Appellate Judge Speaks On The Benefits Of ADR

Monday, June 25, 2012 - 15:02

Concerns about the expense and delays associated with traditional litigation have led to a national movement in state and federal judicial systems to seek alternative forms of dispute resolution (ADR). In addition to offering companies the opportunity to address disputes while avoiding litigation, ADR affords law firms and outside counsel an additional approach to providing flexible, cost-effective legal representation. Edwin H. Stern, who in 2011 retired from the Superior Court of New Jersey Appellate Division, where he had served as Presiding Judge for Administration since 2004, serves as Counsel at Gibbons P.C. in Newark and is a qualified mediator included on the roster of court-approved mediators. Following is a discussion with Mr. Stern on the various definitions and benefits of ADR.

What is the difference between mediation and arbitration?

Mediation is a process by which a third party (sometimes called a “neutral” or “mediator”) helps parties settle their own dispute. Mediation is designed to aid the parties in reaching a mutually acceptable settlement. Mediators do not act as judges and do not make decisions. Rather, they help the parties, in sessions together and separately, to focus on the issues and the strengths and weaknesses of their positions, as well as to recognize the litigation costs and risks of not reaching a resolution satisfactory to all parties before a judge decides the case as a result of litigation.

Arbitration is another form of dispute resolution as an alternative to traditional litigation in the judicial forum. However, it involves adjudication with an independent decision maker. The parties have no control over the disposition or resolution of the matter, as they do in mediation; an individual or panel of individuals, generally expert in the area related to the dispute, make the decision. And they do so in a more formal proceeding with the presentation of evidence and rules governing the proceedings. Formal opinions with the decision are usually required. Commercial contracts frequently include provisions that require resolution of disputes by arbitrators selected as provided in the agreement. Unlike mediation, where the parties control the disposition, arbitration requires the arbitrator or arbitrators to make the decision, which is usually binding unless vacated by a court of law for limited reasons, including fraud or because the nature of the arbitration exceeded the scope of the parties’ agreement.

Under what circumstances would one of these ADR solutions be preferable over the other?

Complex contract disputes, such as construction, employment, or commercial contract disputes, are often subject to arbitration. Arbitration is more likely to involve commercial transactions that have arbitration requirements in the governing contracts and that primarily involve financial issues and remedies. In other words, arbitration often flows from an agreement to arbitrate that was part of the original transaction itself, with that transaction having a significant financial component. Also, arbitration is almost like a trial, so more complex disputes (such as contract disputes) often require more of a trial-like setting and cost more than mediation.

Mediation may be preferable when, for example, the higher costs associated with arbitration do not make financial sense given the nature of the dispute or amount in dispute. However, employment disputes that involve claims of discrimination, for instance, can be successfully mediated because the remedy sought is often more than monetary damages.

Also, mediation is a good solution when a dispute falls under a fee-shifting statute, where an attorney collects fees as part of the litigation process if his or her client prevails, or there is a risk of the attorney not collecting fees at all. Mediation avoids the costs of discovery and the preparation and pre-hearing time required in an arbitration. Mediation is more informal and calls upon the parties themselves to recognize the ultimate goal of agreeing. That is why, for example, mediation is encouraged in the family law arena.

That is not to say that mediation cannot be used in very complex disputes with large financial claims at issue. It is, and very successfully. Mediation can also take place at any stage of a litigated matter, including right up to trial. However, the earlier the process is used, the greater the potential savings in legal fees and transactional costs related to experts, depositions, e-discovery and the like.

Why would a party choose mediation or arbitration over litigation?

The benefits of mediation provide assurance of a result to the parties without the risks of an uncontrollable and unsatisfactory result in court. Private mediation permits the dispute resolution process to go forward on the parties’ own schedule in comfortable surroundings before a mediator of the parties’ own selection. Stated differently, mediation permits the parties to control their own dispute resolution and make their own determinations premised on the belief that, with the proper guidance, the parties can dispose of a dispute, before or after a complaint is filed in court, without the risks of litigation before a judge the parties do not select.

Like mediation, arbitration is an alternative to litigation in court, because the arbitration agreement provides a process by which the parties can select an arbitrator, the scope of the arbitration and any limitations related to the disposition. Also like mediation, the parties can usually arrange to have the arbitration proceedings conducted in comfortable surroundings at their convenience, and the matter is usually resolved far more expeditiously than in court.

One of the most important distinctions between mediation and arbitration on the one hand and litigation on the other is confidentiality. With some exceptions, courtrooms are public places that anyone, including the media, is free to observe and report on. The only persons allowed to attend a mediation or arbitration are the parties to the process, counsel and others the parties have agreed can participate. If a dispute involves highly confidential or potentially embarrassing information, then using mediation or arbitration can keep that information from becoming public.

