To Mediate or Arbitrate?

How to keep a dispute from dragging you into court

What you say to a mediator is confidential. The mediator can disclose only what each party says can be shared with the other side.

Mediation can be a great way to get an objective opinion about the strength or weakness of your position or claim.

In more complicated matters taken to arbitration, three people might take on the problem: an arbitrator chosen by the claimant, one chosen by the respondent and a third chosen by the two arbitrators. The chance of a fair outcome here is high.

We do live in a most litigious society. That doesn't mean, however, one must go to court over every dispute. The following will help you decide if there's another legal path to take.

Mediation is a form of "shuttle diplomacy." The parties agree to select a mediator to see if a settlement agreement can be achieved. The mediation itself is nonbinding, the concept being that the mediator is stepping in to see if a compromise can be accomplished amicably without having to go to arbitration or litigation. The mediator is a neutral facilitator.

After agreeing to take this route, the mediator meets with both parties and then separates them. She will listen to the claimant's position, then meet alone with the respondent, going back and forth as often as needed to see if an agreement can be reached before giving her opinion on the likelihood of this.

I have found a good mediator gets good results, while a bad mediator gets you nowhere. Thus, the selection of the right mediator, or the right arbitrator, is essential to the success of the effort. Remember, mediation is nonbinding and cannot be disclosed; if matters are solved, you enter into a formal agreement for settlement, which is an enforceable contract.

Like mediation, arbitration uses an outsider who is selected by the parties. Arbitration results can be made binding or nonbinding, and unlike mediation, sophisticated rules govern the process, depending upon the organization selected. Most people are familiar with the American Arbitration Association, but other organizations provide similar services, sometimes at lower cost and less fuss. Arbitration can be expensive and is time-consuming.

The process starts with the filing of a claim with the arbitration organization, and the respondent is notified. Once an acceptable candidate is found, a scheduling conference is held. The case then proceeds and if not settled, with discovery completed, a hearing is held. While most rules of legal evidence apply, they are not strictly enforced. After the hearing, the arbitrator issues an opinion that can be enforced in a legal proceeding.

Arbitration can be undertaken only if both parties agree to it. Many contracts contain arbitration provisions, but I am not a great proponent of this at the get-go, before any dispute has come up. If a problem does arise, the parties can then agree to go to arbitration. At that time they can select the provider of the service as well as the organization whose rules will govern the proceeding.

Litigation is the lengthy and expensive last resort. Next month, we'll talk about what you need to know and how to prepare if your dispute is set to go to trial.

Jonathan T. Howe, Esq., is a senior partner of the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., specializing in meetings and hospitality law. Email questions to him at