Save money on legal disputes

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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.”

Services at your doorstep

If you’re interested in testing mediation or arbitration, consider low- or no-cost local services often offered through your local government. The Jefferson County Mediation Services, or JCMS, in Golden, Colo., is one example. In most cases, JCMS costs nothing for participants.

“We have 212 trained volunteer mediators,” says Mark Loye, the program’s director. “We’ll call both sides in the dispute and arrange a time to discuss potential solutions. The classic case that got our program going is the barking dog. It could be that the dog owner builds a run so the dog can’t see the street. Maybe the neighbor gets a set of the dog owner’s keys and can let the dog inside.

“If the parties agree on a resolution, they sign a memorandum of understanding. It’s not a contract and doesn’t have the force of law. It’s just a written agreement between them, and hopefully the problem is solved.”

JCMS also offers arbitration. “Our typical arbitration case is blight,” says Loye. “The municipality is asking that a property be identified as blighted. That involves a hearing, and rather than pay a hearing officer, the owner asks one of our volunteers to handle it.”

You can also hire your own mediator or arbitrator. “I do absolutely everything — business, real estate, landlord-tenant, domestic and employment disputes,” says Malow, “along with personal injury cases.” Like Malow, mediators and arbitrators typically charge by the hour, with fees varying, depending on the number of parties involved and the dispute’s complexity. You’ll also typically pay an administrative fee.

Nelson is working through the American Arbitration Association, or AAA. “So far, it costs about $3,000,” he says. “The initial payment was $1,500, which the AAA holds as a retainer. If you spend it before the process is over, the AAA will bill you, and you can make payments online by credit card. The costs have been reasonable.”

Hire your own big gun

If you’re not sold on mediation or arbitration, you can also hire a negotiator to act on your behalf to resolve a dispute. “Negotiation is the least structured and probably most misunderstood form of alternative dispute resolution,” says Jeff Gordon, a professional negotiator in Raleigh, N.C. “In a negotiation, you hire a negotiator to work out the issue. Unlike a mediator or arbitrator, the negotiator is partial to your side and strongly advocates for your position.”

Gordon charges $300 per hour but realizes that may be pricey for some consumers. In those instances, he recommends hiring an attorney to negotiate — under strict instructions. “Find an attorney who’s willing to help you settle your claim,” he says. “But make it clear you’re not interested in suing but using the law as a lever to get a negotiated settlement.”

If you’re convinced you can resolve a dispute on your own — without a mediator, arbitrator or negotiator — Gordon has sobering advice. “Most people think they’re great negotiators and want to handle disputes themselves,” he says. “I’ve learned in negotiations with my wife that if I’m personally involved, I get wrapped up in the emotional issues and lose every time. For the same reason you shouldn’t be your own lawyer or doctor, you shouldn’t be your own negotiator.”