Alternative dispute resolution

Can we talk?

By
From the March 2014 issue of Columbus CEO

Thinking of suing that firm that did you wrong as a customer or that vendor for poor quality merchandise?

Try mediation or arbitration instead. The two methods are among remedies collectively known as alternative dispute resolution (ADR). Business owners who turn to ADR save time, money and maybe the business relationship that’s in question.

“ADR is a cost containment mechanism. Cases move faster and that saves money,” says Bill Nolan, managing partner at Barnes & Thornburg.

Going to court can be an expensive and lengthy way to solve disputes, so it’s a good idea to consider ADR early on to help control legal costs.”

Business owners can consider several ADR methods. “We don’t see them as alternatives to litigation, but rather as a continuum. Direct negotiation between parties is on one end and courtroom litigation is on the other. The further you go into the continuum, the greater the involvement of a third party such as a mediator, arbitrator or judge,” says Jacqueline Hagerott, manager of the Ohio Supreme Court’s Dispute Resolution Section, which helps local courts across the state build dispute resolution programs.

Legal experts explain why staying out of the courtroom likely is a better way to resolve business disputes.

ADR scenarios

It’s common for today’s commercial contracts to include language that waives the right to trial. “Lawyers are increasingly adding mediation or arbitration clauses in the contracts they write. Both are private and confidential, unlike court proceedings. A lot of business people like that,” Nolan says.

“Business contracts can have a sequence of how disputes are resolved. It starts with a good faith effort to work it out between the parties using mediation. If that fails, then you can move to arbitration or court,” says Steve Chappelear, member at Frost Brown Todd and mediator.

Just about any dispute can be successfully mediated. “The exceptions I see are when a very important question of law is involved. You’d want a judge to determine how the law applies so the proper legal precedent is set. And there are some cases where there’s just so much baggage and emotion that it has to go to court. That happens more often with family disputes than with businesses,” says Chappelear.

The Franklin County Municipal Court’s Civil Section offers mediation. “After a case is filed, judges and magistrates can refer it to mediation,” says Eileen Pruett, manager of the small claims division and dispute resolution programs. In 2012, Franklin County Municipal Court conducted 1,020 mediation cases, with 895 of them settling.

Unlike Municipal Court, Common Pleas Court does not offer mediation services directly to the public. “Judges refer cases for mediation to magistrates within the court,” says Stacy Worthington, court support services director. “Mediation occurs in damage hearings quite a bit.”

Common Pleas arbitration cases also are referred within the court by judges’ staff attorneys, Worthington says.

So how does a business owner know where to file?

Municipal Court handles claims up to $15,000. Common Pleas Court arbitrates cases up to $50,000.

“Common Pleas Court doesn’t have a floor for the claims it hears, so there’s concurrency between the two courts. If a business has a $2,000 dispute, it can file in either Municipal or Common Pleas. They have a choice,” Chappelear says.

When a case is unlikely to settle, Chappelear says he usually chooses Common Pleas Court. “The odds of Municipal Court hearing civil trials are very low. A trial date might be set six months from now, but there’s a great likelihood it will be continued if they’re really busy that day, Chappelear says.

The parties pay for the services of ADR professionals. “People don’t directly pay a judge or jury, so clients are surprised that they’re responsible for their mediator or arbitrator. It’s usually split equally between the two sides,” says Jeffrey Fanger, managing member of Fanger & Associates in Cleveland.

However, some courts regularly schedule mediation sessions where volunteer mediators hear cases.

Mediation

Mediation can occur before a lawsuit is filed or after. It can be initiated by a judge or magistrate, or an attorney can approach opposing counsel about it.

A mediator can be a lawyer or a judicial officer. He or she does not have authority to decide the outcome, rather the parties must mutually agree to any settlement.

“A good mediator is an objective third party who finds different ways of thinking about the dispute to bring both sides together,” says Nolan, who’s also a mediator.

“You’re ten steps ahead of the game if you choose a mediator who knows the area of law that applies to your dispute. That saves time, effort and money when compared to educating a judge or jury about the ins and outs of the situation,” Fanger says. He, too, has mediated cases.

Mediation is more informal than arbitration or a trial. It generally incorporates joint discussions with both parties, private caucuses with each side and direct negotiations between the two sides. These conversations go back and forth over a few hours, days or weeks.

“The lawyers who prepare the case for trial are in the best position to secure a reliable result in mediation. Information from key sources reveals the facts and merits, or the lack of facts and merits, in their claims and defenses,” says Frank Ray, owner and president of Frank A. Ray Co. LPA. In 2014, he began focusing solely on private mediation after nearly 40 years of litigating.

“It can be difficult to hear a mediator’s opinion. You don’t want to undercut the lawyers, but often you must be honest and ask ‘What chance do you think you really have to get summary judgment with your argument?’” Nolan says.

“Mediators can talk about how a case can go awry in court, but sometimes the first time the client hears that is from my mouth,” Ray says.

A settlement is formalized once agreement is reached. “The agreement may not be everything you wanted, but I’ve seen many cases where the best business decision is to get the dispute over with and move on,” Nolan says.

Arbitration

Arbitration is more structured than mediation. It can include preliminary hearings, information exchange and preparation, and hearings with witnesses.

“Arbitration is essentially a trial without jurors,” Ray says.

The parties can select their arbitrator on their own or through an organization such as the American Arbitration Association. “You’re not confined to using a lawyer unless that’s what the contract language calls for. You want someone who’s influential and knowledgeable in the law and industry you’re arbitrating,” Ray says.

An arbitrator’s decision, known as an award, doesn’t have to follow the law or legal precedent. It can be binding or non-binding. “Either side can go to court if they don’t like a non-binding decision, but binding decisions are not appealable through the court system,” Chappelear says.

Lisa Hooker is a freelance writer.