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The Pros and Cons of Alternative Dispute Resolution

Question: Can’t We All Just Get Along? Answer: No.


Author Max Lucado said, “Conflict is inevitable, combat is optional.” He was right. Disputes and disagreements have a way of sneaking up on even the most non-confrontational of people—good people. Now let’s suppose you’re one of those personality types that likes to get things done, even push the envelope at times. It’s what you have to do to be successful, right? Yes, but pushing hard isn’t going to lower the odds of you getting into conflict.

    

But let’s make it really interesting. Let’s toss into the mix the fact that you’re a member of (arguably) one of the most conflict-generating occupations around: construction contracting. Your odds were high enough that conflict was going to find you, but now that you add in the fact that you’re a contractor, the odds are off the charts. It’s not a matter of “if” anymore as much as “when” you’re going to find yourself mired in a business dispute, one possibly threatening lengthy litigation, layers of lawyers, hefty legal fees and high stress levels. With this in mind, don’t you think it’s a good idea to know your options?



Alternative Dispute Resolution

Well, believe it or not, all business conflicts do not have to end up in a courtroom. There are alternatives out there that can help you avoid costly litigation the next time a conflict comes around. One such alternative is a procedure known as alternative dispute resolution, and it can often provide conflict resolution that is less expensive, less time-consuming and less stressful than conventional litigation. ADR is a group of approaches used to resolve disputes outside of the traditional court system.

    

ADR methods are generally less formal, less adversarial and more flexible than courtroom proceedings, and they offer parties the opportunity to resolve their disputes in a more collaborative and customized manner. ADR can be used for virtually any type of dispute as long as both sides agree to it. The most common forms of ADR are mediation, arbitration and negotiation. You will also see additional adaptations of ADR, like settlement conferences and something known as “community dispute resolution” that are sometimes used in civil cases. For our purposes, however, we’ll be focusing only on the first three because they are more apt to show up in building contracting matters.



Mediation, Arbitration and Negotiation

Mediation is when a neutral third party, the mediator, helps to facilitate communication and negotiation between the parties to reach a mutually acceptable resolution. He’s more of a “cheerleader” to help guide the parties to come to their own solution between them. Arbitration, on the other hand, involves the same sort of neutral third party, the arbitrator, but this time the arbitrator acts like a judge and makes a binding decision after hearing all the arguments and evidence presented by the parties. This leaves us with negotiation, which is a process wherein the parties engage in direct discussions with one another to resolve their dispute.

    

Regardless of which ADR procedure you choose, the main advantage is its flexibility. Unlike courtroom litigation, which follows strict court procedures and rules, ADR methods can be tailored to suit the unique needs and circumstances of the parties involved. The parties also have more control over the process, and they can choose the neutral third party, the timing and the location of talks. This level of flexibility allows for a more collaborative and creative problem-solving approach and can often lead to more satisfactory and sustainable outcomes. Another significant advantage of ADR is its cost-effectiveness.

    

Courtroom litigation can be quite expensive, involving attorney fees, court costs and other substantial expenses. ADR, on the other hand, is generally less expensive as it typically involves fewer formal procedures and less legal expense. It also has a quicker resolution timeline, thereby saving the parties valuable time away from what contractors do best: contracting. Besides cost savings and flexibility, ADR also offer parties the opportunity to preserve personal/business relationships. Litigation can be adversarial and antagonistic and can strain relationships between parties—even parties who have known each other for years.

    

In contrast, ADR methods such as mediation and negotiation emphasize cooperation, communication and finding mutually agreeable solutions. This can help maintain or even improve relationships between parties, which is particularly important in ongoing business relationships or in cases involving family disputes where preserving relationships is often a priority.

    

But we’re not done yet. ADR can provide parties with more privacy and confidentiality. Court proceedings are generally public, and the details of a dispute may become part of the public record. ADR, on the other hand, can be conducted in a confidential and private setting, allowing parties to protect sensitive information and maintain their privacy.



Better Each Day

More and more each day, construction professionals are seeing ADR clauses included in public and private work specification manuals. This is due to a variety of reasons, not the least of which is the negative past experiences of all parties to our judicial court system where even if you win, you may still be out thousands of dollars (even hundreds of thousands of dollars) in attorney’s fees and court costs, leaving the litigant a patently hollow victory. This isn’t necessarily so with ADR.

