THE ADR REVOLUTION - WILL IT WORK FOR YOU?

Many of our clients ask us about the potential benefits of "ADR" - alternative dispute resolution. Unfortunately, ADR has become a buzzword beset by myth and misunderstanding. First, you should understand the types of ADR. ADR generally falls into two categories: mediation and arbitration. Mediation is a non-binding process through which the parties to a dispute sit down with a paid professional who acts as a facilitator in the effort to bring the parties to a voluntary agreement. Normally, the parties will submit detailed documents to the mediator explaining their positions, and the mediator will go through an often lengthy process of "shuttle diplomacy" in the effort to help the parties appreciate the strengths and weaknesses of their positions and the risks of a trial. If the parties cannot reach a compromise agreement, the mediation fails and, except for the delay and the cost, the parties are none the worse for wear.

Arbitration, on the other hand, is a binding process. The arbitrator, a paid professional or group of professionals selected by the parties, listens to the evidence and hands down a decision. The case proceeds generally as would a trial before a judge, albeit somewhat more informally - opening statements, direct examination, cross examination, summations, and post-trial written submissions. The key, however, is this: the arbitrator's decision is final; there are no appeals.

The pros of ADR. Litigation in court can be a time consuming and expensive way to resolve an commercial dispute. Moreover, it often places sophisticated business and technical issues into the hands of judges who may not have expertise in the area, or lay juries who are not equipped to deal with the issues, leading to unpredictable and, sometimes, aberrational results. ADR can resolve a dispute more quickly and efficiently, and can be structured so as to place the dispute into the hands of someone who has experience and expertise in the subject matter.

The cons of ADR. If mediation works, it is much cheaper than smash mouth litigation; if it doesn't, however, it injects delay and extra cost (although, even after a failed mediation the parties have a higher level of understanding respecting the case, which can speed things along in the litigation that follows). As for arbitration, if you win, it's great; if you don't, it's not so great, in view of the finality of the process. In a trial, you have the option of presenting your case to a group of jurors and their collective wisdom or, at worst, to a single judge who can be reversed on appeal. In an arbitration, all your eggs are in one basket.

There is no simple answer to the "to ADR or not to ADR" issue. It is not a panacea. Often, cases that involve lots of parties and issues will benefit by mediation, because all of the participants will weigh the extreme cost of going forward with a trial, which will serve as a significant incentive to settle. A skilled mediator can often forge a settlement in such matters. Depending on which side of the case you are on, disputes that turn on highly technical issues a judge or jury might not understand might be better tried before an arbitrator who is qualified to understand the technicalities. In a case that is within the ken of most judges and juries, however, you might feel better getting a group decision and/or having the opportunity to appeal, just in case.

If you conclude that mediation or arbitration might work, keep in mind that you cannot compel the other side to participate unless you have so stated in an agreement executed before the dispute breaks out. And if you do so provide, there are a plethora of techniques and ADR organizations you can choose, each of which may produce different results. For example, in a high-tech case in which you want a qualified arbitrator, you want to make sure that your ADR agreement provides that the arbitrator has the requisite qualifications, or you might be stuck with the worst of both worlds - an unqualified decision maker from whom there is no appeal. You must get professional advice on the drafting and analysis of ADR provisions, since they define the rules of the game by which you will be forced to play. For instance, in some cases, your counsel will know that the other side cannot prove its case in court; the other side might submit an ADR provision that waives the normal rules of evidence. Obviously, you will not want to go along with that. There are a great many, similar variables that can affect your opportunity to prevail.

SUMMARY - Here are the key facts on ADR:

• Be aware of the ADR options. It's not a panacea, but in the right case, it can be extremely helpful in terms of saving costs and time;
• Distinguish between mediation and arbitration. Even if you are uncomfortable arbitrating a case, mediation might be a great alternative in the effort to produce a quicker, cheaper settlement, particularly in a case that will be expensive and time consuming to litigate. Assess your willingness to compromise and, if there is room to move, seriously consider a mediation alternative;
• Be extremely careful before you enter into a contract that includes an ADR provision, particularly an arbitration clause. Your adversary may be using the provision to rope you into a procedure that will not serve your interests.

Powell, Trachtman, Logan, Carrle & Lombardo, P.C. is a full service law firm with offices in suburban Philadelphia, PA, Harrisburg, PA and Cherry Hill, NJ. Powell Trachtman represents a variety of commercial enterprises, entrepreneurs and business executives in respect to their litigation, litigation avoidance planning, business formation, business transactions, estate and tax planning, and other needs. We are also approved defense counsel for numerous insurance carriers in matters pertaining to professional malpractice, products liability, employment practices, directors and officers liability, and many other fields. For more information, contact us at info@powelltrachtman.com and visit our website at www.powelltrachtman.com.

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