Alternative Dispute Resolution

Arbitration more closely resembles traditional litigation in that a neutral third party hears the disputants' arguments and imposes a final and binding decision that is enforceable by the courts. The difference is that in arbitration, the disputants generally agreed to the procedure before the dispute arose; the disputants mutually decide who will hear their case; and the proceedings are typically less formal than in a court of law. One extremely important difference is that, unlike court decisions, arbitration offers almost no effective appeal process. Thus, when an arbitration decision is issued, the case is ended.

Final and binding arbitration has long been used in labor-management disputes. For decades, unions and employers have found it mutually advantageous to have a knowledgeable arbitrator—whom they have chosen—resolve their disputes in this cheaper and faster fashion. One primary advantage for both sides has been that taking disputes to arbitration has kept everyone working by providing an alternative to strikes and lockouts and has kept everyone out of the courts. Given this very successful track record, the commercial world has become enthusiastic about arbitration for other types of disputes as well.

Now a new form of arbitration, known as court-annexed arbitration, has emerged. Many variations of court-annexed arbitration have developed throughout the United States. One can be found in Minnesota, where, in the mid-1990s, the Hennepin County District Court adopted a program making civil cases involving less than $50,000 subject to mandatory nonbinding arbitration. The results of that experimental program were so encouraging that legislation was later enacted expanding the arbitration program statewide. As of 2003, most cases were channeled through an ADR process before they could be heard in the courts. A growing number of other federal and state courts were adopting this or similar approaches.