If you have recently bought a house, opened a brokerage account, or contracted with the government, chances are you have agreed to some form of "alternative dispute resolution" (ADR). Because these processes are in most cases a matter of contract, it has become important to understand them, know where they might crop up, and anticipate ways to use them to your advantage.
Arbitration and mediation are the most common forms of ADR. In mediation, the parties hire a neutral person to help them identify and prioritize their needs and to understand the financial and other costs of continuing their dispute. If they do not reach agreement, the process does not prejudice their rights. By statute, offers made during mediation and information given the mediator are confidential; the mediator cannot be called as a witness except to testify to the parties' agreement. In a surprising number of cases, however, the parties find a resolution each can live with.
Recognizing that fact, courts and agencies have injected mediation into their proceedings. For example, judges routinely conduct settlement conferences and parties are encouraged to use court-sponsored, specially trained mediators in residential eviction and in custody and visitation disputes. The Construction Contractors Board (CCB) has a team of "conciliators" who facilitate on-site resolution of disputes between homeowners and builders.
Although success through mediation is voluntary (no one can force parties to agree), failure to mediate can have consequences. Refusal to attempt settlement is a factor a court considers in awarding an enhanced fee (up to $5,000) to a party prevailing in litigation. Similarly, if CCB conciliation fails, the investigator may then make findings which can bind the parties or at least become persuasive evidence at a later hearing. Contracting parties may create consequences. For example, the form of Sale Agreement currently used by most Oregon Realtors conditions recovery of attorney fees at arbitration on offering to mediate beforehand.
In arbitration, parties submit evidence to an individual or panel (usually three) arbitrators, who then make an "award," which is frequently binding on the parties (i.e. no appeal may be taken). The arbitrators need not be lawyers and ideally have expertise to understand the nature of the dispute. The process is generally quicker and less formal than a court case; restricted document discovery and depositions, coupled with experienced arbitrators, more relaxed evidence rules and flexible manner of presenting testimony, frequently make it cheaper. A final award may be enforced as a judgment.
In Oregon , claims under $50,000 go to non-binding "court-annexed" arbitration, conducted before a local attorney. Any party may appeal from an award, which returns the case to the regular court docket, but failure to improve one's position at trial entitles the other party to attorney fees. In Marion County , this process resolves about 80% of the cases.
Because binding arbitration is a matter of contract, the parties have an opportunity to tailor the process, or, if one party has the upper hand in negotiation, to impose a process on the other party. The contract may, for example: a) identify the organization that will appoint arbitrators; b) subject some (but not all) claims to arbitration; c) set timelines; d) control available discovery; and e) limit types and amounts of damages. Courts favor arbitration and, except in cases of public policy, will enforce the parties' agreement.
In some situations, other forms of ADR may be appropriate. In one process, called "fact-finding," the parties hire a neutral person to investigate disputed facts and make findings by which they agree to be bound. This process works well where the dispute involves a series of transactions or is otherwise fact-intensive. The parties are spared the cost of conducting a hearing, which generally entails hiring lawyers to formally present testimony and documents.
Other forms of ADR may do the job. Collective bargaining agreements almost always require employees to "grieve" their issues through a series of supervisors before going to court or arbitration, a process that can work for non-union employers as well. Similarly, in many circumstances where speed is essential or going to court is cost-prohibitive (e.g. small construction projects), the parties may agree to address any dispute to a person they both can trust, split the costs, and agree to abide by that person's decision.
Because ADR is a matter of contract, it pays to anticipate the kinds of disputes you may encounter and, if possible, design up front a process to resolve them in the most expeditious and cost-effective way. Truly, an ounce of prevention is worth a pound of cure.