Litigation is one of the few things managers dread. It damages business relationships, tarnishes reputations, as well as eating up enormous sums of money, time, and talent. Although most smart managers know that lawsuits are steadily increasing, and they are increasingly avoidable.
Therefore, handling commercial disputes without litigation is imperative to nip the evil in the bud. Many alternatives to litigation can nip lawsuits in the bud. Further, it can resolve long-standing disputes, and even produce win-win solutions to long-standing fights that would otherwise only leave both sides damaged.
According to a study, U.S. corporations are paying approximately more than $20 billion a year to litigation attorneys. It is an alarming fact that distracts our attention from other and more importantly increasing business costs of litigation.
Besides, lawyers’ fees and other direct costs get the most attention because they are easy to measure. Nevertheless, from the company’s perspective, the indirect business costs of litigation, the cost of diverting key personnel from productive activities, or the cost of destroying a profitable relationship with a former business ally, are more important.
There are several causes for the high cost of resolving disputes, but the most important is the mindset established and nurtured by the adversary system. The crux of this system is that lawyers for opposing parties have the responsibility to present every piece of evidence possible for the benefit of their clients.
Moreover, pretrial discovery or other litigation procedures are designed in the exploration of relevant evidence. By training, temperament, and professional duty litigation attorney tends to exploit these procedures to the fullest. Each lawyer has a responsibility to be as zealous as an advocate and resolve conflicts to the satisfaction of both parties.
For many years, alternatives to traditional litigation have been around. However, “Alternative Dispute Resolution” (ADR) as a formal technique and an accepted business practice has emerged in the 1970s.
Alternative Dispute Resolution (ADR)
Alternative Dispute Resolution is not an activity that thrives in a little black box. It is a joint venture between the company and its attorneys. It requires management participation. If handled with adequate skill, ADR can bring an opponent into the venture as well.
However, the most common forms of ADR are arbitration, mediation, the rent-a-judge program, and mini-trial. Although multiple techniques can be combined to form hybrids suited to a particular dispute or legal jurisdiction. Let us have a look in detail.
Arbitration
It is adversarial and produces a binding decision made by a third party. It resembles litigation. However, the decision to pursue arbitration is at times made after a conflict has arisen. Moreover, arbitration rules are up to the disputants to decide.
Precisely, the parties to the dispute choose either a single arbitrator or a panel of arbitrators (normally three), who then hear evidence coupled with arguments from attorneys and render a legally binding decision.
Mediation
It differs from arbitration in the neutral third party domain. The mediator does not impose a solution; rather help the parties in resolving their dispute. Therefore, a mediator’s functions vary depending upon the personalities as well as wishes of the parties, and their attorneys.
The rent-a-judge program
It is a variant of arbitration where the parties to the dispute choose a retired judge to hear their case as an arbitrator would. However, retired judges are occasionally used in traditional arbitration, but the rent-a-judge program uses normal trial court procedures to resolve the issue.
Minitrial
It is a hybrid of traditional settlement negotiation, mediation, and adjudication. It is a voluntary procedure normally initiated by the disputants themselves. Although judges might suggest or encourage it, where suit has already been filed. Briefly, the whole process takes from one to four days.