What is Mediation and Arbitration?

By Attorney Edward Jesson

     In most counties in North Carolina (if not all), every case filed in District or Superior Court there will require some form of mandatory alternative dispute resolution (“ADR”). Generally speaking, if a case is filed in District Court the alternative dispute resolution method will be arbitration. If a case is filed in Superior Court, the alternative dispute resolution method will be mediation. Further, many contracts contain provisions that provide if a dispute arises the aggrieved party must submit their claim to arbitration instead of or before filing a lawsuit.

Mediation

     A third-party neutral person (the mediator) is selected by the parties involved in the dispute, or, if the parties cannot reach an agreement, appointed by the Court. Generally, the mediator will be a local attorney selected by the parties for his or her expertise in the law that is in dispute. While participation in court ordered mediation is mandatory, the nature of mediation means that the mediator cannot force the parties to resolve their dispute, the mediator can only make his or her best effort to get the parties to compromise. Most of the time, the parties will each have the opportunity to give an opening statement and discuss the case together in the same room. Then the parties will move into separate rooms and the mediator will go room to room, discussing the strengths and weaknesses of each party’s case trying to broker a deal to settle the dispute. If the parties come to an agreement, that agreement is reduced to writing and will typically be enforceable by the court. However, if the parties cannot come to an agreement, the mediator cannot force the parties to settle. The mediator is only there to facilitate a negotiation as opposed to being there to decide the case.

Arbitration

     In contrast, the arbitrator is there to decide the case. The arbitrator will decide which party is entitled to relief and what that relief is based on the claims presented. The arbitrator, in effect, gets to act like a privately hired judge and jury in deciding points of law and factual issues based on witness testimony. In North Carolina District Court, the parties are ordered to an early arbitration which is limited in time to one hour. At the end of that hour, the arbitrator (who is appointed by the court from a panel) decides who “wins” the case. It is important to note that in mandatory district court arbitration, if one party disagrees with the decision (which almost always happens), that party can appeal the arbitrator’s decision, and the parties will simply continue with the litigation process.

     That is in stark contrast to voluntary arbitration: In voluntary arbitration, the arbitrator (again, selected by the parties for his or her expertise in law being contested) is permitted to make a final decision, and, absent a very limited set of exceptions, the arbitrator’s decision is final and can generally be enforced by the court if need be. Often, contractual arbitration is governed by the American Arbitration Association (“AAA”). AAA has a certain set of rules and requires the parties to select arbitrators from certain “panels.” While one advantage of arbitration is often said to be that it is more cost effective than litigation, that is not always the case, especially if you get involved with three arbitrator panels from the AAA or for particularly complex cases.

     Like most things involving disputes and dispute resolution, there is no “one size fits all” approach. If you, your business, or someone you know, is involved in a legal dispute, it is best to seek counsel of an attorney that has experience dealing with that specific type of dispute. As always, the attorneys at Jesson & Rains, PLLC are ready and willing to help!