When a dispute arises between
businesses, it is not uncommon
for one of the parties involved to look to the court system for resolution
by filing a lawsuit. However, there is an
alternative method available to resolving
legal problems before going to court.
“Alternative dispute resolution, or ADR
as it is commonly called, is a process
where legal disputes are removed from
the court system and resolved by trained
mediators or arbitrators independent
of the court system,” says Daniel P.
Makarski, senior partner at Secrest
Wardle.
Under the right circumstances, ADR
can be used to settle disputes faster and
less expensively than if the dispute were
processed in the court system. In addition to saving time and legal expenses,
ADR provides parties with greater privacy than is afforded in a public courtroom
and can permit valued relationships
among parties to be preserved.
Smart Business spoke with Makarski
about ADR, the benefits it provides and
how ADR costs compare to cases
processed in the court system.
How can a company benefit from using
ADR?
The primary benefits of ADR are expedited resolution of issues, cost savings
and finality. It is faster and less expensive to engage a mediator or arbitrator to
resolve a dispute than it is to proceed
with protracted litigation in the courtroom that may not be finally resolved for
many years because of delays and
appeals.
What are the most commonly used forms of
ADR?
The most common form of ADR today
is mediation. With this process, the parties select a mediator, usually an experienced attorney with expertise in the area
of the dispute, either prior to the commencement of litigation or early on in
the case. The mediator convenes in a
conference or conferences with all of
the parties involved as well as their
counsel and attempts to amicably
resolve all outstanding issues.
Arbitration, another form of ADR, is increasingly being contractually mandated.
Many business contracts require that
the case be decided by an arbitrator or
arbitration panel. The selection of the
arbitrator or arbitrators and the rules
governing how the arbitration will proceed are either included in the contractual language mandating arbitration or
delegated to an entity such as the
American Arbitration Association. All
parties are bound by the decision of the
arbitrator or arbitration panel.
Under what scenarios is it most appropriate
to use ADR?
An appropriate scenario for ADR is a
dispute between businesses that they cannot resolve themselves. Instead of filing suit, or continuing an existing lawsuit, parties can retain a mediator to try
to bring them together and resolve any
outstanding issues. If this is not possible,
parties can select an arbitrator or multi-person arbitration panel that will decide
all issues in an expedited manner.
How should a business go about selecting
the appropriate ADR process?
Since all ADR processes involve some
legal issues, it is my recommendation
that businesses should rely upon the
trusted advice of their counsel to decide
which ADR process is appropriate for
them.
How do ADR costs compare to cases
processed in the court system?
ADR has significant cost-savings
potential in comparison to litigating in
the court system. Business disputes are
usually handled by attorneys on an
hourly fee basis. The more complicated,
contentious and protracted the dispute,
the more expensive attorney fees and
costs will be. If a dispute can be resolved
by a trained mediator or arbitrator prior
to or early on in a case, these costs and
fees can be eliminated or significantly
reduced. Generally, the mediator’s or
arbitrator’s fee is paid pro rata by the
parties and will be a fraction of what it
would cost to proceed with a fully litigated case.
DANIEL MAKARSKI is senior partner at Secrest Wardle. In 2002, he was awarded the prestigious Respected Advocate Award from the
Michigan Trial Lawyers Association. In 2003, he received the Civility Award from the Macomb County Bar Association. Reach him at
(586) 465-7180 or [email protected].
