Alternative Dispute Resolution CHAPTER 4 Alternative Dispute Resolution

Market Alternatives to Litigation From a business perspective, court litigation is too risky and uncertain Alternative Dispute Resolution (ADR) is Quicker, cheaper and much more private In international contracts and in cyberspace, ADR is especially prevalent because of the added uncertainty of operating in those market settings ADR is often divided between negotiations, mediation, and arbitration In reality these three categories tend to blend together

Negotiations and Settlements Most legal disputes are negotiated and settled Attorneys are trained at skillful negotiations without becoming emotional Settlements, often negotiated by attorneys, are private and not an admission of liability Positions taken during settlement negotiations by each party cannot be used as evidence in court if negotiations break down and the parties go to court Many firms have settled disputes that they should have taken to court

Structured and Assisted Settlement Negotiations Structured settlement negotiations are designed to give the parties a reality check when a lawsuit is likely These procedures take place in B to B disputes Mini-trials--almost always confidential The parties agree to exchange information Evidence is presented in front of a neutral third party whose decision is non-binding, but influential By having the parties cooperate in constructing the mini-trial often paves the way for a settlement Note that the neutral third party may do some mediation during and after the mini-trial in order to obtain a settlement

Structured and Assisted Settlement Negotiations Summary Jury Trial Evidence is presented to advisory jurors whose decision is non-binding, unknown to the jurors Evidence is presented without testimony of witnesses In 95% of the cases summary jury trials lead to settlements Corporations can buy their way to the head of the line by renting judges Various ADR streamlining can be used The decision can be confidential

Mediation In mediation there is neutral third party who tries to get both of the parties to agree on a settlement Mediators do not have the power to impose a verdict like an arbitrator Mediation often results in greater positive feelings towards the other party and the process because there is no winner or loser Mediators need not be licensed or attorneys, but often mediators are attorneys Although traditionally used in labor disputes, mediation is increasingly being used in divorce, petty crime, contract disputes and by government regulatory officials

Arbitration Unlike mediation, an arbitrator has the power to impose a verdict Arbitration often takes place because the parties in a contract agree to arbitrate rather than litigate In some contracts there is a requirement to mediate first, but if that does not work, then the dispute is arbitrated Arbitration agreements in contracts are becoming increasingly prevalent: employment contracts, brokerage agreements, franchises, and many others

Arbitration Arbitration retains all of the advantages of ADR relative to litigation: Speed, less costly, and confidential All federal statutes are subject to arbitration agreements unless Congress states otherwise in the statute In Gilmer, an employee’s right to sue for age discrimination was subordinated to an arbitration agreement in the employee’s employment contract

Arbitration Procedure Procedure in arbitration is less formalized than civil procedure in court litigation The arbitration agreement will usually name the procedure for selecting the arbitrator Most arbitrators have a specialty The pleadings in arbitration are called the submission-- Plaintiff is required to state what the dispute is about and the def. is required to respond

Arbitration Procedure In arbitration, a hearing is equivalent to a trial in court litigation Again, in arbitration there tends to be less formality The parties can agree on procedures to cut down and time and expense Arbitration is not open to the public There is less variance in damage awards relative to juries An award in arbitration is equivalent to winning a civil case The decision to award the complaining party normally occurs quickly and is not accompanied by an opinion

Appeals to Courts Normally decisions of arbitrators are not appealable, but there are exceptions In general the scope of authority of arbitrators is for the courts to decide Arbitrability of disputes is a judicial decision Lack of consent to the arbitration agreement is another ground for appeal Asking a party to sign an agreement that calls for arbitration right before a medical operation provides grounds necessary to contest whether consent was voluntarily obtained

Appeals to Courts Other bases for appeals of arbitrators’ decisions include: Statutes that do not allow for arbitration It is illegal for a party to waive their rights to sue under a statute that states rights cannot be waived by an arbitration agreement Under the Federal Arbitration Act, an award can be contested if the award was the result of Fraud or corruption Bias by the arbitrator Arbitrator was guilty of gross procedural error

Appeals to Courts Appeals to courts can take place if The decision of the arbitrator was contrary to public policy e.g., decisions that appear to support or encourage illegal drug use. Decisions that appear to support racial prejudice

Arbitration Arbitration is mandatory in a number of situations: Public unions do not have the right to strike and so disputes with govt. employers must be submitted to arbitrators Medical malpractice claims in some states Court annexed arbitration--generally ordered when the amount in dispute is relatively low

International Arbitration The uncertainty associated with domestic litigation is magnified at the the international level Between companies arbitration agreements are very common as well as the following clauses Forum selection, choice of law, payment (currency specification), language, and force majeure (Acts of God and war that excuse performance) Among the commercial nations of the world adherence to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards is universal Again with international arbitration, the awards are basically not appealable

International Arbitration The International Chamber of Commerce (ICC) provides for scrutiny of its awards in arbitration through the ICA (Int’l Ct. of Arbitration) The ICA provides for an added layer of fairness for international arbitration awards ICA scrutiny makes it much more unlikely that ICC awards will be annulled by national courts

Online Dispute Resolution (ODR) Disputes that originate in cyberspace are making use of a new for of ADR, ODR By far the most common online dispute occurs in conflicts trademark owners and web sites whose domain names are confusingly similar The ACPA provides trademark owners with significant legal ammunition if the web site owner is subject to the U.S. courts Often the trademark owner simply wants reassignment of the domain name because the def. is not subject to U.S. jurisdiction

Online Dispute Resolution (ODR) ICANN has developed its Uniform Domain Name Dispute Resolution Policy (UDRP) for reassignment of domain names According to UDRP a domain name should be reassigned if the TM owner sues a web site if the domain name is identical, or confusingly similar the domain name owner has no legitimate right to domain name, and the domain name has been registered and used in bad faith

Other Examples of Online Dispute Resolution In cyberspace all forms of ADR exist: settlements, mediation, and arbitration All communication takes place online No need for face to face contact so costs are lower Online arbitrators are also specialized Court acceptance of ODR verdicts is not established at this time.