Two lawyers are shaking hands after reaching a successful agreement during a business meeting, while their colleagues applaud them

Arbitration, settlements, and mediation in Texas in brief

• Alternative dispute resolution (ADR) is usually cheaper and faster than going to trial – particularly if handled properly by attorneys for the plaintiffs and the defendants.
• Alternative dispute resolution is the term for reaching an agreement between parties without going to trial and includes settlements, mediation, and arbitration.
• The vast majority of lawsuits (proceedings by one party against another in a civil court of law) are settled before going to trial, primarily through various forms of alternative dispute resolution – agreements between the parties without court intervention.
• ADR is commonly used in cases such as child custody, property disputes, business disagreements, personal injury, contract disputes, and any other dispute that is not a criminal matter.

The following information is provided by T. Michael Ballases, a Texas attorney and expert in lawsuit resolution, awarded best lawyer designation in 2023 and 2024.

Decline in litigation of lawsuits

For the resolution of legal disputes, most people are familiar with litigation as two opposing lawyers representing their clients before a jury in a courtroom, popularized through TV legal dramas.

However, litigation is a more general term applying to any number of actions in a court-based process. Simply filing a lawsuit with a court is an act of litigation. Another form of litigation is when opposing parties initiate a trial in search of a ruling by a judge or jury.

Going to court

Today, very few civil cases are actually decided by a court. How many exactly? For suits brought in federal court, estimates are as low as 1% of the total filed.

Court trials are expensive, time consuming, and often emotionally exhausting. The courtroom rules of procedure are stringent and more confining than the process of a settlement outside of court. Further, U.S. Supreme Court decisions have made case disposition (resolution) by a litigating party’s motion more likely.

Summary judgement

One avenue to case settlement is a summary judgement, in which a judge makes a ruling on a case, or parts of a case, before trial begins. Either party can seek a summary judgement, yet another type of litigation.

To succeed in a motion for summary judgment, one party must present conclusive evidence to the court before trial that there is no dispute as to material (important) facts. The “movant” – the party making the motion – has the burden of proof in asserting no such dispute. To succeed, his or she must successfully demonstrate that no reasonable jury could rule against the movant based on the evidence.

In weighing the motion, the court (the judge) looks at the evidence in the light most favorable to the non-movant (the party who did not make the motion). The court may grant either a full or a partial judgment.

For example, a judge might grant summary judgment on the question of liability (fault) of the opposing party but leave the issue of amount of damages owed through a trial.

Summary judgment should not be confused with a directed verdict, also known as an instructed verdict or “judgment as a matter of law.” Summary judgments are considered before a trial commences, whereas a motion for a directed verdict can only be made after the movant’s opponent has had an opportunity to present all evidence in his or her favor during trial.

Methods of alternative dispute resolution (ADR) for Texas lawsuits

The other alternatives to trial are settlement, mediation, and arbitration. These are collectively known as alternative dispute resolutions (ADR).

The Texas Alternative Dispute Resolution Procedures Act and The United States Arbitration Act govern alternative dispute resolution methods in Texas. Both outline procedures for ADR methods such as mediation and arbitration, including enforcement of agreements and awards.

Much of the legal preparation for out-of-court settlements is similar to trial preparation. These include:

• Investigating the facts.
• Gathering documents and evidence.
• Filing a demand to correct the rights issue.
• Response to the demand.
• Deciding to try to reach an agreement through negotiations.

From there the plaintiff and defendant lawyers have a few options, from negotiation or involving third-party help to reach an agreement.

Lawsuit settlement

Generally, a settlement is any agreement reached before trial through negotiation between the opposing parties without outside help from a neutral referee such as a judge or an arbitrator (see below). A settlement can occur at any point – sometimes before a lawsuit is filed.

Settlement through two-party negotiation is usually the first attempt at ADR. It is generally an informal and flexible process and can take place at any time right up to and during trial, with the two parties determining all aspects of the negotiated settlement.

Reaching settlement is frequently the best outcome of a legal dispute. But success depends on the expertise of the attorneys on the specific dispute at hand and the law governing its resolution. For this reason, seasoned lawyers are typically the better negotiators.

Pros of settlement

• The individual parties have direct input in pursuit of a customized agreement that addresses the needs of both parties.
• A settlement can be more time-efficient and cost-efficient than going to court or even through mediation and arbitration (defined below).
• Settlement terms can remain private, so sensitive information can be kept out of public records.

Cons of a settlement

• Power imbalances between the parties can result in unfavorable terms for the disadvantaged party.
• If a plaintiff’s or defendant’s attorney is not as skilled as their opponent’s legal counsel, the respective client can lose the benefit of impartial outside guidance available in arbitration and mediation.

Mediation of lawsuits

Mediation is a more formal form of negotiation than a settlement. It involves employing a neutral third party to help opposing parties arrive at a consensus. In Texas, mediation may be required in some cases before the disputants can go to trial.

Sometimes the term facilitation is used to describe a third-party discussion with the disputants to reach a decision or consensus. But the goal of mediation goes further and seeks a resolution of the entire issue with specifics.

