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Health & Fitness

Dramatic Cost Savings with Mediation

The cost-savings from using mediation are substantial and fall into four separate categories: (1) Financial Cost, (2) Opportunity Cost, (3) Relationship Cost and (4) Emotional Cost.

Financial Cost. Resolving a dispute with litigation is a very expensive undertaking. Parties are required to hire lawyers, who generally bill by the hour, and the costs add up quickly. Even cases that settle before trial typically only do so after significant money has been spent in the pre-trial discovery phase. In a relatively uncomplicated lawsuit, it is not unusual for out-of-pocket expenses for depositions, experts, trial materials and the like to be in the tens of thousands of dollars. These costs are increased exponentially in the case of complex litigation. In addition to attorney fees and discovery expenses, parties to a lawsuit incur trial-related expenses such as expert witness fees and court costs. Arbitration is more economical than litigation but still involves substantial outlays on attorneys and pre-hearing expenses. And because the process involves a hearing with the presentation of evidence and legal arguments, the arbitrators’ fees add up. Mediation is the least-costly method for resolving disputes that people cannot work out on their own and will almost always save the parties money compared to litigation or arbitration. The primary reason is that mediations are completed in substantially less time than other conflict resolution methods, so even when lawyers are involved, the parties’ monetary outlays are much lower. Many mediations, including those involving substantial property rights where the stakes are high, tend to be completed in a day or less. Even a lengthy mediation that lasts several days will be a small fraction of the cost of going to court.

The actual cost of a mediation will vary depending upon the complexity of the case and, although some studies have been done, quantifying the cost-savings from mediation isn’t an exact science because every dispute is different. Still, there is little or no debate around the fact that choosing mediation over traditional adversarial method saves money. In addition to saving on attorney fees, the parties do not spend money on pre-trial maneuvering or incur court reporter fees or similar expenses. A party’s share of the mediator’s fee for even a lengthy mediation is a tiny percentage of the cost of a full-blown legal battle played out in court or in a hearing before an arbitrator.

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Opportunity Cost. “Opportunity cost” refers to the value of an alternative that must be given up in order to pursue a certain activity. In other words, it refers to what a person cannot do because he is doing something else. People’s resources are finite, so when they spend time and energy on one thing, it’s not available for something else. When it comes to dealing with conflict, resources spent resolving the dispute are not available for other pursuits. For example, when a business owner meets with her lawyer to prepare for trial, she is diverting time and attention away from running her company. When an employee spends days responding to a document production request or sitting for a deposition, he is not at his desk generating business, pursuing leads or managing others. Students and the unemployed face opportunity cost issues as well: Time and energy spent on conflict resolution means time and energy away from more pleasurable pursuits like family, leisure activities and even sleep. Since mediation resolves conflict substantially faster than litigation or arbitration, the opportunity cost of using mediation is lower than these alternatives. Put another way, mediation offers parties in conflict tremendous “opportunity cost savings.”

Relationship Cost. Placing a dollar value on a destroyed relationship is impossible. However, no one doubts that confrontational court battles and arbitration proceedings damage important relationships almost every time. Since litigation and arbitration usually degenerate into something resembling warfare, businesses in particular incur a cost in the form of lost business opportunities with their adversary. In mediation, the principals sit together, communicate about their dispute and collaborate on a resolution. Because the parties work together on a solution in a non-adversarial process, there is a greater likelihood of mending fences and salvaging an ongoing business relationship. Individuals in conflict are also likely to preserve and even improve their personal relationships with one another as a result of using mediation.

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Emotional Costs. Although some people enjoy battle and seem to thrive on conflict, most find it stressful and even traumatic. In describing how mediation reduces the emotional cost of resolving disputes, it is helpful to think about it in terms of four attributes: What, How, Where and When. (I) What. In litigation and arbitration, the focus is solely on the dispute. The entire objective of the process is to determine who did what to whom. Spending substantial amounts of time and energy reliving history can be emotionally-debilitating, particularly for people who feel they have been wronged. In mediation, the focus is on finding solutions and the future. Conjuring up and concentrating on an unpleasant event in the past causes more anxiety for everyone, at a higher emotional cost, than focusing on the future. (II) How. In an adversarial proceeding, each party works diligently to prove that the other side was at fault, which is accomplished through a series of attacks and counterattacks as each side works to discredit the other in front of the judge or arbitrator. In mediation, rather than make allegations and charges, the parties communicate about ways to move forward and collaborate on a solution to their problem. Because mediation by its very nature involves everyone working together, the process is inherently less emotionally taxing than engaging in battle, which is the hallmark of litigation and arbitration. (III) Where. The allegations and accusations made during a trial occur in the very public setting of a courtroom, often causing embarrassment to the people and businesses involved. Court rulings typically contain facts about the dispute, and these documents are easily-accessible to the public through a rudimentary Internet search. Mediation is private, so the parties needn’t endure the potential shame and humiliation associated with having the details of their dispute made public, which carries a high emotional cost. (IV) When. Litigation is a long, drawn-out process, and parties are required to wait as their trial runs its course. The uncertainty about the outcome causes stress, apprehension and fear for many people. They feel stuck and unable to move forward with their lives while the process drags on. Since mediation resolves disputes quickly and the parties decide the result in real-time at their session, the anxiety of waiting a year or longer to learn the outcome is reduced substantially if not eliminated.

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