MEDIATION-ARBITRATION
MED-ARB
DEFINING THE PROCESS
Med-arb is a combination of mediation and arbitration. The med-arb process
begins with the standard procedures of a basic mediation without pleadings,
discovery, subpoenas and the other formalities that are common to binding
arbitration. The mediator has the freedom that mediation allows them in being
able to talk to the parties both collectively or privately as he/she deems to be
appropriate. In mediation, the parties present their case to each other in hopes
that they can come to an agreement to settle their dispute. With the assistance
of the mediator, the parties strive to understand the positions and concerns of
the other party with the expectation that the parties can reach a settlement
that is fair and equitable to both parties. At a point where the mediator and
both of the parties feel that they have come to agreement on as many items as is
possible through the mediation process, the mediator will assist the parties in
executing and signing a Mediation Settlement Agreement to cover the issues upon
which the parties have reached agreement. If all items have been successfully
resolved, the med-arb process will come to a close. If there are any unresolved
issues after the mediation process has concluded, they would then be forwarded
on to the binding arbitration process as specified in the Med-Arb agreement. It
is interesting to note that had the parties not chosen the Med-Arb process, the
disputants would now have to utilize the lengthy and costly litigation process
to settle the unresolved items remaining after the mediation process has
concluded.
There are two recognized forms of Med-Arb. The first form utilizes the mediator
as both the mediator and the arbitrator, which allows the mediator to adjourn
the mediation and then conduct an arbitration session allowing for any
additional discovery that may not have been presented during the mediation
session or any other information that the parties would like to present to the
arbitrator to prove their case on the remaining unresolved items. In this form
of Med-Arb, it is advantageous to first write up a Mediation Settlement
Agreement on the resolved items without giving the parties any indication of how
the mediator/arbitrator is leaning on the unresolved issues. The primary reason
why the Mediation Settlement Agreement is written up prior to commencing the
arbitration is that there is always the possibility that one of the parties
might be upset with one of the binding decisions of the arbitrator or with the
arbitration process itself and they would leave the mediation/arbitration
without having signed the mediation Settlement Agreement which reflects the
settled items that were previously agreed upon by the parties. A Mediation
Settlement Agreement is a legal contract that must be signed by both parties and
is enforceable through contract law in a court of competent jurisdiction.
The second and more standard form of Med-Arb is a full mediation session
followed by a full arbitration session if the mediation session is not
successful in resolving all of the disputed issues. A mediator is pre-selected
by the parties and a separate arbitrator is either pre-selected by the parties
or the parties will wait to select an arbitrator based on the specialization
that the arbitrator will need to posses in order to understand and handle the
issues being presented to arbitration. Traditionally, in the dispute resolution
section of a contract, mediation is specified as the primary ADR process and
arbitration is specified only in the event of a mediation session where one or
more issues are unresolved. A final Mediation Settlement Agreement is executed
and signed by both parties that reflects the items which have come to a
successful resolution and are considered completely settled. Only the unresolved
items go on to binding arbitration as specified in the Med-Arb Agreement. On
larger cases or on larger construction projects, the Med-Arb process begins with
the standard mediation process and is followed by binding arbitration that may
be conducted by one arbitrator or may be conducted by a tripartite (three
person) arbitration panel.
The major advantage of Med-Arb is that the arbitration process will only be
required to handle the unresolved issues, if any, after the mediation session
has been concluded. It is widely recognized that the most expensive part of an
arbitration or litigation is the discovery process in presenting your case to
the arbitrator or judge. Many issues may be settled through mediation without
the time and expense that would be required to present them properly to an
arbitrator, judge or jury. It thus becomes far less costly to prepare for an
arbitration that involves only a few of the original disputed issues.
The success of mediation relies heavily on both parties having full confidence
in the mediator and a belief that there will be a special privacy and trust
between themselves and the mediator. In the mediation process, it is not
uncommon for a party to confide certain confidential, private or privileged
information to the mediator that they would not have disclosed to an arbitrator,
judge or jury. When Med-Arb form one is utilized, there is a possibility that
the unresolved items might have been settled during the mediation if, in fact,
the parties had completely confided in the mediator and had not held back
information on those issues. As a result, it is generally recommended to utilize
the second form of Med-Arb; having a separate mediator and a separate
arbitrator. The chance of a total settlement through the mediation process is
greatly increased if the parties have total trust and confidence in the mediator
without having to worry that information that the mediator is given may be used
against them in the issuance of an arbitration award. If cost and time are very
important and/or if the issues are not complicated; form one utilizing the same
person as both the mediator and arbitrator should be considered. (If time and
cost are really important, the Parties should look into the “Binding Mediation”
ADR process.)
