Whether or not a civil lawsuit has been filed, both sides of a legal matter can use arbitration and mediation as alternative dispute resolution (ADR) tools, in an effort toward reaching a satisfactory out-of-court solution to their dispute. Arbitration and mediation can be used in almost all kinds of civil cases, including personal injury claims, contract-related matters, and business disputes. In this article, we'll discuss the key differences between arbitration and mediation.
Binding Versus Non-Binding
Let's start out by discussing perhaps the biggest difference between the two processes: arbitration is usually binding, while mediation is not. That means, if your dispute goes to arbitration, you are bound by the arbitrator’s decision. The losing party has an extremely limited right to appeal an arbitrator’s decision. In contrast, mediation is a voluntary process in which the mediator works with the parties to see if they can resolve their differences and settle the lawsuit or dispute.
Now let's take a step back and look at the bigger picture.
The Arbitration Process
Plaintiffs’ lawyers rarely use arbitration in civil cases, unless they have to (because a contract clause mandates arbitration, for example, more on this soon). This is because they want to have the prospect of a large jury verdict to use against the defense attorney and insurance company.
A plaintiff is unlikely to get a large award in arbitration (certainly not in comparison with what a jury might decide to award). This is because arbitrators are generally experienced lawyers or judges who will carefully and unemotionally assess the plaintiff’s damages, and will not typically award the plaintiff more than the circumstances reasonably call for.
There are certain types of cases in which the plaintiff is required to go to arbitration. These are usually situations in which the plaintiff is bound by a contract to submit a dispute to arbitration rather than go to court. An example is disputes over uninsured and underinsured motorist coverage. In these kinds of cases, the plaintiff is filing a claim against his/her own insurance company. Almost all motor vehicle insurance policies have a clause that requires the policyholder to submit all disputes over uninsured and underinsured motorist claims to binding arbitration.
Arbitration works more or less like a regular lawsuit, except that the parties do not submit the case to a jury, but instead to either a single arbitrator or to a panel of three arbitrators. The parties are permitted to conduct pretrial investigation (called "discovery") just like a regular lawsuit, and, if they get into a dispute over discovery issues, they can request that the arbitrator make a ruling on the issue.
And of course the other major difference between arbitration and a regular trial is that the losing side in an arbitration has only a very limited right of appeal. All states, as well as the federal government, have laws governing appeals from arbitrations, and they usually only allow appeals in cases involving corrupt arbitrators, fraud, or very serious misconduct. A claim that the arbitrator’s award was unfair usually isn’t enough to merit review of the decision. This is why plaintiffs’ lawyers generally stay away from arbitration in civil cases if they can help it.
The Mediation Process
In contrast, mediation is an entirely different ballgame. While an arbitrator decides who wins and who loses, a mediator tries to help both sides of the dispute find their way to a mutually-satisfactory settlement. The mediator, unlike an arbitrator, has no power to impose a resolution on the parties if they refuse to agree.
In terms of the timeline of a typical lawsuit, mediation is usually done after the parties have finished the discovery period and before they have started to prepare for trial. That way, both sides will know what the opponent’s case is, but will not have started to incur a lot of trial expenses.
Most courts now require the parties in most lawsuits to go to mediation. So, technically, mediation is mandatory in that the parties have to attend, but they are not required to resolve the case through mediation.
Process-wise, mediation is basically "shuttle diplomacy." The parties will begin in the same room, and each side will make a brief presentation of how it sees the evidence. Then the mediator will separate the parties and will go back and forth between the two rooms, trying to bring the parties closer together. Often the mediation is successful, and the mediator will have the parties sign an agreement acknowledging that they have settled the case.
If the mediation is not successful, the parties simply continue on with the lawsuit, and possible trial. They are certainly free to have a second mediation or to discuss settlement informally, and usually they do. But the key to mediation is that the mediator can’t force the parties to resolve the case.