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Why Use ADR

Although ADR is worth considering in most cases, there are certain cases where ADR is clearly better suited than others. The issue confronting parties, attorneys, businesses and insurance representatives is whether ADR offers some advantage over the ordinary course of negotiation, litigation, pretrial discovery and the costs, frustration and uncertainty involved in trial to resolve a case. Factors relevant to that decision are discussed herein.

Advantages of ADR:

COST SAVINGS. The primary reason why litigation is so expensive in Massachusetts is well known: pre-trial discovery and discovery-related motion practice. According to a recent study of the federal courts by the Brookings Institute, 60% of the cost of litigation is attributable solely to pre-trial discovery. Further, the cost for the personal appearance of expert witnesses at trial, generally required by the trial court’s evidentiary rules, is extremely high. ADR’s simplified procedures, which allow in many cases for the presentation of expert testimony and other documentary evidence by affidavits and written submissions, generally result in lower legal costs and accrued discovery expenses. The fees for arbitration vary from provider to provider but are a fraction of what discovery and trial in the Court system would cost parties. Please refer to MDRS fees at our website www.mdrs.com.

TIME SAVINGS. Litigation in the Courts is often delayed by the backlog of pending cases. A trial in the court system could take two years or more after suit is filed. Although most courts have improved their efficiency by reducing their case backlogs over the past years, often due to the success of ADR processes, continuing budgetary cuts have dramatically impacted the Courts and their ability to effectively handle the number of cases presently in litigation.

On the other hand, cases submitted to mediation or arbitration with a private ADR provider such as MDRS can often be scheduled for hearing within days of submission, depending on the needs and availability of the parties. Most ADR providers render final and binding arbitration decisions anywhere from 10 to 20 days from the close of the hearing.

CONVENIENCE. Unlike the scheduling of a trial by the court, with ADR the parties select a mutually convenient time and place for a hearing. Last minute postponements and delays, often resulting when a court is not ready for the case to commence as scheduled, are generally avoided by using ADR. Last minute calls by court clerks saying that the court needs you commence trial tomorrow do not occur when using ADR.

FLEXIBILITY. Using ADR, the parties can tailor a dispute resolution process that will work best for them based on each individual case, whether, for example, non-binding mediation, binding arbitration or perhaps binding high-low arbitration. Using ADR, the parties often can retain greater control over the manner in which their dispute is resolved than they would if they opted for trial in the court.

CHOICE OF NEUTRAL. Using ADR, the parties mutually select the arbitrator(s) who will decide the case, or the mediator who will assist them in resolving their dispute, having at their review detailed background materials. In the courts, the parties do not know which judge their case will be assigned to, nor what experience that judge may have in the particular field of law that their case involves. If a jury trial is requested, ordinarily the decision makers on the jury have no experience in the law or in the valuation of cases. ADR providers such as MDRS offer retired judges or experienced attorneys as neutrals who have training and experience in the particular area of law involved in each case.

PRIVACY AND FINALITY. For many parties an important advantage of ADR is the private resolution of their dispute. This is often the case where reputational interests are involved or where the parties wish to limit public access to documents, exhibits, pleadings and testimony. An ADR arbitration hearing or mediation session takes place in a private office setting and not in an open court room with spectators. A related concern of some parties may be avoiding a reported decision where an adverse precedent would encourage the filing of additional cases against the party. Another important advantage of ADR to many parties is that except in certain rare circumstances, the arbitrator’s decision is final and is not subject to appeal, which could take years, require significant further costs and result in continued uncertainty.

PRESERVING ONGOING RELATIONSHIPS. To many, no experience can be more adversarial than trial in the Court system. Prior relationships that may have existed between disputants, i.e., whether former business associates, neighbors, employers and employees, married couples, etc., seldom survive the strain of protracted litigation. In contrast, the informality of the mediation process, the mutual decision to elect mediation, the mutual selection of a mediator, and the focus of the mediator on the existing relationship often can help not only resolve the immediate dispute but also often increases the parties’ ability to resolve future disagreements in a nonadversarial manner. Even the process of binding arbitration is less likely to further damage once beneficial relationships that may have existed between parties.

RISK MANAGEMENT. ADR proceedings can be structured in a manner that controls risk by setting limits on the range of outcomes, for example, by using a high-low arbitration format. Such controls are particularly useful where there is a risk of a runaway jury or where the amount in controversy is such that a wholly adverse decision could be ruinous to one of the parties. In mediation, of course, risk is always controlled because a party is free to refuse any offer until a satisfactory one appears.

Some Disadvantages of ADR:

SPLITTING THE APPLE. Anecdotally, a criticism often made by some attorneys and insurers is a perceived tendency of arbitrators or mediators to split the differences between the parties, with arbitrators being reluctant to say “no” to a plaintiff by issuing a defendant’s verdict, or, on the other hand, being reluctant to issue a significant award in favor of plaintiff where warranted. With the development of ADR in the marketplace, both with private as well as public providers, however, these concerns have been addressed to a great extent. ADR arbitrators who show a tendency not to make tough choices based upon the evidence presented, risking the alienation of one or another party, or who have any bias for or against plaintiffs or defendants are simply not being selected for service.

LIMITED DISCOVERY. Use of ADR can result in less protracted and expensive discovery, and often results in informal free exchange of information and documents, without excessive depositions, interrogatories and document production requests often involved in the courts. However, for a party in need of information, who needs to take depositions and obtain information through discovery to prove his case, neither mediation nor arbitration at an early stage may be advantageous to them. Certain discovery may be needed for this party to properly prepare their case, before a mediation or arbitration is scheduled.

RELAXED RULES OF EVIDENCE. Some parties want the protection of formal rules of evidence imposed by the courts, for example, the inadmissibility of hearsay statements, as a further safeguard that the decision rendered is based on “clean” evidence. Most arbitration agreements relax rules of evidence, with many, for example, allowing hearsay statements and permitting the introduction of other evidence which may be prohibited in a court trial. The specific arbitration rules of the ADR provider should therefore be carefully reviewed in advance. Many arbitration rules can be modified if requested by both parties in advance of the hearing, i.e., to rule out hearsay statements, etc., so long as the modifications do not violate any applicable law.

LACK OF APPEAL RIGHTS. Parties who may be aggrieved by the decision of the arbitrator, but for rare exceptions, have no right to appeal the decision, as they may have in the court system.

LIMITED DEVELOPMENT OF THE LAW. A frequently made argument against the expansion of ADR throughout the legal system is the risk that ADR will stunt the development of law. Arbitration decisions are generally unreported and remain confidential. The common law is developed by litigation and reported decisions of the courts. Many feel that, particularly in high stakes or high profile cases, if such cases are resolved by ADR, the law will not develop with its customary vigor, and that predictability and direction for the law will be undermined.

OTHER ADVANTAGES OF LITIGATION. Some cases should go to trial, and the following are some characteristics of cases in which litigation may be needed or desirable:

  • Cases where a party has exercised bad faith and in settlement discussions may not be suitable for mediation or even arbitration.
  • Where the claim on the other side is totally without merit and there is a 100% likelihood of winning.
  • Where the delay inherent in litigation serves the business interest of the client.
  • Where the visibility of litigation may serve the goals of the client.
  • Where it is important for the client to establish a public record resulting from discovery and trial.
  • Where it is important for the client to discourage other claims and establish a tough stance on specific issues.
  • Where the client needs remedies that are available only through litigation (i.e., an injunction, attachment, or declaratory judgment).