Some of the Rules and Procedures of the ADR Provider allow the parties to
mutually agree to allow the mediator to go on to be the arbitrator even if the
parties had pre-selected another individual to serve as the arbitrator. Many
times the parties may not have held back on providing all of their information
to the mediator and the parties feel that the mediator can go on to issue a
neutral and unbiased arbitration award. The parties are very often impressed
with the neutrality, expertise and professionalism of the mediator. By utilizing
the same individual, the parties would save time and efforts that would be
required to bring a new arbitrator up to speed on the issues being presented to
the arbitration process, especially if there were only a small number of issues
that remained unresolved at the end of the mediation process. It would not be as
cost effective to start a new arbitration process at a later date. If the
parties decide to use the same mediator as the arbitrator, the parties will need
to execute and sign a Mediator’s Med-Arb Agreement, which stipulates, among
other issues, that the mediator may have been given confidential, private or
privileged information during the mediation and that information may be utilized
by the arbitrator in the issuance of his/her arbitration award.
If you do proceed from mediation to binding arbitration, if you do not have an
attorney, it is recommended that each party retain the services of an attorney
as most states have adopted arbitration statutes which dictate specific
procedures that need to be followed including, but not limited to: pleadings,
discovery, witnesses, depositions, the hearing and the final award as rendered
by the arbitrator. In most cases, the final arbitration award is rendered within
30 days after the end of the arbitration. Even if the same individual serves as
the mediator and arbitrator, the arbitrator will usually not issue the
arbitration award until sometime later after the arbitration hearing has been
concluded.
At the end of the Med-Arb process, the parties will have a Mediation Settlement
Agreement that will reflect the issues that were settled and agreed by the
parties during the mediation and an arbitration award that will reflect the
decisions of the arbitrator that will be final and binding on both parties.
HOW AND WHEN TO UTILIZE THE MED-ARB PROCESS
Med-Arb can be utilized in almost every case where the
parties are looking for a final and binding decision but would like the
opportunity to first discuss the issues involved in the dispute with the other
party with the understanding that some or all of the issues may be settled prior
to going into the arbitration process, with the assistance of a trained and
experienced mediator.
Although arbitration may be specified as the dispute resolution process to be
followed in settling a dispute, any two parties may agree to anything as long as
both parties are in agreement. As a result, the parties may choose to utilize
the mediation process prior to utilizing the stipulated arbitration process.
Both parties will have to execute and sign a Med-Arb Addendum in order to
legally allow the Med-Arb process to occur. If you have not specified a dispute
resolution process to settle disputes, a Med-Arb Agreement should be executed
and signed by both parties.
LEGAL ISSUES
If after the Mediation Settlement Agreement and the
Arbitration Award has been executed and are in effect and one of the parties
does not comply with the terms and conditions of the Settlement Agreement or of
the arbitration award, an attorney will need to enforce the Mediation Settlement
Agreement in a court of competent jurisdiction authorized to handle a “Breach of
Contract” case or an attorney will need to file an “Enforcement Order” with a
judge in a court of competent jurisdiction to enforce the arbitration award.
ADDITIONAL INFORMATION AND RESOURCES
Additional information including examples of Med-Arb
Addendums, Med-Agreements and other related Med-Arb documents can be found on
the Construction Dispute Resolution Services, LLC website
www.constructiondisputes-cdrs.com. Med-Arb is a recognized ADR process and is
explained in more detail in several ADR publications and books.
MED-ARB OVERVIEW AND SUMMARY
Med-Arb is a very effective process that will allow the
parties to know that at the end of the process, all issues and items that are in
dispute will be settled. If the arbitration process was used to settle all of
the disputed issues, the parties would not have the opportunity to express their
personal thoughts and views until called upon to testify at the arbitration. By
utilizing the mediation process prior to the arbitration process, the parties
are afforded the opportunity to personally express their views and concerns to
the other party in an informal discussion process under the guidance of a
trained and experienced mediator. The cost of the mediation process is far less
than the costs related to arbitration. If the disputed issues can be settled
through the mediation process, the cost for the dispute resolution process will
be far less than it would have been utilizing arbitration only or litigation. In
addition, the parties will have a greater feeling of accomplishment in that they
personally participated in the settling of their own dispute.
