Alternative Dispute Resolution

INTRODUCTION

          Over the course of the last few years, it is increasingly common for parties in a civil dispute to use mediation and arbitration as means of alternative dispute resolution (“ADR”) as an alternative to conventional litigation in State and Federal Courts.  Although ADR normally saves litigation costs and allows for a speedier resolution there are unique issues that arise with increasing frequency that counsel and litigants should consider before agreeing to release claims and settle a dispute.  One particular issue comes up with increasing frequency is created when after a successful mediation the parties enter into a settlement agreement calling for the mediator to act as arbitrator in the event of a dispute concerning the terms of the settlement. This may seem well-advised at the conclusion of a successful mediation as the parties normally have grown to trust and respect the mediator and both sides presume that the knowledge gained during a mediation will simplify a subsequent arbitration with the mediator now sitting as a finder of fact as an arbitrator. 

MEDIATOR AS ARBITRATOR

          Before considering what seems like an efficient common-sense approach, both sides and their counsel should carefully consider the ramifications of this decision, and the limitations created when a voluntary consensual process such as mediation morphs into a binding non-appealable arbitration proceeding.  Although most mediators offer arbitration as another service, the skill sets required are vastly different as are the processes. These are some of the considerations litigants should be apprised of before making the decision to identify your mediator as an arbitrator in their settlement agreement.

Advantages

1. Familiarity with the Case:

• Continuity: A mediator who has already facilitated discussions between parties will have a deep understanding of the issues, interests, and dynamics involved. This continuity can lead to more informed and contextually appropriate decisions.

• Efficiency: The mediator’s prior involvement can expedite the arbitration process, as they are already familiar with the case details, reducing the time needed to get up to speed.

2. Cost-Effectiveness:

• Reduced Costs: Using the same individual for both mediation and arbitration can lower costs associated with hiring a separate arbitrator and reduce administrative expenses.

• Streamlined Process: The transition from mediation to arbitration can be smoother and quicker, potentially saving on legal fees and other related costs.

3. Consistency in Decision-Making:

• Aligned Objectives: The mediator-turned-arbitrator is likely to maintain consistency in the interpretation and application of the settlement agreement, as they have been involved from the outset.

• Trust and Rapport: Parties may have already built a level of trust and rapport with the mediator, which can facilitate a more amicable arbitration process.

Disadvantages

1. Perceived Bias:

• Impartiality Concerns: There may be concerns about the mediator’s impartiality if they transition to the role of arbitrator, especially if one party feels the mediator favored the other during mediation.

• Conflict of Interest: The dual role might create a conflict of interest, as the mediator’s prior knowledge and interactions could influence their arbitration decisions.

2. Role Confusion:

• Different Skill Sets: Mediation and arbitration require different approaches and skill sets. Mediators facilitate negotiation and compromise, while arbitrators make binding decisions. The shift in roles might be challenging for some professionals.

• Expectations Management: Parties might have different expectations from a mediator compared to an arbitrator, leading to potential dissatisfaction with the arbitration process.

3. Legal and Ethical Considerations:

• Regulatory Compliance: There may be legal and ethical guidelines that restrict or complicate the transition from mediator to arbitrator. Ensuring compliance with these regulations is crucial.

• Confidentiality Issues: Information disclosed during mediation is typically confidential. Using the same individual as an arbitrator might raise concerns about the appropriate use of this confidential information.

4.     Actual Undisclosed Bias

·        Due to the conduct of the mediation and the personalities of the participants one should consider to what extent things that are done or said during a mediation process may impact the mediator’s subjective impressions. Even if a mediator understands their role may expand or change in an arbitration phase of ADR, mediation presentations by skillful advocates may impact his or her ability to objectively consider evidence presented at arbitration.  As a fact finder, an arbitrator is expected to advocate for or find the truth whereas a mediator advocates for resolution, a process that may or may not be facilitated by factual determinations.

CONCLUSION

While appointing a mediator as an arbitrator in settlement agreement offers several benefits, including familiarity with the case, cost-effectiveness, and consistency, it also presents challenges such as perceived bias, role confusion, and legal or ethical considerations and even actual bias as a carryover from the mediation process.. Careful evaluation of these factors is essential to determine the most suitable approach for resolving your particular dispute.