Alternative Dispute Resolution Act of 1998: Key Requirements

The Alternative Dispute Resolution Act of 1998 requires every federal district court to offer civil litigants alternatives to a full trial, such as mediation, early neutral evaluation, minitrials, and arbitration. Codified in Chapter 44 of Title 28 of the U.S. Code, the law made structured settlement processes a permanent feature of federal civil litigation rather than an informal option. If you have a civil case in federal court, the Act shapes what your judge can order you to try before trial, what stays confidential when you try it, and what deadlines you face if arbitration produces an award you do not like.

What the Act Requires of Federal District Courts

Each federal district court must authorize the use of ADR in all civil actions, including bankruptcy adversary proceedings, through its own local rules.¹ This is a mandate, not a suggestion. Every district has to run an ADR program, designate someone knowledgeable to administer it, and recruit and train the attorneys and other professionals who serve as neutrals.

Because each court writes its own local rules, the shape of ADR varies from district to district. What mediation looks like in one federal courthouse may differ in scheduling, panel selection, and confidentiality scope from another. The statute sets the floor; the local rules fill in the details.

One boundary matters up front: the Act does not disturb the Federal Arbitration Act in Title 9. Private arbitration agreements governed by that separate law are unaffected by anything in Chapter 44.

Which Cases Are Covered

The Act reaches every civil action filed in federal district court. At a minimum, each court must require litigants to consider using ADR at an appropriate stage of the case.² Consideration is the operative requirement for most methods; a court can push you toward mediation or early neutral evaluation, but arbitration needs your consent.

Districts can exempt specific cases or whole categories of cases where ADR would not be appropriate, after consulting with local bar members and the United States Attorney for the district.² The statute does not list which categories qualify, so exemptions differ by court. Check your district’s local rules to see what applies where you filed.

The ADR Methods the Act Recognizes

The statute defines ADR as any process, other than a ruling by the presiding judge, in which a neutral third party helps resolve disputed issues. It names four:¹

Mediation, in which a neutral facilitates negotiation but does not decide the outcome.
Early neutral evaluation, in which a legal expert reviews both sides’ positions early and gives a candid assessment of strengths and weaknesses before discovery costs pile up.
Minitrial, in which attorneys present condensed arguments to decision-makers on each side who have settlement authority.
Arbitration, in which an arbitrator hears evidence and issues an award.

Arbitration is the only one of the four that produces a decision rather than facilitating one. That difference drives the special rules below.

Special Limits on Arbitration

A federal court can send a case to arbitration only when every party consents, and that consent must be freely and knowingly given. No party or attorney can be penalized for refusing to arbitrate.³

Even with consent, three categories of cases cannot be arbitrated at all:

Cases alleging a violation of a constitutional right.
Cases where jurisdiction rests on federal civil rights statutes under 28 U.S.C. § 1343.
Cases seeking money damages above $150,000.

The damages cap has a practical wrinkle. Unless the plaintiff’s attorney certifies that damages exceed $150,000, the court may presume the case falls within the cap and treat it as arbitration-eligible.³ The constitutional and civil rights exclusions preserve the right to a full trial where fundamental liberties are on the line.

Arbitrators themselves face additional requirements. Districts that authorize arbitration must set certification standards, and every arbitrator takes the judicial oath and follows the same disqualification rules that apply to judges. An arbitrator with a personal or financial connection to a party cannot serve.⁴

The 30-Day Deadline After an Arbitration Award

This is the highest-stakes procedural point in the Act. After the arbitration hearing, the arbitrator files the award with the court clerk along with proof of service. Once that filing happens, any party unhappy with the result has 30 days to file a written demand for a trial de novo, meaning a fresh trial as if the arbitration never occurred.⁵

If nobody demands a trial de novo within 30 days, the award automatically becomes the judgment of the court. From that point it carries the same legal weight as any civil judgment, with one critical exception: it cannot be appealed.⁵ Miss the window and the arbitrator’s decision is final.

When a party does demand a trial de novo, the case returns to the regular docket as though arbitration had never taken place. Evidence about the arbitration proceedings, the amount of the award, or anything else about what happened during the hearing is not admissible at the new trial, unless it would independently qualify under the Federal Rules of Evidence or the parties agree otherwise.⁵ The contents of the award are also sealed from the judge who might be assigned to try the case, so the arbitration outcome does not color later rulings.

Confidentiality of ADR Communications

ADR only works when parties can speak candidly, and the Act protects that candor. Each district court must adopt local rules providing for the confidentiality of ADR processes and prohibiting disclosure of confidential dispute resolution communications.²

In practice, what you say in a mediation session generally stays in that session. Settlement offers, candid concessions about weaknesses in your case, and compromise proposals floated during negotiation cannot ordinarily be used against you at a later trial. Because the confidentiality rules live in each district’s local rules rather than the statute itself, the exact scope differs by court. If confidentiality matters to your strategy, read the local rule before your session.

What Happens If a Party Refuses to Participate

The Act does not contain its own sanctions section, but judges are not without tools. Federal Rule of Civil Procedure 16 gives courts broad authority to sanction parties who fail to appear at pretrial conferences, refuse to participate in good faith, or disobey scheduling orders. Court-ordered ADR sessions typically fall under Rule 16’s umbrella.⁶

Available sanctions include striking pleadings, prohibiting the introduction of evidence, dismissing claims or defenses, and entering default judgment. The court must also order the noncompliant party or its attorney to pay the reasonable expenses, including attorney’s fees, caused by the noncompliance, unless the failure was substantially justified.⁶ Many districts add local rules that require neutrals to report willful failures to attend or participate in good faith.

Non-binding does not mean optional. Once a court orders you into an ADR session, showing up unprepared or sending a representative without authority can cost more than treating the process seriously would have.

1
Office of the Law Revision Counsel. 28 USC 651 – Authorization of Alternative Dispute Resolution
2
Office of the Law Revision Counsel. 28 USC 652 – Jurisdiction
3
Office of the Law Revision Counsel. 28 USC 654 – Arbitration
4
Office of the Law Revision Counsel. 28 USC 655 – Arbitrators
5
Office of the Law Revision Counsel. 28 USC 657 – Arbitration Award and Judgment
6
Legal Information Institute. Federal Rules of Civil Procedure Rule 16 – Pretrial Conferences; Scheduling; Management