Dan Murphy of Murphy Law Group explains the differences between mediation, arbitration, and litigation—how each one handles legal complaints, how you might enter into arbitration, and how judgements are reached in each.
John: Hi, I’m John Maher. I’m here today with Dan Murphy of the Murphy Law Group in North Andover and Boston Massachusetts. Today we’re talking about the differences between mediation, arbitration, and litigation. Welcome Dan.
Dan: Thanks for me having me, John.
John: Sure. Dan how are mediation, arbitration, and litigation different?
Dan: Mediation and arbitration are both forms of alternative dispute resolution mechanisms. Both of them are alternatives to what you might know as a simple court case in terms of a case that that takes the form of a complaint being filed in one of the public courthouses–whether it would be on the state level, at the district court level, superior court level, or in the federal courthouse.
John: Okay. Let’s talk then about mediation and arbitration. How are do those differ?
Dan: They differ significantly. Arbitration is in a lot of respects nothing other than hiring a private judge or panel of judges to make decisions in a case. Arbitration is not an attempt by the parties to seek common ground to resolve a case. It is really bringing your case before either a panel or a single arbiter, similar to the way in which you would bring it before a judge or a jury and hiring those people to make a determination.
Oftentimes, arbitrations are agreed to as a mechanism to resolve a case prior to parties having the dispute. In other words, if the dispute is a commercial dispute and the parties were contractually bound prior to the dispute arising and the contract has a mandatory arbitration clause that would be the manner by which the parties would resolve the case as opposed to litigation.
It does not mean that the parties could not also utilize mediation to resolve the case. It would be simply that they contractually agreed that the case would be resolved from a finder of fact perspective by arbitrators versus a judge or jury.
John: Why would two parties want to go through an arbitration rather than do a litigation and have that being in a court of law that determines this? Is this less costly?
Dan: The thinking is efficiency. But the reality is that is not always the case. Sometimes arbitrations take on a life of their own just the way litigations do. But the thinking is efficiency. The thinking is, well, you’re subjecting the parties to arbitration and you’re subjecting your parties to a third-party making a decision. There is a little more control over the process in arbitration versus litigation.
In litigation there are civil rules of litigation that allow you of periods of time during which to conduct a discovery–whether it’d be written discovery followed by a formal deposition practice. And they can be extremely lengthy in time. But that just as an example, in arbitration the arbitrator may well decide that each of the parties has 60 days to exchange a written discovery, the tracking order in a typical litigation case in court might be nine months to get that done.
The arbitrators could decide, as an example, that each side is limited to taking three depositions. In standard litigation in court under the rules of civil procedure there is no limitation on the amount of depositions that one party could take.
John: You mentioned that there can be like an arbitration clause in a contract that would result–if there’s a dispute that you go to arbitration. Can you have a mediation clause and an arbitration clause in the same contract? Then when would you do one versus the other?
Dan: You absolutely can. Typically if you have a mediation clause in a contract, it would precede the triggering of an arbitration. The parties would be committed to attempting to resolve the case in the mediation context prior to moving to the next step which is arbitration. Even once you have entered the step of arbitration you can always move back into mediation again, if the parties believe that it would be helpful to have a third-party attempt to bring each of the parties together, to find common ground.
John: Is there ever a point then at which you can go from an arbitration to litigation? Or just the fact that you’re deciding to use arbitration as a method of resolving the dispute mean that it ends there.
Dan: Typically once you’ve committed to arbitration, you’re committed to arbitration; it’s outside of litigation. There are always exceptions to the rule: if some type of a conflict came up with an arbitrator along the road or if something were added to the dispute that might for some reason to take it out of arbitration.
But typically once you’ve committed to arbitration you’re committed to arbitration. Once you’re committed to litigation in the courts you are committed to litigation in the courts. But in both instances that does not mean that you could not fall back to mediation at any given time.
John: When do you think that using litigation might be a more appropriate method of resolving a dispute?
Dan: Well, litigation is the standard way to resolve a dispute. It takes the parties agreeing, whether it would be before entering into a contract or before filing a lawsuit that arbitration would be an alternative method that they would look to. But the standard method would be litigation.
Sometimes there’s a dialogue between the parties before a litigation starts. Other times there is no dialogue between the parties before a litigation starts. Litigation is the standard approach with arbitration being an alternative approach–one that you may be bound to because you’ve done so contractually before the dispute ever arises or one that the parties agreed to procedurally as a way in which to approach the dispute.
John: Okay. Any final thoughts on mediation, arbitration, and litigation and how they work to resolve disputes between parties.
