Alternative Dispute Resolution: Who Is Involved in It?

By Dr. Gary Deel, Ph.D., J.D.
Faculty Director, School of Business, American Public University

Note: This article contains content adapted from lesson material I wrote for APU classes.

In previous articles, I’ve discussed the different types of alternative dispute resolution (ADR), including arbitration, mediation and other less common methods. In this article, we’ll examine the different people that might be involved in an ADR dispute.

ADR Parties: The People Affected by Conflict

Individuals who are directly involved in a conflict are referred to as “parties,” notwithstanding whether the individuals pursue ADR or formal litigation. Most conflicts consist of one dispute between two parties.

In the formal civil litigation system, there is always a plaintiff and defendant. However, there are exceptions to this norm.

At times, there may be situations where having multiple parties on either side of a dispute is either permissible or necessary. For example, suppose a class action lawsuit is filed against a toy store for selling a defective toy. Once the class action is certified by a court, all purchasers of the defective toy may be parties to the dispute, so there would be multiple plaintiffs.

But also suppose that in this same example, the toy store is contractually entitled to indemnification from liability by a third party, the toy manufacturer. In this case, the toy store may insist that the third party participate in the conflict resolution process; this would be a case of multiple defendants.

As a final distinction, parties who do not have direct interest in the outcome of the suit may still be involved for other reasons, such as to determine a party’s rights to property that might be involved in the dispute. Let’s suppose the defective toy caused the deaths of some children, and life insurance policies are owed. In this type of case, the life insurance providers may compel a suit between the families of the children and the toy store (and/or manufacturer) to determine liability before policy benefits are paid.

Similarly, there may also be more than one dispute between parties. Suppose, for example, that a hotel contracts with a restaurant franchise for the operation of a restaurant inside the hotel. After a few months of operation, the two parties discover conflicts concerning the 1) profit sharing; 2) the leasehold for the space in which the restaurant operates; and 3) the rights to use of the restaurant’s intellectual property (such as its name and logo).

Although there are fundamentally different legal issues in the restaurant example, those issues would likely be litigated in the same suit in a court of law if they arise from the same written agreement. Consequently, alternative dispute resolution professionals should be prepared for complex issues.

The Use of Agency in Alternative Dispute Resolution

Agency is another way in which additional parties may be brought into a dispute. The concept of agency provides that a principal may hire an agent to act on his or her behalf. The agent’s actions, depending on the circumstances, may bind the principal to promises made and obligations undertaken by the agent.

For example, suppose that a homeowner hires a realtor to help sell his house. The homeowner explicitly advises the realtor that he will accept no less than $100,000 for the house.

However, the realtor finds a buyer who offers $75,000, and she accepts the offer on behalf of the homeowner. Barring any reason that the buyer would or should know that the homeowner instructed the realtor to not accept offers of less than $100,000, the law may hold that the homeowner is obligated to the commitment made by the realtor.

But this is not to say that the realtor is off the hook in her behavior. Her negligent (if unintentional) or fraudulent (if intentional) conduct is a breach of her agreement with the homeowner, so the homeowner may recover from her any financial losses that he incurs (in this case, at least the $25,000 for the price difference). However, the “apparent authority” possessed by the realtor in binding the homeowner to an agreement is a very important factor in dispute resolution.

Agency is a very important concept in cases involving employees acting within the scope of their jobs, because employees are generally viewed as agents of their employers.

ADR Professionals Keep the Dispute Process Moving Along

In addition to individual or group parties, other people involved in an alternative dispute resolution dispute usually include ADR professionals who facilitate the process. As examples, mediation makes use of third-party mediators, and arbitration employs the use of arbitrators.

ADR professionals are usually licensed attorneys with special credentialing to perform arbitration functions. In many cases (especially with arbitration), they are court judges who perform arbitration in addition to their judiciary capacity.

Although it is not necessary for any party to have attorney representation at any ADR procedure, strictly speaking, it is often advised that attorneys should routinely manage these affairs and use their expertise to yield the best possible chances of success.

When attorneys are retained in alternative dispute resolution, they have a number of specific obligations to their clients. They include:

• Duty of competence: Depending on jurisdictional rules, attorneys may or may not be ethically obligated to recommend or even discuss ADR with their clients, but alternative dispute resolution should be a part of the counseling process wherever appropriate. Attorneys should use their expertise to thoroughly inform their clients of the different ADR options, and recommend the ADR options that are most likely to produce satisfactory results.
• Duty of fiduciary: As with traditional litigation, attorneys have a fiduciary duty to bill their clients only for services actually performed and to use best efforts in representing clients at all times.
• Duties of confidentiality and loyalty: Whether clients are pursuing alternative dispute resolution or litigation, attorneys always have duties to protect their clients’ interests at all times. These duties include maintaining the confidentiality of any client information to which they are privy and advising if an attorney has relationships with other people (such as opposing parties) who may be adverse to the client. In such situations, that attorney must either withdraw as counsel or obtain informed consent for the representation.

Paralegals Provide Assistance to Attorneys

Paralegals are legal professionals who assist attorneys with the administration of their legal services. Although paralegals are commonly heavily involved in the legal duties of the attorneys they serve throughout the process, there are very specific and strict rules limiting the involvement and autonomy of paralegals.

Generally, paralegals must not perform any duties that amount to the independent practice of law. Any decisions regarding client business must be made by attorneys handling such cases, and any correspondence, letters, or court filings drafted by paralegals must be reviewed and approved by attorneys prior to transmission.

Notwithstanding these limitations, paralegals are eligible in many jurisdictions to perform certain types of ADR services (e.g. mediation). Also, paralegals can earn alternative dispute resolution credentials if they wish to offer these services, either in connection with a law firm or independently.

Consultants and Expert Witnesses in Alternative Dispute Resolution

Sometimes, the nature of disputes requires a detailed explanation of complex issues by expert witnesses or consultants. For example, one of the most common issues in personal injury disputes is the nature and degree of injury, and this often involves careful assessment and explanation from trained medical professionals.

The ability to articulate the merits of one’s case to a layperson can be vital to a satisfying resolution of a dispute. In addition to my duties as a university faculty director, I also serve as an expert witness for attorneys and I’ve written about my work in many hospitality-related cases.

The use of expert witnesses and consultants is more common in matters of arbitration and other types of binding ADR, where the outcome is final and the importance of effective argument much more critical.

Each of the people involved in the alternative dispute resolution process has an important role to play, and together their work allows for an alternative to litigation that is often less expensive, less time-consuming, and less complex. Without these important roles and structures, ADR remedies could not serve the benefits that they do for disputants.

About the Author

Dr. Gary Deel is a Faculty Director with the School of Business at American Public University. He holds a J.D. in Law and a Ph.D. in Hospitality/Business Management. Gary teaches human resources and employment law classes for American Public University, the University of Central Florida, Colorado State University and others.