When we last saw Dick and Jane, Dick had been served with a lawsuit for breach of his employment contract, but had prevailed in avoiding an interlocutory injunction shutting down his new company. We then looked at the discovery process.
For this month, we switch to attempts to settle a lawsuit amicably. Generally, parties during the case will send and receive settlement offers by and through their attorneys. Some cases are in a settlement posture from the very beginning. Other cases require discovery and the exchange of information in order for the parties and their lawyers to accurately evaluate the case and possible outcomes. In either scenario, most every case eventually goes to mediation.
There is some public confusion about the difference between mediation and arbitration. Mediation is a good faith effort by the parties to resolve the case by agreement (or at least resolve parts of the case). The parties meet and work with a trained mediator. At mediation, the parties will usually meet with the mediator for a period of time to outline their case and contentions. After the joint session, the mediator will break apart and spend time with each party privately. These individual sessions are called “caucus.” In caucus, the mediator will often speak candidly with each party about their position, the strengths and weaknesses of their case and the potential for settlement. The mediator then moves back and forth between the parties relaying offers of settlement and compromise. If the parties can reach a result, a memorandum of settlement is prepared and signed. Unlike arbitration, mediation is not final and binding on the parties if they choose to adjourn. Either party can reject the position of the other party and continue in Court. The discussions, offers and exchanges at mediation are confidential and cannot be admitted at trial. Neither party is able to subpoena the mediator to trial and try and use anything gained at mediation in evidence.
Arbitration is a completely different method of dispute resolution. In arbitration, the parties present their case just as they would in trial. However, instead of presenting the matter in Court, the matter is presented to an arbitrator (or panel of arbitrators) selected by the parties. Quite often, arbitration is the result of language buried in contracts such as credit card applications and other commercial transactions wherein an entity wishes to ensure that disputes are litigated in a common forum rather than in local courtrooms across the Country. The enforceability of these adhesion style arbitration clauses is the subject of extensive case law.
In other instances, arbitration can present a high degree of value, particularly for sensitive cases, very high net worth cases and clients and other matters wherein the parties may require or desire a hearing officer with a certain level of expertise or background. In lieu of waiting in turn for available time and attention with a Judge, the parties in arbitration can often privately schedule the matter at times and dates which are convenient for them. In addition, arbitration is not a public proceeding whereas Courtrooms must almost always be open to the public. In certain cases, privacy concerns can be a paramount reason for selecting arbitration. Unlike mediation, the parties are bound by the decision of the arbitrator and cannot withdraw from the process, once commenced.
In an employment case such as Dick’s dispute with his former employer, it is a virtual certainty that the parties would be ordered to attend mediation in an attempt to resolve the case. It would not be unreasonable that the parties might also consider a private arbitration for the reasons stated above. For purposes of our continued discussion/education, we will assume that arbitration was agreed upon and that a Court-ordered mediation failed to result in settlement. Thus, our discussion next month will turn to the process of a final jury trial.