• Alternative Dispute Resolution
  • What is Alternative Dispute Resolution?
    • Arbitration
    • Mediation
    • Conciliation
    • Mini-Trial
    • Moderated Settlement Conference
    • Summary Jury Trial
  • Finding an ADR Provider
  • Costs
  • ADR and the Settlement Process
  • Resources

For decades, clients, judges, and lawyers have complained about the cost, inefficiency, acrimony, and risk of litigation. Everyone involved with civil litigation realizes these negative aspects, but until recently no one has done much about it. The time for change is upon us.

Historically, lawyers were trained exclusively in the adversarial method of jurisprudence. The adversarial system of jurisprudence is based on the concept that justice will emerge best if competing parties, represented by lawyers, present their admittedly biased version of a case to a judge or jury, and have the flaws of their positions exposed through cross-examination. In fact, this system works quite well in some cases, particularly when cost and relationships between opponents are not major concerns. In many cases, however, the cost of litigation is prohibitive, the fighting and acrimony inherent in the process destroys relationships that otherwise could be preserved, and the complexity of litigation causes major delays.

Sophisticated parties, particularly corporations that may be involved in a great deal of litigation, now realize the huge costs of the adversarial process. To reduce exposure to a litigious atmosphere, as well as time and money, people are looking for alternatives to the traditional approach. Texas has developed a state policy to encourage peaceable resolution of disputes.

The purpose of this chapter is to help business decision makers understand the current status of alternatives to litigation. In the modern civil litigation environment, the knowledgeable decision maker can and must insist on using options that have the potential to reduce some of the present problems of litigation. The chapter addresses how to choose the type of alternative dispute resolution that will be most effective in a particular matter and discusses the characteristics of an effective mediator, arbitrator, or other neutral party. There will be many exceptions to the general statements of this chapter, however, and readers always should make dispute resolution decisions only with the advice and counsel of their lawyers, whose enthusiastic participation is essential to the success of any alternative to traditional litigation.

Simply stated, alternative dispute resolution (ADR) is the process of resolving disputes without going to trial before a judge or jury. ADR typically is less expensive and more confidential than the public trial process. Courts in many states, including Texas, are encouraging alternatives to traditional litigation. Texas statutes provide that each Texas county may establish an ADR system through which parties to litigation may resolve disputes in an informal way.

ADR clears cases through the system more rapidly, freeing judges to focus their expertise and energy on issues that are the most complex, significant, or resistant to settlement. The faster cases move through the system due to settlement, the better the judicial system, because the parties resolve their own matters and reduce delays. ADR is a powerful tool for judges to use in managing their caseloads and ADR usually reduces the total costs for litigants. Finally, with few exceptions, disputes resolved by ADR are private and confidential.

Dispute resolution processes may be voluntary, mandatory, binding, or advisory. The most frequently used methods of ADR are mediation and arbitration. Additional types of ADR include conciliation, moderated settlement conference, mini-trial, and summary jury trial.

Arbitration

Most clients and lawyers have some familiarity with arbitration, which is simply a private trial in which a third party decides the outcome of a case after lawyers present evidence. Unless the parties have provided in their agreement for a particular arbitrator, the court will appoint the arbitrator or arbitration panel. The arbitrator or panel usually has expertise in the area of dispute. The arbitrator is charged with making a decision, which is binding or non-binding according to the parties' stipulation. If binding, Texas law provides that a court must enforce the decision like any other contract. Voluntary arbitration is conducted pursuant to an agreement between parties, usually in the form of a contract before a dispute arises, that they will submit any dispute to arbitration.

Texas has adopted the Uniform Arbitration Act, which declares valid and enforceable agreements to arbitrate and provides exclusive grounds for a judge to overturn an arbitration award.

Arbitration works best in cases involving factual conflicts that can be resolved by experts on a particular subject. For many this is a distinct advantage to arbitration. Many business people feel especially comfortable knowing their dispute is settled by an expert who is knowledgeable in a particular field. There are many cases in which arbitration is appropriate if speed is desired and the parties are willing to risk living with a third party's decision. The securities and construction industries, for example, have utilized arbitration very successfully.

Some arbitration cases are as complex and expensive as litigated cases. Usually, however, they are settled without much publicity. This can be a significant advantage if a dispute involves sensitive issues, such as trade secrets or future business plans, or if the parties prefer to remain out of the public eye.

