Med-Arb is a long-standing and robust practice that combines the flexibility and self-determination inherent in mediation with the certainty and finality of arbitration. Med-Arb has become widely used in the last decade. A survey performed by David Lipsky and Ronald Seeber found that an astonishing forty percent of responding Fortune 1,000 corporations had engaged in med-arb in the preceding three years.1 Notably, Med-arb is not a new concept. Professor Derek Roebuck indicates that in ancient Greek and Egyptian traditions, med-arb was the norm rather than the exception.2 In both ancient and modern Muslim legal practice, the judge must make serious efforts to bring the parties to agreement before trial.3 Med-arb is very popular in other cultures. In Japan, for example, most cases submitted to arbitration actually undergo “med-arb.”4 Australia, Canada, Hong Kong, and Japan have actually enacted arbitration laws that contain med-arb provisions.5 Today, in Canada and Australia, med-arb is used routinely to resolve public sector labor disputes and arbitration statutes expressly permit resolution by this method.6

Proponents of med-arb convincingly argue that it eliminates the major weakness of mediation – lack of finality – while allowing the parties to use an arbitrator with whom they have built up trust during the mediation process.7 This allows maximum flexibility and saves the cost and time associated with selecting a separate arbitrator should mediation fail.8

Despite the popularity and obvious usefulness of med-arb, it remains controversial. Some arbitrators treat it as heretical and even unethical. Some observers view it as impossible to fairly combine the two processes, believing that the inherent tension between the neutral’s initial role as a facilitator and her potential role as an adjudicator renders the procedure coercive, ineffective, and disruptive of basic due process.9 However, the med-arb process is alive and well in California. Parties should not be deprived of this alternative given that many of the same risks exist and are deemed acceptable in other contexts. Med-arb’s advantages of finality and swiftness are obvious. Examining the process’ criticisms can help assist parties in determining whether med-arb is the right process for a particular dispute.

The Due Process / Natural Justice Issue
Perhaps the most frequently-cited defect of med-arb is that the neutral hears evidence in private caucus that the non-caucusing party cannot respond to, because he has not heard it. This is often referred to as a “due process or “natural justice” violation.10 Natural justice has two elements: Parties must be allowed to hear and answer an opponent’s case, and any decision affecting a person must be made by an impartial tribunal.11 At its most basic, due process requires notice and an opportunity to be heard.12 Many critics of med-arb doubt whether a neutral will be able to disregard what she learned in the mediation phase while acting as an arbitrator.13 An arbitral party who was excluded from a private caucus during mediation has not had notice of “new evidence” presented during that session or an opportunity to respond to it. This situation is a prima facie violation of fundamental fairness.

However, concerns about exposure to improper evidence reflect doubts about the neutral’s ability to disregard that evidence, rather than a flaw in the med-arb process itself. But judges are routinely expected to disregard inadmissible evidence without any due process concerns being expressed. There is no consensus about a neutrals’ supposed inability to disregard inadmissible evidence. Megan Telford, who surveyed med-arbiters working in Ontario’s Grievance Settlement Board, reports that the great majority of the neutrals surveyed felt that the issue was not a practical problem since they were able to disregard inadmissible evidence.14 The California Court of Appeal in Lindsay v. Lewandowski 139 Cal App 4th 1618, 1620 (2006) expressly authorized med-arb, holding:

We do not suggest that parties are prohibited from agreeing that, if the mediation fails, they will proceed to arbitration. And, should they so desire, they may agree that the same person may first act as mediator and, if he or she fails in this task, act as the arbitrator. Whether or not this arbitrator (nee mediator) may consider facts presented to him or her during the mediation would also have to be specified in any such agreement.

Clearly, the Court in Lindsay believes that the med-arbiter can disregard such evidence.

The Waiver Issue
California Rule of Court 3.823 (a), concerning evidence in arbitration, provides: “All evidence must be taken in the presence of the arbitrator and all parties, except where any of the parties has waived the right to be present or is absent after due notice of the hearing.” Many scholars recommend obtaining an explicit waiver of the risk that the med-arb neutral will learn confidential information during the mediation process.15 At a minimum, the waiver issue should be discussed with counsel as part of preparation for a med-arb procedure.

The Coercion Issue
Critics of med-arb claim that it gives neutrals the power to coerce settlement by (at least implicitly) making it clear in mediation that in the event arbitration goes forward, an unfavorable award will result.16 Although such a scenario is certainly plausible, it ignores the reality that professional mediators do not achieve settlement “at all costs.” After all, they want to maintain a reputation for fairness, without which they will get little business. While med-arbiters admit pressuring the parties on occasion, for the most part they deny a “directive” approach; in fact, parties are more motivated to settle in the shadow of arbitration.17 But this is a natural outcome of the process. The parties chose med-arb because they wanted the certainty of a result; otherwise, they would have chosen pure mediation.

Further, even outside the med-arb process, the prospect of a looming trial or upcoming arbitration encourages settlement. Therefore, this “weakness” of med-arb is actually a feature of any adjudicative process; it should not be laid at the door of med-arb in particular.

Reluctance to Disclose Information and Posturing for the Neutral
A final criticism of med-arb is that the parties will refuse to disclose information as they normally would in mediation because they are too conscious of the neutral’s future role as an arbitrator. A related argument is that a party will try to spin the facts to make herself look good in front of the med-arbiter.

