Two of the most common methods of alternative dispute resolution are arbitration and mediation, but ADR also includes early neutral evaluation, conciliation, mediation-arbitration, mini-trial, and the use of an ombudsman.
In arbitration, the parties involved in a dispute present their cases to a neutral third party, who then renders a legally binding or nonbinding ruling, depending on the parameters agreed upon by the parties. Through mediation, the parties reach a voluntary settlement with the neutral's assistance. The mediator's role is solely an advisory one.
In 1998, Irell & Manella created a special division to provide mediators and arbitrators for cases handled by other firms. The center now handles hundreds of ADR cases each year, Mr. Wagner said.
"We saw there was a demand for it, especially high-level ADR work—the complex, multiparty, class-action, complicated lawsuits," Mr. Wagner said.
According to Mr. Wagner, the use of mediation has "exploded."
Mr. Wagner said ADR has "now become a major part of lawsuits. It's another tool in a litigator's toolbox that can be used to get results for clients." He added that "you get terrific results. You take tough, difficult disputes…and you cut allthat short, and you get it resolved. You get it resolved earlier, and you get it resolved to where the parties find it satisfactory."
In the late 1980s, Mr. Wagner mediated a Tulsa, OK, case involving a center for developmentally disabled children. After the death of some residents, a group of parents brought a lawsuit against the center, attempting to close it and relocate the children. The center was eventually closed, but that brought an ancillary lawsuit from the local school district, which said it could not handle the burden of taking on 250 disabled children.
That subsequent suit ended up in Mr. Wagner's hands for mediation. "I walked into a room full of arguing people and told them they had a common objective. They all had a primary concern for the children," he recalled. "It took about a year to negotiate the settlement. We had a series of meetings. I spent the next five years implementing it."
Eventually, the children were integrated into about 10 school districts.
"In a mediation process, you always have at least two winners. No one leaves the process—it doesn't end—unless all the parties involved are satisfied in the results. In court, oftentimes, people walk out discouraged or disgruntled with the results," Mr. Wagner said.
Firms across the country have created special ADR divisions or practice groups, as they are often called, with lawyers specifically adept at ADR cases, including Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, LLP, in New Jersey and Hunton & Williams, White & Williams LLP and Fulbright & Jaworski LLP, each with offices in various U.S. cities.
"Law firms have traditionally focused ADR as part of their litigation department," said Eric Tuchmann, general counsel of the American Arbitration Association. "Increasingly, you're really seeing a number of law firms that have specific arbitration departments or sections, particularly in international law."
Some of the cases taken to arbitration have been unusual.
John J. Kerr, Jr., a partner in the litigation department of Simpson, Thacher & Bartlett LLP in New York City, represented DHL International in the 1990s in an International Chamber of Commerce arbitration in Paris involving a dispute under a shareholders agreement. The arbitration stemmed from lawsuits filed by various women who claimed they bore the children of one of the company's founders, Larry Hillblom—the H in DHL.
Mr. Hillblom allegedly had a string of sexual relationships with women while living on the tropical island of Saipan. His seaplane crashed in 1995, and, although his body was never recovered, he was legally declared dead. Several of the women with whom he had sexual relations came forward, claiming his alleged offspring should get a share of his estimated $500-to-$700-million fortune. Mr. Hillblom had a controlling interest in DHL's stock. Mr. Kerr represented the company in the arbitration regarding the stockholder issues brought about by the women's suits.
ADR can be pursued in virtually any case that can be litigated, including those involving business, insurance, labor relations, public policy, family, securities, small claims, and international trade.
Mediators and arbitrators may be attorneys or retired judges or businesspeople with expertise in the particular field related to the case. These neutral third parties can be provided by organizations such as the American Arbitration Association, the largest ADR provider in the United States with approximately 8,000 arbitrators and mediators on its national roster. The association handled almost 175,000 ADR cases in 2003.
Enactment of the Federal Arbitration Act in 1925 was a major milestone in the history of ADR in the United States because it required the enforcement of arbitration agreements. Prior to the law's passage, courts rarely enforced such provisions.
"There was judicial hostility to the [arbitration] process, so the FAA was passed to counteract that," Mr. Tuchmann of the AAA said. "It basically states that arbitration agreements shall be enforceable to the same extent as contracts, generally."
Equally important was the United States' decision in 1970 to join the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which had been established in 1958. The Convention provides a model law with language that has been adopted by more than 100 countries and creates an international framework for resolving business disputes.
Mr. Tuchmann said the Convention "provides a more predictable and more mutually acceptable way of resolving disputes."
International arbitration has helped lessen concerns that can arise when litigating in a foreign country's courts, where laws often differ from those of the United States.
"We didn't know what to do with awards and how to handle international law, and a lot of foreigners were afraid of United States law for various reasons," said Joseph D. Becker of Becker, Glynn, Melamed & Muffly in New York City. "Once arbitration became available on an international frame, it was appealing and actually helped promote international trade."
Mr. Becker, who specializes in international arbitration, has represented clients in cases in cities such as Paris, London, and The Hague.
As with anything, there are pros and cons to ADR.
Litigation can often be a lengthy process, made even longer by potential delays or appeals. It is also often a costly process, financially and emotionally. Unfavorable outcomes can lead to strained and even severed personal or professional relationships, as well as negative publicity.
Arbitration and mediation are usually faster, with the parties involved controlling most aspects of the procedure—from the time and location to the scope of the potential award. ADR is usually less expensive and provides confidentiality and privacy that today's open court proceedings cannot.
Educating a judge or jury on the technical particulars of a dispute can take time. Using an expert in the subject matter of the dispute as the mediator or arbitrator can cut down on that time.
While courts must follow the letter of the law and all that it entails, arbitration and mediation are less formal. "Arbitration has an informal air about it with very few rules binding on the proceeding, so many attorneys prefer it as well," Mr. Becker said.
On the other hand, because ADR offers confidentiality, it may not be the best way to resolve a dispute when the parties want publicity for the issue. Parties may also prefer to litigate cases when trying to set legal precedent.
Neither mediators nor arbitrators are required to comply with any uniform standards for education, training, or practice. "There is no formal certification for arbitrators and mediators," Katherine Burton, AAA's director of corporate communications, said. "However, the American Arbitration Association has developed, in cooperation with the American Bar Association, a code of ethics for arbitrators, as well as our Model Standards of Conduct for Mediators, which were developed with the American Bar Association and the Society of Professionals in Dispute Resolution."
Mr. Wagner said the main drawback with ADR is "with regard to those cases that don't resolve and then go through with court—that adds to the cost and length of the case."
So what does the future hold for ADR?
Mr. Kerr said today's courts view ADR as a viable option, with many courts requiring some form of ADR before providing a court date, in the hope that court might be avoided all together.
While ADR has not overtaken litigation as the main method in resolving disputes, its use is expected to expand as an ever-increasing number of cases continue to clog the country's court systems and clients and attorneys look to avoid litigation.
"When I started practicing in the 1970s, there was a deeply ingrained bias to arbitration—the thinking being that everyone had a right to their day in court in front of a jury of their peers," Mr. Kerr said. "That mentality has changed with a growing recognition within the federal court system that they were overwhelmed with caseloads."