DEFINING THE PROCESS
Arb-Med is a combination of arbitration and mediation. The
Parties pre-select an arbitrator and a mediator. On larger cases, the parties
may select a tripartite arbitration panel consisting of three arbitrators. A
single arbitrator or tripartite arbitration panel is usually specified in the
construction contract. If Arb-Med is specified in the construction contract and
a single or tripartite panel is not specified, the Parties or their attorneys
will need to agree on whether a single arbitrator or tripartite panel is to be
utilized to conduct the arbitration portion of the Arb-Med process. Regardless
of whether a single arbitrator or a tripartite panel is utilized to conduct the
arbitration hearing, a single mediator is utilized to conduct the mediation.
The Arb-Med process begins by conducting a standard arbitration process as if
the arbitration award, issued at the end of the arbitration, is to be the final
and binding resolution to the dispute. After the arbitration hearing has been
concluded, the Parties will then meet with the pre-selected mediator who will
conduct a full mediation covering the same issues that were covered in the
arbitration. The difference in this mediation is that both parties have put
forth, during the arbitration, all of the information that they have to prove
their position as to each issue in the dispute. Having heard the other Party’s
full information on each of the issues, the Parties will now have one more
chance to settle each issue with the assistance of a trained and experienced
mediator. If a Party feels that they have proven their case and that they will
probably have the arbitrator decide in their favor, there is little likeliness
that they will come to a settlement on that issue unless the other Party comes
up to their request or at least very close. Each issue is reviewed and mediated
with the expectation that the Parties can come to a settlement after having
heard the full presentation of the other Party during the arbitration.
The arbitrator is notified, in writing, by the mediator of all of the settled
issues as a result of the mediation. The arbitrator is not provided with a copy
of the Settlement Agreement that was signed by the Parties that specifies the
details of how the settled issues will be resolved as the mediation is not part
of the arbitration process and the details of the Settlement Agreements should
in no way influence the decisions of the arbitrator. The arbitrator will then
issue an arbitration award to be utilized to settle all of the unresolved issues
remaining after the mediation has concluded. This arbitration award, along with
the Settlement Agreement that was written up to reflect the settled issues
during the mediation, will constitute the final and binding documents that will
specify how each of the disputed issues will be handled. It is common practice
for the arbitrator to issue the arbitration award within thirty days after the
closing of the arbitration hearing. In Arb-Med, the arbitrator does not issue a
final award until he/she has been notified that the mediation process has been
concluded. The arbitration award is typically issued within thirty days of that
notification of the conclusion of the mediation.
It is widely recognized that any issues that can be settled by the Parties gives
the Parties more satisfaction than through the issuance of an arbitration award
by a third party arbitrator. Parties are sometimes surprised and shocked by an
arbitration award. Even when the Parties feel that they should be the prevailing
Party in an arbitration award, the arbitrator may have seen something different
or feels differently than the Parties and will thus issue an arbitration award
that reflects his/her decision that he/she considers to be a fair and equitable
solution to the disputed issues handled by the arbitration. Although an
arbitrator with knowledge and/or experience relating to the issues should render
a more fair and equitable award than a judge or jury, the arbitrator is a human
being and is subject to the same emotions and feelings that a judge or jury may
have. Taking the ability to decide what is right or wrong away from the
arbitrator can yield a greater feeling of satisfaction by the Parties if they
can come to a mutual agreement on the handling of a disputed issue. The
mediation process following the arbitration process affords the Parties the
opportunity to settle the disputed issues with the assistance of a trained and
experienced mediator. If the mediation process settles all issues that were
submitted to arbitration, the arbitrator will not issue an award and the
Mediation Settlement Agreements shall constitute the final documentation for the
settlement of the dispute.
It is not uncommon to have the mediator attend the arbitration hearing in order
to better inform him/her of the information available concerning the issues in
the dispute. It does add to the cost of the dispute resolution process, however,
it is money well spent. Having the mediator, who should have an expertise
related to the issues being covered in the dispute, attend the arbitration, will
better prepare the mediator to handle the issues involved in the dispute.
