The question is sometimes raised about the possibility of mediation to resolve differences between parties that otherwise would give rise to litigation. Although arbitration and mediation are related, they are far from identical. People not in the legal community sometimes have difficulty distinguishing them even when, in practice, they work very differently. The following is a necessarily short and general overview of these work in the eastern counties of Pennsylvania (not including Philadelphia).

Arbitration usually means a legal process which is much like courtroom procedure, but the decision maker is generally not a judge and there is no jury present. In Pennsylvania, there are two types of arbitration which are not at all alike, although the same word is used for both. ?Common-law? arbitration can only take place if the parties agree. Often, the agreement to arbitrate is set forth in a contract between the parties prior to a dispute arising. In some contracts, every difference between the parties is subject to the provisions for arbitration. In other contracts and written agreements, only certain disputes are subject to arbitration. Parties sometimes disagree over whether or not a particular dispute is within the provisions of the arbitration clause and occasionally that is litigated.

When the parties commence common law arbitration, some mechanism is employed to select an arbitrator who will be neutral. There are a number of different techniques to selecting an arbitrator; for example, if the arbitration is conducted through the American Arbitration Association (AAA), then AAA will provide a list of five to ten names to each party. The parties will have the right to rank their choices, or strike some names, without showing the other side and presenting their list to AAA. Then AAA will pick the arbitrator (or arbitrators) from among the top names chosen by both.

Common law arbitration takes place much like a civil lawsuit. There is a written complaint, called a demand for arbitration, and a written answer, which is usually very brief. In what is called the discovery process, each side produces its documents for the other side, expert reports are prepared and presented, and depositions of the potential witnesses are taken. After discovery, a hearing is conducted by the arbitrator in which the rules of evidence generally apply. The parties call their witnesses during the hearing for examination, the witnesses are subject to cross-examination and evidence (often documents) is presented. Usually the parties? attorneys provide written legal arguments to the arbitrator. The arbitrator makes a decision, reflected in writing often just a monetary award, which is generally final.

Although either side has the right to try to appeal the arbitrator?s decision in court, courts in Pennsylvania generally will not reverse an arbitrator even if the arbitrator makes mistakes of fact or law. The view of the courts is that the parties chose arbitration to be a ?fast and final? dispute resolution mechanism, and part of that choice is surrendering most rights of appeal.

Arbitration is very commonly used to resolve construction disputes, employment and labor disputes, and disputes over stocks and securities. Whether arbitration is really faster and cheaper than a court proceeding is open to some debate, but it does have certain advantages in terms of scheduling and access to the arbitrator for rulings during the course of the arbitration leading up the hearing. In Pennsylvania, it is difficult to get a ?date certain? far in advance for a trial being conducted in either state or federal courts; usually, the parties (and their attorneys) are relegated to some sort of trial list which means you can get called to trial anytime within a two or three week period on very short notice.

When the parties choose an arbitrator, the arbitrator arranges mutually agreeable dates for the arbitration far in advance, which is a great advantage for the parties and witnesses in terms of scheduling. For most business people, one of the great disadvantages of litigation is not only its cost and uncertainty, but the amount of ?emergency interruption? and inconvenience that litigation represents for people whose time is valuable and who would rather (or absolutely need) do something else. Of course, the arbitrator must be paid; usually both sides split the cost of the arbitrator.

?Statutory? arbitration is compelled whenever a lawsuit is filed in Pennsylvania state court and the only demand made by either party is for money damages (as opposed to injunctive relief: an order directing one party or another to do something or not do something) and the amount of money damages is under a certain threshold; in counties outside Philadelphia, generally statutory arbitrations are mandated if the amount demanded is less than $50,000.

Three lawyers who are members of the County Bar Association hear these type of arbitrations (I have heard a number of these arbitrations). The three lawyers acting as arbitrators do not get involved until the day of the arbitration and know nothing of the case until a few minutes before the arbitration begins, which takes place in the courthouse. A hearing is held that day and the arbitrators immediately thereafter issue a written award of money (or no money, if the defendant prevails), and do nothing more.

Either side may easily appeal the award of the arbitrators in statutory arbitration, and if either side appeals, the whole matter is heard de novo (completely new) by the judge or judge and jury. Since either side can so easily appeal, the real value of statutory arbitration is to allow the parties to present their case, and to hear the other sides? case, and to see what three disinterested lawyers think about it. Often this is significant in getting the parties to voluntarily settle their case afterward (the arbitrators? award puts some economic value on the case, which improves everyone?s realism in evaluating their prospects or risks); but if the parties don?t settle, upon either side?s appeal the case continues in the court system.

If the amount either party claims in the initial complaint is more than $50,000, or if some relief is requested other than money damages, then this type of statutory arbitration is not available.

Mediation is much different, in that mediation does not produce any decision, but it sometimes helps produce a settlement. A mediator is chosen by the parties and each party agrees to pay half the mediator?s cost. The mediator may or may not be legally trained. The mediation is less concerned with the underlying merits of the case (who is right, or who is likely to prevail in court) and more concerned with finding middle ground between the parties. After a mediation is over, the mediation is ?successful? if the parties have found enough areas of agreement to voluntarily agree to settle their case.

The mediation is not successful if the parties do not agree on a settlement after it concludes. If the mediation is not successful, the mediator ?drops out of the picture? ? mediators are never called as witnesses in any later legal proceeding and they never give a written opinion about who might have a better case, or who might be right. If the mediation does not work, it is as if it never happened. For that reason, one criticism of mediation is that it often costs money and time without producing any result at all.

Mediation works best when there is not a fundamental legal dispute (e.g., who is interpreting a contract or document correctly, or who is liable for a certain injury or breach of contract), since the mediator is not going to decide those issues and may not even be trained in deciding them. Mediators assume that each side is going to have to ?give something up? to get something. If the underlying dispute is over an issue of principle, mediation is not usually effective. It works best when the differences between the parties are over the amount of money to award for a claim that is admittedly valid (e.g., a dispute over the amount of money damages, but no dispute that some damages are due).

Mediation also only works if the dispute is entirely between the two parties and no part of the dispute affects anyone else. For that reason, mediation is very problematic for homeowners or condominium associations (or unions or governmental bodies) if it involves an interpretation of documents or legal rights affecting multiple people who are not part of the immediate dispute. For example, if one homeowner thinks the association documents require that monthly assessments should only be $50, not $100, and brings a lawsuit, it would be difficult to mediate that. Even if the mediator got an agreement from the Association and the party to ?split the difference? (which is what mediators love to do) and agree that the dues should be $75 ? what happens if another homeowner then sues the Association and says the dues should only be $25, or should be $125?

Ultimately, every type of alternative dispute resolution is practiced because, on some sets of facts, with some parties, in some circumstances, it holds out the hope of resolving the dispute more cheaply, more quickly or more fairly (or with more control over the process) than the traditional lawsuit in court. Whether one of these tools fits a particular situation well or poorly is the type of judgment play that an attornney should make in consultation with a client.

This general discussion is not legal advice and is not binding with respect to any actual controversy. It is offered by way of general information only.