Facing a Pointed Dispute?
A battle that goes to court can be a costly and dragged-out
undertaking. Instead, many small-business owners are turning
to arbitration, mediation and negotiation. Read the latest about
these alternate methods of resolution.
By Carol Milano © 2000 ChamberBiz
A woman who owns a successful Midwestern sales firm hired
her younger sister, just out of college, to cover a thriving
Florida territory that the owner had spent 10 years building.
"It took a lot of work to train and coach her to sell with
no experience," recalls the older sister, who requested
anonymity. She was stunned three years later when her sister
announced "she wanted to run her own operation and cut me
out. We had no written agreement -- she's my sister!" Enraged,
the owner demanded compensation for her time and lost territory.
Their battle escalated. Finally, in desperation, the warring
siblings called in a mediator.
These sisters are not alone -- more and more entrepreneurs
are using Alternate Dispute Resolution (arbitration, mediation
and negotiation) to settle business problems quickly and affordably.
As exorbitant legal fees keep small firms from pursuing even
solid cases, they're shunning traditional lawsuits; often followed
by appeals, these can drag on for years.
In a court case, records are public information. Especially
in sensitive matters, disputing parties prefer confidentiality
-- required in arbitration and often elected in mediation. Arbitration
guarantees resolution: its decision is binding. Mediation leads
to voluntary agreement.
Whether your dispute is with a client, supplier, partner or
employee, "first try to negotiate yourself, person to person.
You can initiate this before or after a lawsuit," explains
Thomas Rothschild, a New York attorney and arbitrator. If no
solution is found and the amount in question is small, consider
small claims court. If enough is at stake, mediation or arbitration
may be suitable.
Mediation is facilitated negotiation. "As a third party
smoothing the rough edges that kept two sides from a settlement,
a skillful mediator helps create a resolution meeting both parties'
needs, so this problem won't recur," notes Rothschild.
Manhattan-based mediator Kathi Elster spoke separately with
the two embattled sisters, then held three two-hour conferences
last fall. "Kathi worked with us by phone and fax until
we reached equitable disassocation and compensation agreements,"
the owner of the sales firm reports. "I don't know if I
could have gotten through this without mediation -- it removes
emotions, sticks to facts. We agreed that [my sister] not talk
to me about business anymore." The owner won't rule out
a future professional link: "with mediation, the damage
that could have been irrevocable never happened. I'd use mediation
"Much faster than a court case, arbitration resolves
a current dispute. But underlying problems may persist; the relationship
may end," says Rothschild. Assigned by the organization
disputants approach (see Resource Box), an arbitrator hears a
case on a mutually agreeable schedule and renders a decision
(typically 30 to 60 days after hearings end).
To real estate developer Carole Taylor, awaiting results of
her first arbitration, "It's a great method! I like dealing
directly with one individual rather than a jury. Our case was
complex: Costs were high but we saved time -- and time IS money,"
exclaims the president of Wings Point in New York City.
Most Alternate Dispute Resolutions begin with one party saying,
"This looks like something we could resolve with a mediator
or arbitrator. Would you agree to it?" When both sides consent,
they buy services directly from a mediator or arbitrator and
split costs. The two sisters shared a $15,000 fee for 10 hours
of mediation; costs vary.
Sandy Lamb negotiated her own settlement after a local real
estate franchise refused to pay a $15,000 bill from her Denver
public relations firm. She hired a lawyer to sue them and their
parent company. The case dragged on, with legal fees in the thousands.
Finally, Lamb called the CEO in California to ask, "What
do I have to do to get you to pay my fee?" Told to provide
evidence she'd done the work in her bills, Lamb sent copies of
all her "product." Convinced by her documents, the
CEO authorized full payment (by the parent company). Lamb lost
her attorney fees, but learned two valuable lessons: always keep
excellent records, and put an arbitration/mediation clause in
your standard contract. (705)
SOME SOURCES FOR ALTERNATE DISPUTE RESOLUTION
American Arbitration Association Specialties: arbitration and
mediation. National office refers to local affiliate. Fees: For
mediation, vary by location and type of dispute. Arbitration
filing charge: $500 (for claims under $10,000) and up. Hearing
fees begin at $150 for single arbitrator, plus cost of hearing-room
rental. 1-800-778-7879; www.adr.org
JAMS/Endispute Specialties: mediation
and arbitration. National office refers to JAMS locations in
over 30 cities. Fees: Hearing costs typically $300 to 500 per
hour (higher if four or more parties involved). Some arbitrators
have day rate or higher hourly rate. 1-800-352-5267; www.jamsadr.com;
e-mail: firstname.lastname@example.org. * NOTE: attorneys for disputing parties
have to call.
Arts Resolution Services Specialty:
Mediation for arts-related cases. Nationwide referrals to Volunteer
Lawyers for the Arts offices that either provide mediation services
or recommend a local private mediator. Fees: $10 per hour and
up at VLA (depending on parties' gross incomes). Private mediators:
about $300 per hour and up; 1-800-526-TALA; www.vlaa.org/other.htm
Business Strategies Seminars (Kathi
Elster, President) Specialty: Partnerhip Mediation for small
business. Services also available by phone and fax. Fee: $150
an hour (per mediator; two may be involved) (212) 481-7075; e-mail:
Ask your Chamber of Commerce or Better
Business Bureau for a referral or check Yellow Pages under Arbitration
and Mediation for local providers. Many lawyers, now trained
in alternate dispute resolution, charge a high hourly rate, but
you'll pay for far fewer hours than a court case requires.
To try negotiating on your own, read
"Work With Me! Resolving Everyday Conflict in Your Organization,"
by Gini Graham Scott. (Davies Black, 2000)
Many of these articles
appear on the publication's website, which are often password-protected
or members-only. For your convenience, I've gathered them on my own