Here’s why pandemic is increasing mediation and arbitration cases

Business News | 16 Sep |

The COVID-19 pandemic wiped out our workouts. It disrupted our dinners. It squashed our social life. Now, it’s likely to trim the number of trials our legal system sees.

To further prevent the spread of COVID-19, Maricopa County Superior Court issued an order that steers certain litigants away from jury trials in favor of mediation and arbitration, which is a fairly big deal if you’re facing a business dispute.

“It is not so much the kind of jury trial, but rather the posture of the case that will drive the diversions to mediation and arbitration,” says Gary Smith, manager at Guidant Law Firm. “Cases will go through a triage of sorts. Mediation will be encouraged for cases more susceptible to settle. Arbitration will be encouraged for smaller-dollar, simpler-issue or lower-risk matters. No one will be forced to give up a jury trial if they prefer it and are otherwise entitled.”

Michael R. Ross

Gary M. Smith

According to legal experts, there is one major advantage to taking your business dispute to mediation or arbitration instead of a jury trial.

“In one word, speed,” says Wendi Sorensen, shareholder at Burch & Cracchiolo. “Opting for mediation or arbitration instead of a jury trial will likely bring your matter to a close much sooner than awaiting trial.”

Experts say the coronavirus has severely affected our court system, due largely to the need to socially distance, and the effect that has on the ability to appear in person and to impanel a jury.

“Although some courts have tried options involving Zoom–type trials, the results have been mixed, and parties involved in litigation are hesitating to stipulate to this option,” Sorensen says. “Once we are able to safely resume in-person appearances, criminal matters will take priority due to the constitutional right to a speedy trial. Therefore, we expect it will be at least a year before trials are able to resume.”

What’s involved in mediation and arbitration?

When it comes to a business dispute, Smith says mediation is the parties’ opportunity to write their own outcome.

“It is a negotiated settlement facilitated by a mediator,” he says. “The mediator makes no decisions or rulings, and is there strictly to help the parties communicate and help in the architecture of settlement.”

According to Smith, mediation succeeds when these stars align:

• The parties know what they need — not what they want

• Are ready to be done with the dispute

• Can accept not having all of their questions answered

• Are willing to compromise

• Logic overrules emotion

Wendi Sorensen

Christopher-Zarda

“That does not mean mediation is easy or pleasant,” Smith says. “It is a lot of work and long days.”

Arbitration, by contrast, substitutes a traditional judge with a privately hired arbitrator.

“It often replaces court rules for other rules, and offers flexibility as to time and place for the arbitration hearing,” Smith says. “In many ways, arbitration mirrors court. However, the arbitrator can be selected using criteria such as subject matter knowledge.”

Because you are buying their time, an arbitrator will have as much time for your case as you want, which is in stark contrast with Superior Court, where judges carry hundreds of cases.

“Arbitration is the antithesis of mediation,” Smith says. “It is a ‘day in court.’ It requires fastidious preparation and deep focus on discrete issues. Arbitration’s strong suits are ‘faster and final,’ as there is effectively no appeal from arbitration. Parties have to show up like it’s the Super Bowl.”

Pros and cons of mediation and arbitration

As with all forms of dispute resolution, Christopher Zarda, director of complex litigation at MacQueen& Gottlieb, says there are definite pros and cons to mediation and arbitration.

“Mediation, a non-binding dispute resolution procedure, allows the parties to separately present their subjective case to an independent mediator,” Zarda says. “Picking the right mediator with the right experience allows for a full and frank discussion and exchange of information couriered between the parties. This also allows an experienced intermediary to provide frank commentary on the relative strengths and weaknesses of asserted claims and defenses, with the mediator advocating not for one party over the other, but rather for the successful settlement of the claims.”

The downside to mediation, according to Zarda, is its non-binding nature, meaning that no matter how strong your position may be, there is no guarantee the matter will be resolved as the parties cannot be compelled to settle.

“Arbitration can be quicker than waiting for a dispute to wind its way through the court process and the court’s burdened calendars,” says Michael R. Ross, shareholder at Gallagher & Kennedy. “Arbitration typically involves less discovery — the acquisition of information, documents, and pretrial testimony — than the court system, which generally means that the parties save money and time.  Arbitration hearings are typically less formal and rigid than trial, although arbitration hearings in complex matters can often feel just like a trial without the courtroom and the judicial robes.”

The downside of arbitration is that it comes with a price.

“Private arbitrators, typically former judges or active attorneys, charge an hourly fee for their services, and there are also significant administrative fees charged by neutral services that oversee the appointment of arbitrators and the process,” Ross says.

Another frequent complaint from participants in arbitration and their counsel is that an outcome at arbitration is generally not subject to appeal.

“Parties that are not satisfied with the outcome have to live with it — there is not another bite at the proverbial apple except under vary narrow circumstances,” Ross says. “Of course, the flip side to that concern is that an arbitration provides finality and avoids what some view as a drawn-out appellate process.”

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