As a mediator, I have occasionally been asked at the initiation of a mediation whether I would agree to serve as an arbitrator if the mediation doesn’t resolve the parties’ dispute. The parties’ objective is innocent; they’d like to save the time and cost of educating another neutral. Often the parties already know me and trust that I’ll be fair. But almost always, I decline, unless I can alter the process (more on that later), and here’s why.
Almost all my mediations involve some private caucusing. My style of mediation involves adjusting my process and approach to what the parties need at a specific instant. I try to diagnose what is impeding progress and focus on how to remove the impediment. As the process evolves from my first private meeting to a joint session, to caucusing, I try to build trust with the mediation participants. I want them to see me as both a neutral mediator and an honest broker who can convey valuable information about the potential settlement alternatives. In the course of my conversations, I try to learn useful information that gives me insights into the needs of the parties. I also engage in reality testing by playing devil’s advocate, challenging legal and factual positions, sometimes aggressively. In the reactions that participants share with me privately, I often learn where the parties acknowledge weaknesses in their positions. Thus, the mediation process, as I practice it, is a collaborative process that involves divulging information to me as the trusted neutral.
In contrast, arbitration is an adjudicative process that relies upon procedural fairness. Although the procedural rules may be more relaxed than those used in court, the foundational principle of searching for the truth is not. Ex parte contact is prohibited because it creates the potential for untested and unchallenged evidence or arguments to influence the arbitrator. Every communication with the arbitrator must be shared with the opposing party.
If the arbitrator has served as a mediator and had private conversations with a party, there is simply no way to protect the integrity of the arbitral process. The med-arb neutral has inevitably learned information from private meetings, without opposition, that likely colors his or her impression of the case. In the process of reality testing, verbal and non-verbal responses to tough questioning can lead a neutral to observe weaknesses in a party’s case. Even worse, if a party has decided beforehand that it won’t settle and wants to arbitrate, no matter what, the opportunity for mischief is great. The disingenuous party can use the private session to influence the neutral, knowing that none of what is said will be challenged by the other side. As neutral and fair as one might want to be, the opportunity for pre-conceived bias about the facts, law, and the correct outcome is great. In short, the mediation process is inimical to a fair arbitration.
For these reasons, I almost always refuse to serve as a mediator or arbitrator in the same dispute. But, there are a few exceptions to my general rule. First, after I explain my reluctance to arbitrate after mediating a matter, I offer the parties an alternative: arbitrate first and then mediate.
While this would seem to turn the dispute resolution process on its head, it is actually a strategic way to guarantee the parties certainty of a resolution while maintaining the integrity of both the mediation and arbitration processes. The process works as follows: the arbitration process proceeds to a conclusion in as streamlined a process as the parties feel comfortable using. I try to use my best poker face during the course of the arbitration so that I don’t betray what I might be thinking. At the conclusion of the arbitral case, I write a simple award that I seal in an envelope and put in my desk drawer. Then, the mediation commences. Knowing that the outcome of the arbitration has already been determined seems to give the parties added incentive to reach a negotiated solution. In this manner, I’ve protected the integrity of the arbitral process by avoiding any ex parte contact.
While there may be some added expense in conducting the arbitration prior to the mediation it’s not as much as one might think. First, the parties are only hiring one neutral. By having the parties present their cases in the arbitration, I’ve been educated about the issues prior to starting the mediation, saving a considerable amount of time that would otherwise be expended if I had just mediated the matter. But, most importantly, the parties have been ensured of a fair process that hasn’t been corrupted by accidental or intentional contamination from a prior mediation. Of course, I have to be extremely careful not to reveal by word or body language how I have already ruled in the arbitration.
The second exception is less interesting but worth mentioning. A good settlement is one in which the issues stay settled. In some settlements, there are future opportunities for dispute over the implementation of terms. Consequently, I always encourage parties to have a robust dispute resolution process included as a term of the settlement. Occasionally, I’m asked to serve as the adjudicator of a future dispute implementing the terms of a settlement, and I sometimes agree. Because I’m more knowledgeable about the negotiations that have led to the settlement, it may be easier for me to determine party intent than a neutral that is new to the parties.
The next time you or opposing counsel proffers the idea of a med-arb, think carefully about the inherent drawbacks. The savings in cost may not be worth it.