ADR Spotlight: An ideal ADR solution

By William L. Weber Jr.

All mediators have experienced a case that SHOULD have settled but just didn’t for one reason or another. Sometimes it is the emotions of the parties, sometimes the stubbornness of counsel or there doesn’t seem like there is any good reason at all!  The best way to ensure final resolution is to prepare an agreement at the outset that requires the parties settle the case.  The name of this approach is MED/ARB!       

MED/ARB is a seldom used ADR process that has been around for years. When the parties decide that it is time to explore settlement that basically provides if the case doesn’t settle through mediation the parties will automatically move to arbitration. The arbitrator WILL make a binding decision settling the case.

There are a number of legal issues and ethical issues involved with the MED/ARB process. Although these issues will be explained in this article and should be discussed by counsel prior to commencement of the MED/ARB agreement, none of the issues justify abandonment of this approach. MED/ARB may be the best ADR process available!

Advantages
The biggest advantage of MED/ARB is the bottom line – the case will be resolved. If the mediator doesn’t settle the case, the arbitrator will.  This process works.  It is as simple as that!
Counsel for the parties know that if the efforts to resolve the matter  during mediation fail, the matter will inevitably move to the next stage – binding arbitration and a decision will be made.  This puts additional pressure on the parties to settle the case.  Mediation is historically recognized as a “WIN-WIN” process whereas litigation and arbitration usually end up with one winner and one loser.  To avoid the risk of being a loser each side takes a long look at settling through mediation.

Preparing the Agreement
When the MED/ARB agreement is drafted, counsel and the parties should decide if the mediator will also be the arbitrator if the case is not settled.  This is not essential and the decision could be made when and if mediation fails.  However, this is not the preferred approach. Especially if heated emotions are prevalent at the end of mediation.  If heated emotions are involved, a reasonably quick resolution is often hard to accomplish.  On the other hand, if the agreement specifies how the next step to arbitration will be handled, the emotions issue is avoided since the decision on who is going to handle the arbitration  is all ready predetermined.

When Dick Hurford (a PREMi Professional) was Litigation Counsel for MASCO, he instituted a MED/ARB program for handling non-union employee disputes.  He found that resolution during the mediation phase was achieved in 95% of the cases; only 5% proceeded to arbitration.  The program was so successful it was expanded beyond employee disputes.

Confidentiality Issues
It is customary in mediation practice throughout the United States for communications transpiring during mediation to  be kept confidential unless a public policy exception justifies disclosure, e.g., if fraud or a crime of some kind would be covered up by non-disclosure. See Michigan Court Rule 2.412 published on April 5, 2011.

The mediator often is privy to confidential information disclosed by parties during private caucus. For example, after learning during caucus what the bottom line is for a party, can the mediator continue to behave as a true neutral if the mediator now becomes the arbitrator? An affirmative answer insults many ADR experts who are critical of the MED/ARB process. A negative answer insults ADR providers who pride themselves on their ability to behave in a neutral manner notwithstanding receipt of confidential information.  On the other hand, if a new person is brought in as arbitrator, isn’t this really starting over? The parties to MED/ARB have to balance the potential for tainting the neutral process versus the time and money that can be saved if the same person who handled the mediation and is familiar not only with counsel and the parties but also the facts in the case. The PREMi Associates who use MED/ARB report that generally the parties choose the same person as mediator/arbitrator just because it is more efficient and they trust the PREMi provider to be just and fair.

If the parties are troubled by having the same neutral as both a mediator and arbitrator, the simple solution is to agree to use a new, different arbitrator.  Any ethical issues will quickly disappear but time and additional costs are factors to consider.

Ethical Issues
There is no court rule or statute in Michigan prohibiting the combination of mediation and arbitration in the same process. Nevertheless, many practitioners question the wisdom of such a process and simply avoid using it.
This is their choice.  Opponents argue that neutrality is destroyed. Proponents contend that the parties have the inherent right to prepare a contract that combines mediation and arbitration and that professionals can act justly and fairly. The decision should be left to counsel and the parties.

Is an ARB/MED Agreement Practical?
As the name implies, in this process the parties begin with an arbitrator and after evidentiary hearings it moves to mediation. At the conclusion of arbitration, the neutral keeps his/her decision under seal. The parties are not informed of the arbitrators decision and the same arbitrator commences to mediate the issues. If the mediation is successful, the case is settled. If not, the seal is broken and the parties learn the decision of the arbitrator. 

New facts learned during mediation that were not revealed during the arbitration proceeding may have an impact on the parties. When the decision of the arbitrator is unsealed the result may not be very appealing to the parties because everyone knows that the arbitrator made his/her decision without access to the “new “ facts discussed during the subsequent  mediation.
In conclusion, MED/ARB is strongly recommended as an ADR process rather than ARB/MED.
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William L. Weber has a background in litigation, commercial transactions and government relations.  He was an antitrust trial lawyer for the Federal Trade Commission in Washington, D.C. prior to joining General Motors Legal Staff, where he had numerous roles, including attorney in charge of Environmental Law, assistant general counsel and practice area manager.  Weber was legal advisor to numerous General Motors committees, including top management, as well as special counsel for legal and legislative matters.  Weber is the founder and executive director of Professional Resolution Experts of Michigan (PREMi, http:/premiadr.com), which has 16 independent members who specialize in mediation and arbitration.