Disputes arise with an alarming frequency in the horse business. They can range from something relatively minor, such as a misunderstanding over a feed bill, to a problem serious enough to threaten the continued existence of your business, such as alleged liability for a career-ending injury to a valuable show horse in your care.

Hardly ever is it sound business practice simply to ignore a dispute, but how should you proceed?

The response from one party to a disagreement, or often from both parties, reflects the increasingly litigious nature of our society–a lawsuit. This might or might not be appropriate, however, depending upon the nature of the dispute, the relationship between the parties, and other factors.

There are options that might allow you to reach a mutually agreeable solution with the other party before going to court, and you do yourself a great disservice if your automatic response to every disagreement is to rush to the telephone and dial "1-800-will-sue."

Lumped together under the general description of "alternative dispute resolution," or "ADR," these out-of-court options include informal negotiation between the parties, mediation, and arbitration. Differences between the various forms of ADR generally involve whether a third party is involved, and if so, the scope of the third party’s role in the process.

You probably are familiar already with informal negotiation; this occurs every time the disputing parties attempt to work things out between themselves.

Face-to-face negotiations have inherent risks, however, and you should be aware that any statements you make to the other party might later be considered admissions of fault on your part if the dispute winds up in court. In some states, even a simple apology might be construed as an admission that you did something wrong.

If you decide to negotiate with the other party, you should consider having another person present to serve as a witness in case the dispute eventually goes to court.

Among all the types of ADR, arbitration is most similar to a trial. Arbitration involves an impartial third party, the arbitrator, who assumes a central role. After giving both parties an opportunity to present their respective cases, an arbitrator makes a decision that generally is binding on the parties.

Mediation, the focus of this article, also involves an impartial third person who attempts to guide the disagreeing parties to reach a mutually satisfactory solution. A mediator listens to both sides, helps the parties devise a compromise or alternative solution, and generally serves as a buffer between the parties. Although a mediator might suggest a solution, he or she does not decide how to settle the dispute. Mediation is, in a sense, negotiation with a referee who attempts to guide the parties to a mutually agreeable resolution.

Disputes Suitable for ADR

The first and most important requirement for successful mediation is a mutual desire to resolve the dispute outside the courtroom. Because mediation is generally voluntary (although sometimes it can be court ordered), and because a satisfactory resolution requires input and, generally, compromise from both parties, mediation will not work if one party wants to mediate the dispute and the other party does not. Both parties must be committed to making the process work, and both must be willing to accept the final agreement.

Even if both parties want to proceed out of court, however, not all disagreements are good candidates for ADR.

If resolution of your dispute turns on the determination of a fact, for example, it is very unlikely that mediation will be successful. If a boarder whose horse was injured after escaping from a paddock on your farm demands reimbursement for the animal’s value, the fundamental question might be whether you or an employee left the paddock gate unlatched after turning the horse out for the day. If the boarder insists that the gate was left open, while you assert that the owner went into the paddock and failed to secure the gate, it is unlikely that mediation will resolve the factual question.

It also is possible that either your insurance carrier, that of the boarder, or both, will have an interest in the outcome and will object to mediation between the parties.

If the dispute involves liability, property damage, injury to an animal or person, or anything else that might involve your insurance company, you should check with your carrier before proposing mediation to the other party.

Mediation also generally is a poor way to determine the legal consequences of an action. In the above example, assuming that your employee left the gate open, the next question that must be answered is whether that action was legally negligent. In other words, did you have a duty of care toward the boarder’s horse, was that duty of care breached, and was there an injury?

Mediation is ideal, on the other hand, when the dispute involves subjective matters about which both parties can compromise. For example, you sell a young horse that you think will be an excellent show hunter prospect, but after a few shows, the buyer is not happy with the horse’s placings. He still wants to keep the horse as a pleasure mount for his daughter, but he thinks the price he paid for an "A" circuit prospect is too high for a pleasure horse.

To complicate things more, the buyer made an initial payment when he took possession of the horse, but he still owes you the balance.

The litigation possibilities in this scenario are numerous. You might sue the buyer for the unpaid portion of the purchase price, or the buyer might sue you, claiming breach of warranty because the horse did not turn out to be the "A" circuit campaigner you promised.

