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What are the Alternatives?

Over the past several years, a new phrase has been bantered about by lawyers and business people.  That term is “Alternative Dispute Resolution” or ADR as it is often called.  So what is this ADR and how does it affect you?  Over the next three articles, we will look at ADR, as well as traditional dispute resolution forums, in an effort to explain the benefits and risks of each.

Initially, it is helpful to identify the various mediums commonly utilized to resolve disputes.  In this regard, it is easiest to view these options in terms of a spectrum.  On one end of the spectrum we have the options which allow for the most self-determination by the parties to the dispute.  On the other end of the spectrum we have the options through which the disputants relinquish control over the resolution process to a third party.  In such a case, the third party imposes a resolution on the disputants.

The following is a list of the most common types of dispute resolution, starting on the side of the spectrum which allows for the greatest self-determination.

1.  One on One Negotiations:  This is the most common mechanism used to resolve disputes.  The two or more parties who are in dispute argue their positions, without any third party intervention.  We have all experienced these forms of negotiations with our parents, spouses, kids, friends, business relations, etc.  Generally the parties argue their positions until an agreement is reached - even if that agreement is that the parties simply agree to disagree.  Clearly, this form of dispute resolution allows for the maximum amount of self-determination between the parties.  They control the tempo of the process, as well as the final resolution.

2.  Mediation:  Mediation is very similar to the “One on One Negotiations.”  Once again, the parties are involved in a negotiation process geared toward reaching a resolution.  The key difference is that this negotiation process is facilitated by a third party whose role is to assist the parties in reaching a resolution.  This third party is called a mediator.  This form of dispute resolution allows for substantial self-determination.  The primary difference between Mediation and One on One Negotiations is that the mediator will tend to have a substantial impact on the tempo and style of the process.  In addition, through suggestions, implicit or explicit, the mediator will likely impact the resolution.  Notwithstanding the mediator’s influence, the disputants have the peremptory freedom to determine if, and how, the dispute will be resolved.

3.  Non-Binding Arbitration:  Non-Binding Arbitration likewise involves a third party.  This third party is called an arbitrator.  This process can be extremely formal or entirely informal.  In this forum, the parties present their positions to the third party.  Once the sides have presented their respective positions, the arbitrator gives an advisory ruling as to how the dispute should be resolved.  The key word in the last sentence is “advisory.”  The ruling is not binding on the parties.  Rather it is intended to provide the parties with a “reality check.”  In other words, it offers the parties an opportunity to see how a third party is likely to rule if the matter is submitted to a binding forum such as Binding Arbitration or Trial.  While the parties do not control the process or the ruling in Non-Binding Arbitration, through their ability to reject the arbitrator’s ruling, they retain ultimate control of the dispute resolution process.

Parenthetically, many times disputes which are in the court system are ordered to Non-Binding Arbitration.  It should be noted that while the arbitrator’s decision is not binding, there are penalties for a party pursuing the matter through trial in the event that party does not obtain a result which is better than the ruling received in the Non-Binding Arbitration.

4.  Binding Arbitration:  Binding Arbitration is the same technical process as Non-Binding Arbitration.  The critical distinction is that the ruling by the arbitrator is binding on the parties.  In fact, as will be discussed in greater detail in the third part of this series, the ruling by the arbitrator, generally, is not subject to appeal.  As such, it has a greater binding force than rulings derived from other dispute resolution forums.  Needless to say, when the parties submit their dispute to Binding Arbitration, they relinquish meaningful control of the process, along with the ultimate resolution of their dispute.

5.  Court Trial or Bench Trial:  A Court Trial, commonly called a Bench Trial, is a trial in front of a judge, without a jury.  In this forum, the parties present their case in a formal setting and the judge issues a ruling on how the dispute is to be resolved.  While this tends to be a more formal process than Binding Arbitration, it is otherwise quite similar.  One key distinction is that the ruling by the judge may be appealed.  Once again, in this forum, the parties relinquish all meaningful control of the process and the ensuing results.

6.  Jury Trial:  A Jury Trial is the same basic process as a Court Trial.  The critical distinction is that all issues of fact are presented to a jury which maintains broad control over the ultimate determination of how the dispute is to be resolved.  The only limitations to the jury’s control of this process are those imposed by law and enforced by the judge.  As is the case with Binding Arbitration and a Court Trial, the parties forfeit control of the process, along with their ability to determine how their dispute is to be resolved.

The foregoing has been intended to provide a capsule explanation of the various modes for dispute resolution.  The two processes which have been promoted over the past decade, and are commonly found in the various agreements utilized by real estate professionals, are Mediation and Binding Arbitration.  Next, we will take a detailed look at Mediation; followed by an examination of the risks and benefits of Binding Arbitration.  Through this series, it is hoped that you will attain a greater understanding of your “alternatives.”

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