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To mediate or not to mediate. That is the question

After running a business for any length of time, it's possible that you will end up in a dispute with another business or individual. If your efforts to work out the issue fall on deaf ears, you might need to consider taking legal action. The question is whether to enter into costly, time-consuming and often frustrating litigation, or to choose another avenue of resolving the dispute.

In order to make an informed decision, you probably need some basic information regarding litigation and the alternatives. Mediation and arbitration work well for many business owners, and one could work for you as well.

What do mediation and arbitration have in common?

Both of these alternative dispute resolution methods provide you with a way to avoid litigation. Each method employs a neutral third party or parties to assist in resolving your dispute. Beyond that, they begin to differ in essential ways.

Arbitration

The first, and possibly most important, difference between arbitration and mediation involves the outcome. Most arbitration proceedings are binding, which means that you and other party must live with the decision. Unlike litigation, however, you agree to be bound by the decision without the possibility of an appeal.

Most of the time, three arbitrators preside over the proceedings. Each side chooses one and then the two choose a third. They hear evidence and issue a written opinion with their decision. These proceedings feel more formal and tend to mimic a trial.

Mediation

In the alternative, mediation usually only involves one neutral third party (the mediator). The mediator's primary objectives do not include making the decision for you. He or she facilitates negotiations, provides ideas for resolving your dispute and provides an opinion regarding how a court might rule in a particular situation. However, you will not receive legal advice from the mediator regarding your position. You will need to employ your own attorney for the process.

The mediator also keeps you and the other party on task in an attempt to keep the negotiations from failing. Mediation is also non-binding. If negotiations break down and no way back presents itself, your dispute can go to court. This method also involves less formality. You and the other party can sit down together to hash out the problem. Each of you receives a chance to present your side of the story as well.

In addition, as is the case in arbitration, your discussions remain confidential and out of the public eye. As a business owner, you might prefer this since the dispute may never tarnish your business's reputation, which can happen even if you're in the right.

Before beginning mediation

Before you sit down at the negotiating table, you and the other party must agree on the following points:

  • Payment
  • Confidentiality
  • Non-binding decision
  • Length
  • Negotiation in good faith

After signing this agreement, you can begin negotiations. Once you and the other party reach an agreement, it's put in writing and signed by both parties.

The need for an attorney

Having a California attorney at your side during mediation often increases your chances of achieving a settlement satisfactory to you and the other party. Not only could an attorney's advice help guide you through negotiations, but he or she can also ensure that your legal rights remain protected and that any agreement put to paper includes the proper details and everything to which you and the other party agreed.

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