ARBITRATION AND MEDIATION
An Alternative to “See You in Court”
Disputes and disagreements have been a part of business and personal life since the beginning of time. In ancient times before development of our modern court system we have today, individuals with disputes met on the battlefield at dawn with swords or pistols. The court system offered a neutral third party – the judge or jury-to settle the dispute. However, within the past ten years, courts have become clogged with lawsuits because of insufficient time or judges to conduct trials on all the cases. Fewer than 95% of lawsuits filed are actually decided by a trial. In response to the glut of lawsuits, court began developing alternative dispute resolution (ADR) programs in which parties in lawsuits could participate voluntarily. In some situations, participation is mandatory. ADR is also found in a variety of settings outside the court system.
What is ADR? ADR refers to the wide variety of methods by which conflicts and disputes are resolved other than through litigation. Mediation and arbitration are the most common processes.
Mediation
Mediation is the most popular form of ADR. Mediation is a process of dispute resolution focused on effective communication and negotiation skills. The people involved in the dispute come together voluntarily to look for a solution to their dispute. The person who helps them is called a mediator. Mediation is an informal process, although the mediator does structure the discussion. However, the mediator does not decide how the dispute should be resolved. Mediation is not a process to force compromise, although compromise is an element of the process. Each party’s limitations are respected and a party is only expected to make a shift in its approach to the problem if it becomes convinced that it is reasonable to do so. Most people find it a comfortable and productive procedure. Many people are more satisfied with the outcome of mediation than a trial because they have taken an active part in solving their own problem, rather than waiting for a judge to impose a solution.
Mediation is being used in almost every conceivable type of dispute resolution and comes in various forms. The process has also been effectively adapted for multiple party dispute resolution with tremendous success. In an attempt to capitalize on the success rates, legislation is slowly being amended to include provisions for mediation of disputes.
The advantages of mediation are many. Some of the most important benefits of mediation include:
- Mediation generally enjoys an 80% - 85% success rate.
- The parties have more control over the solution to their problem.
- Mediation is focused on resolving the problem quickly.
- Mediation is a gentler way to resolve disputes between parties who have a relationship with each other that will continue after the dispute.
- Mediation is not expensive.
Arbitration
Arbitration is a procedure for resolving of disputes on a private basis through the appointment of an arbitrator, who is an independent, neutral third person. The arbitrator hears and considers the merits of the dispute and makes a final and binding decision called an award. The process is similar to the litigation process because it results in a decision being made by a third party. However, the parties usually choose their arbitrator and the manner in which the arbitration will proceed. For example, if the dispute is fairly straightforward and does not involve any factual questions, the parties may agree to give the arbitrator the documents that relate to the dispute and a written position statement. Other parties might choose to have a hearing similar to a trial. Parties sometimes choose more than one arbitrator who will decide as group.
The advantages of arbitration over a court trial can include the following:
- The parties can choose an arbitrator who has expert knowledge of the law, business or trade in which the dispute has arisen.
- Arbitration is not expensive if the process is kept simple, although complicated arbitration can be as expensive as a trial.
- Arbitration can be arranged within days, weeks or months and does not take as long as litigation.
Court-Sponsored ADR Programs
Many New Mexico courts have mediation programs for all disputes or specific types of disputes, such as domestic or water rights. The United States District Court for the District of New Mexico requires parties to a lawsuit to participate in a settlement process that is similar to mediation. The parties are not required to settle their dispute, but they are required, at a minimum, to meet with the assigned Magistrate Judge to discuss settlement. The First Judicial District Court (Santa Fe, Los Alamos, and Rio Arriba Counties) Second Judicial District Court (Bernalillo County) and Third Judicial Court (Dona Ana County) have settlement programs similar to the Federal Court. Attorneys who practice in these counties usually act as the mediators or facilitators. The Third Judicial District Court administers a grant from the State Justice Institute providing for the mediation of individual claims to local water rights. Staff at the Office of the State Engineer (OSE) first attempt resolution of a claim. If an agreement is not reached, the OSE refers the case to the Court’s program and a mediator is assigned.
Courts in the First Judicial District, Second Judicial District, Third Judicial District, Fifth Judicial District (Chavez, Eddy and Lea Counties), and Eleventh Judicial District (McKinley and San Juan Counties) have mediation programs for settlement of family law disputes. The mediators can be local attorneys, accountants, psychologists, and other types of professionals who are either employees of the court or who are paid by the parties.
At least two district courts in New Mexico have mandatory arbitration programs for some types of disputes. These are the Second Judicial District and the Third Judicial District Court. In both these courts, cases where no party is asking for anything other than monetary relief not exceeding $25,000 may be referred to arbitration. An arbitrator essentially operates as a judge, in that he or she makes a decision (award) after arbitration is concluded. Arbitration is generally a less formal process than litigation. Evidentiary rules are relaxed and discovery may be limited. Arbitration can be useful to parties who are unable to reach agreement and are willing to accept the award of an arbitrator. Either the Court or the partiesmay select an arbitrator. Although the losing party may appeal the decision of the arbitrator to the judge assigned to the case, there is strong encouragement not to do so. If the party who appeals obtains a decision at trial that is the same or worse than arbitration award, that party will be ordered to pay the expenses of the other party in court, including attorneys fees.
The Metropolitan Court in Bernalillo County sponsors a voluntary mediation program. Magistrate courts might also have such programs.
CAVEAT: There may be other ADR programs available, so check with your local courts. Information in this article about court-sponsored programs is based on information available from court websites.
