Mediation and arbitration
By Ken Gorman
Lombardo and Gilles
Mediation and arbitration have gained acceptance and are
increasingly used as a direct result of overcrowded courts. The
main reason for the backlog of court cases is that the population
has grown faster than the number of courts and not, contrary to
popular misconception, from an increase in the overall
litigiousness of our society. One response has been to require
mandatory Alternative Dispute Resolution (
”
ADR
”
) in almost all civil cases.
Mediation and arbitration
By Ken Gorman
Lombardo and Gilles
Mediation and arbitration have gained acceptance and are increasingly used as a direct result of overcrowded courts. The main reason for the backlog of court cases is that the population has grown faster than the number of courts and not, contrary to popular misconception, from an increase in the overall litigiousness of our society. One response has been to require mandatory Alternative Dispute Resolution (“ADR”) in almost all civil cases.
Most civil cases in the state courts go through one of these procedures in advance of the trial, and all of the attorneys and litigants must participate in good faith. A recent Supreme Court case confirmed that a party cannot be ordered to attend mediation though they can be ordered to attend and participate in arbitration or a settlement conference. Most ADR procedures are conducted by an attorney with significant experience or a retired judge. ADR procedures are different than a mandatory settlement conference, which is held by a judge.
Mediation is an effort to settle: it is non-adversarial, there is no testimony, and the goal is to reach a resolution through compromise and dialogue. Mediation is usually held early in the dispute process and sometimes even before a complaint is filed so that the parties can save money by avoiding litigation. Attorneys exchange briefs setting forth the facts and legal positions of each party. The parties, attorneys and mediator meet in a conference room, discuss the rules, exchange basic ideas, and then break up into separate rooms while the mediator uses shuttle diplomacy to try to resolve the disagreements. Mediation is always confidential, meaning that none of the offers, demands or conversations can ever be admitted at any subsequent proceeding, including a trial.
If the mediation was ordered by a judge, then the mediator reports to the court that mediation occurred, it was attended by the parties and counsel, and succeeded or did not succeed. There is no penalty for not settling at mediation.
Arbitration is like a miniature trial with modified rules of evidence. A case can be ordered to “judicial arbitration.” In a judicial arbitration, the court provides the attorneys with a list of potential arbitrators who have been approved by the judge. The attorneys get to “strike” one of the arbitrators. If several names remain after that, then the judge selects the arbitrator.
If arbitration is compelled by contract, such as in many real estate purchase contracts and construction contracts, the arbitrator is often required to be from one of several prominent state or national firms. These firms include the American Arbitration Association and JAMS (Judicial Arbitration and Mediation Services).
One major difference between arbitration ordered by the courts and private arbitration is how discovery is handled. Discovery means depositions, interrogatories (written questions) and exchange of documents before trial (or the arbitration). In arbitration ordered by the court, discovery is governed by the Code of Civil Procedure. By statute, discovery in a case is cut off 30 days before the arbitration. In private (or contractual) arbitration cases, often the rules do not permit discovery absent approval from the arbitrator. This is to cut down on excessive discovery, which makes court-ordered arbitration more expensive.
Another difference between judicial (or court-ordered) arbitration and private arbitration is that judicial arbitrators are free in a judicial arbitration. The judicial arbitrators donate their services to the court. Private arbitrators generally charge $500 per hour for their time, and often there are mandatory administrative filing fees that run from $1,000 to $10,000, depending upon the size of the case. The same is true of mediation: if the parties agree to undergo mediation as “supervised” by the court; that is done by mediators whose time is donated. If they elect private mediation, then they have to pay the mediator’s fee, which are about the same as an arbitrator’s fee.
Arbitrators act like a trial judge: the arbitrator hears evidence, rules on objections and admissibility, and renders a decision. The main differences between a trial before a judge and an arbitration is that (i) the arbitration is usually at the arbitrator’s office instead of court, and (ii) much of the evidence can be admitted without the formalities required in court. Arbitrators often get reports and depositions instead of live testimony since this reduces time and expense.
In judicial arbitration, the arbitrator’s award is nonbinding. If either side rejects it in writing within 30 days, the case goes back onto the trial calendar. The disadvantage to rejecting an arbitration award is that if the rejecting party does no better at trial, they may lose their right to costs and may be forced to pay the expert costs of the other side.
In contractual arbitration cases, the arbitration is almost always binding on the parties. The whole point of having arbitration clauses in contracts is to require people to use that procedure instead of the courts.
Mediation is statistically far more likely to settle a case than non-binding arbitration. Most litigation attorneys advise their clients to mediate rather than arbitrate for three reasons: (i) the non-adversarial nature of mediation; (ii) mediation saves a lot of attorney’s fees and costs; and (iii) there is often little downside to participating in mediation. A person must consider these factors in deciding whether to mediate or arbitrate a dispute and when signing any contract with a mediation or arbitration clause.
This column is the work product of Lombardo & Gilles, LLP, which has offices in Hollister and Salinas. Ken Gorman is an attorney with Lombardo & Gilles, LLP. You may contact the author at (888) 757-2444 or [email protected]. Mail your questions to Ken Gorman, It’s the Law, c/o The Pinnacle, 380 San Benito St., Hollister, CA 95023.
