By Robert M. Caldwell, PhD
Faculty, John Sperling School of Business
Litigation is expensive. So while the number of civil suits in the U.S. may actually be on the decline (since the aggressively litigious days of the 90s), the cost of bringing a dispute to trial continues to rise.
This dramatic rise in all types of cases prompted the state of California to pass the The California Dispute Resolution Programs Act in 1986. The Act's statutory provisions (codified at California Business and Professions Code' 465-471.5) and its Regulations (contained at California Code of Regulations, Title 16, Chapter 36) created a state-wide system of locally-funded programs that provide Alternative Dispute Resolution (ADR) services (primarily mediation) to county residents. These services help resolve more formal court proceedings and encourage courts, prosecuting authorities, law enforcement agencies and administrative agencies to make greater use of ADR techniques (California Department of Consumer Affairs, 2009).
The California statute recognized that the resolution of disputes can be time-consuming, complex and unnecessarily costly when achieved through formal court proceedings. According to the California Department of Consumer Affairs (2009), “to achieve more effective and efficient dispute resolution in a complex society, greater alternatives to the courts, such as mediation, conciliation and arbitration should be encouraged.” In Addition, ADR programs, “may offer less threatening and more flexible forums for persons of all ethnic, racial and socioeconomic backgrounds” (California Department of Consumer Affairs, 2009).
In the current strained economy, the need for reducing legal costs has become even more acute. In complex civil litigation, for example, parties could use ADR to avoid the time needed for deposing witnesses and preparing for trial, as well as avoiding the cost of the trial and associated court fees. Depositions alone, in even simple cases, could take115 days. Preparation for trial and the trial itself would take another 120 days. Complex litigation could cost close to two million dollars in attorneys fees, expert witness fees and other expenses to recover damages (Fisher, 2005).
Mediation can resolve many disputes for a fraction of these costs and certainly in less time. In an uncontested divorce proceeding, for example, costs can be $5,000 to $10,000 for a retainer and $250 or more for hourly rates for each party. These costs do not even include filing fees, multiple court appearances and court costs. Disputants with limited or shrinking resources are realizing that a $3,000 to $4,000 fee for mediation is a bargain.
The effectiveness of ADR is significant. Kaskell (2007) reports that using mediation for cases that result in settlement during or shortly after the mediation generally fall into the 80% to 90% range.
The more important factor in a strained economy is cost savings. Ford (2003) cites a survey conducted by Price Waterhouse and Cornell University's PERC Institute on Conflict Resolution of over 530 corporations in the Fortune 1000 category. The survey revealed the following trends:
- 90% of respondents view ADR as a critical cost-control technique.
- 54% of respondents indicate that cost pressures directly affected their decision to use ADR.
- Corporations that have developed collaborative conflict management systems report significant litigation cost savings.
- Brown and Root reported an 80% reduction in outside litigation costs.
- Motorola reported a 75% reduction over a period of six years.
- NCR reported a 50% reduction and a drop of pending lawsuits from 263 in 1984 to 28 in 1993.
ADR, therefore, “can assist in the resolution of disputes between neighbors, some domestic disputes, consumer-merchant disputes and other kinds of disputes in which the parties have continuing relationships. A noncoercive dispute resolution forum in the community may also provide a valuable prevention and early intervention problem-solving resource to the community” (California Department of Consumer Affairs, 2009).
References
Boston Law Collaborative (1998, March). Useful information about dispute resolution. Alternatives, CPR (Center for Public Resources) Boston, MA Institute for Dispute Resolution.
California Department of Consumer Affairs. (2009). California Dispute Resolution Programs Act – Statutes.
Fisher, P. (2005). Mediation: Approaches and Insights, Chapter 28. Los Angeles, CA: Juris Publishing. Retrieved April 23 2009.
Ford, J. (2003, 15 July). Workplace conflict: Facts and figures. Mediate.com. Retrieved April 22 2009.
Kaskell, P. H. (2007, March). Is your infringement dispute suitable for mediation? Alternatives to the High Cost of Litigation, 20, (3). pp. 45, 59-61 WIPO Arbitration and Mediation Center Retrieved April 23, 2009.
United States Department of Justice Office of Dispute Resolution. (2003, July 15) Statistical Report: Office of Dispute Resolution. Washington, D.C.
