The combination of mediation and arbitration (Med-Arb) is an often-overlooked alternative dispute resolution vehicle. Med-Arb is a hybrid mechanism in which the parties attempt to reach a voluntary agreement with a third-party neutral first through mediation, and if that is not successful, through arbitration. San Francisco lawyer and arbitrator Sam Kagel is often credited with developing Med-Arb to settle a nurses’ strike in the 1970s; today it is still most commonly found in the labor and international arenas, but it is also increasingly being used in commercial settings.
Med-Arb gives parties the best that mediation and arbitration have to offer, providing incentives to resolve issues promptly, efficiently and in a less costly manner. Facing the prospect of an adverse, non-appealable determination in arbitration, parties have an incentive to resolve their disputes at mediation: the few studies examining Med-Arb have generally found that parties were substantially more motivated to settle in mediation because they wanted to avoid the loss of control that would come in the arbitration phase.
It is important to note that Med-Arb is not a “one-size-fits-all” kind of process; each Med-Arb should be tailored to the circumstances of the dispute and needs of the parties and should be undertaken only with the parties’ full, voluntary consent.
Consideration of the Med-Arb Process
The suggestion to use the Med-Arb process almost always arises at the initial meeting with the neutral. Whether the provider is selected as a mediator or as an arbitrator does not matter, for it is at the point and time of the initial meeting with counsel and perhaps the parties that the concept usually germinates. A common factor in determining whether Med-Arb is appropriate is the willingness of the parties to settle, which usually can be identified at the time of the pre-hearing or pre-mediation conference.
On many occasions, when an ADR provider is selected as an arbitrator, counsel may request Med-Arb at the pre-hearing conference or even during the arbitration hearings if there is a possibility that all or a portion of the case can be settled if the neutral agrees to mediate all or some of the issues involved.
This scenario also applies in cases where a mediator is retained. Often a neutral is selected because of the advocates’ familiarity and comfort with him or her, but this does not necessarily mean that the clients are equally comfortable with the neutral. Thus, if the Med-Arb process is being considered, the mediator-arbitrator often will schedule a second pre-hearing to meet with clients and counsel to discuss the Med-Arb process, explaining what it is, how it works and that if the mediation does not end in agreement, he or she will render a final, binding decision. At that conference, it is imperative that the mediator-arbitrator describe both the benefits and criticisms of the process.
Med-Arb is a voluntary process, and the parties’ freedom to choose it, as well as the neutral, contributes to its success. The process and its scope should always be in the hands of the parties, starting with the initial pre-hearing conferences in which the neutral talks about Med-Arb and the parties’ expectations. Throughout discussions, the neutral should underline the fact that the process is up to the parties and that they, not the neutral, determine its boundaries.
The American Arbitration Association (AAA) offers mediation services to all those who sign up for its arbitration services. When the neutral retained is an arbitrator, in the initial meeting with counsel the advocate will generally identify and suggest, based upon the nature of the claims involved, whether mediation is appropriate. It is important to note that the AAA Med-Arb process uses different neutrals for the mediation and the arbitration portions of a Med-Arb.
Critiques of Med-Arb
Many of the criticisms and complaints surrounding the traditional Med-Arb process are actually concerns about possible abuses by the neutral mediator-arbitrator. To create a productive and fair process, the neutral must have certain essential skills. First, he or she should be accomplished and experienced in both mediation and arbitration and understand the requirements and standards for both roles. (There are mediation and arbitration protocols governing the ethical standards in each process, but none of the standards encompasses their combination.) Second, the neutral must be able to move from a facilitative role to an evaluative, decision-making one. Third, the neutral must be able to disregard the information and the positions of the parties that he or she learned during the mediation. Finally, the neutral must be able to gain and keep the trust of the parties and establish and maintain credibility for the process. The neutral’s personality, substantive expertise and experience all play significant roles in creating and promoting this trust.
A common critique of Med-Arb is that information shared during confidential mediation caucus sessions will impact the arbitration award. Some arbitrators do not consider this to be a problem; others decline to serve as mediator-arbitrators for just this reason. Certainly, the influence of confidential information is a potential problem, but as long as the mediator-arbitrator informs the parties how confidential information will be handled throughout the Med-Arb, these concerns can be ameliorated. Specifically, the mediator-arbitrator should address how he or she will deal with information in caucus and in the arbitration hearings. Ideally, the neutral should start the arbitration as if there had been no mediation, but the neutral should also tell the parties that he or she is a human with a brain that remembers but will make every effort to disregard what was said or presented in the mediation. Judges do this all the time when receiving information that should not be admitted into evidence, commonly practicing “temporary amnesia,” and mediator-arbitrators can do it, too. In my discussions with providers who have performed Med-Arbs, nearly all said they believe that the concerns about the misuse of confidential information are overstated.
Benefits of Med-Arb
The few studies of the process clearly support the notion that Med-Arb does seem to reduce costs and increase the efficiency of the dispute resolution process. Med-Arb is most likely to be successful in cases in which there are many complex interrelated issues and the arbitration hearing is expected to be lengthy. Of approximately 12 Michigan-based Med-Arb cases in which I have served as the neutral in the past few years, only two have gone to the arbitration stage. All these cases were complex commercial disputes involving a variety of issues. In the two matters that did go to arbitration, the number of issues arbitrated was significantly reduced as a result of agreements obtained during the mediation stage.
In my experience as a Med-Arb provider and in my discussions with those who have used Med-Arb, I have concluded that those who have never utilized the process tend to fear the unknown and be critical of it. In reality, given Med-Arb's flexibility and the variations that can be incorporated in a Med-Arb process, there really is no reason for advocates and their clients in complex commercial cases not to try it. Med-Arb will continue to grow as a viable and effective process because it is an economical, efficient and fair method for the settlement of disputes.
Martin C. Weisman, who has been recognized as a Michigan "Super Lawyer" and a Michigan “dBusiness Top Lawyer,” has more than 43 years’ experience in the areas of alternative dispute resolution, banking, finance, partnership and shareholder issues, real estate and construction matters and general commerce contract disputes. He has served as a neutral, court- or party-appointed arbitrator, mediator and/or case evaluator in hundreds of commercial matters. He can be reached at firstname.lastname@example.org or http://www.wysr-law.com/lawyer-attorney-1464605.html. A sample Med-Arb agreement is posted to the Weisman, Young & Ruemenapp web site under Resources and Publications: http://www.wysr-law.com/lawyer-attorney-1464573.html.
 See David L. Gregory, The Internationalization of Employment Dispute Mediation, 17 N.Y. Int’l L. Rev. 2, 28 (2001); Thomas J. Brewer & Lawrence R. Mills, Combining Mediation & Arbitration, 54 Disp Resol J. 32, 34 (1999); Gerald F. Phillips, It’s More Than Just Med-Arb: The Case for Transitional Arbitration, 23 Alternatives to High Cost Litig. 141 (2005).