Can We Talk?
Settling disputes outside a court of law can save you time, money
and aggravation. Alternative dispute resolution is the way
BY WILLIAM H. DONAHUE JR.
You hear the term alternative dispute resolution (ADR) in practically
every industry, profession and area of law today, but there's a lot of misunderstanding
about it. Let's look at what ADR is, how it's being used among jewelers
and what it may come to mean to the industry.
Disputes between parties, whether for business or personal reasons, need
to be resolved. When there's no mechanism to settle disputes, history shows
chaos or even violence occur as people take matters into their own hands.
For centuries, disputes were resolved by village elders, tribal chieftains,
kings or other leaders. In the past few centuries, courts with judges and
juries became the predominant means of settling disputes that people couldn't
settle themselves. But in the last decades of the 20th century, the court
system has become increasingly slow, complex and ruinously expensive.
ADR has several benefits over litigation. In most cases, it's quicker
and less expensive. Backlogged court dockets and schedule conflicts of busy
attorneys can drag out court cases for months or years. Legal fees for lawsuits
can range from a few thousand dollars to hundreds of thousands or millions.
Tens of thousands of legitimate disputes go unresolved because the cost
of pursuing a claim is more than the claim is worth. It's become clear to
many people involved in business disputes an alternative to litigation is
necessary. ADR, in its many forms, is that alternative.
What Forms Can ADR Take?
There are two major kinds of ADR: arbitrationand mediation.They
differ in some fundamental ways and require different skills of the person
conducting them. But they share the goal of resolving disputes quickly,
efficiently, inexpensively and fairly.
They also share the requirement the arbitrator or mediator be impartial,
be perceived by both parties as impartial and be highly skilled in the practice
of arbitration or mediation.
In many ways, arbitration is a private court system. The parties present
their case to the arbitrator, who sits as judge and jury. The rules are
made by or explained to the parties before the arbitration starts, and the
parties agree to them, usually in writing. Then the arbitrator listens to
both parties (or reads their submissions if the arbitration is done "on
the papers") and renders a decision.
The decision can be binding (no right to an appeal) or non-binding (either
party can appeal to a preagreed-upon authority such as a panel of arbitrators,
an administrative agency or the court system). Even in binding arbitration,
however, a court can overturn a decision for fraud or other significant
improprieties in the process.
A mediator doesn't render a decision, but works with the parties as a neutral
and guides them to resolve their dispute themselves. The underlying principle
in mediation is that most disputes have a solution that's beneficial to
both sides, though it's usually not exactly what either party wanted in
Mediation is effective for a wide range of disputes. Hundreds of towns
and cities have instituted community dispute resolution programs to keep
feuding neighbors out of police stations and backlogged municipal courts.
Divorce mediation has become so accepted that some states require all divorcing
couples to attempt some degree of mediation before resorting to litigation.
Even school children are being trained in "peer mediation" as
a way to resolve classroom and schoolyard disputes.
Mediation is particularly useful and effective in disputes between people
whose relationship is likely to be ongoing. This is why neighbors and school
children who continue to have contact with each other do better when they
mediate and settle disputes themselves than when a judge or teacher imposes
a solution on them. The same thing is true for divorcing couples with children.
Their paths will continue to cross as their children grow. People who mediate
their divorces have far fewer problems afterward than those whose divorce
terms are imposed by a judge.
For these reasons, mediation can be highly effective in business situations
too. Because of the small and close-knit nature of the U.S. jewelry industry,
you'll likely deal with many of the same vendors, customers and competitors
over the years, even though new ones appear also. And while many employee-relation
disputes arise only after the employee has left, many do not; if resolved
quickly and fairly, you may not have to lose and replace the employee at
In each of these circumstances, it's far easier to maintain relationships
when you've all resolved your disagreement fairly and efficiently in the
less-hostile environment of mediation.
How ADR Works
Under ADR, the claim and resolution are usually confidential, unless agreed
otherwise by the parties in advance. For a jeweler with a reputation to
protect, this is an important factor. One lawsuit reported in your local
newspaper can undo years of hard work you spent establishing trust and credibility
even if you ultimately win. The news media are under no obligation
to give your victory the same coverage they gave the initial allegations.
This applies to customer/retailer disputes as well as retailer/retailer
Parties to an ADR process can almost always use attorneys to help them
or represent them in the proceeding, but many choose not to. Attorneys tend
to be more involved in arbitration than mediation and in binding than non-binding
John Spadea, a trained and certified mediator in Lemon Grove, CA, sees
a major role for ADR in disputes between suppliers and retailers. He's less
optimistic about the widespread adoption of ADR in consumer disputes. The
problem is the issue of impartiality and trust on the part of the customer,
says Spadea, who is a former jeweler and now runs a consulting business
for retailers. For such a process to work, there would need to be a program
that's nationally recognized as fair and impartial, he says. Recently, the
Jewelers Vigilance Committee developed guidelines for just such a program.
It has codified the goals, criteria and procedures of its Alternative Dispute
Resolution Services, which are designed to handle a wide range of disputes
throughout the industry.
William H. Donahue Jr. is an attorney in New Jersey and a trained
mediator, accredited by the New Jersey Association of Professional Mediators.
Disputes at DDC
The Diamond Dealers Club of New York has had an alternative dispute resolution
program since 1931. The program differs somewhat from an ADR program the
Jewelers Vigilance Committee is developing for the jewelry industry. The
primary difference is that all 1,800 DDC members are required to submit
disputes to arbitration if they can't be resolved by other forms of ADR,
such as mediation.
To be members, dealers must agree they won't circumvent the process by
going to court first to resolve disputes. The arbitrator's decision is binding
and is enforceable in New York state and federal courts without a rehearing
on the issues or merits of the case.
This is a comprehensive system of dispute resolution and an effective
means of preventing costly and prolonged litigation for club members.
DDC President Eli Haas says arbitration tribunals decide 100-150 cases
Copyright © 1998 by Bond Communications.