Alternative Dispute Resolution
Because of the time and cost involved with litigation, other avenues have been developed. These avenues are referred to as alternative dispute resolution ("ADR"). Two of the most common are mediation and arbitration.
Mediation is generally non-binding. Typically, both parties agree to a mediator. The mediator, both parties, and possibly the lawyers for both parties meet as a group initially. Each party or his attorney may have an opening statement to inform the mediator of his view of the situation and what he wishes to achieve. Each party then moves to a separate room. The mediator goes back and forth between the rooms offering her impressions of the case and trying to negotiate a compromise. If a compromise can be reached, it is memorialized in a binding agreement. If a compromise is not reached, the dispute continues. The mediator is generally not in a position to force an agreement on either party.
Courts may require that parties submit to mediation. For example, mediation is required in divorce cases. Although the mediation will not be binding, it gives the parties the opinion of an independent third party. This opinion may help persuade a party who is being unreasonable or may make a party realize his case may not be as strong as he thought it was, thereby encouraging settlement.
Arbitration is more formal and generally is binding. Typically, both parties agree on an arbitrator or a panel or arbitrators. Most parties will require that the arbitrator(s) be certified by the American Arbitration Association ("AAA") and that the rules of the AAA be used. Arbitrators certified by the AAA are certified in particular areas of the law. The arbitrator holds a hearing using modified rules of evidence and issues a binding ruling.
There are several advantages to using ADR. One is time. Courts have very busy dockets, and it could take months or years to have a case heard by a jury or a judge. ADR can usually be arranged much more quickly. How quickly will depend in large part on the time needed for preparation. Even though a matter may be submitted to an arbitrator rather than a jury, the attorneys will still need to gather evidence, work with witnesses, including expert witnesses if necessary, etc. The second major benefit can be cost. With arbitration, many preliminary hearings and other matters may be eliminated, reducing lawyer time and cost.
There are also disadvantages to ADR. The most serious disadvantage is the loss of a right to appeal. Unlike the ruling of a judge or jury, the decision of an arbitrator is cannot be appealed. This is not true for arbitration that is ordered by a court. Cook County, for example, has a mandatory arbitration program for certain small civil cases. The cases are heard by three Illinois attorneys who issue an "award" at the end of the proceeding. Either party can file a rejection of the award within thirty days, and the matter will then proceed to trial.
Another serious disadvantage of ADR can be the loss of a public record. Many organizations prefer arbitration because it keeps accusations and/or evidence of their wrong doing private. An arbitration is not open to the public like a trial is, and there is no public record of the proceedings. Organizations also prefer arbitration because it prevents the filing of class action lawsuits.
Depending on the situation, however, a lack of a public record may be an advantage to ADR. Although ADR is most commonly used for business disputes, it can be used for personal matters, such as family disagreements. Using arbitration, a family can resolve its disputes without airing its dirty laundry.
ADR can be a strategic choice or it can be mandatory. Many contracts contain a mandatory arbitration provision and set the rules for the arbitration, typically adopting the AAA rules. Because consumers often have little choice when signing certain contracts (think about the service agreements you "sign" when installing new software), both the AAA and state law provide come consumer protections. For example, for an AAA arbitration, the consumer filing fee is $200, while the business fee is $1,500. For very small claims, the cost of arbitration can exceed the cost of going to court. The filing fee for a small claims case in Sangamon County ranges from $91.00 - $156.00, depending on the amount of the claim.
The Illinois legislature attempted to provide protection to nursing home residents through the Health Care Arbitration Act. This act set rules and restrictions for arbitrations with nursing home residents. However, the Illinois Supreme Court determined that the act was preempted by federal law and could not be enforced.
Arbitration provisions are more and more common. There is likely one in every consumer contract you sign. There may be one in your employment agreement, a health care agreement or even a will or trust. As always, carefully review any document before signing it. If you are able to negotiate, you may wish to cross through the arbitration clause. Either way, you need to know what your options are.