HOW AND WHERE ARB-MED IS UTILIZED
Arb-Med is utilized mostly where the Parties, or one of the
Parties, does not have confidence in having a third party neutral, such as an
arbitrator or judge, render a final and binding decision. The Party or Parties
would prefer to control their own destiny. By going through the arbitration
process first, the Parties have the opportunity not only to see what the other
Party has to offer to defend their own position, the Parties also have the
opportunity to see the attorneys in action. A Party may feel differently about
their chances of being the “Prevailing Party” after fully observing the
arbitration hearing including the discovery, witnesses, experts and related
testimony that is offered. In addition, although the arbitrator is supposed to
remain neutral and independent, the Parties have the opportunity to see the
arbitrator in action and may get a feeling for which way the arbitrator is
leaning before he/she renders a final and binding arbitration award.
Arb-Med can be utilized by any industry that utilizes binding arbitration to
settle disputes. Through proper contract language, the Arb-Med process can be
stipulated as the mechanism that will be utilized for any dispute resolution.
Most often it is not called Med-Arb, however, arbitration is stipulated as the
first step in the dispute resolution process and mediation is specified as the
second step.
SPECIAL CONSIDERATIONS
After the arbitration has concluded, both Parties will have
the opportunity to re-evaluate their respective positions and should be more
open to settlement. Typical Arb-Med processes are very successful in the
mediation phase in settling most of the issues in dispute. The arbitrator will
only issue an arbitration award after he/she has been advised of he issues that
were settled. Typically, the arbitrator is not privileged to review the
Mediation Settlement Agreements as they were not part of the arbitration process
and in no way should influence the decision of the arbitrator.
On rare occasions, at the request of both of the Parties, the arbitrator will be
given the Mediation Settlement Agreements after he/she has written and submitted
the arbitration award so that he/she can incorporate the terms of the Settlement
Agreements into the final arbitration award so that any failure of a Party to
comply with the terms of the arbitration award will be subject to enforcement
according to the procedures afforded the arbitration award in a court of
competent jurisdiction as opposed to having to enforce the Mediation Settlement
Agreements through a Breach of Contract proceeding in a court of competent
jurisdiction.
OVERVIEW AND SUMMARY
Arb-Med is another innovative combination of two recognized ADR procedures that are designed to offer Parties to a dispute the opportunity to settle disputes according to a method that they prefer to utilize rather than going only to binding arbitration or litigation to settle disputes. Arb-Med has proven to be an effective and reliable method of dispute resolution that should be considered by all Parties who have the potential to be involved in a dispute in the future.
CDRS Mediated-Arbitration is
a new form of Alternative Dispute Resolution (ADR) that was conceived and
developed by Construction Dispute Resolution Services, LLC. CDRS is well known
for its innovative ADR programs designed to provide the construction industry
with affordable and expeditious dispute resolution processes that can be
provided by construction-knowledgeable ADR Specialists in order to arrive at a
fair and equitable settlement to a dispute.
To our knowledge, CDRS Mediated-Arbitration is a process that combines both
mediation and arbitration in a manner that has not been utilized before the
introduction of this new process. CDRS is a strong believer in the mediation
process. Arbitration offers a finality that standard mediation cannot offer and
mediation offers the opportunity for the Parties to informally discuss their
concerns and their opinions without worrying about the mediator making a
decision that they will be bound to accept. This new method allows the benefits
of both processes in one simplified form of dispute resolution.
The CDRS Mediated-Arbitration process first allows the Parties to select an
arbitrator(s) according to the CDRS Arbitration Rules and Procedures. The
Parties then select a mediator according to the CDRS Mediation Rules and
Procedures. The Parties proceed with the arbitration process up to and including
the arbitration hearing according to the CDRS Arbitration Rules and Procedures.