Mediation

Mediation is different from arbitration in that instead of presenting a case in a courtroom, the parties settle the case themselves with the assistance of a neutral mediator. The mediation process is flexible and can be tailored to each individual situation. In a typical commercial dispute mediation, attorneys for the parties present a brief statement of the case before the mediator. This is an excellent opportunity for the parties to listen to each other's positions. The parties meet privately with the mediator after the initial case statements, which encourages candor and helps the mediator identify factual discrepancies and substantive issues. Usually, the mediator will shuttle between conference rooms, trying to identify the core issues and obtaining agreement on tangential issues. In this way, a mediator is able to assess the parties' positions and can begin to help them propose various settlement options.

Creativity in settlement discussions is most likely when the decision maker, rather than a proxy, participates directly in the process. The person with the power to make a binding agreement understands the elements of the dispute with an intimacy that only comes from living through the dispute. Lawyers, however, are essential participants because they can point out the legal risks of tentative settlement proposals and help the litigants focus their energy and creativity on solutions that meet their legal needs.

Mediation is non-binding because the mediator does not have the power to impose a resolution upon the parties. Rather, the role of the mediator or mediation panel is to help the parties reach their own resolution. Parties sometimes stipulate beforehand that any agreement reached will be enforceable as a contract. However, if the parties do not reach agreement between themselves, there is no agreement to enforce and the parties are free to use other methods to solve their dispute.

Mediation gives the parties a sense of involvement in the dispute resolution process, making compliance with the result more likely than in the case of an imposed solution. Even in cases in which the parties cannot reach an agreement, the process of mediation may better define the dispute and help each party understand how a judge or jury might react to the case in court. Agreement can be reached on some issues while the parties agree to seek an advisory or binding judgment on the issues that remain in dispute.

Parties who use mediation successfully can learn valuable skills to help them address future conflicts more creatively. Mediated cases usually are settled in less time than litigated cases, achieving considerable cost and time savings. Even people who believe they could win a court case sometimes prefer to mediate rather than incur court costs and lawyers' fees, which could swallow a large part of any award received. A significant benefit of mediation is that the litigants maintain confidentiality and control over the terms of settlement as well as the settlement process itself. This can be very important if the parties want to avoid a public airing of their disputes. Mediation generally is considered to be private and confidential. Most communications and documents, including work notes made and used during mediation, are confidential and cannot be used in a court of law should there be subsequent litigation.

Mediation is used to resolve disputes in a wide variety of settings. Whether the dispute involves students, neighbors, family members, businesses, parties to an accident, governmental agencies, or nations, the mediation process is an effective tool for achieving solutions by mutual agreement rather than by court order.

Conciliation

Conciliation is an informal process in which an agreed-upon neutral third party is asked to investigate a dispute, usually one involving complex or technical issues. Conciliation is voluntary and private. The third party meets with the parties to the dispute at separate times, analyzes the disputed facts, and issues his or her findings in a non-binding report or recommendation. This process may be especially useful in handling sensitive internal disputes, such as an allegation of discrimination within a company. Such cases often provoke strong emotions, internal divisions, and even conflicts of interest that can interfere with a supervisor's or manager's ability to conduct a fair and impartial investigation of an allegation. To avoid the appearance of unfairness, a company may turn to an outside neutral third party in hopes of reaching a settlement all employees will respect.

Mini-Trial

In a mini-trial, each party presents its position in trial-like fashion before a panel that includes selected representatives for both parties (such as managers or executives) and neutral third parties. Every panel has one neutral advisor. A mini-trial can help to define the issues and develop a basis for realistic settlement negotiations. The representatives from the two sides provide an overview of their positions and arguments to the panel. As a result, each party becomes more knowledgeable about the other party's position. After hearing each side's presentation, the panel, including the advisor, meets to develop a compromise solution, as in the mediation process. The neutral advisor also may issue an advisory opinion regarding the merits of the case. The advisory opinion is not binding unless the parties agree beforehand that it will be binding and enter into a written settlement agreement. The primary benefit of a mini-trial is that both parties have an opportunity to develop solutions, because each side has representation and access to detailed information.

Moderated Settlement Conference

A moderated settlement conference is like a mini-trial in that the parties' attorneys are involved and the goal is to reach a settlement agreement. The process also involves a neutral third party who works with the parties and the attorneys. It is a method for the parties to a dispute to evaluate their case and come to a realistic understanding of its settlement potential. Unlike the mini-trial, there is no trial-like presentation of the facts. All of the people involved sit in negotiations and work with the advisor, who suggests a solution. The parties may accept or reject the decision. If the parties cannot settle, the impartial advisor helps narrow the dispute and suggests guidelines for managing discovery.

