In March, the New York Jets acquired quarterback Tim Tebow from the Denver Broncos in what was one of the most difficult National Football League trades in recent history.
According to media reports, a contract clause requiring the Broncos to pay Tebow $5 million in advance salary nearly derailed the deal. Ultimately, the Jets and the Broncos resolved the issue and closed the trade, using alternative dispute resolution (ADR). Tebow’s contract highlights ADR as a means to resolve disputes quickly and for the benefit of both parties.
This article provides a brief overview of mediation and arbitration, two common types of ADR.
Mediation
Mediation is a meeting among disputants, their representatives, and a mediator to discuss a potential resolution to a dispute. The mediator’s role is to help the disputants explore issues, needs, and resolution options. Mediation is most often non-binding and done with the assistance of a hired, professional mediator.
Benefits of mediation:
- The process is confidential, private, and less formal than both litigation and arbitration;
- Parties participate in the selection of a mediator;
- Parties have direct participation and control over the outcome;
- Mediation can be scheduled at an early stage in the dispute;
- A settlement can be reached more quickly than in litigation;
- Parties can save money through reduced legal costs.
Disadvantages of mediation:
- Parties can attend mediation and come away without a settlement;
- The mediator cannot force the parties to settle;
- Since mediation settlements are not binding, parties can elect not to settle before signing a settlement agreement.
Arbitration
Arbitration is the submission of a dispute to one or more impartial persons for a decision, known as an “award.” Awards are made in writing and are often final and binding on the parties.
Benefits of arbitration:
- The process is confidential, private, and less formal than litigation;
- Parties have the opportunity to select arbitrators with experience and familiarity with the nature of the dispute;
- Arbitration decisions can be made final and binding on the parties.
Disadvantages of arbitration:
- The arbitrator’s decision can bind a party without a right of appeal;
- Compelling a party to arbitrate can be a difficult process, even when the contract in dispute compels arbitration.
- Arbitration provisions in contracts are common. They sometimes require parties to arbitrate before or in lieu of taking a matter to court. In some cases, the contract may make arbitration final and binding and without a right to appeal. While beyond the scope of this article, careful attention should be made before adding an arbitration provision into a contract, for the reasons outlined above.
Using ADR
Parties can use ADR to cover almost all types of disputes. Below are a few examples of the types of matters ADR can help:
- Contract claims, commercial problems, organizing or closing a business or partnership, insurance claims, real estate transactions;
- Sales/purchase disputes, warranties, refunds, repairs, deposits, services, interactions between sales personnel and customers;
- Employment discrimination, sexual harassment, wages, and working conditions.
