Dispute Resolution: 3 Alternative Methods to Litigation
Last Updated: September 07, 2023
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Key Takeaways:
- Taking legal disputes to court is no one's first choice because it can be expensive and time-consuming.
- First, people should try an alternative dispute resolution (ADR) method, such as negotiation, mediation, or arbitration.
- A mediator does not decide a dispute while an arbitrator functions more like a judge, deciding the outcome.
No one ever wants to find themselves in the middle of a legal dispute, but sometimes they are unavoidable. Disputes can arise when two parties have a contract and one party violates the contract’s terms. When married couples separate or divorce, they often disagree on at least some of the details of their break-up.
Unfortunately, you may not be able to avoid certain legal disputes throughout your life. However, you can control how you resolve them. Courtroom litigation to resolve a disagreement with another party can be time-consuming and expensive. Luckily, there are alternative ways you can go about resolving disputes.
This article will cover some alternatives to litigation, including negotiation, mediation, and arbitration.
What does litigation mean?
Litigation is the process of deciding lawsuits and legal disputes in court.
Generally, litigation involves a plaintiff and defendant. Either or both parties can be individuals or organizations. The plaintiff is the party that files a suit, initiating legal action. The defendant is the party that is being sued.
Litigation can have certain drawbacks, including:
- The amount of time it can take
- The potential for costly legal expenses
- The potential for one party to request an appeal (i.e., a higher court change or reverse the original decision)
- The public’s access to court records
Sometimes, legal disputes have to be litigated. For example, criminal cases must go through litigation and cannot be resolved outside of court.
On the other hand, civil disputes do not have to be litigated in court. Examples of civil cases include contract disputes and negligence claims. Ideally, civil disputes are settled outside of court by using an alternative dispute resolution method. However, litigation may be the last resort for two parties in a civil dispute if they cannot reach a mutual understanding.
What is alternative dispute resolution?
Alternative dispute resolution (ADR) is any way of resolving a dispute without litigation. The three types of ADR methods that this article covers are negotiation, mediation, and arbitration.
There are many different types of disputes that parties can settle with ADR methods, including these examples:
- Contractual disputes: A contractual dispute arises when one or both parties to a contract breach the terms of their agreement. For example, suppose a homeowner hires a contractor to renovate their kitchen and the contractor fails to complete the project or produces defective work. In that case, the homeowner could argue that the contractor breached their Service Agreement.
- Divorces and family disputes: Spousal support, property equalization, parenting time, child support, and child custody are all common issues in divorce and separation cases that can be settled using ADR methods. Once an agreement is reached a consent application can be prepared for a judge to sign.
- Personal injury cases: A personal injury case involves one party sustaining injuries due to another party’s wrongful act. Personal injury claims can often result from automobile accidents. If one driver is hurt in an accident that was not their fault, they could seek a financial settlement from the other driver. Rather than go to court, the parties may negotiate, and the affected driver may accept a financial payment and release the at-fault driver from liability.
1. Negotiation
Negotiation is the most basic form of alternative dispute resolution. Negotiation between parties is often the first step for those trying to resolve a legal dispute because it does not cost anything and does not require the involvement of a third party.
Although there is no requirement for a third party to be involved while parties negotiate, the disputing parties can still consult a lawyer to protect their interests.
There are no rules or regulations for how negotiating takes place. Parties may meet in person, over the phone, or by video call to negotiate a resolution to their dispute. Parties can even negotiate through representatives, such as their lawyers, and avoid direct contact.
Negotiating is successful when parties resolve their dispute and come to a mutual agreement.
Negotiation benefits
Negotiation is beneficial for many reasons, including the following:
- It allows parties to retain complete control and create a customized outcome
- It is a flexible process that still allows parties to consult a lawyer
- It does not have to be scheduled and can be less time-consuming than litigation
- It is less formal than litigation
- It is collaborative and forces communication
- It can save the parties’ relationship (e.g., divorcing spouses)
- It does not cost anything
Despite its many benefits, straightforward negotiating does not always work. Sometimes parties cannot calmly communicate or come to an agreement themselves.
In addition, some disputes cannot be solved through negotiating alone. For example, it is not possible to get divorced through negotiation, or any other form of alternative dispute resolution for that matter. Spouses can try to negotiate the terms of their divorce, but a divorce judgment still has to be filed in court and signed off by a judge.
Furthermore, if parties have not consulted a lawyer, or otherwise made themselves aware of their rights, they may not be in a good position to negotiate.
