With courts shuttered for several months, COVID-19 has exacerbated New Jersey’s existing legal logjam. The number of backlogged cases this May was 153 higher than May 2019, according to the Administrative Office of the Courts.

With court cases proceeding slowly, litigants are understandably looking at other options. For some, mediation and arbitration can provide a solution, as they allow cases to be resolved outside the courtroom. However, before choosing to proceed with either dispute resolution alternative, it is important to fully understand how it will impact your legal rights.

Arbitration

In arbitration, a neutral individual or group of individuals (either an arbitrator or an arbitration panel) is appointed to resolve the dispute. In some cases, the parties can select arbitrators who subject matter experts that are knowledgeable about complex areas of law, such as intellectual property, insurance, or securities law.

Arbitration generally proceeds more quickly than court proceedings and, therefore, is often less costly. Like a court proceeding, arbitration generally involves hearings and the submission of documents. However, it has its own set of rules, which are generally much less formal than court proceedings. Unlike mediation, it is important to note that the arbitrator’s decision is generally final and binding on the parties.  That, of course, means there is usually no appeal from an arbitrator’s decision. If a party believes the decision is improper, arbitrary, or fails to follow applicable law, it is nevertheless stuck with that decision.

Mediation

In mediation, a neutral third party is called on to help negotiate the differences in the parties’ positions in order to lead to settlement of all or some of the issues in dispute. Unlike a judge or jury, the role of the mediator is to help the parties find common ground rather than make any binding decision regarding the dispute.

Mediation is fairly informal. During mediation, the parties and their counsel typically have the opportunity to meet privately with the mediator. During these sessions, you can clarify issues and answer questions that the mediator may have about your positions.  While a court is limited to determining ultimate relief, i.e., liability and damages, mediators are free to propose creative solutions.

While mediation is not binding upon the parties, statistics show that about 80 percent of claims mediated in the federal courts ultimately settle. Even when mediation is not successful at fully resolving the case, it can often narrow the issues that remain in dispute and require court resolution.

Advantages of Alternative Dispute Resolution

Both mediation and arbitration are forms of alternative dispute resolution (ADR), as they are an alternative to traditional court proceedings. Prior to COVID-19, ADR had some advantages over litigation. Below are several that are even more relevant today:

• Less Time and Money: ADR is almost always less costly and time-consuming than going to trial. This is particularly true for complex cases involving complicated issues and/or multiple parties. With businesses closely monitoring expenses during the ongoing economic slowdown, ADR can be an attractive option.
• Use of Technology: Unlike courts who have been forced to quickly embrace technology, ADR was already using video conferencing and tools to conduct proceedings remotely. As a result, the processes have been well-tested and refined. 
• Confidentiality: Court cases, judgments, and opinions are generally public records. ADR generally allows the parties to maintain the confidentiality of the proceedings, which can help litigants avoid media attention regarding their legal matters and resolve claims without harming their brand or reputation.
• Reduced Risk: Putting your fate in the hands of a judge or jury is always a gamble. In complex commercial cases, the parties run the risk that the decision-maker will not fully grasp the claims/defenses they have raised and award a much higher verdict than is warranted. ADR allows the parties to have greater control over the outcome, whether it is selecting the arbitrator or working with a mediator to settle the case.
• Preservation of Business Relationships: Litigation can be contentious and often destroys the strongest business relationships. ADR, particularly mediation, can preserve those relationships by encouraging the parties to work together to find a mutually-beneficial resolution. In these tough economic times, it can be particularly beneficial to maintain existing business partnerships.

Despite the benefits discussed above, ADR isn’t the best fit for resolving every complex commercial matter. Accordingly, it is important for clients and their counsel to carefully evaluate the risks and benefits of each course of action.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Joel Kreizman, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.