As the cost of litigation has grown and the appetite for its attendant risks declined, owners and contractors have increasingly relied upon mediation and binding arbitration to resolve disputes. One particularly unique dispute resolution format is the combination mediation/arbitration (or “med-arb”) where the same neutral serves as both mediator and, if needed, arbitrator. In the med-arb format, mediation and arbitration are scheduled concurrently so that the threat of arbitration, and its binding result, hangs over the mediation like the proverbial Sword of Damocles. The parties know that if mediation fails, arbitration immediately follows without delay.
The significant wrinkle in the med-arb approach is that the neutral mediator also serves as fact-finder and decision-maker in the event of arbitration. This is not the case in the traditional mediation/arbitration scenario where the mediator has no role in the arbitration and decision-making process. Thus, the parties know that their discussions with the mediator are confidential and will not have any influence on the arbitrator’s decision. This traditional separation between mediation and arbitration enables the mediator to encourage a level of candor from the parties that may be difficult to achieve in the med-arb format.
With the med-arb format, the parties must recognize that the mediator may learn facts about the dispute or the parties that might otherwise be inadmissible in arbitration. The mediator is expected to disregard such information in the event he or she subsequently sits as arbitrator. But human nature can make it difficult if not impossible for the mediator to erect the appropriate mental barriers and “forget” what he or she has heard. As such, parties to the mediation may withhold information harmful to their case that they might normally share with a traditional neutral mediator. Where the parties exercise such caution, the likelihood of a mediated settlement may decline.
By the same token, parties may disclose to the mediator wholly irrelevant yet harmful information about the other party in an effort sway the soon-to-be-arbitrator’s impressions of the case. In this way, the mediation may be used as a means of presenting evidence that might never have been heard.
Given this dynamic, you may be wondering about the benefits of the med-arb approach. First and foremost, is the opportunity for a quick and relatively inexpensive resolution. A recent dispute I worked on took less than nine months to fully resolve from the moment the case came through the door. Once the parties agreed to the med-arb format, it took just four months for the arbitrator to issue her decision and award. Considering the significant number of issues presented by the parties, litigation likely would have dragged on for two or more years and likely would have entailed extensive discovery. Under the circumstances, med-arb offered a tremendous opportunity to save the time, expense, and aggravation of a prolonged litigation schedule.
Second, the threat of immediate arbitration may provide the necessary incentive for the parties to approve a mediated settlement. With traditional mediation and arbitration, the arbitration hearings are often not even scheduled at the time of mediation. Thus, arbitration may seem more theoretical than real to your clients whose rights and interests will be ultimately be decided should mediation fail. Without the imminent possibility of loss at arbitration, settlement may remain out-of-reach until just prior to arbitration.
Ultimately, these benefits must be weighed against the risk of having the same person serve as mediator and arbitrator. Attorneys are well advised to consider the relative strength of their case taking into consideration all facts and circumstances that might be shared with the mediator by the opposing party. Thus, if you are concerned that your client may be cast in an unflattering light by the disclosure of otherwise inadmissible evidence during mediation, the med-arb format may not provide a benefit to your client. In contrast, if your client has a strong case and you believe there is little risk that the mediator will be swayed by irrelevant information, med-arb may offer a cost-effective alternative to litigation. Regardless, attorneys should assess the strength of their case using a holistic approach that might not normally be needed.
For further information and an interesting discussion of the merits and pitfalls of the med-arb format, the following articles are recommended. See Martin C. Weisman, Med-Arb: The Best ofBoth Worlds, Dispute ResolutionMagazine, Spring 2013, at 40; Brian A. Pappas, Med-Arb: The Best of Both Worlds May Be Too Good to Be True, Dispute Resolution Magazine, Spring 2013, at 42. Both articles and others are available at http://guides.library.harvard.edu/content.php?pid=442479&sid=4396465