Cases in which mediation is frequently used:

• Personal injury disputes – Often parties may relatively quickly reach agreement on who bears liability for a personal injury but are unable to agree on the amount of damages owed to the injured party. Mediation can allow a more efficient and amicable determination of damages than a trial may provide.
• Breach of contract claims – Contract disputes commonly flow from parties’ differing views on contract obligations of each party. These differences are often the result of poor communications and diverging interpretation of contract clauses. One advantage of mediation is that it permits the parties to address such differences in a more controlled and less charged atmosphere.
• Divorce – The process of legally ending a marriage can be especially contentious and trying for a couple. Years of growing acrimony can boil over into each side refusing to budge on sensitive issues such as child custody and dissolution of marital property. Whereas one spouse or the other (or both) may chafe at a judge’s ruling on such matters, dissolution through mediation may instead enable both parties to find greater satisfaction in the outcome because they were allowed a fuller role in negotiating the outcome.

Mediators are generally legal professionals trained in negotiation in seeking to understand the underlying interests of the parties and analyze the points of the conflict. This can involve letting the two sides freely express grievances as well as emotions.

Mediation is voluntary and can occur with both parties together or in separate meetings. The objective is to reach a voluntary and sustainable agreement. Mediators strive to avoid passing judgement on a position and only arrive at a settlement with the mutual agreement of the parties.

Pros of mediation

• A good success rate, which is one reason mediation is popular.
• Flexibility to find a solution that meets the needs of both parties, which might not be possible in a trial or binding arbitration.
• Reduces personal animosity through active collaboration. This can serve to preserve relationships between the disputants, particularly when family members or business associates are involved.
• Mediation can take place even after a trial has begun, thus potentially reducing the time and expense of court proceedings.
• Confidentiality is preserved as the mediation communications are private, which also enhances openness in the process. This can be important if mediation fails and the parties eventually go to court.

Cons of mediation

• The parties must be willing to compromise, and if they are not, mediation is unlikely to work.
• The agreement reached is not binding until signed by the parties, as are most arbitration outcomes and court decisions. But once a mediated agreement is signed by the parties, it becomes binding.
• Failure means proceeding to either arbitration or trial.
• The outcome in some instances may be less beneficial than a court determination, particularly if one or both parties is not represented by an attorney.

Arbitration

In arbitration, a neutral person (or persons) evaluates arguments and evidence presented by both sides. An arbitrator might be a retired attorney or judge, as well as someone with specific training in arbitration. This method of ADR is closest to a court proceeding, with rules on discovery and evidence determined by law.

After hearing from both sides, the arbitrator makes a decision. In many or most cases, an arbitration decision is binding, particularly when arbitration is contractually required for disputes between businesses and customers. Examples include rental car agreements and services contracts between law firms and clients.

However, parties can agree beforehand that the agreement is not binding, meaning it can be challenged in court. This means the time spent on arbitration may have been wasted, at least in the view of one of the parties.

The parties can also negotiate various aspect of the arbitration process. For example, it is not uncommon in disputes involving large monetary amounts for the parties to agree to an arbitration panel of three.

By stipulating an odd number of arbitrators, the parties may feel some assurance that a majority vote will be fairer than the decision of a single arbitrator who is potentially subject to individual biases. These are reasons why parties may opt to be represented by lawyers trained and experienced in arbitration.

Pros of arbitration

• Arbitrators are specifically trained typically possess special expertise and understanding of the legal issue(s) being considered. This may result in better-informed and fairer decisions.
• Parties can select the arbitrator or arbitrators, with an eye towards in-depth knowledge of the legal issues at hand.
• Arbitration generally allows a faster track to resolution than going to court. It can also be more cost efficient than a settlement or mediation due to the skill and focus of a well-chosen professional arbitrator.
• Arbitration decisions are private; the hearings and results are not part of the public record of a court ruling.

Cons of arbitration

• In some instances, expenses can be greater than those of settlement or mediation resolutions. While usually less costly than a court decision, expenses can add up if multiple arbitrators are involved and the issues are more complex.
• Neither party may be happy with a binding arbitration decision. This is generally less likely in mediation when both parties make compromises.
• Arbitration may be required by contract or law and therefore the only available process. Even if the parties would like to use mediation or proceed to court, arbitration is sometimes mandatory.
• The parties may have limited or no rights of appeal. When arbitration is established as binding, overturning the arbitrator’s decision can be very difficult or impossible.
• Some contracts make arbitration mandatory, blocking the option of suing in court.

Despite potential disadvantages of arbitration, since the passage of federal arbitration law in 1926, nearly 9 million cases have gone through arbitration, according to the American Arbitration Association. The law held that arbitration is “valid, irrevocable and enforceable” – in other words, as legitimate as a court decision.

About T. Michael Ballases, Texas trial attorney

Michael Ballases’ practice is focused on litigation of civil cases and in avoiding court litigation when possible. He has wide experience and expertise in helping his clients attain their desired outcomes through settlement, mediation, and arbitration methods. He effectively employs these methods in business and commercial disputes, real estate, banking, contracts, and general civil matters. He takes a common-sense approach in determining how to attain what his clients seek in court and through alternative dispute resolutions.

Learn more about T. Michael Ballases

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