ADR In Other Situations
ADR is found frequently in contracts. Large employers often required employees who have disputes with supervisors or each other to participate in mediation. Some large employers have a policy of mandatory arbitration that takes the place of a lawsuit if an employee is terminated or disciplined. Consumers sometimes are confronted with purchase agreements that contain arbitration requirements. An example of this is a person who purchased a mobile home from a dealer in New Mexico and was required by the purchase agreement to have arbitration, rather than a trial, on the problems the purchaser had with the mobile home. Individuals who purchase vehicles can also be required to go to arbitration when they take advantage of the New Mexico “Lemon Law”. Some insurance companies have agreements that they will arbitrate claims against each other, rather than go to court.
How can you use ADR
Whenever you are sued or file suit, consider the option of attempting to settle the dispute through one of the court-sponsored voluntary ADR programs. Even if you are in a court district that does not have a program for your particular type of dispute, consider sharing the cost of a private mediator with the opposing party. Private mediators can be located by checking the yellow pages of your telephone directory. Consider putting mediation or arbitration policies in place for resolving disputes with your employees and your customers.
Conclusion
Alternative dispute resolution involves methods of resolving disputes without litigation but is not intended to replace litigation. Even the strongest proponents of ADR agree that certain matters must be resolved through the courts. However, there are other methods for resolving disputes that offer many advantages over the adversarial route, which should be explored before litigation is commenced or proceeds too far.
By Judy K. Kelley, Esq.
TRENDS IN THE LAW
In fashion and political trends, California frequently leads the nation. The same is true for legal trends, especially those involving discrimination. Under that state’s law, a managers refusal to fire a fragrance saleswoman who was not considered attractive enough by an upper-level male manager was protected by state law, * When the lower manager complained of retaliation by the company for her refusal to fire the ‘unattractive’ employee, the state Court of Appeals rejected the company’s argument that ordering a manager/employee to fire another employee because of her looks did not constitute sexual discrimination. The court stated that it could infer that the upper level male manager, ‘would not have ordered the employee fired if she had been a man, simply because a man’s physical attractiveness would not have been an issue.”
Melissa Morris, Esq.
*Yanowitz v. L’Oreal USA, 131 Cal. Rptr, 2d 575, 2003
HOW STRONG IS YOUR BUNGEE CORD?
Overheard: “I always sign those releases for recreational activities, because I know they aren’t enforceable. Nobody can waive liability for their own negligence.”
The New Mexico Supreme Court would disagree. Don’t decide, however, to go into the bungee-cord jumping, hot-air ballooning, river rafting, or other recreational business based on the Court’s very recent decision to the contrary.”
The case arose in 1996 when Nicolas Berlangieri took a horseback-riding trip at The Lodge at Chama. During the ride he fell from the horse and suffered serious physical injuries. The cause of the fall was disputed, but may have been improper saddling of the horse by a Lodge employee, causing the saddle to slip off to the side and throw the plaintiff to the ground. Mr. Berlangieri and his wife sued The Lodge for his injuries. Before starting the ride, though, he had signed a release relieving The Lodge from liability for injuries he suffered while riding…”whether or not resulting from the negligent act or omission of another person or persons.”
Finding that Mr. Berlangieri had given up his right to sue The Lodge when he signed the release, the District Court dismissed the case, but when the Berlangieris appealed, the Court of Appeals reversed, saying that such releases should never be enforceable when a risk of serious physical injury or death is at stake.
When the case finally reached the New Mexico Supreme Court, seven years after the original accident, the Court upheld the Court of Appeals, allowing the plaintiffs to continue their lawsuit against The Lodge. It did not, however, agree that all releases, in the recreational context, of liability for negligence resulting in physical harm would be unenforceable, but only that in the particular circumstance of this case, the release was against public policy.
The case may now go to a jury for a determination of the cause of the accident, whether The Lodge was at fault, and the amount of the plaintiff’s damages. Several more years could pass before the case is heard and all appeals exhausted. Mr. Berlangieri may get nothing. Regardless of whether it wins or loses the case, The Lodge, or its insurance company, will have paid thousands of dollars in attorneys’ fees.
In light of this daunting scenario, if your business provides recreational activities, you may well wonder under just what circumstances the New Mexico courts will uphold a customer’s signed release relieving the business from liability for its negligence in case of personal injury to the customer. For what they’re worth to the business owner hoping to rely on such a release, here are some factors the courts will consider:
- Such clauses will be construed strictly against the drafter. Any vagueness will be interpreted against the business.
- No release of liability can protect the business from liability for its, or its employees’, intentional or reckless acts.
- The release must be clear and ambiguous. It must contain “such clarity that a person without legal training can understand the agreement he or she has made.”
- The release must not be against public policy.
Don’t try to draft such a release on your own. In fact, under the current state of the law, even the most confident and qualified attorney faces significant challenges in the drafting of a release guaranteed to stand up under the above analysis. Recreational business owners should also seek additional protections. These include incorporation of the business and obtaining adequate liability insurance for its activities.
*Berlangieri vs. Running Elk Corporation, No. 27,492, filed August 28, 2003.
By Melissa Morris, Esq.
TAX QUESTIONS? DON’T ASK THE IRS
You have 57 percent chance of getting a correct answer to your tax question when you call an IRS tax center, according to Treasury Department investigators. Complete and correct answers were provided by IRS employees to 45 percent of the questions, and correct but incomplete answers were furnished in 12 percent. Solution? Call your accountant.
THE BUSINESS OF BUSINESS
- Everythingcomes to him who hustles while he waits. Thomas Alva Edison
- Business is a combination of war and sport. Andre Maurois
- If you aren’t fired with enthusiasm, you’ll be fired with enthusiasm. Vince Lombardi
- When your work speaks for itself, don’t interrupt. Henry Kaiser.