Many of us have considered a situation where the same person is asked to both mediate and arbitrate a dispute. The conventional wisdom is that arbitration must come first since the mediator could receive confidential communication or information that might be inadmissible at the arbitration hearing or just not offered or revealed by the party in question. The other side is that arbitration is every bit as expensive as a trial, in some cases more so when you add in the administrative fees of some of the organizations facilitating it. Therefore, mediation should come first because it would save the expenses associated with a full-blown arbitration hearing. Furthermore, many mediators, (me included), don’t want to hear confidential information in the private sessions anyway because if it can’t be shared with the other side, it is of little use in resolving the matter.

We all know that alternative dispute resolution is a creature of contract so what happens when it provides that mediation and arbitration are to be conducted by the same person? I came across a very interesting clause in a construction case that required just that:

In the event the mediation does not resolve said claim or dispute; the parties agree that all information provided to the mediator, including the Consulting Firm’s finding/recommendation, shall be used by the mediator to provide a final and binding arbitration resolution/ruling in writing within ten (10) days of mediation. The parties hereto agree that said resolution will be final and may be submitted to a court of appropriate jurisdiction for enforcement. The substantially prevailing party at such mediation/arbitration shall be awarded reasonable attorneys’ fees and costs in addition to any other awards.

A little context here. The contract was for the replacement of a roof on an office building. It was between the owner and contractor but also named the “Consulting Firm”, which was a group that advised the owner like an architect. The only duties of the Consulting Firm referenced in the contract were to “declare substantial completion” and “consider applications for payment” from the contractor. But it was to play a very interesting role in dispute resolution.

In the event of a dispute, the issue was to be submitted to the Consulting Firm whose duty it was to, “submit a resolution to each party within five days.” If that did not resolve it, the parties could invoke the mediation provisions. But if that failed, the above language created some interesting questions for me.

The contract required that I was to issue a “final and binding arbitration resolution/ruling” within ten days of the mediation. But in making that ruling, I was to consider “all information provided to the mediator, including the Consulting Firm’s finding/recommendation.” While both sides would know the particulars of the Consulting Firm’s findings, they might not know the extent of the information provided to me in the private sessions. If someone provided information in the private sessions that they considered confidential, was I to ignore it or pretend I did not hear it when I considered my ruling? Or, should I have declared at the outset that I would share with everyone, any information provided to me in the private session?

Fortunately, we settled the case in mediation and did not move to the arbitration phase, but I think the threat of a binding decision looming in 10 days may have helped moderate the demands of both sides.

The same person can conduct a mediation before arbitration in some circumstances, but the parties should very carefully craft the rules and protocols to maintain the integrity of both.