Med-Arb: The Debate Continues

A couple years ago Slaw columnists Kari D. Boyle and Ian Mackenzie collaborated on a pair of excellent articles on Med-Arb – Kerri from the mediator perspective and Ian from the adjudication perspective.

These articles insightfully highlight many of the legal, ethical and practical issues surrounding the idea of having a single person act as both mediator and arbitrator – issues that continue to be hotly debated among mediators and arbitrators.

Med-arb has become widely accepted in labour, family and other areas. The main reason is efficiency.

There are many different models of med-arb. All of them rest on the foundation of express informed consent of the parties to engage in both mediation and arbitration. In most cases, there is a pre-existing agreement to arbitrate –either in a contract or under some other adjudication process. The decision to mediate usually comes later, after the dispute has arisen.

There is nothing unusual in a decision to try to mediate a solution, then arbitrate any issues that remain unresolved. It is the idea that a single neutral can do both that raises the unique risks and opportunities of med-arb.

In January, I had the pleasure of moderating a panel discussion on med-arb for the ADR Institute of Ontario’s business and commercial section. Panel members David McCutcheon and Stephen Morrison focussed on some of the practical challenges neutrals and counsel face when adopting this model for resolving commercial disputes, in particular. (The ADRIO panel built on a med-arb session at the ADR Institute of Canada annual conference in Calgary which generated a lively discussion on the benefits and risks. Recordings of both panels are available from the ADR Institute.)

Many people who question the benefits of med-arb say you should look for the best mediator and the best arbitrator for each specific case. It’s difficult or impossible to find someone who will excel in both roles, they say. Why compromise one or both processes?

Because it works in practice, advocates say.

Everyone can save time and money if the same person acts as mediator and arbitrator. No need to get two people up to speed on the issues.

Putting the arbitration on hold for a short time and actively engaging with the parties to facilitate a settlement is often successful. The parties may resolve all the issues, or may narrow the scope of the arbitration to one or two issues that can be decided relatively quickly.

But even the strongest advocates acknowledge that there are real concerns about confidentiality and impartiality.

Can the mediator be effective if he or she cannot meet privately with the parties and receive information regarding the dispute and settlement option in confidence?

Can the arbitrator be truly impartial and make a decision based on the evidence, if he or she does meet with parties privately and has information from one that the other doesn’t know about?

One question that keeps coming up is whether a mediator/arbitrator who learns something during the mediation that hurts one party or another can set that information aside during the arbitration and render a fair decision, based only on the evidence. Will that information inevitably influence the decision? (See: Keeping a Secret from Yourself? Confidentiality When the Same Neutral Serves Both as Mediator and as Arbitrator in the Same Case)

But arbitrators do that all the time. So do judges. They hear arguments about admissibility of evidence and, if they decide it’s not admissible (or relevant), they set that evidence aside.

As an arbitrator, I have had situations where I have had to rule on whether certain documents should be produced. I have had to decide whether evidence was admissible and what evidence was relevant to the issues in dispute.

I feel that I was able set aside inadmissible or irrelevant information. But maybe I’m just deluding myself: some argue that this is an impossible task and that judges and arbitrators alike are always influenced to some extent. We must always be conscious of this risk of subconscious bias – my point is that it exists in every form of adjudication, not just med-arb.

Parties will often try to influence the neutral during mediation, with information that may not be relevant to the matter in dispute, but tends to paint their opponent as dishonest or unreliable.

One can’t refuse to hear this kind of information as a mediator. All one can really do is ask: “Why are you telling me this? How is this relevant?”

One suggestion, made by Stephen Morrison at the ADRIO meeting, is that the neutral explain to the parties up front that there is a difference between “information” and “evidence”. Everything the neutral hears at the mediation phase is information; it isn’t evidence. Some of it may become evidence later, if the dispute goes to arbitration. Much of it will not.

Again, this is no different from any other arbitration. In many cases, there will be a pre-hearing conference with the parties and their counsel, to lay out the issues in dispute and make decisions about procedure and scheduling. In my experience, each party will make very broad claims about their case, position themself as the “good guy” and paint a negative picture of the other side. This is just a normal part of arbitration advocacy.

The same will happen during opening statements at the hearing. These statements may or may not be supported by the actual evidence.

One would hope that this same kind of advocacy, attacking the credibility or integrity of the other side, doesn’t happen at mediation, where the focus should be on settlement. But it does.

One of the real practical limitations of med-arb, I think, is that the parties always look at the neutral as a decision maker, rather than as a facilitator. This may limit their candour about potential settlement options.

Everything a party or counsel says at the mediation phase, is screened through a filter that asks: “How will this affect the decision, if this goes to arbitration?”

Parties are less willing to concede any factual or legal weakness in their position and, as a result, may be less willing to make the concessions needed for settlement.

Take for example, a commercial dispute where the claim is $1 million in damages. The claimant may be reluctant to talk about settling for half that amount for fear that the arbitrator will take it as an admission that the claim is worth only that much and will reduce the ultimate award. The respondent may be afraid to offer any money at all for fear that it will be taken as an admission of some liability.

The neutral must make every effort to reassure the parties that this is not the case. The parties must be free to discuss a wide range of settlement options, knowing that none of them will affect the ultimate decision if the matter goes to arbitration.

I had a med-arb case several years ago that illustrates how this can work. I was appointed arbitrator in a contract billing dispute. The parties had decided up front that they wanted it to be a med-arb and I agreed to do that. The arbitration claim turned on the interpretation of a particular clause in the contract. As it turned out, the mediation completely ignored the troublesome clause, and focused on several options to extend the contract in a way that would increase the value for both sides. The potential gains were seen to be more than the amount in dispute and both sides were willing to give up some of those gains to make the dispute go away.

So, virtually nothing discussed during the mediation session had any bearing on the issues in dispute in the arbitration. Both sides understood, I think, that if they didn’t settle, there would be a win-lose decision on the contract interpretation.

Neither side ever asked me what I thought of the contract clause in issue. If they had, I would have said I had no view on it one way or the other, but both sides should be aware that their interpretation might be wrong. That risk – plus the additional cost of arbitration – should be some incentive to settle. And it was.

That brings us to another practical aspect of med-arb. In commercial mediation, the parties often expect the neutral to offer an evaluation of the merits of their case. That is something the med-arb neutral cannot do.

The neutral can “kick the tires” to test the issues in dispute. Gently in some cases; more vigorously in others. But the neutral must make it clear that he or she is doing this with both sides. Otherwise, one party may conclude that the neutral is leaning in favour of the other.

At the ADRIO meeting, it was suggested that some of the risks of med-arb might be reduced or eliminated if the mediation proceeded without any separate meetings with the parties. (This is a model taught by Robert Mnookin and Gary Friedman at the Harvard Program on Negotiation and there are many advocates who say this should be the default for all mediations, not just med-arb).

I think that this is something that parties should seriously consider. It certainly changes the dynamic of the mediation phase, but it may help protect the integrity of the arbitration phase. There are always trade-offs.

The take-away from the recent ADR Institute sessions and from other discussions on med-arb is that it is a very useful, practical approach to resolving all kinds of disputes, as long as everyone involved is aware of the potential pitfalls and takes proactive steps to avoid them.