October 1, 2006
By: Riccardo A. DiMonte
ADR (Alternative Dispute Resolution) is an alternative to litigation. This article explores what it is, what it’s not, advantages, disadvantages, and whether you have a choice. After all, it is an alternative only if you have a choice.
The term “ADR” refers to alternatives to the state or federal trial court system, The U.S. and Illinois constitutions give citizens the right to file grievances against fellow citizens to resolve disputes between them without resort to force or violence. In federal and state governments, the judicial branch of government supplies a check and balance to the legislative and executive branches you learned about in high school.
The Court System
Some citizens find our court system somewhat daunting, time-consuming, and expensive. Document discovery, interrogatories, depositions and pre-trial conferences were intended to eliminate trial by surprise and encourage settlements. However, pre-trial discovery is expensive. Historically, arbitration, as an alternative to litigation, was created by merchants and business people who wanted a faster, better, cheaper, and simpler system of resolving business disputes. A dispute between cotton merchants was decided by another cotton merchant. A dispute between financial institutions was decided by a finance wizard.
Arbitration requires an agreement between the parties to submit their dispute to one or more arbitrators. If you sign a contract containing an arbitration clause, in the event of a dispute, your opponent may force you to arbitrate. Today, persons purchasing houses, automobiles, and consumer goods are oftentimes surprised to learn that nestled within the documents accompanying the transaction is language requiring them to submit certain disputes to arbitration. The arbitrator receives the parties’ evidence and arguments. The arbitrator makes a decision which is binding on the parties. If necessary, the courts will enforce the arbitration award.
Another form of ADR is mediation. Mediation requires an agreement between the parties to submit their dispute to a mediator. Unlike litigation or arbitration, the mediator does not make a binding decision. Instead, the mediator is a neutral party who helps the parties negotiate a settlement agreement. Like a settlement conference in litigation, a mediation is simply an attempt to negotiate settlement terms.
In deciding whether to choose arbitration or litigation, thoughtfully consider each of the appropriate factors. As a general rule, arbitration may be faster but not necessarily cheaper. A three-arbitrator panel may cost you $1,500.00 per hour. On the other hand, whatever you pay extra for the arbitration panel you may save in attorneys’ fees over a more extended two- to four-year trial delay. Is a jury trial important to you? Do you need discovery and depositions? Do you want to appeal if you lose? If you win in court, your opponent may appeal, but if you win (or lose) in arbitration, appeals are not allowed.
Alternatives to litigation are arbitration, mediation, or simple, old-fashioned negotiation. Whether to choose litigation, arbitration, or mediation requires deliberate, thoughtful decision-making. Once you go to court, you have waived your right to arbitration. Likewise, once you have chosen arbitration, you have waived your right to a jury trial, your discovery is limited, and there is no right to appeal on the merits. When you have the choice, make it thoughtfully and deliberately. Once made, the choice is final.