Robert Smith

Tips for ADR


Alternative Dispute Resolution (ADR) is not a panacea. It is inappropriate for certain kinds of cases. Interesting an opponent in mediating can sometimes be difficult, but the provider may be able to help. Reference to a corporate policy may also be helpful. The disputants may initiate mediation before or after a lawsuit is filed, or even after a trial or appeal. The determining factor is whether the dispute is ripe for negotiation. The criteria for determining which disputes should be submitted to mediation are examined, as is what may be done if the dispute does not settle.

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when not to use adr

ADR is not a panacea for all cases. Certain kinds of cases are generally considered to be inappropriate for resolution by any means but by a judge or jury after a trial. Two such kinds of cases are mentioned here:

  1. cases in which there is a need to set clear judicial precedent — namely, cases designed to test a law or to create new law, and
  2. cases involving fraudulent claims.

ADR may not be appropriate in the following cases as well:

  • when an important public policy is at issue.
  • in cases involving loans secured by real property. The “one-action” rule adopted by some states in their anti-deficiency statutes may call into question the use of ADR processes for the lender.

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interesting the client and other parties in mediation

Interesting an opponent in mediating a dispute can sometimes be difficult. Many businesspersons and some attorneys–far fewer nowadays–are simply not familiar with the process and suffer from the common aversion to new ideas.

Some lawyers and clients are hesitant to suggest mediation to their opponents for fear of appearing weak. This concern may be ameliorated by placing a pre-dispute mediation clause in contracts. A preexisting agreement to mediate allows a disputant to suggest mediation and to appear as if it were only complying with contract terms.

Let the Provider Do It
A mediation provider or agency will usually contact the other side with the offer to mediate and will attempt to convince the opponent to accept the offer by persuading them to mediate. Many providers offer this service for free.

An offer to try a collaborative settlement process might be more readily accepted if it comes from a neutral third party than if it comes from the opponent in the middle of an emotionally heated dispute.

Convincing a client to mediate can sometimes be difficult. Clients who are angry with the opponent and feel personally affronted by the opponent’s past and present conduct may not be willing to sit down and negotiate face-to-face with the opponent.

Moreover, many people, including many businesspersons, do not understand the process.

To counteract these factors, counsel should clearly explain the mediation process, and perhaps stress mediation’s advantages, including mediation’s low cost (as opposed to the usually high costs of litigation), confidentiality, nonbinding nature, and low risk.

Some clients will appreciate their attorney’s efforts to keep the costs down and to expedite an early resolution to the dispute. Other clients’ however, may view a suggestion to mediate as less-than-zealous advocacy on the part of their attorney or an indication of the attorney’s lack of faith in their cases.

Thus, before an attorney suggests mediation, he or she should try to gauge the client’s frame of mind to determine whether the client is ready for negotiations. Settlement is, of course, not the same thing as capitulation or an admission of wrongdoing.

Free Discovery
The other side’s attorney may also be an obstacle to mediation. Common fears of litigators about mediation include: loss of control and predictability of the process, the possibility of uncomfortable discussions about attorney’s fees in the presence of clients, possible provision of free discovery, the opportunity for the opponent to evaluate the client, and actions by the mediator that may persuade opposing counsel not to concede further.

Opposing counsel’s resistance to mediation may sometimes be overcome by reference to a corporate policy that encourages the use of alternative dispute resolution and an offer to pay the mediator’s fees.

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timing of submission of disputes to mediation

The disputants may initiate mediation either before or after a lawsuit is filed. Depending on the nature and complexity of the dispute, it may be submitted to mediation before a good deal of discovery is completed.

Early use of mediation may be warranted when settlement is crucial and face-to-face negotiations or continued litigation are likely to result in an increase in hostility between the disputants. However, disputants should not submit a dispute to mediation before conducting enough discovery to negotiate a settlement accurately and fairly.

Late in the Game
Disputants may also submit a dispute to mediation late in the game–just before trial. Parties often agree to mediation as this late time because the imminent trial date rouses them out of complacency. They are confronted with the costs of trial and the prospects of defeat. The parties become willing to take a chance on mediation to avoid the uncertainty and expense of trial.

The disputants may use mediation after a trial has been concluded, and even after an appeal has been filed. The procedural status of the dispute does not dictate whether mediation is appropriate; whether the dispute is ripe for negotiation is the determining factor.

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determining which disputes should be submitted to mediation

Generally, any dispute that is amenable to settlement by negotiation is amenable to settlement by mediation. However, a dispute should be submitted to mediation only when two criteria are satisfied–the parties have evinced a good-faith interest in settling, and the parties and their counsel have acquired enough knowledge of the facts to negotiate intelligently and fairly.

A great difference between the disputants’ initial positions should not preclude mediation, as long as the disputants display a genuine desire to settle the dispute.

Other factors make a dispute appropriate for resolution by mediation. These include:

– A need for confidentiality.
– A need for maintaining business relations between the disputants.
– A need for speed in resolving the dispute.
– A need for flexibility in procedures or in remedies.

A veteran mediator has suggested the following as conditions that may indicate that a case is suitable for mediation:

  1. The disputants have not discussed settlement in three months, or the case is more than two years old.
  2. One side is having client-control problems.
  3. A lawsuit will soon be filed.
  4. One side is not furnishing the other with the information it needs to discuss settlement.
  5. The case is in litigation, and a major round of discovery will soon begin, or the parties must begin to prepare for trial.
  6. The case involves multiple parties, and they are having difficulties putting together a comprehensive settlement.
  7. Co-parties cannot agree among themselves on settlement possibilities.
  8. One party or one counsel is engaging in questionable litigation practices, such as unnecessary discovery or procedural maneuvering.
  9. Experience tells the parties or their counsel that this dispute will be settled.

Some factors that make a dispute inappropriate for mediation include:

  1. The need to establish judicial precedent.
  2. The presence of possibly fraudulent claims.
  3. The presence of one (or more) parties who are unwilling or not ready to compromise their positions or negotiate in good faith.
  4. Important or necessary parties to the dispute are not available or willing to mediate.
  5. The disputants have not completed enough investigation or discovery. This factor may delay the institution of mediation, but should not deter the disputants from seeking mediation at a later date.
  6. One party would, or believes that it would, benefit from delay of resolution to the detriment of its adversary.

Generally, mediation’s flexibility and emphasis on each party’s interest may be suited for disputes that do not require extensive fact finding. For example, a routine collection action on a consumer loan, where there is no question that the borrower is in default, might be amenable to mediation. The lender is concerned about receiving payment, while the borrower is sometimes looking for breathing room to get his or her finances in order.

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what if the dispute does not settle?

In the event that the mediator is unable to help the disputants reach a settlement, the disputants must decide what to do next. If their mediation agreement does not specify what process(es) the disputants must use if mediation fails, the disputants are, of course, free to pursue any other course of action generally available, including litigation.

Unless the disputants provide otherwise, the mediator has the authority to end the mediation session when, in his or her judgment, further efforts at seeking resolution would be fruitless.

Parties may put “teeth” in their mediation agreement by specifying the steps to be followed if mediation fails. These “fallback” processes may be designed to make settlement in mediation more appealing.

This is excerpted from ADR for Financial Institutions by Robert M. Smith (West Group, 2nd ed.1998,
1200 pp.) [Footnotes omitted]

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