Required to Mediate or Arbitrate? How to Get the Opposing Party to the Table

Business and commercial contracts include mediation and arbitration clauses with increasing frequency. This is true with contracts between business to business, business to consumer, and public policy / government contracts such as:

1. Contracts to Buy and Sell Real Estate in Colorado require mandatory mediation for disputes that arises related to the contract (paragraph 22)
2. Concerning Common Interest Communities, SB 06-089 amended the Colorado Revised Statute 38-33.3-124 to read:
   

   Legislative declaration - alternative dispute resolution encouraged - policy statement required. (1) (a) The general assembly finds and declares that the cost, complexity, and delay inherent in court proceedings make litigation a particularly inefficient means of resolving neighborhood disputes. Therefore, common interest communities are encouraged to adopt protocols that make use of mediation or arbitration as alternatives to, or preconditions upon, the filing of a complaint between a unit owner and association in situations that do not involve an imminent threat to the peace, health, or safety of the community.

3. Virtually all Credit Card Agreements
4. Online Service Agreements for E-commerce
5. Banking Agreements to open Checking or Savings Accounts
6. Corporate Contracts
7. Private Business Contracts

Colorado laws, judges, and courts have consistently demonstrated a clear preference for ADR (Alternative Dispute Resolution), ordering mediation and arbitration as a desirable first step to resolution. This holds true even when there is no pre-existing ADR agreement, such as in contested divorce situations, small claims court proceedings and other litigation proceedings. For example, there is mandatory mediation prior to setting a hearing date for Small Claims Court in Douglas County. ADR is not generally favored for criminal matters.

While the requirement exists, the mystery for many consumers and private citizens is how to get the opposing party to the table. How do I initiate mediation or arbitration?

Initiating Mediation:

The majority of contract disputes are zero-sum games. One wins, the other loses. A dollar in my pocket takes a dollar from yours. The complaining party is usually very eager to obtain resolution because they are the one that wants the dollar. The opposing party or respondent is eager to avoid settlement because resolution might mean surrendering a carefully accumulated dollar.
To that point, excuses abound: I don’t like your choice of mediator; those dates don’t work; mediation is too expensive, etc. Delays, excuses, and smokescreens may frustrate complainants to the point of giving up, with varying degrees of success. These tactics can also backfire, causing complainants to redouble efforts. Based on the individual circumstances, refusing to mediate can be proven as contempt of a court order, or breach of a contractual requirement, so some unintended or unsavory consequences may result for the refusing party. Judges may not look favorably on such attempts.

• HOW TO FILE: Colorado Mediators & Arbitrators offers a formal mediation filing process, using a Mediation Submission Agreement. Once a party files for mediation, the responding party is given 10 days to respond. If no response if received or the responding party refuses to mediate, the CoMA Case Administrator is then able to write a letter to the filing party indicating that “…a formal request to mediate was filed on (date) providing a choice between CoMA’s 16 Panel Members (9 attorneys, 7 industry experts currently). However, no response was received or there was a refusal to mediate.” The filing party may then file in court, demonstrating their attempt to comply with the mediation requirement. The court generally upholds the contractual requirement to mediate. Calculated delays may have an adverse inference on the responding party, and usually don’t alleviate the requirement.

Initiating Arbitration:

Arbitration requirements effectively eliminate access to a litigation process through the courts. In general, arbitration is less expensive, less formal, and more expedient / faster than litigation. In some circumstances, it is just the opposite, as when a claim, currently $7,500 in Colorado, would otherwise be eligible for Small Claims Court.

Additionally, some very well known forums front-load significant administrative fees on the claimant and charge relatively low response fees, making resolution of a complaint impossible for some individuals. Corporations favor these forums, because they are able to gracefully side step addressing an aggrieved public.

What if the contract calls for AAA Rules, does the arbitration have to go through AAA?

A contract might require the use of a particular forum's rules, very commonly AAA / American Arbitration Association, NAF / National Arbitration Forum, or other dispute resolution forums. Does this mean that arbitration must also be administred by the same forum? Generally no. Any forum may administer the arbitration using another forum's rules. CoMA has administered several arbitrations using another arbitration forum's rules of procedure. The first matter an arbitrator may decide is which rules to use when in dispute.

Colorado Mediators & Arbitrators, on the other hand, evenly divides a modest administrative fee between the claimant and respondent, allowing each party to bear a proportionate cost up front. Fees can be shifted as appropriate by the arbitrator in the award.

• HOW TO FILE: Filing for arbitration is determined by claim amount, with Claims of $74,999 and Under are governed by Expedited Arbitration Rules;Claims of $75,000 and Over are governed by regular Arbitration Rules. Submission Agreements are easy to use, with .pdf electronic fillable forms.
• Identify Arbitration Rules of Colorado Mediators & Arbitrators when drafting new ADR provisions: View Sample Arbitration Clause