Use Mediation or Arbitration Instead– Faster, Cheaper and Better
Ways to Resolve Business Disputes

RESOLUTIONS-360™
Kendall C. Reed, Esq., LL.M.

I’ll sue! This might be your first thought when faced with a significant business dispute. However, I suggest you think twice before doing so. It could be faster, cheaper, and better to mediate or arbitrate.

Disputes arise in the ordinary course of business; this is a given and it happens despite our best efforts to the contrary. Fortunately, most business disputes are successfully handled by simply talking things out. As we all know, however, this does not always work, and when it doesn’t, lawyers are often called in. When the initial skirmishes between the lawyers don’t solve the problem, litigation is often the inevitable next step. It is important to note that this sequence is by its very nature escalatory and involves increasing cost, loss of control by the parties themselves, and perhaps worst of all, a threat to valuable business relationships.

Is there a better way? I believe there is, and it is to use mediation or arbitration.

What is mediation? Mediation is a process whereby a third party helps those in conflict to find their own solutions. Such a third party can bring many useful attributes and skills to bear on a problem. A mediator is neutral to the dispute. He or she is not blinded by partisan biases, and as such, can better see the reality behind the dispute. People embroiled in a dispute can be remarkably unrealistic in their perceptions of their situation, and skewed perceptions generally lead to foolish actions. A mediator can help the parties see reality.

A mediator can provide a means for people to back down from extreme positions. Have you ever noticed that people in the heat of a dispute play one-upsmanship? This can result in the parties placing themselves out on a limb. A mediator can provide a way back by making non-partisan, sensible suggestions about possible solutions.

A mediator can act as a buffer between the parties. It is human nature that each move by one party tends to be seen as provocation for a stronger counter-move by the other. In this way, and very quickly, an emotional storm can be whipped up. As a result, people can very quickly become enemies, and sadly, this process can even lead to violence. A mediator can step between the parties and control the flow of information such that any provocative aspect is left out. This can cause emotions to cool and reason to return.

A mediator can encourage parties to engage in productive problem solving. In many disputes, emotion and one-upsmanship take over such that noting else is going on. When these issues are controlled, problem solving can begin. This is useful because the parties are usually in the best position to develop solutions. The parties are most intimate with the underlying problems and are the only people who know what will count as an acceptable solution.

One problem solving tool is worth special mention, and this tool is the identification of interest. Most of the time, people in a dispute are very clear and forceful about what they want. Unfortunately, most people don’t realize that what they say they want is, at best, only one option for getting what they really want, and this type of fixation can prevent flexibility.

Let me give you a hypothetical example of this distinction between positions and interests. Let’s say that my wife and I are talking about where to take our next vacation. I want to visit my family in Colorado. My wife, on the other hand, wants to go to the beach. These are our positions, and on the face of it there is no middle ground. However, instead of arguing back and forth about which of our positions is better, we might shift our focus to our respective underlying interests. If we do so, we might find that I want to visit my family because I want to experience family dinners and recapture a sense of closeness. We might also find that my wife wants to go to the beach so she can experience quite, sunshine, palm trees, and tropical breezes. Viewed in this way, our disagreement might not be a disagreement at all. There might be any number of ways for each of us to get what we want. One possibility might be for us to organize a joint family reunion in Hawaii. A good mediator is adept at encouraging parties to look past their positions and explore their interests.

Having said all of these good things about mediation, it is not always appropriate. Some disputes require a decision. When this is the case, litigation can be appropriate because this is the essence of litigation – a judge or jury decides the matter. At the same time, this benefit comes at the cost of the negatives I mentioned above, such as cost, loss of control, lawyers, etc. Fortunately, even when a third party must decide a dispute, litigation is not the only option. You can use arbitration instead.

What is arbitration? Arbitration is a process whereby a private third party makes a binding decision, but all other aspects of the process are within the control of the parties. The parties are free to choose an arbitrator who knows the subject matter of the dispute or the industry in which the parties work. A knowledgeable person is less likely to be fooled by one side or the other. The parties are free to set the date for an arbitration hearing, rather than waiting many months or years in the court system. Nothing prevents the parties from having a hearing a week after a dispute arises, which can be extremely useful in the context of an ongoing relationship and where a fast decision is necessary. This is a process used today in the construction industry to great effect. The parties are free not to use lawyers, which can result in a considerable savings.

Arbitration can cause bad feelings, just like litigation, but in arbitration this can be minimized. A quick, inexpensive, and fair decision between parties who have an honest disagreement can allow everyone to move on with minimum damage to their working relationship.

So, the next time you think – I’ll sue! – I urge you to follow that thought with – but let me first consider mediation or arbitration.