Arbitration and mediation are two related methods of Alternative Dispute Resolution (ADR) that are all too often confused in Indiana injury law. Alternative Dispute Resolution involves methods of resolving disputes outside of the court system. By resolving disputes short of litigation, parties can save the excess time and money associated with a lengthy trial. While both mediation and arbitration serve similar goals, they each have their own advantages and disadvantages and a particular method should be chosen based on the specific needs and wants of the parties.
Mediation involves a neutral, third-party who assists the disputing parties in reaching a mutual agreement outside of court. The mediator does not decide the case or even make legal recommendations. The sole job of the mediator is to assist the parties in the process of reaching an acceptable agreement by using techniques to open and improve dialogue between the parties. Mediation in Indiana is governed by Indiana Code 4-21.5-3.5 which sets guidelines for the mediation procedure such as selecting a mediator and submitting evidence. Under this chapter, a mediator has the same immunity as a judge would have in Indiana.
On the other hand, arbitration is much more like a trial where the disputing parties hire an attorney or retired judge to hear and decide the case. Most arbitration is “binding” which means the decision made by the arbitrator is legally enforceable in the same manner as a judgment of a court. This is the most distinguishing factor between arbitration and mediation in which the mediator simply discusses settlement options and assists the parties into coming to a voluntary agreement. In Indiana, Arbitration is governed by the Uniform Arbitration Act which is codified under Ind. Code 34-57-2-1. Because arbitration is more similar to an actual trial, the Uniform Arbitration Act is much more detailed then the Indiana code governing mediation practices.
There are several advantages and disadvantages of each method, and therefore, one alternative may be more useful than the other depending on the needs of the disputing parties. Arbitration is most commonly used in commercial disputes between sellers and consumers or employees and employers. Arbitration allows the arbitrator to make the final determination of liability and/or damages; a determination which is enforceable upon the parties.
Arbitration is often criticized in contractual settings in which the weaker party (i.e. a consumers or employee) has little power to negotiate their contract. This situations typically deal with boilerplate, form contracts that contain arbitration clauses that give the stronger party the advantage if a dispute arises. The validity of arbitration clauses is not a settled matter among US courts but some have found contracts by large companies, such as Blockbuster and AT&T, to be unconscionable (unfair) and, thus, unenforceable. However, other courts have found these arbitration clauses to be enforceable.
Mediation is the quicker and cheaper alternative to litigation and arbitration, but while it does get around the high costs, formalities, and complexities of the court system, it does not create a binding judgment unless both parties consent to it. Therefore, if a party wishes to have their dispute settled by a binding and enforceable agreement, then mediation may not be the best alternative.
Overall, both methods serve a distinct purpose in Alternative Dispute Resolution and both can help solve disputes outside of more costly litigation. However, they both have their advantages and disadvantages and disputing parties must be aware of these when deciding which method to choose in solving their dispute.