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Matt Wertheim logo

Contact Matt at 415-775-8950
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Mediation Versus Arbitration

What is the difference?

Arbitration is no different than going to court. The same rules of evidence and civil procedure apply. Instead of the matter being heard at a courthouse with a judge, the matter is decided by a retired judge, lawyer, or private individual (non-lawyer) who as the arbitrator acts as the decider of the dispute. Many professionals such as doctors, stock brokers, and large corporations require that disputes be resolved by arbitration and not court. By requiring arbitration, any emotional appeal a case might have with a jury is lost, and often the cost of resolving the dispute is less by arbitrating. Often it is substantially less expensive (provided the arbitrator's fees are not excessive). The type of arbitration might also dictate whether the arbitrator's fees are split amongst the agreements also determine who handles/oversees the arbitration. The two (2) biggest providers in the Bay Area are The American Arbitration Association and JAMS (Judicial Arbitration and Mediation Services).

Mediation is when the parties get together (usually with their lawyers) and try and reach a mutually acceptable resolution. Often mediation is required before parties can either arbitrate or file an action in a state or federal court. For instance, in a standard Residential Sale/Purchase Agreement, the parties have the option of requiring mediation first. Many arbitration clauses include a provision that neither side can recover attorney's fees at arbitration unless they have first tried to mediate.

What are some of the important things to know and consider about mediation?

Having the appropriate attitude before attending the mediation:

The informality of a mediation - it is not a trial as the mediator has no power to decide anything. The mediator's role is to facilitate negotiations and resolution. There is the "give" and "take" of the process and a participant should not be discouraged by this bargaining process nor be offended by it.

Understand confidentiality and what that means - participants should understand that what takes place at the mediation is confidential. Nothing which is said or done during a mediation can be brought up in court or at arbitration during the trial of the clients' case. The clients will not be prejudiced by the process.

Get down to business - It is the participants' decision whether to settle, and hopefully at the mediation the parties will have all the necessary information to make an informed decision about whether or not to settle.

A chance for an objective view of the case - The mediation is a chance to get an objective view of the case so everyone should listen carefully to what the mediator says. The mediator will often comment on the issues and give his or her views on each side's case and the pros and cons of settlement versus proceeding further. This provides an objective, third-party's view of the matter which can be very valuable. Often a mediator is selected that has substantial experience with the particular subject matter and issues in dispute.

Settlement is voluntary - There is no decision unless all agree! Some clients think a mediation is an arbitration and the neutral will decide the case. There is no one forcing the parties to settle. A deal with be done only if all agree to all terms and conditions.

What are some of the benefits of settling at mediation?

  • The financial costs of further proceeding. Litigation, whether in arbitration or court can be extremely expensive
  • The certainty of a settlement versus the uncertainty of a result by trial or arbitration
  • Adverse publicity that may result? Often parties settle at mediation in private so as to avoid publicity either from the filing of the case or from losing in a public forum. Settlement avoids the public "airing" of personal life and issues - particularly sensitive medical or psychological problems
  • The present value of money in hand versus the chance of a greater gain at trial or arbitration. There is a positive impact on life planning of having money now, rather than the long wait through trial, arbitration, and possible appeal.

A mediated result is a business-like way of resolving a dispute through a third party neutral who may comment on the issues in the case. The participants should be ready to engage in this process and understand that this can be a productive, positive way for resolution. And, the clients have control over the outcome! If a participant at mediation does not like the proposed settlement, then he/she may simply end the mediation and proceed further down the path of litigation.

Participants/litigants/clients do not have such control if the case is left to a judge, jury or arbitrator's discretion.

Written by Matt Wertheim. See Mediation Services.

The information you obtain at this site is not, nor is it intended to be, legal advice. See disclaimer.