How do you get started and proceed with a mediation or arbitration?

Before the mediation begins, I plan to ask the parties to exchange and present me with a statement of their position and goals for the mediation, and to read it. I then plan to do three things at the very outset of every mediation:

  1. Explain to the parties jointly the benefits of mediation in terms of potential expeditious resolution of disputes achieved by the parties themselves without the risk of an unexpected or unacceptable resolution and subsequent limited scope of review by a court.
  2. Review the procedure to be followed at the mediation, including the right of each party to give an opening statement (which I do not encourage, because it makes the proceeding adversarial at the outset, but which may be necessary in some cases to permit a party to “vent” or speak for therapeutic reasons), and then proceed to meet with the parties separately (in “caucuses”) to ascertain a party’s perceptions of strengths and understanding of weaknesses and to learn what is of priority or significance to the party.
  3. Emphasize the confidential nature of the proceedings to assure that nothing can be used against either party until or unless an agreement is reached, that nothing said during the process is admissible in a court of law, and that anything said in caucus will not be disclosed by me to the other party unless they give me permission to do so.

After the separate caucuses, the caucuses can continue or the parties can meet together if a joint meeting on an issue or issues would be deemed beneficial or when a specific proposal may be ripe for joint review and reaction. Everything is based on the unique facts and circumstances relating to the parties and the issues involved.

An arbitration is more formal and usually involves an opening statement of each side before evidence is presented. The arbitrator is more of a judge because he or she finds facts and makes conclusions of law, so the arbitrators may be more passive unless objections or motions are made.

How do you build a practice in this area?

To build a mediation practice, you could actually begin by taking a relevant course or two. There are two types of mediation: court ordered and private. Rule 1:40 of the Rules Governing the Courts of New Jersey indicate the educational and professional background requirements, as well as the coursework, to become eligible to handle court-appointed mediation. Mediation coursework involves 18 classroom hours and more for family court matters. You subsequently have to observe five hours of mediation; upon completion, you are eligible to be added to the roster for court-ordered mediation. If you are then selected for a mediation, you are required to put in two free hours to the mediation, one hour of preparation, and one hour into the mediation itself, which is the minimum length of time the mediation must last. After one hour, the parties may chose to stop the mediation, but if they move forward, you may charge at a rate that is usually pre-negotiated.

In a private mediation, the parties’ attorneys select a mediator they believe is right for that case and ask him or her to serve. The mediator is paid his or her standard rate unless, of course, a discount has been agreed on.

Most arbitrators are affiliated with such groups as the American Arbitration Association, a nonprofit ADR provider, or for-profit ADR providers like JAMS. These groups have certain standards the arbitrators must meet and may require their panel members to take continuing education courses in ADR practice and procedure. (Interestingly enough, my firm is currently involved in litigation centered on a dispute over a selected arbitrator’s qualifications.) Other arbitrators work independently. Many are not lawyers but rather professionals in certain fields that include engineering, construction, insurance, labor and employment.

Do others at Gibbons practice alternative dispute resolution?

Gibbons attorneys are experienced in commercial and business litigation and arbitration of all types, including employment and construction disputes. Some have gone through formal training and are included on the court roster of approved mediators who are assigned cases sent to mediation by the judiciary. Others are equally proficient in particular practice areas as well as the mediation and arbitration processes and do private mediations and arbitrations at the request of the parties. At Gibbons, I joined retired jurists John Gibbons, James Zazzali and Andrew Moore – a formidable group within the firm that has carved an exceptional niche that includes alternative dispute resolution.

What are the particular benefits of having a retired judge, like you, handle a mediation or arbitration?

The benefits of having a retired judge conduct a mediation include the fact that he or she can evaluate the possible outcome of litigation, just as trial judges try to settle litigated cases, if the matter cannot be settled in the alternative forum. In some technical cases, a non-judge expert in the particular field may be better able to identify the problems and risks related to a party’s position. On the other hand, in most cases, an experienced judge with the ability to carefully listen to the parties can add his or her perspective or evaluation of the downside and possible risks a party faces even if he or she is absolutely convinced the position being advanced is unassailable. The Appellate Division of Superior Court has a Civil Appeals Settlement Program to help save the time and cost of preparing transcripts and briefs on appeal. An appellate judge can evaluate a case, based on the reasoning of a trial court and scope of review, and assess what he or she thinks the likelihood of success would be on the appeal. In other words, mediation and arbitration can occur before litigation is commenced, during it or even after judgment while an appeal is pending, and there should be a risk-benefit analysis of the cost of litigation or further litigation against alternative forms of dispute resolution.

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