Use of Alternative Dispute Resolution Mechanisms in the United States

An Effective Tool to Control Risk and Address Rising Litigation Costs. 

In the United States, litigants and courts seek to employ forms of alternative dispute resolution- defined for purposes of this article as any mechanism that is used to resolve the dispute outside of the courtroom.  In general, in the United States, only a very small percentage of cases that are filed actually go to trial.  But often the parties wait until the case is nearly ready for trial or even the start of trial to engage in serious settlement discussion.  In some cases, it may be necessary to fully develop the factual record and to complete a full discovery process (which precedes trial) before evaluating settlement options.  But in most cases, the parties could save time and resources by engaging in an alternative form of dispute resolution to save costs and to control resources and risk.  There are many different forms of dispute resolution.  In this article, I focus on the use of mediation as an effective dispute resolution tool.  This article addresses the advantageous features of nonbinding mediation as a means of resolving virtually all types of disputes.

What is Mediation?

Mediation is, simply put, a guided settlement negotiation.  A neutral individual acts as a facilitator in the discussion and in that capacity fulfills many functions.  The mediator might assist each party in identifying and articulating the key issues that must be resolved and the objectives of each side.  The mediator might structure the discussion process to forge areas of agreement and narrow the dispute.  The mediator might develop his or her own suggested resolution for each side to consider.  In some cases, where the mediator has significant expertise in the substantive dispute, the mediator might offer an opinion on the likely outcome in litigation, which in turn might assist the parties in evaluating their respective positions. 

Why “Nonbinding” Mediation?

Mediation is most often conducted in a nonbinding format; which means that the mediator does not have the power to make the final determination.  This allows the parties to explore options for resolution without risk and allows a free exploration of options.  This nonbinding approach can be advantageous even if it does not result in resolution. 

How is Mediation Conducted?

Typically, either a court or the parties will select a mediator or a panel of potential mediators (sometimes proposed by an alternative dispute resolution provider).  The mediator and the parties will agree on ground rules for the mediation.  For example, it is important to agree on whether and to what extent the proceedings, positions, and statements of the parties are confidential and not subject to disclosure in the litigation (In general, the parties should be free to articulate proposals and counterproposals without fear that those proposals will later be used against them in another proceeding).   Mediation is distinctive for its varied structure.  Each situation presents its own unique characteristics, and a good mediator will structure the process to most effectively meet the situation.  Some mediations are conducted in a manner that mimics aspects of litigation with presentations by each side and the submission of mediation briefs.  Other mediations are conducted without having the parties meet face to face.  The mediator will meet with each side, develop an understanding of the areas of common ground and the areas of dispute, and then proceed to work with each side to explore options, flexibility, and bottom line requirements.  The mediator will often seek to communicate areas of flexibility and potential resolution options to each side– in effect testing approaches to determine a structure that could meet the needs of the parties.  In some cases, a mediator might opine on the relative merits of the arguments of each side. 

What are the advantages of mediation as a form of dispute resolution?

• A mediation can be structured in the way most appropriate for the needs of the parties and the type of dispute. This means that the mediator and the parties can fashion a process and even incorporate issues that would not be involved in the court proceedings.
• A mediation can be structured to proceed quickly. For example, the parties might schedule a short period of time, a few weeks perhaps, to try mediation.  If the short-term process results in progress toward resolution, they can extend the time frame. 
• A mediation process can offer creative solutions, including agreements regarding future business dealings that could not be achieved in litigation.
• A mediation is typically nonbinding. The parties can explore options and resolutions while maintaining their positions in the event the mediation fails. 
• A mediation is relatively inexpensive.

Are there disadvantages to mediation?

The only real disadvantage (other than the expense of a failed mediation) is the mechanism to enforce a mediation agreement.  A judgment in litigation is enforced through the court. A mediation agreement achieved in a private nonbinding mediation is a contractual document but does not have the imprimatur of the court (Of course, the parties can in some cases seek to have the mediated agreement embodied in an order).

