Arbitration/mediation and mediation/arbitration are hybrid alternative dispute resolution processes that have become more prevalent in the past few years.
Under a traditional med-arb approach with binding arbitration, the parties agree to begin with the mediation process.
The parties attempt the collaborative aspects of a mediation utilizing the mediator’s skills to assist the parties with a self-directed settlement.
If the dispute cannot be resolved through the mediation process, then the parties move into the arbitration phase. The neutral serving as the mediator now switches roles and becomes the arbitrator.
In this role, the neutral will issue a binding arbitration award, which may include findings of fact and conclusions of law.
The parties are bound by the decision of the arbitrator. Depending upon the nature of the case, the mediation and arbitration process could occur on the same, or consecutive days.
Conventional med-arb has its value. However, this article will explore what I believe is an even more productive dispute resolution tool, namely: an arb-med that implements nonbinding arbitration.
Arb-med typically occurs with a binding arbitration. Under this approach, the neutral conducts an arbitration hearing. The arbitration decision is not disclosed to the parties.
The neutral then serves as a mediator to assist the parties in reaching a settlement. If a settlement cannot be achieved, the neutral returns to the role of arbitrator and presents the parties with the binding award.
You may ask, “why use non-binding arbitration instead of binding arbitration for the Arb-Med process?”
The obvious answer is that several Florida judicial circuits are now requiring parties to participate in nonbinding arbitration before any trial.
As a result, incorporating nonbinding arbitration into a hybrid process with mediation makes sense if both procedures will be required by the court anyway.
Moreover, the nonbinding nature does not mean that the award is futile.
Pursuant to Chapter 44 and Rule 1.820, there is a potential fee shifting risk for parties that choose to reject the award, proceed to trial and receive an adverse judgment.
The process is straightforward. The parties first conduct a nonbinding arbitration.
Once completed, the nonbinding arbitration award is issued to the parties.
The neutral, formerly the nonbinding arbitrator, now takes on the role of mediator.
In this role as mediator, the neutral may have productive confidential conversations with the parties regarding the findings of fact and conclusions of law within the award.
This is beneficial because the participants may now assess their risk based on the neutral’s thoughts from the arbitration award when engaging in mediation discussions.
The neutral’s candid assessments of the parties’ positions in the award may help parties, counsel and adjusters reevaluate their risks.
Timing is everything for a successful arb-med.
The neutral and the parties should time the nonbinding arbitration to occur with enough time before the mediation session to allow sufficient time to get the award issued.
The parties need time to evaluate the award regardless of whether or not they agree with the arbitrator’s ruling.
This is especially the case when insurance considerations are involved. Claims adjusters require sufficient time to receive and evaluate the award before mediation occurs.
Although adequate time between the nonbinding arbitration and mediation must occur, the parties should avoid prolonged gaps between the two processes.
Having mediation too long after the nonbinding arbitration may be counterproductive to the arb-med process.
The parties need to have the information from the arbitration somewhat fresh in their minds as they communicate with the mediator and prepare positions for mediation.
In summary, while an arb-med may not be an option for every legal dispute, there are certainly situations where parties can benefit from this resolution process.
Bryan Rendzio is a former judge for the 7th Judicial Circuit of Florida. He is board certified in construction law by The Florida Bar and a full-time neutral at Miles Mediation & Arbitration.