Either way, and no matter who eventually wins, litigation in this situation will be time-consuming and expensive, with attorney fees possibly totaling more than the original purchase price of the horse. Irreparable harm also might be done to the reputations of the parties as a result of publicity stemming from the trial.

Submitting the dispute to mediation, on the other hand, might result in a resolution that both you and the buyer can live with, at a fraction of the cost and time of a lawsuit. Working with a skilled mediator, the parties attempt to reach a compromise; in this case, possibly a final price that is somewhat lower than your original asking price.

The advantages of this approach to problem solving are clear. First, mediation generally results in a resolution much faster than a lawsuit. This can be especially important when, as in the above example, the subject of the disagreement is a living animal with a limited number of productive years.

Second, mediation generally is more convenient than litigation. A judge’s over-crowded docket, always a scheduling concern when proceeding in court, is not a factor in mediation. The parties and mediator schedule their own conferences, and the parties’ schedules generally can be accommodated.

Third, mediation should be less expensive than a lawsuit because attorneys sometimes are not involved and because there generally is not extensive (and expensive) discovery and expert testimony. There are fees associated with mediation, however, and expert assistance sometimes is required, so the expected savings are not always realized.

Fourth, there is more privacy for the parties. With few exceptions, court proceedings are open and available to the public. Also, there generally is less intrusive discovery during mediation than in the course of a lawsuit. Once litigation is begun, each party has the right to obtain information from the opposing party on a wide variety of topics that might be only marginally relevant to the actual subject of the lawsuit. This process, called discovery, is expensive, time-consuming, and often extremely intrusive into the business and personal affairs of the litigants.

Finally, because mediation should be less confrontational than litigation, it might be possible to resolve a dispute with a business associate while preserving the relationship.

Choosing a Mediator

Having made the mutual decision to pursue mediation, the next step for the parties to a dispute is choosing a mediator. The success of mediation depends primarily on the participants’ willingness to attempt to resolve their disagreement in good faith, a process that often begins when the parties agree on the mediator.

Attorneys sometimes serve as mediators, and many cities have mediation services that, for a fee, provide mediators.

A primary consideration should be any possible conflicts of interest the mediator might have, and you should insist that the mediator disclose any potential conflicts prior to the mediation. Another important consideration is the expertise of the mediator in the horse business.

A substantial portion of a mediator’s training and expertise involves finding a middle ground, a skill that can be applied regardless of the nature of your specific dispute. However, it might be easier for everyone involved if the mediator has some knowledge of the horse industry because of its often-specialized nature and terminology. Things can proceed more quickly if the mediator does not start from scratch.

It is difficult to generalize about the mediation process, since every mediation and every mediator is different. A session often starts with the mediator speaking to each party individually to gain a basic understanding of the issues. (The mediator might or might not request that written or documentary material be submitted in advance.) The mediator then alternates conferences with the parties, who generally remain separated through the mediation.

Guided by an impartial third party, give and take between the parties is the heart of mediation. The objective is two reasonably happy parties, and it is attainable if both sides are willing to negotiate with that goal in mind. Going to court should be your last option, not your first.

Setting the Stage for Discussion

After the parties settle on a mediator, but before the mediation process actually begins, a written mediation agreement should be executed. This agreement generally will be provided by the mediator, but if he or she does not offer one, you should request that the understanding of the parties be recorded in writing.

The agreement should identify the parties, state the anticipated costs of the mediation, including whether experts will be required and their expected fees, and explain how the costs will be allocated between the parties. It is customary for the mediation expenses to be divided equally.

The written mediation agreement also should state that the process is a confidential one, and that the mediator will not serve as an attorney, witness, or non-

testifying consultant for either party if the dispute cannot be resolved through mediation and there is subsequent litigation. By the same token, the agreement should provide that any written statements or other documents produced by the parties during the mediation process will be destroyed at the conclusion of the mediation. This level of confidentiality is important to encourage the participants to be open and candid with the mediator.

Finally, the agreement should set out the circumstances under which the mediation will be concluded, whether through a written settlement agreed to and signed by the parties, through the mediator’s unilateral decision that no agreement can be reached, or through the withdrawal of the mediator or one of the parties.