Resolving Ohio Business Disputes Through Arbitration or Mediation

Why Use Alternative Methods to Resolve Business Disputes?

Disputes are inevitable in business, and how you resolve them can be critical. When conflicts arise, litigation is often the first option that comes to mind. For many Ohio businesses, however, alternative dispute resolution (ADR) methods such as arbitration and mediation may be more cost-effective, practical, and less time-consuming. Understanding how these ADR methods work, and their advantages and limitations can help business owners make informed decisions when faced with disputes.

What Is Arbitration and How Does It Work?

State law on arbitration is found in the Ohio Revised Code Chapter 2711. Arbitration is a private dispute resolution process in which a neutral third-party arbitrator is selected to hear both sides of a dispute and make a binding decision. Many business contracts in Ohio include an arbitration clause requiring the parties to resolve their disputes through arbitration. The process is generally less formal than a trial but more formal than mediation. It can be voluntary or mandatory, depending on the terms of the business contract or agreement. This is how arbitration works:

• Selection of arbitrator: The parties agree on a neutral arbitrator or panel of arbitrators. These are often professionals with expertise in the subject matter of the dispute. 
• Presentation of evidence: Both sides present evidence and arguments. Although similar to a trial, arbitration is generally less rigid than courtroom proceedings. There are no formal rules of evidence, and the process is typically more streamlined.
• Decision of arbitrator: After hearing both sides, the arbitrator issues a decision, known as an award. In binding arbitration, the award is binding and enforceable in court. When non-binding arbitration is used, the parties are not obligated to accept the arbitrator’s decision.

What Are the Pros and Cons of Arbitration?

Resolving disputes through arbitration has both advantages and disadvantages:

• Pros of arbitration: With fewer formal procedures and shorter timelines, arbitration can be significantly less costly than litigation. Unlike court cases, which are part of the public record, it is confidential and private. Arbitration can be completed in months, while litigation may continue for years. As the arbitrator’s decision is final, with limited grounds for appeal, it provides certainty and closure of the dispute.
• Cons of arbitration: While it is generally less expensive than litigation, costs of arbitration can add up if the process is extended or a panel of arbitrators is used. Some argue that arbitration may favor larger businesses with greater resources to draft contracts with arbitration clauses designed to protect their interests. In binding arbitration, parties have limited rights to appeal the arbitrator’s award. This can be a drawback if you disagree with the decision. 

What Is Mediation and How Does It Work?

Mediation is a voluntary process in which a third-party mediator facilitates communication between disputing parties to help them reach a mutually acceptable resolution. The Uniform Mediation Act, codified in the Ohio Revised Code Chapter 2710, addresses confidentiality and the conduct of mediators and prohibits mediators from being called as witnesses in court proceedings related to the mediation. The mediator does not make a binding decision but helps the parties explore options for settlement. Mediation may be used in business disputes when parties want to preserve their relationship or are willing to negotiate. The process works as follows:

• Selection of mediator: Both parties agree on a mediator, who is typically a trained professional with experience in conflict resolution.
• Initial meeting: The mediator meets with both parties, either separately or together, to gain an understanding of the issues in dispute. This allows the mediator to identify the concerns and interests of each party.
• Negotiation: The mediator facilitates open communication between the parties by helping them identify common ground and explore potential solutions. Although the mediator may offer suggestions, the final decision is left to the parties. 
• Agreement: If the parties can reach an agreement, it is put into writing and signed by both sides. The parties may choose to make this agreement legally binding. 

What Are the Pros and Cons of Mediation?

Mediation, like arbitration, has certain benefits and drawbacks:

• Pros of mediation: Unlike arbitration, mediation allows the parties to control the outcome of the dispute. Because it is a collaborative process, it can help preserve business relationships that may otherwise be damaged. It is a flexible, informal process that allows the parties to explore creative solutions that may not be possible in an arbitration or court setting. Mediation is private, and the details of the dispute do not become part of the public record.
• Cons of mediation: Mediation is a non-binding process unless the parties agree to make the final settlement legally binding. If it fails, the dispute may still go to arbitration or court. The process relies on the cooperation of both parties, and there are no guarantees a resolution will be reached. If there is a significant power imbalance between the parties, one side may feel pressured into accepting a settlement that is not in their best interests. 

Arbitration vs. Mediation: Which Method Is Best for Resolving a Business Dispute?

When considering arbitration or mediation for resolving a business dispute, it is essential to assess the nature of the dispute, the relationship between the parties, and the desired outcome. Arbitration may be preferable if the dispute requires a final, binding decision or involves complex legal or technical issues that require expert knowledge. Mediation is more appropriate when the parties are willing to negotiate and prefer to maintain control over the resolution.

At Watson Kuhlman, LLC, we excel in helping businesses resolve complex legal matters. Our seasoned business lawyers can help you understand the process, prepare your case, and ensure your rights are protected throughout dispute resolution. Contact us at 216-208-7858.