2. Mediation
If disputing parties try negotiating but cannot reach a mutual agreement, they will often introduce an impartial third party in what is known as mediation.
What is mediation?
Mediation is a process in which disputing parties have a neutral facilitator to help them settle outside of court. Mediation can be voluntary or court-ordered depending on your state and specific dispute.
Disputing parties can each hire a lawyer to provide them with guidance and legal advice during mediation, but it is not a requirement to do so. It is a good idea to hire a lawyer most of the time because they can explain how laws and legislation impact the dispute.
Mediation is mainly associated with family law, but it can also be used in other types of cases. In some states, during family law cases, such as custody battles or divorces, parties have to attempt mediation before they have the option of litigation. In other states, courts can order parties to try mediation when they believe it may be helpful.
What is a mediator?
The mediator is the neutral facilitator that guides mediation. Mediators help parties reach a compromise but do not give legal advice or decide the outcome of a dispute. They ensure the parties understand the law and facts, facilitate the negotiation process, and let the disputing parties decide the settlement for themselves.
States have varying requirements for working as a mediator, meaning education, training, and experience can vary widely. Some states, such as Alaska, have no standards or licensing requirements. Other states have court-certified mediators and have specific rules for becoming a mediator.
Mediation process
For voluntary mediation, disputing parties can begin the mediation process once they recognize that negotiating is not working and they cannot settle their dispute on their own. Mediation starts with hiring a mediator.
Once the parties have a mediator, both parties, the mediator, and possibly each party’s lawyer meet in a neutral location. Generally, the mediator will follow these steps:
- Establish the rules: The mediator explains the process and sets some rules for behavior. Mediators may also ask for a verbal commitment from each party that they are willing to compromise and work towards a mutual agreement.
- Present each party’s case: Each party presents their case and explains their point of view regarding the dispute.
- Meet with each party individually: The mediator may meet with each party separately to better understand all the details.
- Consider the law: If each party has a lawyer, the lawyers will discuss how certain laws and legislation affect the case. Mediators ensure that the parties and their lawyers are considering relevant laws.
- Negotiate between the parties: The parties will eventually negotiate to reach a settlement. Parties can negotiate by meeting with their mediator or communicating through their mediator.
- Settle the case: Mediators attempt to help the parties reach a solution or settlement.
How much does mediation cost?
The cost of mediation varies greatly depending on the type and complexity of the dispute, and the mediator. Mediators on Thumbtack cost $170 to $200 per hour. If you are considering hiring a mediator, ask for a quote or a breakdown of their pricing beforehand.
In cases of intellectual property infringement disputes, parties could utilize the World Intellectual Property Organization (WIPO) Arbitration and Mediation Center. When using the services provided by WIPO, there is a minimum cost of $300 per hour or $1500 per day.
How long does mediation take?
Much like mediation costs, the amount of time mediation takes depends on the type and complexity of the dispute. Furthermore, finding a mediator and getting scheduled into their availability can take time.
According to CommunityDispute.org, mediation sessions usually last two to three hours. If a dispute is somewhat straightforward with only one or two issues at hand, it could be resolved in a single session. Multiple sessions are usually needed for more complex disputes, such as divorces involving children.
Does mediation take place in court?
No, mediation does not take place in court. Unlike litigation, which takes place in court, mediation can happen wherever parties choose. Typically, parties agree on a neutral, less formal location to meet with their mediator.
Mediation benefits
Mediation has many benefits, including:
- It is more affordable than litigation
- It is a flexible process that allows a customized resolution
- It allows parties to retain control and decide how to resolve their dispute
- It is informal and does not require the involvement of a court
- It typically is a much faster process than litigation
- It encourages collaboration and can protect relationships
- It is confidential, unlike litigation which is public except for family law
Is mediation legally binding?
No, mediation is a non-binding process, unlike arbitration. Even when mediation is court-ordered, it is still a non-binding process. This means that disputing parties are not obligated to accept a settlement or resolution. Instead, they must voluntarily and mutually agree to a solution. Mediators never impose a binding decision on the parties.
Once disputing parties agree to a solution and sign a contract that outlines the terms of their agreement, the terms of the contract become legally binding.
3. Arbitration
When disputing parties have tried negotiating but cannot reach an agreement, they may find arbitration a useful resolution method. Arbitration is the resolution method that is most similar to litigation. Sometimes, if disputing parties cannot reach a consensus through mediation, they will pivot to trying arbitration.
What is arbitration?