    

One of the main attributes of ADR that is so appealing to users is its lower cost, plus the fact that you may also avoid devoting time and effort by staff to complex litigation procedures. Mind you, this isn’t to suggest that ADR is a routine process. ADR cannot be performed with no effort. While ADR is touted as informal, the parties often fail to understand that procedures are necessary to make this informality work. The one who masters the ADR process will reap the benefits. But to do this, it will help to lay the proper parameters for the ADR hearing. Some of these parameters might include the following:


  • The neutral party to be selected. If you can’t find someone locally, you can contact the American Arbitration Association, www.adr.org, which can recommend or even provide mediators or arbitrators.

  • The names of the individuals whose attendance will be required at the meeting.

  • Legal representation by the parties, if any.

  • Exchange of information by the parties (similar to “discovery” in courtroom cases but with slightly more liberal guidelines).

  • Use of experts, if any.

  • Scheduling or calendar of meetings.


A Downside to ADR?

Nothing is an absolute panacea, and I’d certainly be doing a disservice if I didn’t also examine some negative aspects of ADR. The first is the lack of formality and legal protections. Sometimes the same informality that makes ADR so appealing can also make it less than desirable to others. One of the downsides is that there may not be formal rules of evidence, cross-examination or other legal protections that are available in a court of law. This could result in a lack of fairness and due process, potentially leading to outcomes that are perceived as unjust or biased by one or both parties.

    

Another potential downside of ADR pertains to the range of legal remedies available, which may be limited compared to those available in a conventional court of law. In arbitration, for example, the arbitrator’s decision may be binding, and there may be limited opportunities for appeal or review. This means that parties may not have the same level of recourse or options for legal remedies (in layman’s terms, no appeals) if they are dissatisfied with the outcome of the ADR process. This can leave parties feeling unsatisfied or feeling that they haven’t been presented with proper recourse should the decision not go in their favor.

    

ADR may also suffer from the challenge of unequal bargaining power between the parties involved in the dispute. In some cases, one party may have more power or resources than the other (but I guess you could say the same thing about courtroom cases too), which can result in an imbalance of negotiation or decision-making power. This can lead to outcomes that may not be fair or equitable, particularly if the disadvantaged party feels pressured or coerced into accepting an unfavorable resolution. This power imbalance can be particularly pronounced in cases involving large corporations or parties with significant financial resources against so-called “little guys.”

    

Still another potential problem is that ADR processes are often confidential, meaning that the details and outcomes of the dispute resolution are not made public. While confidentiality can be seen as an advantage in certain situations, as it allows parties to protect their privacy and avoid public scrutiny, it can also have drawbacks. The lack of public transparency in ADR can make it difficult to hold parties accountable for their actions, and it may not provide the same level of accountability and scrutiny as a public court proceeding. This can result in concerns about fairness, impartiality and transparency, particularly in cases involving public interest or societal issues.

    

Next, there’s the “limited legal precedent” against ADR. Unlike court judgments, ADR decisions do not set legal precedents. This means that the decisions made in ADR processes do not establish legal principles that can guide future cases. While this can provide flexibility in tailoring solutions to individual disputes, it can also result in inconsistent outcomes and lack of clarity and continuity in legal standards. This can be particularly challenging in complex or precedent-driven areas of law where consistency and predictability are important.

    

Lastly, the enforceability of ADR decisions can also be a downside. While arbitration awards are generally enforceable, there may be challenges in enforcing decisions made through other forms of ADR, such as mediation or negotiation. If one party re-negs or fails to comply with the agreed-upon resolution, the other party may face challenges in seeking enforcement through the legal system. This can result in additional costs and delays in achieving a resolution, potentially undermining the effectiveness of the ADR procedure itself.

    

In the end, the choice on whether or not to apply the ADR philosophy to your situation is based on you, the complaint itself and the opposing party. Given that the outcomes of mediation and negotiation are not policed by a third-party enforcer as conventional courtroom cases are, it goes without saying that the players in an ADR dispute must be the type of stand-up people who will commit to and honor the outcome of the procedure. If not, or if you have legitimate concerns over the other guy’s trustworthiness, then a courtroom proceeding may be the way to go. But at least now you know there are options out there if you need them. Check them out. It may be just may be the perfect fit for you. Good luck!



S.S. Saucerman is a retired commercial construction estimator and project manager who worked for a large upper-Midwest general contractor. He is also an established freelance writer and author whose work spans more than 20 years.

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