Summary Jury Trial

A summary jury trial is a court-managed process that takes place after a case has been filed but before it reaches trial. In a summary jury trial, each party presents its arguments to a six-person jury. Abbreviated opening and closing arguments, as well as an overview of arguments, are presented. Counsel usually are given one hour each for their presentations, and are limited to presenting information that would be admissible at trial. No testimony is taken from sworn witnesses, and proceedings generally are not recorded. Because the proceedings are non-binding, rules of evidence and procedure are more flexible than in a normal trial.

The jury renders an advisory, non-binding decision (verdict) based on the information provided. The verdict can give both the attorney and the client insight into the case, and may suggest a fair basis for settlement of the dispute. If the dispute is not resolved by counsel at or immediately following the summary jury trial proceeding, a pretrial conference is held before the court to discuss settlement.

A summary jury trial proceeding typically concludes in less than a day, but on rare occasions extends beyond a full day. The proceedings may be presided over by either a district court judge or a magistrate assigned by the judge.

As noted, Texas has numerous dispute resolution programs through the county court system that provide ADR services. Participating courts, therefore, have information regarding programs and providers. Additionally, the State Bar of Texas assists parties wishing to resolve a dispute through arbitration or conciliation by providing names of trained impartial third parties. Other resources for finding an ADR provider are listed at the end of this chapter.

Several steps should be taken when choosing an ADR provider. Parties should inquire about training, experience, and substantive knowledge. The kind of person chosen as an arbitrator or mediator will vary, of course, depending on the dispute at hand and the personalities involved. An arbitrator should have expertise in the substantive area of dispute. A mediator should be a good listener, should be able to identify the issues that are truly important and fundamental, and should be creative in proposing solutions. An arbitrator or mediator also should be someone with sufficient experience to command the respect of the parties and their lawyers. If, after selecting a person to hear the dispute, a party to the dispute genuinely feels that the mediator or arbitrator has shown bias, has a conflict of interest, or lacks the skills or experience necessary to mediate the case, he or she should voice the concern.

There is a wide range of ADR providers with varying levels of specialization, expertise, ability, and quality. The kind of ADR provider appropriate to a particular dispute depends on the kind of dispute, the parties, how much money is involved, the level of expertise necessary to handle a matter, and how far the parties are into the dispute. Some ADR providers offer dispute resolution services for specific kinds of disputes, such as large, multi-party disputes. Some providers have special areas of expertise, such as environmental dispute resolution.

Any impartial third party-whether in the role of mediator, arbitrator, or another neutral role-must have a minimum of 40 hours of training. Texas law provides that the training be approved by the court and that it include education in conflict or dispute resolution techniques. Under certain circumstances, a judge may appoint a third-party mediator or arbitrator who does not have specialized conflict resolution training, but who has similar experience or education. For example, sometimes an attorney may be appointed by a court to assist in ADR.

The costs of ADR vary depending on the type of dispute, the type of ADR process chosen, and the experience and expertise of the ADR provider. Because Texas dispute resolution programs use a portion of the court fees collected by Texas courts, usually there is no charge for these ADR services. Costs are paid by the court system. The parties pay the impartial third party's fee, as long as it is reasonable. The costs of for-profit ADR providers vary depending upon the experience and expertise of the provider chosen. Some ADR providers charge an hourly rate while others charge a flat fee for handling an entire matter from initiation to resolution. Even if a given ADR provider charges a substantial hourly rate, using ADR often resolves a dispute quickly, saving time and money.

The vast majority of lawsuits settle prior to trial, with the likelihood of settlement increasing the closer cases get to trial. That is the point at which judges, attorneys, and clients give settlement the most time and attention. It is also the point at which substantial fees have been paid, discovery is complete, and opposing arguments have been heard. In addition, sufficient time has passed for emotional wounds to heal and for clients to have begun addressing new issues in their lives or businesses. ADR is one device to speed the settlement along. Typically, ADR accelerates the point in the process at which settlement occurs. ADR may be used to avoid litigation entirely, but failing that, ADR is an effective way to decrease the time and money spent in litigation. This can result in large savings and better results than having a judge or jury make a decision for the parties.

General information about alternative dispute resolution is available from the following organizations:

• American Arbitration Association, 140 51st Street West, New York, NY 10020, (212) 484-4000.

• National Institute for Dispute Resolution, 1726 M Street N.W. #500, Washington, DC 20036, (202) 466-4764.

To find out whether a particular county in Texas has established a dispute resolution program, contact the dispute resolution program office or ask for "information" at the county courthouse.

The State Bar of Texas provides names of trained impartial third parties. Contact the State Bar of Texas, P.O. Box 12487, Austin, TX 78711-2487, (512) 463-1463 or (800) 204-2222.