Dan: Well, mediation is always appropriate. As I said the idea of a mediation is to bring smart people together on each side of a case with a third party who can evaluate the case properly, and can talk to each side about the strengths and weaknesses of the case to make each side recognize that if they go forward and lose control over the case, some other party being a jury or a judge or an arbitrator is going to make a decision.
They’ve got no control over the outcome of that decision and that they’re much better off trying to find a way to be satisfied with a resolution of the case in the context to the mediation than they are completely losing control and giving it to a third party whether it be an arbiter or judge or jury.
John: Alright that’s great information Dan. Thanks again for speaking with me today.
Dan: Thank you John.
John: For more information about the Murphy Law Group, visit the firm’s website at mlgllc.com or call 978-686-3200.
Dan Murphy of the Murphy Law Group answers your questions about mediation. What is mediation? Why do disputing parties seek it out? How can it solve legal matters without going to trial?
John Maher: Hi, I’m John Maher. I’m here today with Dan Murphy of the Murphy Law Group in North Andover and Boston, Massachusetts. Today we’re talking about mediation. Welcome, Dan.
Dan Murphy: Thanks for having me, John.
John: Sure. Dan, can you define mediation for me?
Dan: Mediation is really nothing other than structured settlement negotiation.
John: Okay. How does that differ from arbitration?
Dan: Mediation means that there are no decisions being made by the mediator. The mediator is simply acting as a person who can attempt to bring each side together by evaluating the case, evaluating the strengths and weaknesses of each of the respective parties’ positions, and advising each party as to those strengths and weaknesses, and trying to pull each side a little more toward the center to have a meeting of the minds to resolve the outstanding dispute.
John: How does a matter get to mediation?
Dan: A matter can get to mediation in any number of ways. In the business contracts that we formulate now, we generally put in a mandatory mediation clause so that if a party has a mandatory mediation clause in a contract, for example, that is in dispute, before such time as they can file a lawsuit, they have to subject themselves to mediation and make a good faith attempt to resolve the case.
John: That might prevent a matter from having to go all the way to trial?
Dan: Certainly. In that example, it would require the parties to sit down and to evaluate their positions before they went into a full-fledged litigation.
John: When is mediation appropriate?
Dan: Mediation can be appropriate at any time during a dispute resolution process, whether it be a pre-litigation, or in the middle of litigation, or even on the eve of trial. Mediation can always be an effective way to resolve a case. It’s a tool that more and more practitioners are using because it’s an effective way to resolve a case far more efficiently than going through the entire process of litigation.
Even when you’re in the middle of a litigation, you’re in the middle of trial, there are cases that are mediated to resolution at that time because even in the middle of trial, you’re not at the end. Even when you get to a verdict, there’s an appeal and the process goes on and on. Mediation, the idea is to find a resolution that maybe neither party is completely happy with but both parties are satisfied with.
John: Okay. Do you find that mediation is more successful or less successful, at the beginning or at the end of a procedure?
Dan: No. There’s no absolutes with respect to mediation, it is from an efficiency perspective. If the parties can fully evaluate their cases early on and have developed their respective positions to a satisfactory degree so that they can bring their matter to a mediator, a mediator can evaluate where the case is and where it’s likely to go. The earlier you get to mediation, the better it is because the earlier you get to mediation the more efficient then it is for your client in terms of finding a resolution to the case.
John: Are there times when mediation would not be appropriate for two parties who are in dispute?
Dan: The time when it’s inappropriate is really when both sides are just completely entrenched in their positions and there is no moving off their position. Often times you hear that principle is an expensive virtue, and that’s typically where parties get stuck. It is that one party says, “No, I’m not moving on grounds of principle,” and the other side may say the same, rather than putting themselves in the shoes of the opposing party and trying to see it from their perspective. Also, looking at it from the likelihood of success from your own perspective and recognizing that there is always a chance that if the case is going to trial, there’s a chance that you’re going to lose. There’s no case that’s a 100%.
John: Who acts as a mediator, and how do you pick one?
Dan: There are various people who are very effective mediators. There are some that are more specialized in one area than another. As an example, there some who specialize in personal injury, there are some that specialize in business disputes. There are former judges out there who spent time, as an example, in the business courts, who may be particularly adept at dealing with a given issue. There are all kinds of people who are very effective that work very hard at resolving cases and can bring parties toward resolution.
John: Does a mediator need to be an attorney who obviously has a handle on the law, and where the case might go, and have a really deep understanding of the laws involved in that dispute?
Dan: I have never used anyone but an attorney. Well, lay people may be able to evaluate disputes that are fact-driven only, without looking very much toward the law. I can’t think of very many situations involving parties who have a dispute where it would be appropriate to bring somebody other than an attorney. You need someone who is going to be able to talk about not only the likelihood of success but the process involved, the cost to each side–someone who’s been in the trenches before, who understands all that, and who can speak to those specifics. It’s critical that they have the appropriate training to be able to play that role.