Like negotiation and mediation, arbitration is an alternative dispute resolution method. It is a process in which an impartial third party considers the submissions of both parties and decides the final outcome of a legal dispute. It is similar to litigation because of a neutral party's involvement in determining a final decision. The neutral party is known as the arbitrator.
What is an arbitrator?
An arbitrator is a neutral party that determines the outcome of a legal dispute. Sometimes, a panel of arbitrators can settle a dispute instead of a sole arbitrator. Arbitrators are similar to judges but often have particular expertise in the area of dispute in question. For example, arbitration is often used in employment law disputes such as unfair dismissal. Generally, arbitrators will consider evidence from both parties, reference applicable legislation and case law, and decide a fair and impartial outcome.
Arbitration process
The arbitration process can look different depending on the specific dispute. Before the arbitration process begins, both parties have to agree to submit the dispute to an arbitrator. In addition, the parties have to agree on the arbitrator or panel of arbitrators mutually. Once the parties have an arbitrator, the arbitration process can begin. Sometimes the contract in dispute between the parties will contain a binding arbitration clause and a method for appointing the arbitrator.
Generally, an arbitration hearing is held. At the hearing, parties present their arguments, testimonies, and any relevant witnesses and documents. Like mediation, the whole arbitration hearing and process is confidential.
Once the arbitrator has heard all the relevant information and reviewed the evidence, they make a final decision.
The decision is final and binding because the parties agreed in advance to binding arbitration. Therefore, the arbitrator’s decision cannot be appealed. In employment law and commercial law in particular, this is seen as fair because of the specialist expertise of the arbitrator with knowledge of the industry compared to a generalist judge.
When can arbitration be effective?
Arbitration can be an effective solution in the following circumstances:
- When parties have decided that they cannot resolve their dispute among themselves
- When parties determine that they need a third party to impose a decision upon them
- When disputing parties do not want to start an expensive lawsuit or court trial
- When parties to a contract are in a legal dispute and there is an arbitration clause included in the contract
- When parties want to keep their dispute and the outcome of their dispute private
How much does arbitration cost?
The cost of arbitration varies widely depending on the complexity of the dispute, the arbitrator’s experience, and the jurisdiction where an arbitrator practices. However, it is thought that arbitrator fees can normally range from about $1000 to $2000 per day.
Arbitration benefits
Arbitration has multiple benefits, including the following:
- Fast and easy: The dispute will normally be resolved much sooner. It may take several years to procure a court trial date, while an arbitration date can usually be obtained within a few months.
- Less complicated: During the arbitration, it’s much easier to admit the evidence. Most matters, such as who will be called as a witness and what documents must be produced, are handled with simple phone calls with the arbitrator.
- Privacy: Unlike a trial, arbitration leads to a private resolution, so the information brought up in the dispute and resolution can be kept confidential.
- Choice of arbitrator: The parties to the dispute usually pick the arbitrator together or have agreed on a method of choosing the arbitrator in their contract, so the arbitrator will be someone that both sides have confidence will be impartial and unbiased.
- Less expensive: Most of the time, but not always the case, arbitration is a lot less expensive than litigation.
- Finality: For binding arbitration, you usually cannot appeal the arbitrator’s decision. That gives finality to the arbitration that is not often available with a trial decision, which may be subject to appeals.
Is arbitration binding?
Typically, an arbitrator’s decision is legally binding on both sides and enforceable in the courts. However, if all parties stipulate that the arbitration is non-binding, either party may reject the arbitrator’s ruling and litigate the dispute instead.
What is the difference between a mediator and an arbitrator?
A mediator helps parties negotiate a settlement that will satisfy all the parties. A mediator does not decide a dispute.
An arbitrator functions more like a judge, deciding the outcome of a dispute based on evidence and law. Arbitrators often have expert knowledge of the particular type of dispute. Arbitration is binding, and the outcome can be enforced like a court order.
Other forms of alternative dispute resolution
Besides negotiation, mediation, and arbitration, there are other types of ADR methods, including conciliation and collaborative law.
Conciliation
Conciliation is an ADR method whereby a neutral third-party conciliator facilitates an agreement but cannot make a binding agreement on behalf of the parties. Conciliation is typically used by employers, unions, or government officials to solve problems before protests, strikes or lockouts occur.
Collaborative law
Collaborative law is an ADR method used in divorces or separations. Collaborative law is also known as collaborative family law. It allows partners to work together to resolve a legal dispute out of court with a collaborative family lawyer.
A collaborative family lawyer attempts to reach an understanding between two spouses. Collaborative law aims to provide the best outcome or settlement for both partners and their children. It is a cost-efficient form of dispute resolution.
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