Conducting Pre- Mediation Economic Analysis to Achieve Successful Alternative Dispute Resolution

This paper is for ( Litigation and dispute resolution ) course this course provides the cornerstone of the Litigation Law track. It introduces the theory and practice of litigation and other forms of dispute resolution, and draws upon the basic tools of decision theory, game theory, and economic analysis to address some of the key features of the litigation process and its institutions. Among the topics addressed are the decision to commence litigation and whether to settle or go to trial; settlement negotiations; strategic behavior as affecting decision making by both private actors and the courts; economic analyses of litigation; agency or moral hazard problems presented by both lawyers and courts; the impact of attorney’s fee arrangements, fee-shifting rules, and court-imposed sanctions; party versus court control of proceedings; and the effect of enforcement costs on competing substantive legal rules.
I will attache the outline of this paper, I want you to follow this order, and I put some sources please use it and use others if you need.
Here is some of my professor’s questions and my answers, I need you to answer his question is this paper too.
he said “you need to work on narrowing the scope. I saw the game tree you included, but I was thinking more about a list of references as well as a lot more specifics regarding what the economic analysis is.

One substantive comment on your game tree – the choice of mediation is usually not all or nothing. If mediation fails, then cases can proceed to litigation. I am not aware of binding mediation where the parties must accept the recommendations of the mediator.”

and when I narrow my paper, he said ”
Based on you Section II and the links you included, you are examining the use of decision theory in order to increase the success that the mediated outcome is accepted. You analysis should attempt to go beyond a purely descriptive paper and analyze how use of decision theory increases “success”. You also should be very specific in defining what “success” means.

I still do not know what the “Chevron case” is (no citation or description of the case) and how it fits.

Still confused about some aspects of your decision tree – often court and arbitration are alternatives – and most of the time arbitration is use prior to litigation in court (e.g., specified in a contract). Are you looking at ex-ante incentives (e.g., at the time of contract) or are you looking at ex-post effects on litigation rates and outcomes? ”
here is my answer:
“In section II, I will define success as the best possible outcome for both parties (i.e, a “win-win scenario” as opposed to going to court, which is very costly in terms of time and money). I will also examine how mediation is more likely to result in a “win-win” outcome than arbitration (either binding or non-binding). In “win-win” situation, both parties will incur some cost, but that expenditure will be minimized when the parties are able to negotiate a reasonable settlement as quickly as possible. An economic analysis will allow both parties to have clear insight into one another’s best interests so that they can come to the most equitable solution.

-“At Chevron, for instance, ADR-based mediation of one dispute cost $25,000, whereas mediation through outside counsel would have cost an estimated $700,000 and going to court as much as $2.5 million over a period of three to five years.” (Carver, Todd B. and Albert A. Vondra, “Alternative Dispute Resolution: Why It Doesn’t Work and Why It Does” Harvard Business Review, May-June 1994)

This case provides an excellent example of how two parties can resolve a dispute at a fraction of the cost of Non-ADR options.

-Both parties are incentivized to choose the option that will allow them to reach a solution that is acceptable to both in the shortest possible period and at the lowest possible expense. However, there are complications that must be considered before we can recommend mediation as an ex-ante provision. Because the more powerful party is far less likely to run out of time and money, specifying mediation in a contract (i.e., between an employer and an employee) it has risks for the employee. In such a case, it is best that contracts continue to indicate arbitration as a the first choice for conflict resolution, with the option of selecting mediation when acceptable to both parties.”

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