Non-disclosure
Some critics of med-arb suggest that participants are unlikely to share unfavorable facts with the mediator, in view of his or her possible role as an arbitrator.18 However, participants are actually more forthcoming in med-arb than in other contexts, perhaps out of a desire to avoid appearing uncooperative to the potential arbitrator.19 Even if there is non-disclosure, this situation is hardly unknown to experienced mediators. It is not unusual for counsel to withhold extremely useful information – data that would probably settle the case—so that he or she can “save it for trial.” This occurs even if the point is expressly made that the settlement process is designed to avoid trial altogether.

Posturing
Likewise, inflating the merits of one’s case in order to look good to the arbitrator could happen in med-arb, but is not limited to that context.20 So posturing cannot be attributed solely to med-arb. In fact, there is no evidence that non-disclosure or posturing is more likely in the med-arb context than it is in single-process ADR, such as mediation or arbitration.

Conclusion
The above analysis shows med-arb has a long history of success, and that despite the numerous criticisms of the procedure, any “defect” in the process has been accepted with equanimity in other contexts. For example, we either presume without thinking that judges can disregard inadmissible evidence, or accept their human frailty with a shrug. Yet we challenge med-arb neutrals for sharing the same frailty. Any coercive behavior by med-arb neutrals is indistinguishable from the general effect of an upcoming bench trial with a skeptical judge. Yet, it is deemed unacceptable for the neutral to express opinions – but acceptable for the judge. Finally, the problems of posturing and non-disclosure face every mediator from time to time; not just the med-arbiter. These risks are not enough to disregard the undeniable advantages of the med-arb process: flexibility, finality, cost-savings, and a high probability that the parties will reach a mediated settlement.

The lesson of the foregoing is not that med-arb is the right answer in every case, but that med-arb is a useful option — especially where the business relationship is worth preserving, but speed is very important. Just as business executives must learn to navigate the legal system in order to succeed, they need to be familiar with the full spectrum of ADR methods, to raise their use with counsel, and to intelligently discuss their strengths and weaknesses when the time for a decision comes. Retired judge and neutral Lawrence Waddington has said “[M]ed-arb is a valuable addition to the constantly maturing world of alternatives to litigation … the increasing use of mediation by the Bar has developed experienced lawyers who recognize a variety of techniques to settle cases and med-arb is one option. No mediator should ignore this potential for resolution of a dispute.”21 Judge Waddington’s insight is as true for business executives as it is for mediators. Med-arb is a valuable tool, which should be routinely considered, and never ignored.

by Scott C. Van Soye
1 Dykema Gossett PLLC, “Arbitration Expert Predicts 21st Century Trends”.
1 Stipanowich, Thomas J., “ADR and the Vanishing Trial: The Growth and Impact of ‘Alternative Dispute Resolution’” Vol. 1, No. 3 J. Empirical Legal Studies 843.
2 Limbury, Alan L., “Making Med-Arb Work” (2007) 73 Arbitration 1, 105 at 106.
3 Khatchadourian, Minas, “Arbitration and Mediation between Europe and the Gulf”.
4 See Sato, Y., COMMERCIAL DISPUTE PROCESSING AND JAPAN, 283-286.
5 See CEDR Commission on Settlement in International Arbitration.
6 See Telford, Megan Elizabeth, “Med-Arb: A Viable Dispute Resolution Alternative,” IRC Press, January (2000), and New South Wales Consolidated Acts, Commercial Arbitration Act (1984), § 27.
7 Brewer, Thomas J and Mills, Lawrence R., “Combining Mediation & Arbitration” DISP. RESOL. J. (1999).
8 Gerald F. Phillips, “Same-Neutral Med-Arb: What Does The Future Hold?,” 60 DISP. RESOL. J. 24, 26 (2005).
9 See Telford, supra note 6 for summaries of these concerns. See also Blankenship, John T., “Developing your ADR attitude: Med-Arb, a template for adaptive ADR”.
10 See Limbury, supra, note 2. “Natural justice” is a concept used in the British Commonwealth. It is similar to what Americans think of as “due process”
11 See Telford, supra note 6.
12 Cleveland Board of Education v. Loudermill, 470 U.S. 532, 545-546 (1985).
13 Kagel, John, “New frontiers in dispute resolution. Skills and techniques: Comment.” IN New techniques in labor dispute resolution (ed. Howard J. Anderson, 1976) 185-90.
14 “Improper Evidence in Nonjury Trials: Basis for Reversal?” 79 HARVARD LAW REVIEW 2, 407 (1965)
15 See Phillips, supra note 8.
16 Blankenship, John T., “Developing your ADR attitude: Med-Arb, a template for adaptive ADR”.
17 See Telford, supra note 6.
18 See Limbury, supra, note 2.
19 See Blankenship, supra n. 3, citing Neil B. McGillicuddy et al.,“Third-Party Intervention: A Field Experiment Comparing Three Different Models,” 53 J. Personality & Soc. Psychol. 104, 110 (1987)).
20 Forester, John, “Planning and Mediation, Participation and Posturing: What’s a Deliberative Practitioner to Do?”.
21 See Phillips, supra note 8.

Scott Van Soye is the managing editor of ADR Times. He is also a full-time mediator and arbitrator working with the Agency for Dispute Resolution with offices in Irvine, Beverly Hills and nationwide. He is a member of the California Bar, and practiced real estate, civil rights, and employment law for over twenty years. He holds an LL.M. in Dispute Resolution from Pepperdine University, where he is an adjunct professor of law. He welcomes your inquiries, and can be reached at scott.vansoye@agencydr.com or (800) 616-1202, Ext. 721. www.scottvansoye.agencydr.com