Use of Mediation in the Judicial System

Many jurisdictions in the United States have rules that are designed to promote mediation. The Alternative Dispute Resolution Act of 1998 authorizes the U.S. federal courts to compel parties to participate in a mediation process or early neutral evaluations. 28 U.S.C. § 652(a). All federal appellate courts have adopted mediation procedures and programs. 

A number of states have statutory provisions mandating mediation in specific categories of cases. Other states or court systems have rules that effectively encourage mediation. For example, the Michigan court rules require that tort cases be submitted to a case evaluation program. Mich. Ct. R. 2.403(A)(2).  The parties have the option of accepting or rejecting the evaluation. Mich. Ct. R. 2.403(C), (L).  If a party rejects the evaluation, the case proceeds to trial. Mich. Ct. R. 2.403(N)(1).  The rejecting party is liable for the costs of the opposing party if the verdict is less favorable to the rejecting party than the evaluation. Mich. Ct. R. 2.403(O).

Courts may also exercise their discretion to mandate mediation and may appoint a mediator (or a special master) to fulfill this role.  The courts may also provide incentives through scheduling and imposition of reporting deadlines.

Keys for in Mediation

1. Know your mediator.  Each mediator has different skills, techniques, and knowledge. Do the research and find the mediator who has the right experience for your situation.
2. Be realistic– both about expectations and about the structure of the process.  If the case is not sufficiently understood or if the case hinges on expert analysis, make sure that the dispute is ripe for mediation and that the relevant information is available.
3. Allow the mediator to develop the process in a way that addresses the existing dynamic between the parties.  If the parties are reluctant to publicly convey an offer (out of concern about the effect on co-defendants, for example), then the mediator might establish a process whereby individual offers are not divulged. 
4. Be proactive.  Often parties to a mediation do not communicate in depth with the mediator before a formal session.  This reactive approach to mediation forfeits one of mediation’s key advantages: the ability to have frank private exchanges early and often with the mediator concerning such things as the parties’ actual expectations, perceived roadblocks to a resolution, strategy, and critical terms in any settlement. Proactive interactions can be crucial.
5. Educate the mediator.  Make sure you have provided the mediator with the tools necessary to understand the problem, the issues driving the positions of the parties and the “dealbreakers.”  For example, if one party is concerned about a concession that might have an effect on other cases in which that party is involved, and if that concern is disclosed to the mediator, then the mediator will be sufficiently well informed to search for other ways to obtain necessary concessions. 
6. Understand your opponent’s motivations.  If you heed the factors that motivate the other side, you can tailor offers accordingly.  Use the mediator to understand the factors that are driving the opponent.
7. Be creative.  Sometimes the solution is outside the scope of standard litigation. Mediated resolutions can involve creative solutions that no court or arbitrator could award regardless of the merits. Ongoing business solutions typically require a degree of consent and commitment not present in more formal settings.  As a result, mediations can provide singularly flexible and efficient solutions to a dispute.

Deborah Greenspan is the co-leader of Dickstein Shapiro’s Complex Dispute Resolution (CDR) Group. Her practice focuses on class action, mass tort, and bankruptcy law and procedure. She has particular experience in mass torts and products liability, analysis of damages and future liability exposure, negotiation, alternative dispute resolution (ADR), claims evaluation and dispute analysis, settlement distribution design and implementation, claims management and risk analysis, and general litigation. Ms. Greenspan has represented clients in the most significant complex litigation matters in the United States. Representative clients include Dow Corning Corporation; Pfizer Inc; Kaiser Aluminum & Chemical Corporation; Armstrong World Industries, Inc.; Corning Inc.; and General Motors. She has been appointed to serve as a special master and neutral in various matters, including the “Agent Orange” product liability litigation, and has designed and implemented complex settlement programs, including as an appointee to the U.S. Department of Justice, the September 11th Victim Compensation Fund of 2001. 

Deborah can be contacted on +1 (202) 420-3100 or at greenspand@dicksteinshapiro.com.