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Save money on legal disputes

Smart Spending
  • There's a difference between arbitration and mediation.
  • "Mediation is settlement negotiations on steroids."
  • Consider low- or no-cost services offered through local government.

Nicolas Nelson is convinced mediation could help settle his dispute with his contractor -- if only the contractor would participate in the dispute-resolution process his own contract requires.

Nelson contends that by the time he'd fired the contractor for delays, he'd already overpaid $77,000 for work the contractor had done, building Nelson's $800,000-plus dream home in Los Angeles.

The contractor disputes Nelson's claim and initially participated in mediation to resolve their disagreement. Later, however, he began canceling meetings. The mediation has continued.

"We've indicated we're willing to negotiate," says Nelson. "He's indicated he's absolutely unwilling. If mediation fails, we're lined up to press straight into arbitration."

Nelson is among a growing number of consumers turning to alternative dispute-resolution procedures to settle their battles with neighbors, contractors and businesses. The goal is to save money, time and stress by keeping their fight out of court.

Arbitrate? Mediate? There's a difference

Arbitration and mediation are both out-of-court dispute-resolution procedures. Yet there's a big difference between them.

"Mediation is settlement negotiations on steroids," says David Abeshouse, an arbitrator and mediator and principal at the Law Office of David Abeshouse in Uniondale, N.Y. "A third-party, neutral mediator acts as a buffer and facilitator between the parties to make it much more likely to achieve a settlement. The mediator isn't making a decision, only helping the parties reach a resolution."

Arbitration is more formal. "Arbitration is a kind of minitrial," says Abeshouse. "I'm essentially a private judge. I hear evidence and render a judgment. It's faster than litigation because the procedures are streamlined. You exchange basic discovery and then proceed with a hearing. There's a lot less lawyering, the whole proceeding takes less time, and there are fewer legal fees."

Most lawyers say there's little downside to mediation, which most parties attempt first. "I think mediation is appropriate in every single case," says Ellen Malow of Malow Mediation & Arbitration Inc. in Atlanta.


But not all are sold on arbitration, which warring parties sometimes try if mediation fails to produce a settlement. In arbitration, you often give up your right to conduct some discovery, which in litigation helps you uncover information in the opposing party's control that may help your case. And if you consent to binding arbitration, you must abide by the arbitrator's decision and forgo your right to appeal.

"I'm not sure it's worth it to give up the right to a jury trial, the right to appeal and, depending on the forum and its rules, discovery," says David Sugerman, a lawyer at Paul & Sugerman PC in Portland, Ore. "You may not be able to depose key witnesses and find out what they're going to say, and I'm not sure it's cheaper. So arbitration may not be worth the time you save, and it may affect the merits of your case."

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