Mediate in Lieu of Mandatory Arbitration

MULT CO 2For civil suits under $50,000, state law requires nonbinding arbitration.  However, an underused local rule allows parties to Multnomah County lawsuits to substitute mediation for nonbinding arbitration.

Mediation is a great option because arbitration is not always the best way to resolve small cases.

Keep a small case small.  Nonbinding arbitration can increase costs.  Typically, both sides take depositions.  Often, one or both sides pay experts for live or written testimony.  Careful and / or anxious counsel will prepare diligently for the arbitration hearing.  If one side wins big, then, the loser will likely appeal to a full-blown trial.  That costs even more.  So, the best chance to keep costs down is to take advantage of Multnomah County Supplementary Local Rule (SLR) 12.025.

The court’s process is simple.  The parties file a stipulation with the court (form is in SLRs).  Then, the parties mediate within the same time frame as arbitration – 91 days from assignment to arbitration. (SLR 13.165).  Even if the parties do not settle, they have met their mandatory arbitration obligation.

If the parties WANT to continue with another step of arbitration following mediation, they can, but they need not.

The mediator reports to the court whether the parties settled.

If, after agreeing to mediate, a party does not mediate in good faith, then the court may award the other party its consequential costs.   The rule does not define “good faith.” So, I look to where good faith bargaining IS defined.

The National Labor Relations Act requires good faith negotiations in collective bargaining.  Federal law does not require the parties to agree. It does not prohibit hard bargaining, that is, asserting a strong position.  However, a “take it or leave it” approach can be considered bad faith.  Also, failing to meet or not having sufficient authority to make agreements can be considered bad faith.  As a practical matter, I doubt that “good faith” would be an issue if the parties actually show up and exchange offers.

Cost of mediation.  SLR 12.025 also states, “unless the parties agree to different compensation,” they pay the mediator at the same rate as the arbitrators who conduct mandatory arbitration.

Conclusion.  Mediation in lieu of mandatory arbitration is underused.  Think about whether your client might benefit from it.

*Jeff Merrick is qualified by the Oregon Judicial Department for court-connected mediations and accepts mediations under SLR 12.025.