Dan MacDonald is a litigation partner and a member of the KNOWlaw* Group in the Toronto law firm McMillan Binch.

As the Canadian film and television industries grow, so do the number of disputes. Broadcaster lawsuits involving millions of dollars make newspaper headlines on a regular basis. Companies going bankrupt and ‘creative’ financing schemes leave disgruntled banks and creditors fighting over the remains. The everyday tensions between financiers, distributors, producers, and creative personnel sometimes interrupt and threaten to shut down a production. Labor disputes are commonplace.

Traditionally, if you had a business dispute with someone, your most likely course of action would be a civil lawsuit, fought out in the courts. Unfortunately, the cost and delay involved in a court action can make it an unsatisfactory means of resolving many conflicts.

The alternative

So over the years the popularity of ‘alternative dispute resolution’ mechanisms (or adr as its often called) has grown. Compared to civil litigation, adr can offer significant advantages.

adr can be carried out in private – avoiding the publicity and embarrassment which may result from using the public court process. The process can be designed to resolve the disputes in a non-adversarial setting more suited to resolving disputes in the context of an ongoing business relationship.

adr is a much more flexible process and can be completely customized to suit the nature of the dispute. Also, rather than having a dispute resolved by a judge who may have no familiarity with the kind of issue in dispute or the film or television industry, adr offers the opportunity to select someone with the right experience and expertise.

Finally, adr offers an opportunity to resolve a dispute creatively rather than in the context of a trial where, quite often, someone has to win and someone has to lose.

Unions and guilds

One pioneering example of adr in the film and television industry is the long-standing grievance and arbitration procedures established as part of the agreements negotiated with actra, the Writers Guild of Canada, the Directors Guild of Canada and various other guilds and unions.

These procedures take care of the vast majority of labor disputes, and for the most part do so relatively efficiently and inexpensively. The civil court system is turned to only for the most serious of cases, and for cases involving significant sums of money.

What’s the right kind of ADR for you?

The factors which make adr so useful in labor disputes also make it attractive for other types of disputes. The fast-paced nature of the film and television production world, for instance, means that there’s rarely enough time for a court action to be of any use in solving disputes.

The biggest advantage of adr is that the parties themselves can customize a procedure that they feel will best work to resolve their disagreements. Sometimes this is done only once the problem arises, but very often it’s done in advance – as part of the contract between two parties who are going to do business together.

As a starting point, we’ll look at the four most common forms of adr: arbitration, mediation, neutral evaluation and mini-trials.

* Arbitration is a form of dispute resolution where a neutral third party, mutually acceptable to the parties to the dispute, makes a decision on the merits of the case.

Arbitration proceedings usually involve an informal hearing process which includes the presentation of evidence and oral arguments. The parties can choose whether or not the process will involve lawyers and whether the arbitration proceeding will be binding or non-binding.

Non-binding arbitration offers the parties an opportunity to consider, for the purpose of assessing their settlement position, the views of the arbitrator on the merits of dispute.

Binding arbitration is similar to the traditional civil litigation process in that, ultimately, a third party makes a binding decision. Provincial legislation typically provides that a binding arbitration decision is final and is subject to review by a court only in very limited circumstances.

* Mediation is a relatively informal process which involves a meeting between the parties, their lawyers and a neutral third party who acts as a mediator.

The mediator informally assists the parties in voluntarily reaching their own mutually acceptable settlement of issues by structuring the negotiating, identifying issues and, where requested, making recommendations on disputed issues.

In many cases, the role of the mediator is to promote and encourage communication between the parties themselves and suggest creative avenues of settlement which may have not been considered by the parties. The mediator acts as a facilitator rather than a decision maker.

* Neutral evaluation is a process in which a neutral third party hears both sides of a dispute based on presentations by lawyers or by the parties themselves.

The neutral third party can be a judge or retired judge or an expert in the area of law or the industry in which the dispute arises.

The neutral evaluator, after hearing the presentations, identifies issues for the parties and provides a non-binding opinion to each on the strengths and weaknesses of their positions and the likely outcome if the case were to go to trial. Based on this information, the parties are in a better position to make an informed decision concerning settlement.

* A mini-trial is a shorter version of the traditional trial and is most often used in cases where the parties anticipate that a trial will be extremely lengthy. It involves time-limited case presentations to decision makers of the opposing party (for example, the president of the company) and to a neutral third party.

The neutral third party moderates the proceedings and typically renders a non-binding opinion as to the probable outcome of the trial.

With the assistance of having seen and heard each party’s best case, the decision makers in attendance then attempt to negotiate a settlement with the assistance of the neutral third party acting as a mediator.

One of the advantages of the mini-trial is that it gives representatives of each of the parties an opportunity to see how the actual evidence is likely to unfold at trial and therefore consider what might be an appropriate settlement of the dispute.

Creating the

best form of ADR

It’s not easy to figure out in advance of a dispute what the best form of adr will be. So what often happens is that people will just fall back on the most well-known form of adr – arbitration – without really giving it much thought.

It’s very common for agreements in this industry to include a clause that says that any dispute will be resolved through arbitration. Unfortunately, this is often done without thinking through whether arbitration is actually an appropriate or realistic way of resolving some disputes.

For instance, does it make sense to use an arbitrator to break a deadlock between two coproducers who disagree on a script or on which actor is best suited to play a lead role? You probably don’t want an arbitrator making that kind of decision.

It might be better to try to craft some more creative way of resolving that particular kind of dispute. For instance, you could establish a mandatory series of meetings to be held within a short period of time – the first with just the parties and then another with some outside help in attendance.

If that still doesn’t work, you can have a respected third party break the tie – if it’s a dispute on a creative matter, you might turn to an outside director or producer.

We’ve even seen people build into their contract that, if all else fails, they’ll flip a coin. That’s certainly a fast and inexpensive form of adr – and in some cases may be just as satisfactory as going to arbitration.

When court works best

But adr isn’t appropriate for all cases. Sometimes, there’s no particular time pressure and a lot of money at stake. Or the parties are so far apart in their positions that no form of adr is going to work. Sometimes the nature of the dispute ultimately requires a final and authoritative decision by a judge in a public hearing. In other cases, remedies which are only available in formal court proceedings, such as injunctions and mandatory orders are required and can’t be obtained in an adr process.

Finally, unless there is a true willingness among the parties to settle the dispute, adr is unlikely to succeed.

Even if your dispute is one that you feel would be best resolved by a court, you may still be involved in some form of adr.

In recent years, many provinces have made alternative dispute resolution a mandatory part of the civil justice system. For example, in Ottawa and Toronto, there are pilot projects where cases are referred to mediation on a mandatory basis. The mediation takes place at an early stage of the proceedings and is conducted by court-connected mediators.

The Ottawa project has a 64% settlement rate, and given the fact that the mediation takes place very early in the litigation process (60 days after the filing of a statement of defense), it’s clear that litigants are saving significant time and money.

A 1995 report found that 95% to 97% of all civil cases in Ontario settled before trial. Many of those settlements take place on the eve of trial on the court house steps after considerable time and money has been spent by the parties.

Given this, even when you’re headed for court, it can make sense to consider adr early in the process in order to achieve a faster, less stressful and less expensive resolution of your dispute.

(This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice in any particular situation.)