How an Out-of-Court Settlement Process Works

Alternative Dispute Resolution (ADR) is the process for settling disputes outside a courtroom. Generally, parties choose ADR because it provides faster, more affordable, and less stressful resolutions than going through a court case does. While ADR does not apply in criminal cases, it can provide aid to individuals, groups, or businesses seeking action from another party.

Alternative Dispute Resolution can take one of four formats: negotiation, mediation, collaborative law, or arbitration. Let’s take a look at each type.

Negotiation

Usually the first attempt to solve a dispute, negotiation involves a discussion between parties or their representatives without a third-party present. Many people are familiar with negotiation because we all negotiate with spouses, partners, family members, and friends as a regular part of everyday life. ADR negotiation is built on the same principles.

Negotiation includes four basic components:

  • It is voluntary. Parties can choose to participate or not and can select any representative to speak on their behalf.
  • It is flexible. The parties involved determine what is or is not negotiable.
  • It is confidential. No one has to know the outcome unless both parties agree to reveal it.
  • It is non-adjudicative. No third party gets involved in settling the matter.

Negotiation is often a fast and inexpensive way to solve a dispute. However, when the two parties involved are of unequal power, negotiation may conclude with the stronger party having gained an unfair advantage over the weaker ones.

Collaborative Law

In a collaborative law approach, the parties involved hire attorneys to represent their interests, but the case does not go to court. Instead, each party signs a contract detailing the rules of negotiation and then proceeds to work their way through their differences. Collaborative law processes often involve non-legal professionals such as financial experts, psychologists, or social workers as part of the negotiations.

Most collaborative law disputes facilitate divorces. In general, this approach helps the two parties in a divorce proceeding better protect their emotions, their children, and their budgets when deciding to terminate their marriages.

Mediation

Mediation is one of the most popular forms of Alternative Dispute Resolution. In this form, a neutral third party called a mediator meets with each party to help them solve the conflict. Each state sets its own rules for who may serve as a mediator. But all mediators are trained professionals. Usually they are former judges or attorneys with specific backgrounds and education in mediation.

Mediators can arrange meetings between parties, offer neutral space for discussions, give advice, set guidelines, and provide the structure necessary to negotiate a settlement. They do not, however, impose solutions on the parties like a judge or jury can do.

Less formal than litigation, mediation provides a non-binding solution. Hence, parties agree to attend mediation, but they do not have to agree to any proposed solution. They may escalate the dispute to arbitration or litigation if mediation does not offer an acceptable conclusion.

Arbitration

The most formal approach to Alternative Dispute Resolution, arbitration requires the disputing parties to bring their case before an arbiter. Each side presents their case to the arbiter as they would in court, and the arbiter makes a decision the way a judge would.

Arbitration involves more rules and procedures than any other form of ADR. Unlike a court, though, these rules and procedures are not usually set by federal or state law. Instead, the disputing parties agree upon issues such as what evidence will be allowed. This would also include a timeline for the process, and how detailed the arbiter’s judgment should be.

Arbitration can involve a binding or non-binding resolution. In a binding resolution, the arbiter’s decision stands like a judge’s decision would in court. On the other hand, in a non-binding resolution, the parties are free to accept or reject the decision.

In most states, arbiters must meet certain legal and professional criteria to qualify for their jobs.

Dispute Resolution Clause

A dispute resolution clause is a clause within an agreement that determines how disputes between the two parties will be mediated. Many businesses and corporations prefer to work through arbitration or mediation instead of going to court, and consequently, they build that preference into their contracts.

The attorneys at Pabian & Russel hold extensive experience in negotiation, mediation, and dispute resolution. To learn more about how our attorneys can help you create a dispute resolution clause or solve a dispute between businesses or regarding probate, contact us today! Read more about probate litigation at Pabian & Russell.