial. Even if a portion of the case will have to go to a full trial, partial dispositive motions are used to streamline the case. The outcome of a dispositive motion can have a big impact on the strength or weakness of a party to negotiate a settlement on favorable terms.
Judicial Settlement Conference – A judicial settlement conference is similar to a mediation. However, unlike mediation, judicial settlement conferences are generally only available to parties when a lawsuit has already been filed. Judicial settlement programs are run through the courts, so there is often not a significant additional cost to participate in one. In a judicial settlement conference, the neutral third party attempting to negotiate a resolution between the parties is generally a judge, although not the same judge who would proceed over a trial in the case. As with mediation, the parties must ultimately agree upon the terms of the resolution, which are written as a legally enforceable agreement between the parties.
Mediation – In mediation, a trained neutral third party is involved to facilitate a resolution, similar to arbitration or litigation. However, unlike in litigation and arbitration, it is still the parties, not the third party who decides the final outcome. If mediation is successful, the agreement between the parties is written as a legally enforceable agreement.
Settlement Conference – A settlement conference can be an umbrella terms for a meeting between the parties to try to resolve the dispute. A settlement conference need not be facilitated by a third party and may just consist of the parties and their counsel. However, in other cases, the term settlement conference may be used in the context of a third-party facilitated negotiation. As with the other forms of dispute resolution between parties, if successful, the terms of the settlement are written as a legally enforceable agreement between the parties.
If you find yourself in a legal dispute with another party and want to review your options and determine the best path forward to meet your goals, the attorneys of Vanderpool, Frostick & Nishanian, P.C. may be able to help. Please contact our office to speak with someone to discuss if we can assist you.
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Brett Callahan is a shareholder at Vanderpool, Frostick & Nishanian, P.C. She is leading the firm’s litigation department. If you have additional questions or concerns contact brett Callahan at bcallahan@vfnlaw.com or call us at 703-369-4738.
This blog post is not intended to provide legal advice or substitute for the advice of legal counsel with respect to specific facts and situations. See disclaimer
