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 again."

"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)



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: info@jamsadr.com. * 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: grobiz@aol.com.

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 website.