On its face, the phrase “binding mediation” sounds like a contradiction in terms: Mediation, by definition, is a voluntary process, in which the parties themselves, with the help of a neutral third party, reach an agreement, which becomes “binding” only if the parties say so. This is of course contrasted with arbitration, in which disputes are submitted to a neutral third party who imposes an outcome upon the parties after an adversary hearing in which evidence, including sworn testimony, is received. A hybrid of these two processes, sometimes referred to as “med-arb” has also been used for many years. In med-arb, the parties agree to first attempt to settle the dispute through mediation, but if the mediation is unsuccessful the mediator then takes on the role of arbitrator. A typical adversary arbitration hearing is then held, and the arbitrator (who initially came into the dispute as a mediator) renders an award, which is then confirmed by the court.
THE ‘BOWERS’ CASE
A more recent development in alternative dispute resolution is the concept of “binding mediation,” which was the subject of a recent California appellate decision which may have important implications for mediation and the ADR process in general. In Bowers v. Lucia (2012 WL 1939722), the parties to a business dispute engaged in a multi-day binding arbitration of one portion of their dispute (the other portion to be decided later in a related civil action). Before the arbitration was concluded, however, the parties entered into a settlement agreement, which they put on the record before the arbitration panel and thereafter confirmed in a written agreement. The agreement provided that both the arbitration matter and the pending civil matter were to be submitted to mediation, with the following essential terms:
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