The pre-selected mediator is required to be in attendance at the arbitration
hearing. At the pre-arbitration conference, each Party is instructed to present
their case on each disputed item individually at the arbitration hearing. After
both Parties have concluded their presentation on an issue, the arbitrator may
suspend the hearing, with the approval of both Parties, and allow the Parties,
with the assistance of the pre-selected mediator, to try to come to a settlement
on that issue, through the mediation process. The mediation is conducted so that
the arbitrator is not present and will not be influenced by the information
shared by the Parties between themselves and/or the mediator. If that issue
and/or any prior issue are settled in the mediation session, it is written-up in
a Mediation Settlement Agreement and signed by both Parties. If there is no
settlement reached in the mediation session, the mediator will notify the
arbitrator that the mediation session has concluded and the arbitrator will
reconvene the arbitration and the Parties will continue with their presentation
of their case on each respective issue that is in dispute. After each of these
issues is presented, the arbitrator will again suspend the arbitration hearing,
with the approval of the Parties, in order to allow the mediator the opportunity
to try to have the Parties reach a settlement. If both Parties feel very
strongly that there is no way that they will be able to reach a settlement in
the mediation session, they may opt to skip the mediation process on that issue
and proceed with the arbitration. This process will continue until all issues
have been presented to the arbitrator(s) and the arbitration hearing will be
closed according to the CDRS Arbitration Rules and Procedures. At the conclusion
of the arbitration hearing, the Parties will have one last time to settle any of
the issues that were not settled during the previous mediation attempts. The
arbitrator(s) will then issue an award that will be utilized in the settlement
of all unresolved issues that have not been settled in the mediation processes
that occurred during the CDRS Mediated-Arbitration process. Because the
mediation sessions are not officially part of the arbitration process, the
arbitrator will not be given the details of the issues that have been settled
other than the arbitrator will be notified which issues have been settled
through discussions and written notification by the mediator.
It is possible that an issue may not be settled during a first attempt at
mediation but may be later settled during a subsequent mediation session as part
of a multiple-issue settlement agreement. There may be no settlement agreements
or only a few settlements reached during early mediation sessions, however, a
full mediation settlement agreement may be reached at the end of the arbitration
process. If there are no issues settled through the mediation process, the
arbitrator will issue an arbitration award to reflect all of the issues in the
dispute as if the mediations never occurred.
As mentioned above, CDRS believes in the mediation process and feels that it is
to the advantage of the Parties to reach a settlement on the disputed issues
rather than relying on the arbitrator to issue an award that is fair and
equitable to the Parties. It is a proven fact that a trained mediator is far
more effective in assisting Parties in reaching settlement agreements than
allowing the Parties to try to settle their differences by themselves. If for
some reason, none of the issues are settled during the mediation, or if the
Parties choose to not mediate during the arbitration, the only extra added
expense to the dispute resolution process will be the added hourly fees of the
mediator who will have attended the arbitration.
Med-Arb is already a recognized form of ADR. In standard med-arb, the Parties
first submit to the mediation process and settle as many issues as they can. In
Med-Arb, all disputed items that are settled through the mediation process are
written up in a Mediation Settlement Agreement which is signed by both Parties
to the mediation. Any issues that are not settled through the mediation process
are then settled through the arbitration process where an arbitrator will render
a “final award” very similar to a verdict or a decision from a judge. CDRS
Arbitration Rules allow the arbitrator to suspend the arbitration hearing if the
Parties, after hearing the evidence and case as submitted by the opposing Party,
feel that they might be able to settle their dispute through discussions by
themselves without the assistance of a mediator. This process can certainly be
successful; however, CDRS believes that an experienced mediator can greatly
assist the Parties in resolving their dispute, rather than leaving the Parties
to try to settle their own dispute. In a standard Med-Arb process, the mediation
session is usually held weeks before the arbitration process and the mediation
is conducted without the benefit of having both Parties having seen the full
discovery that is presented in an arbitration hearing. The Parties also have the
opportunity to see the arbitrator in his/her capacity and might have a feeling
of which way the arbitrator is leaning on the issues discussed which may make
them more open to discussing and settling the issue rather than leaving it in
the hands of the arbitrator. The CDRS Mediated-Arbitration allows the Parties
and the mediator to become familiar with the complete discovery surrounding each
issue before they attempt to settle the disputed issue through the mediation
process.
Arb-Med, another ADR process, only allows for mediation after the entire
arbitration is completed, very often several days, weeks or months after the
arbitration hearing began. It is difficult to remember all of the testimony and
other discovery that was presented during the early stages of the arbitration.
CDRS Mediated-Arbitration offers the opportunity to mediate and settle issues
while the issues are still fresh in the minds of the Parties.
Mediated-Arbitration does have some limitations. It primarily can be utilized
only when there are separate and definable issues in dispute. Construction
disputes usually have multiple definable issues and offer the opportunity for a
CDRS Mediated-Arbitration to provide a mechanism for the complete settlement of
all issues. The Parties and their attorneys, if applicable, should review the
case with a trained ADR provider to ascertain as to whether the CDRS
Mediated-Arbitration process is the best ADR process to use to settle the
dispute.
Please feel free to contact me if you have any unanswered questions on mediation, med-arb or arbitration.