Alternative Dispute Resolution (ADR)

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Page 41

Alternative dispute resolution (ADR) is a term that refers to several different methods of resolving disputes outside traditional legal and administrative forums. These philosophically similar methodologies, which include various types of arbitration and mediation, have surged in popularity in recent years because companies and courts became extremely frustrated over the expense, time, and emotional toll involved in resolving disputes through the usual legal avenues. "The adversarial system is expensive, disruptive, and protracted. More significantly, by its very nature, it tends to drive the parties further apart, weakening their relationship, often irreparably" pointed out Whayne Hoagland in Business Insurance. ADR programs emerged as an alternative, litigation-free method of resolving business disputes.

Analysts also trace the rise of ADR methods to changing attitudes within the American judicial system. Business Horizons contributor Stephen L. Hayford observed that until the 1980s, "attempts by business firms to avoid litigation … were frustrated by a longstanding hostility on the part of the courts toward any devices that infringed on their jurisdiction." But during the 1980s, Hayford noted that a new body of case law emerged that sanctioned the use of binding arbitration provisions in commercial contracts between companies, business partners, employees and employers, etc. This body of law continued to evolve in the late 1990s. For example, the Alternative Dispute Resolution Act of 1998 extended ADR mechanisms throughout the federal district court system. As Simeon Baum stated in CPA Journal, "the act recognizes that ADR, when properly accepted, practiced, and administered, can not only save time and money and reduce court burdens, but also 'provide a variety of benefits, including greater satisfaction of the parties, innovative methods of resolving disputes, and greater efficiency in achieving settlements.'"

Today, legal and corporate acceptance of alternative dispute resolution as a legitimate remedy for addressing business disagreements is reflected in the language of business contracts. ADR contingencies have become a standard element in many contracts between companies and their employees, partners, customers, and suppliers. As U.S. News & World Report noted, "virtually every state has experimented with some form of ADR." With the growth of ADR has come a growing number of organizations and associations designed to assist commercial entities in the use of these alternative dispute resolution methods.

Arbitration Associations and Organizations

There are several U.S. organizations and agencies that are directly involved in arbitration and arbitration issues. These include the National Academy of Arbitrators (NAA), the American Arbitration Association (AAA), and the Federal Mediation Conciliation Service (FMCS). The NAA was founded in 1947 as a non-profit organization to foster high standards for...