Mediation vs. Arbitration- Which should you use and why?

August 1, 2018

We have all heard and possibly used the terms ”mediation” and “arbitration” interchangeably. They are actually two different concepts and two very different ways to perhaps arrive at similar result: the resolution of a legal dispute. The dispute may be a lawsuit or can even be a neighborhood dispute. Municipal Court Judges will sometimes refer a matter to a mediator to resolve a dispute between neighbors that could otherwise result in criminal charges against one or more participants. 
Very simply defined, “mediation” is when you have a neutral party (“mediator”) assist in bringing two or more parties together and having discussions which can potentially lead to a settlement of a dispute. The dispute could be about money, property, civil rights or just about anything that two parties could dispute. The mediator acts as a conduit between the parties and assists in meaningful discussions which the parties may be otherwise unable to conduct. Usually the results are dependent upon the agreement of the parties and there is no binding authority by the mediator. 
An “arbitration” is usually binding (though it need not be) and is usually conducted as a “mini trial” where the “arbitrator” hears a condensed version of the events and/or testimony of the parties and renders an award based upon his or her analysis of the dispute. Arbitrations can take a few minutes or a few hours and can in certain circumstances last days, weeks or months. It is often thought that arbitration can be a significant cost savings to parties and it often is. Care must be taken to clearly set limits when agreeing to arbitrate a case and parameters must be set to not allow the time and costs add up to make this process more expensive and time consuming than it need be. 
The courts in New Jersey have set up ADR (Alternative Dispute Resolution) systems to assist litigants in resolving cases early to avoid the high costs associated with litigation. Mediations and arbitrations are encouraged early in the litigation process to foster early settlements or resolutions. In fact there is a statewide arbitration process for certain types of litigation matters, including automobile accidents cases. Some counties have also required that other types of cases, not covered under the statewide mandate also be arbitrated before trial, such as contract disputes. 
It is also very often that parties entering into a contract will include an arbitration clause requiring that any disputes that may arise in the future concerning the contract will be decided by an arbitrator as opposed to a court.  It is thus important for any individual or business entity about to enter into any contract (or signing any document of legal importance) to carefully review it and, preferably, consult their legal counsel.  One of the biggest “surprises” contracting parties often experience after a contract dispute has arisen is that they are limited to arbitrating their dispute and are precluded from bringing their case in court. Federal and state courts will under most circumstances enforce contractual arbitration provisions and require parties to have their case decided in arbitration.   Thus if you believe that a particular contract is such that you would want to have a dispute over it heard in Court then the time to focus on that is before you even sign it because if it has an arbitration provision then you can count on that provision being enforced.  
Arbitration can be a very valuable means by which parties can resolve a dispute.  In many cases it is the preferred or most desirable way to go and should be encouraged. And if the parties are at odds then mediation can be beneficial as well, and with no binding effect.  Hearing a view of the case from a disinterested third party who has the knowledge and skill to assess the case can bring entrenched parties out of an impasse. There are a number of companies, large and small, which use retired judges or attorneys to conduct arbitration or mediation in all areas of law.  Consult your attorney about this and if your attorney recommends arbitration or mediation then carefully consider his or her advice because your attorney is there to look out for your best interests and reach the best possible result you can reach. Your attorney is also there to ensure that if you do participate in mediation or arbitration, your case is presented in a way that is as favorable to you as possible.
The attorneys at Post Polak have represented clients in mediations and arbitrations in a wide range of practice areas for decades. In fact, a number of our attorneys have themselves served as arbitrators or mediators in a number of practice areas.  If you have questions about a dispute or arbitration or mediation generally please call us at (973) 228-9900 for a consultation.