Conflict Resolution for Small and Family Business: Arbitrating Supplier-Customer Disputes

business arbitrationWhen companies have disagreements with suppliers, distributors or customers, it often disturbs a mutually beneficial arrangement.  Neither party wants a prolonged, expensive legal dispute.  Neither party wants the public, or other customers and suppliers, to know about the dispute or the terms of the underlying contract.  Small or family businesses are often so constrained in time, money or the need for continued production that there is a premium on efficient resolution.

There is an alternative.  If both parties are looking for a fast, cost-contained solution, they can call on an arbitrator to make an expedited decision for them.  An arbitrator is similar to a private judge.  By agreement with the parties, he can look at each side’s version of the facts of the case and any particular laws that apply, then reach a decision that the parties have been unable to reach.  The whole thing can be decided and done within a few months, which reduces the drag on internal resources, reduces the legal bills and reduces the ongoing buildup of conflict between parties that may want to continue to work together.  The whole process stays private, as do the terms of the arrangement from which the dispute arises and even the fact that the parties have done business together.

One way an expedited arbitration process can work is that the parties first try to work out the problem themselves, then call in their attorneys who continue to try to negotiate a solution while preparing for the possibility of litigation or other adversary process.  The attorneys advise the parties of the various ways in which they might resolve the dispute and, if the parties are amenable, contact a professional arbitrator, who is usually another attorney with no relationship to the parties or the case.  For these kinds of cases, parties often choose arbitrators who are experienced business attorneys or commercial litigators who have business experience, so that the context of the dispute makes sense to them.  The arbitrator discloses any conflicts of interest and the parties sign a simple arbitration agreement.

If the parties need information they cannot access except through discovery, the attorneys and arbitrator work together to come up with a plan for streamlined discovery that takes place within a limited time, at limited cost.  The parties, attorneys and arbitrator schedule a hearing at their convenience (the parties retain much more control over scheduling than with a court).  A hearing occurs, which may take as little as a few hours.  Typically the arbitrator will provide a written decision within ten days of the hearing.  The award can be enforced in court if necessary.

Some people object to arbitration since awards are difficult to appeal.  However, very few court judgments are appealed anyway.  Appeals are not always successful, the cost can be prohibitive and further delays can be disruptive.

Although arbitration is not the right solution for every dispute, it can be a useful tool in the right contexts.  Disagreements with suppliers, distributors and customers can be good applications for expedited arbitration proceedings.

Cognitive Bias in Mediation: Fundamental Attribution Error

Massachusetts family mediationPeople tend to process information through some of the same filters over and over again. We call these filters “cognitive biases.” They are hardwired into our brains.

One particularly strong bias is called “fundamental attribution error.” When something good happens, we tend to overestimate the role of our own effort and intention. For instance, a store manager might say, “The changes I made helped us make more money last year,” even though it happened at the time the whole industry was expanding. On the other hand, when something bad happens, we are tempted to assign moral blame.  For instance, in a family mediation in which one party has experienced an injury or illness, the other party will often say, “I know she got hurt, but she really could be fine now if she worked harder at it.” In other words, people do have a subconscious tendency to congratulate themselves and blame the alleged victim.

Both sides of the fundamental attribution error coin come up often in business and family mediation. The mediator first has to decide if it is a barrier to resolution, creating significant difficulties on one or both sides, or if he can safely ignore it. If it is a barrier, he has many options.  He can engage in reality testing, although he should read the parties carefully to be ready to address any explosive pushback if emotions run high. He canhold up a mirror to the party most entrenched or float the fairness bubble.  His goal is to see if the parties’ perspective can be shifted so they can get past the issue.

For the parties, fundamental attribution error can be offensive. People do not like listening to boastful language that implicitly or explicitly denigrates their role in positive developments. At the same time, people do not like listening tolanguage thatimplicitly or explicitly blames them, often by laziness, for not escaping externally imposed constraints. As a party, one can spin the language to increase or decrease the other party’s perception of one’s fundamental attribution error to increase or decrease the other party’s annoyance.  Annoyance often stands in the way of resolution, but sometimes, if people are motivated by a desire to overcome the taint, it can be an impetus. The implicit message to which some parties respond is, “Prove to me you are capable.” Parties who are using the mediator to convey messages should be up front about their goals, since mediators sometimes filter out emotional content in order to keep the focus on the elements of resolution.

Fundamental attribution error: acknowledge its presence, then choose to use it or try to bypass it.