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The Court System

Alternative Dispute Resolution

Types of Alternative Dispute Resolution

Alternative dispute resolution is a blanket term that covers many types of actions, including mediation, arbitration, neutral evaluation, and collaborative law.

Alternative dispute resolution is a process used to solve conflicts without going through the court system. This term covers many types of actions, including mediation, arbitration, neutral evaluation, and collaborative law.

The most common form of dispute resolution is mediation, a dispute resolution method where both parties select a neutral third party, usually with expertise in the disputed area, who helps guide them toward a voluntary resolution. The mediator is not a decision maker but helps the parties reach an agreement, which may be reduced to a release and settlement contract. The parties do not have to reach a resolution. The purpose of mediation is to encourage communication between the parties. The greatest advantage of mediation is that it promotes a continuing relationship between the parties after the dispute is resolved.

In arbitration the parties present their dispute to an agreed-upon, private decision maker. An arbitration hearing is similar to a trial held before a judge, but there is no pretrial phase and most evidence rules are relaxed. The arbitrator, an independent person or group appointed to settle a dispute, usually issues a binding decision, also called an award, within 30 days of the hearing.

Arbitration differs from mediation in that there is certainty the arbitrator will arrive at a decision. A party can appeal an arbitrator's award to a trial court, but courts are reluctant to correct an arbitrator's errors because the parties chose arbitration to resolve their dispute—not the courts.

In neutral evaluation a third party reviews the evidence, listens to the parties' arguments, and evaluates the monetary value to help the parties agree upon a settlement amount. Neutral evaluation can be customized to the parties' specifications and to the dispute at issue. Unlike in arbitration, the decision maker in neutral evaluation does not render a binding decision on the case. Instead, the decision maker issues their evaluation of the parties' respective positions.

Dispute Resolution Methods

Alternative dispute resolution provides an opportunity for parties to resolve their disputes outside of court. Each method has advantages and disadvantages. Litigation is resolution of an issue in court.
Collaborative law is a dispute resolution process that is most commonly used in family law disputes such as divorces. In this process the parties try to reach a settlement agreement, or final resolution, outside of court. This method is typically more cost effective than going to court, eliminates uncertain outcomes, and promotes a cooperative relationship between the parties.

Collaborative Law for Divorce

Collaborative law is a simpler and more private method for parties to reach a divorce settlement outside of court. Once the parties reach an agreement, the settlement agreement is presented to the court for approval.

Arbitration Agreements in Business

Business leaders must understand the complications, advantages, and disadvantages of resolving conflicts through arbitration.

Parties may pursue arbitration, or a court may impose it in certain cases. A binding arbitration clause in a contract requires all or certain disputes arising out of the contract to be resolved by arbitration. Usually these clauses specify how the arbitrator will be selected, where the arbitration will be held, and what law will control. If a party files suit in violation of a binding arbitration clause, then federal and state courts must defer to arbitration.

Business leaders must make sure that binding arbitration clauses are precise because a court will enforce the clause as it is written. A court can set aside a binding arbitration agreement only if the clause is grossly unfair and one-sided or if evidence reveals that a party did not intend to be bound by the agreement. A binding arbitration clause is unconscionable and unenforceable only if it is part of an adhesion contract (one in which the consumer cannot meaningfully negotiate the terms), hides the clause in fine print, unduly favors the drafter, imposes significant costs on the consumer, or includes a confidentiality requirement.

If a court decides not to enforce part of the clause, this does not nullify the entire contract. Usually the doctrine of severability applies. Severability, in the context of contract law, means that the invalidity of one provision of a contract will not make other provisions invalid.

Arbitration agreements have many advantages. Since the method of determining the arbitrator has already been decided in the contract, both parties have confidence that the arbitrator will be impartial and fair. Arbitration is also fast. It could take months to lead up to a trial, and the trial might end after years of litigation. Arbitration limits the parties' rights to an appeal and what the court will review, which gives the arbitration process more finality. The speed of the arbitration process sometimes means it is less expensive than pursuing an action in court. Arbitration agreements also provide a method of resolving a dispute in a private and confidential setting.

Arbitration agreements have some disadvantages. If the arbitrator makes an error, courts are reluctant to correct it. The arbitrator's fee could exceed the cost of litigation. Also, the arbitrator is instructed to follow the law, but they still might decide that neither side should get everything it is seeking.