John: Okay. Can you walk me through the steps of a mediation, what does it look like?
Dan: There are no real steps to a mediation. Let me start by saying that before going to mediation, both sides have to be satisfied that they understand their positions pretty well and that they understand the other side’s positions pretty well. There should be some type of an exchange whether it be a demand letter and a response to a demand letter, or further down the road whether it be in the middle of discovery or just prior to trial.
The parties get to a point where they say, “Okay, let’s see if we can find a way to resolve it.” It may be that they have attempted to resolve the case on their own and that there’s still a gap that they need to close, or it might be that there’s this general sense that both sides want to employ a professional third-party to help them see whether or not they can find common ground and then you go to a day of mediation. Prior to that, you pick a mediator who’s appropriate. Generally speaking, if the attorney on each side throws out a handful of names, there’s usually a common name or a common business that conducts mediations that can be agreed upon.
You go to mediation, you go that day, all of the parties gather in a single conference room. The mediator starts the day by introducing the parties to the mediation process, by telling them that the idea is to seek a resolution to the case that day, by telling them that everything during the mediation that is confidential will be kept confidential, that it’s a confidential process, that if there are offers made during that mediation, those offers are completely confidential and are not to be discussed outside of the mediation.
Then the mediator will ask each side to lay out what their position is, and there is generally a brief time where the lawyers on each side will lay out in a succinct form their positions on the case, and the mediator will ask whether or not there’s been any offers or responses to offers. Once the parties respond to that question, the mediator will take one party out of the room and from there on the mediator will work with each of the parties independently to see if they can work to bridge the gaps to reach a resolution of the case.
John: They might go to one party and come to an agreement about what they want to see as the resolution to the case and what they are willing to give in order to get that resolution and they’re going to take that over to the other party and find out what it is that they want and try to match those two things up together?
Dan: Yes, the idea is to bridge the gap. The idea is if the mediator goes into one room and talks to the party about their position and the mediator has evaluated the case and said, “You know what, I understand your position entirely but one of the things you may have to do is to consider not only A but consider B, because B could happen and if B happens, then the result is going to be different than the absolute outcome that you’re looking for. You have to be willing to move off of A toward B,” and on the other end, you’re talking to the parties on the other end, and you’re doing the same thing. You’re trying to get them to move off of their position by recognizing that while they come with an absolute position, that they have to recognize that may not be where the case ultimately resolves by a finer fact and that they need to take into account the possibilities of another outcome when evaluating the resolution of the case because there’s one thing that’s certain, and that is in a mediation context, the parties have control over the outcome. That’s not the case at trial.
At the trial, you have a verdict, and the verdict goes one way or the other, and the parties have no role in what occurs in that jury room. Whereas in mediation, you’ve got complete control over the day, you can be as creative as you want, you can do all that is necessary to explore, you can ask the mediator, ask questions of the other side. There’re any number of things, but you’ve remained in control of your case during that mediation.
John: What is the ultimate result of a mediation? You end up with a resolution of some kind?
Dan: That’s the idea. I would say, over 90% of the cases that I’ve been involved in, that I’ve taken to mediation have resolved. It’s rare that a case does not resolve when you have a good mediator, and you have effective counsel on both sides because just going to mediation suggests that the parties are ready to look toward resolving the case, rather than just throwing money at litigation and taking chances, because litigation is a gamble.
At the end of the day, you’re gambling with people who have no investment in the outcome of your case. You’ve got everything involved in the investment of the outcome of your case, whether it’d be your business or it be your health that has been affected by why you’re in the dispute in the first place. You’re there trying to reach a resolution and find the best outcome you can have while being in control of that outcome because once it goes to a jury, you’re no longer in control of anything.
John: Explain again the resolution–is it binding? How do the parties then follow that resolution after the end of the mediation?
Dan: Yes. When you say, “is it binding?” it’s binding because the parties have come to an agreement. At the end of the day, a mediator will have you sign a term sheet. The term sheet will contain the necessary terms to show that there’s been a meeting of the minds and that the case has been resolved.
John: Kind of like a contract that you’d be signing?
Dan: Yes. It will typically say, that this will be followed up by a more formal contract, but this is what the parties have agreed to in the mediation. Again, 99% of the time that term sheet will carry over, and the case will be resolved.
John: All right. That’s really great information, Dan. Thanks again for speaking with me today.
Dan: Thank you, John.
John: For more information about the Murphy Law Group, visit the firm’s website at mlgllc.com or call 978-686-3200.