Alternate Dispute Resolution, known as ADR, has become a frequently used tool to resolve disputes. Mediations or arbitrations are both ADR tools that now are commonly used to settle lawsuits. There are pros and cons for each type of proceeding.
What is the difference between the two? Mediations use a mediator, often a retired judge or a lawyer trained in dispute resolution, to act as a mediator to facilitate a settlement. Unless court ordered, mediations are voluntary and the outcome is not binding on the parties. The mediator has no power to mandate a resolution. It is an entirely voluntary process and it is up to the parties to decide whether or not to settle and, if so, upon what terms. Typically, the parties share the cost of the mediator, which is sometimes a flat fee by the day but usually an hourly rate.
The main advantage of a mediation is that the parties entirely control the process from the choice of a mediator, to the location of the mediation (and now whether in person or by zoom), the length of the proceeding (could be part of a day or multiple days), the information presented to the mediator, as well as the adversary, and whether or not an agreement can be reached to resolve the dispute. If no resolution is reached, then the lawsuit continues on to a trial unless the case is settled or dismissed by motion at a later date.
Arbitrations, on the other hand, are designed to produce a final outcome, which is binding on the parties. Arbitrations sometimes use one or a three arbitrator panel (again typically retired judges or lawyers trained in dispute resolution). The format of the proceeding and the number of arbitrators will depend upon whether the arbitration is required under a contract or the parties are voluntarily submitting their dispute to arbitration. Typically, the parties do share equally the cost of the arbitrators. While an arbitration can be less expensive than a trial, it is not necessarily cheaper, depending on the formality used in the arbitration proceeding and the cost of the arbitrators and any filing fees.
That the outcome is binding is both a pro and a con for using arbitration to resolve a dispute. Especially with the backed up courts due to the Covid pandemic, many court dockets are very behind in reaching trials. An arbitration may produce a quicker result than waiting for a trial date.
But, while an arbitration hearing produces finality through a binding award, unlike a trial, there is a very limited right to appeal an arbitration award. While there are many basis to appeal an unfavorable trial verdict, under New Jersey law, there is a limited basis to vacate an arbitration award (such as the award was procured by corruption, fraud, or other undue means or there was evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding.) (N.J.S.A. 2A:23B-23).
New Jersey courts do mandate arbitrations for all personal injury matters (except professional malpractice and products liability cases). Depending on the county, either one or two individuals serve as arbitrators. If two, it would be a plaintiff’s counsel and a defense counsel. If one, it could be either.
There is a limited basis to remove a personal injury lawsuit from the arbitration process, such as the case involves a novel legal issue or unusually complex factual issues. (Rule 4:21-1(c)(1)). But these types of arbitration proceedings, while mandatory to participate in, are not ultimately binding on any dissatisfied party. Any party dissatisfied with the award, within 30 days after entry, may reject the award and file a demand for a trial de novo. The court will thereafter list the matter for a trial.
Thus, while both mediations and arbitrations can be used to resolve disputes, which would be better tool to resolve your dispute? It depends on your goals and what is most important. Is it more important to control the outcome and not be bound by the proceeding? Or is it more important, and worth the risk, to reach a quick and final resolution (recognizing the limited right of appeal of an unfavorable arbitration award)?
