Hooters Restaurant, are finding that using alternative dispute resolution (ADR) to resolve their legal problems offers many benefits.

Alternative dispute resolution (ADR)

Many companies, like Hooters Restaurant, are finding that using alternative dispute resolution (ADR) to resolve their legal problems offers many benefits. The term ADR refers to the resolution of legal disputes through methods other than litigation, such as negotiation, mediation, arbitration, summary jury trials, minitrials, neutral case evaluations, and private trials. Organizations often use ADR to resolve disputes involving contracts, insurance, labor, the environment, securities, technology, and international trade.

Some organizations have created internal mediation systems for resolving disputes within the organization. For example, United Parcel Service (UPS) has a five-step dispute resolution program:

  1. Open door: The employees are encouraged to bring their problems to their supervisors.
  2. Facilitation: The regional managers ensure that the open-door options are explored.
  3. Peer review: The employee and the company representative communicate the differing perspectives of the dispute before a panel of three employees (two selected by the complainant and one by the employer), which recommends a nonbinding solution.
  4. Mandatory mediation.
  5. Optional binding arbitration

 

Why might a business prefer to resolve a dispute through ADR rather than litigation? First, ADR methods are generally faster and cheaper than litigation. According to the National Arbitration Forum, the average time from filing a complaint to receiving a judgment through litigation is 25 months. Because ADR is faster, it is usually cheaper. According to the American Intellectual Property Law Association, for litigation of patent cases valued in the $1 million to $25 million range, the average cost to each party from the filing of the complaint through the close of discovery is $1.9 million. Through the end of trial, the average cost to each party is $3.5 million. Thus, if a party can resolve a dispute in the early stages of the case through alternative dispute resolution, this may save significant money. Second, a business may wish to avoid the uncertainty associated with a jury decision; many forms of ADR give the participants more control over the resolution of the dispute. Specifically, the parties can select a neutral third party, frequently a person with expertise in the area of the dispute, to help facilitate resolution of the case. Third, a business may wish to avoid setting a precedent through a court decision. Thus, many businesses prefer ADR because of its confidential nature. Fourth, because many forms of ADR are less adversarial than litigation, the parties are able to preserve a business relationship.

Not only are businesses increasingly turning to ADR, but courts are generally quite supportive of ADR methods, which alleviate some of the pressure on the overwhelming court dockets. Congress has recognized the benefits of ADR methods through its enactment of the Alternative Dispute Resolution Act of 1998. This act requires that federal district courts have an ADR program along with a set of rules regarding the program. Congress also passed the Administrative Dispute Resolution Act, which mandates that federal agencies create internal ADR programs. This chapter explains the various ADR methods, as well as the advantages and disadvantages of each. Because ADR is becoming more favored internationally, the latter portion of this chapter discusses its use in other countries.

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