Alternative Dispute Resolution (ADR)

What Is Alternative Dispute Resolution (ADR)?

Alternative dispute resolution (ADR) is a means of settling a dispute, conflict, or claim without courtroom litigation. Instead, the parties involved agree to use an ADR process such as mediation or arbitration.

Alternative dispute resolution has gained broad acceptance by the public and the legal profession. If both parties involved in a civil (non-criminal) dispute willingly sign a contract to do so, they are free to choose ADR to resolve the matter. When a lawsuit is pending, in some cases, courts encourage or require the litigants to use ADR to help settle disputes more amicably and reduce the court system’s heavy caseload.

How Does Alternative Dispute Resolution Work?

How alternative dispute resolution works will depend on the ADR method that both parties agree to use. Many ADR attempts begin with direct negotiation between two parties, with both working together to clarify the issue and figure out a solution that works for all parties involved. If a dispute cannot be solved this way, the parties may attempt to move to mediation or arbitration.

To do so, both parties hire a neutral third party, often an attorney who is skilled in these areas. That third party will then use the discovery process to find out as much information as possible (including details the parties were unwilling to disclose to each other) and help brainstorm mutually agreeable solutions.

In mediation, the parties themselves will agree on an outcome. In arbitration, the neutral party decides the outcome.

If a case cannot be resolved with ADR, each party may decide to take it to court. In this situation, a judge will decide the outcome of the case.

Alternative Dispute Resolution Examples

ADR processes are commonly used in a wide variety of civil disputes between individuals and/or organizations. Examples of these types of disputes include the following scenarios:

• You and your spouse decide to get a divorce and cannot agree on who gets to keep the house or whether one of you should pay spousal support.
• A tenant disagrees with the landlord on who is responsible for repairs to the home following a disaster.
• A resident of a neighborhood with a governing community association feels that association board members are misinterpreting or unfairly enforcing rules.
• A group of residents in a nearby neighborhood want to object to a waste transfer station being built in their community due to the possibility of toxic chemicals being released into the air.
• You are a member of a protected class and wish to resolve a dispute over your workplace failing to take disciplinary action when a supervisor harassed you.
• A construction company has a business dispute with a vendor over failing to provide the agreed-upon quantity of materials the company believes it paid for.
• You bought an expensive product and wish to sue the manufacturer because using it according to instructions has resulted in injury or property damage.
• You were hurt in a slip and fall accident while attending a restaurant happy hour after work and are seeking a settlement from the owner.

Some countries also use alternative dispute resolution in certain criminal matters, such as juvenile crime.

What Are the Benefits of Alternative Dispute Resolution?

Depending on the particulars of the dispute and the type of alternative dispute resolution used, ADR may offer a number of potential benefits compared to lawsuits:

• Allows both parties to spend less money on legal fees
• Requires less time due to fewer case delays
• Provides more flexibility than court proceedings
• Ensures simple disputes can be resolved without an attorney
• Carries the potential to preserve relationships since it is less adversarial
• Affords both parties more privacy than court records allow
• Allows each party to maintain greater control over the outcome and create “win-win” solutions to satisfy both parties

Though not every dispute can be solved with ADR, there are many reasons for both parties to take advantage of it when possible.

Which Types of Alternative Dispute Resolution Are Most Common?

There are several alternative dispute resolution methods, and U.S. states have enacted different laws regarding which types they allow. The rules also vary based on which country you’re in. Here are five of the most common ADR types:

Negotiation

Negotiation is perhaps the simplest and most straightforward type of alternative dispute resolution. The disputing parties meet with one another to identify concerns, explore options, and seek a solution they can agree on. No one else acts as a neutral third party to help them negotiate.

Mediation

In mediation, the parties still work to settle the dispute themselves, but an impartial person called a mediator hears both parties out, helps them discuss the dispute, and then helps them decide what to do. The mediator does not control the outcome. Mediation is often recommended when there is a relationship that both parties want to preserve, such as between family members or business partners.

Arbitration

Arbitration is used when disputing parties agree to have someone else decide the outcome. A neutral person called an arbitrator listens to arguments from both sides, considers evidence, and then issues their decision. There are two kinds of arbitration. In binding arbitration, the arbitrator’s decision is final. In nonbinding arbitration, the parties can pursue a court trial if they do not agree with the arbitrator’s decision.

Conciliation

Like mediation, conciliation is a voluntary process during which a neutral third party tries to help two sides come to a resolution that is satisfactory for both. However, in conciliation, the third party comes up with suggestions for resolution and proposes it to both sides. Each party then works from that initial starting point.

Transaction

Transactions are a form of alternative dispute resolution in which two parties work directly with each other to come to an agreement. That agreement is usually written out in the form of a binding contract. This method relies on both parties being willing to collaborate on a solution, as each side will be required to make reciprocal concessions and compromises to end the dispute and prevent it from moving to litigation.

Neutral Evaluation

Think of neutral evaluation as seeking an expert’s opinion. In this form of ADR, each party makes their case to a neutral evaluator, who is usually an authority on the topic of the dispute. The evaluator then provides an opinion about the merits of the arguments and evidence and the different ways the dispute might be resolved. The evaluator’s opinion isn’t binding. The opinion is used by the parties to help them negotiate a satisfactory agreement.

Settlement Conferences

In settlement conferences, the disagreeing parties and their lawyers meet with an impartial person who is either a judge or a settlement officer, to discuss settlement options. The judge or settlement officer doesn’t decide the outcome but helps both parties evaluate the case and negotiate a settlement. A settlement conference may either be voluntarily chosen by disagreeing parties who are not in litigation, or it may sometimes be mandated by a court before a trial begins.

Is Alternative Dispute Resolution Legally Binding?

Whether an alternative dispute resolution agreement is legally binding depends on the process used to reach the resolution and the decisions both parties make at the end of the dispute. Most agreements are considered nonbinding, which means either party can walk away from or renege on an agreement.

However, if you decide to use a binding arbitration process, you will sign a contract and be legally obligated to abide by the terms of that contract.

If both parties decide to sign a contract at the end of a negotiation, mediation, transaction, or conciliation, they will also be legally held to the terms of that contract, provided the contract holds up in court. While a public court may be asked to review an ADR decision, judges rarely overturn them.

U.S. Laws That Cover the ADR Process

In 1985, the U.S. attorney general issued an order recognizing the fact that ADR could help courts reduce the costs and time burden associated with civil litigation. Since then, the United States has enacted two laws surrounding the ADR process, including:

• The Administrative Dispute Resolution Act of 1996
• The Alternative Dispute Resolution Act of 1998

Both of these laws instruct U.S. district courts to authorize and promote the use of ADR by developing local rules for use in their individual jurisdictions.