Chapter 4 Legal Representation and Alternative Dispute Resolution

2 Chapter Objectives 1. Describe the role of attorneys in the dispute-resolution process. 2. List the differences between litigation and the other forms of dispute resolution. 3. Discuss the processes of negotiation and mediation. 4. Identify the steps in the arbitration process. 5. Define summary jury trials and mini- trials.

3 Attorneys and Dispute Resolution Despite the diversity of legal issues that attorneys may confront on a day- to-day basis, they share a common approach to the law because their education nearly always involves an in-depth study of basic legal principles and concepts.

4 Roles of an Attorney Adviser – advises a client on steps to take to avoid possible legal problems. Drafter – writes contracts and other documents for clients. Negotiator – persuades, argues, or settles with another party on a client’s behalf. Advocate – presents a client’s position in court.

5 Attorney-Client Relationship A client must disclose all relevant information to his or her attorney so the attorney can determine the best course of action. The attorney must keep the information confidential—the attorney-client privilege prevents a court and other government bodies from compelling disclosure of the information.

6 Decision to File a Lawsuit Factors include:  Whether the law provides a remedy.  Whether the person can expert to prevail.  Whether the expected benefit will compensate for expenses and other costs, including any business lost as a result of the lawsuit and accompanying publicity.

7 Decision to Defend Against a Lawsuit Factors include:  Whether the relationship with the plaintiff is too valuable to risk.  Whether the publicity surrounding a trial would damage the defendant’s reputation or image.  Whether the dispute could be resolved in a less costly manner.

8 The Search for Alternatives to Litigation Alternative dispute resolution (ADR) is less costly, less time- consuming, and an increasingly attractive alternative to litigation in the courts.

9 The Search for Alternatives to Litigation Forms of ADR include: Negotiation Summary Jury Trial Mediation Mini-trial Rent-a- Judge Rent-a- Judge Arbitration

10 Negotiation and Mediation Alternative dispute resolution methods differ in the degree of formality involved and the extent to which third parties participate in the process. What is the primary difference between negotiation and mediation?

11 Negotiation and Mediation Negotiation The parties come together, with or without attorneys to represent them, and try to reach a settlement without the involvement of a third party. Mediation The parties themselves reach an agreement with the help of a third party, called a mediator, who proposes solutions.

12 ArbitrationArbitration A more formal method of ADR in which the parties submit their dispute to a neutral third party, the arbitrator, who renders a decision, which may or may not be legally binding, depending on the circumstances. Some courts refer certain cases for arbitration before allowing the cases to proceed to trial; in most cases, this kind of arbitration is nonbinding on the parties.

13 ADR Around the Globe Other countries also encourage mediation, arbitration, and other forms of ADR. Examples:  Japan has recently authorized neutral panels to act as mediators in product liability suits.  China passed an arbitration law in 1995 that spells out what types of disputes are arbitrable, the form and content of valid arbitration clauses, etc., all of which should make it simpler for disputes to be settled through ADR.

14 The Federal Arbitration Act The Federal Arbitration Act (FAA) does not establish a set arbitration procedure. The FAA provides the means for enforcing the arbitration procedure that the parties have established for themselves. The FAA covers any arbitration clause in a contract that involves interstate commerce—even where the business activities may have remote connections or minimal effects on interstate commerce.

15 Case 4.1 Hooters of America, Inc. v. Phillips Annette Phillips was employed by Hooters restaurant from Five years after she was hired, Hooters implemented an alternative dispute-resolution program which was not supplied to the employees. In 1996, Phillips was allegedly sexually harassed by Gerald Brooks, a Hooters’ official. Her manager told her to “let it go”, so she quit. Phillips threatened to sue and was told by Hooters that she needed to submit her claim to arbitration, which she refused. Hooters filed a suit against Phillips to compel arbitration but was denied by the court. Increasingly, employers are including arbitration clauses in contracts with their employees. Some argue that while it may be fair to enforce such clauses in contracts between parties of equal bargaining strength, it is not fair to enforce them in employment contracts—because employees usually have no right to negotiate the terms of the contract. Do you agree with this argument? Explain.

16 State Arbitration Statutes Thirty-four states and the District of Columbia have adopted the Uniform Arbitration Act, under which courts generally give full effect to voluntary agreements to arbitrate disputes between private parties. Those states that have not adopted the Uniform Act nonetheless follow many of the practices specified in it.

17 The Arbitration Process The three steps of arbitration are:

18 International Arbitration International standards for the recognition of arbitration agreements and awards are set out in the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Article V(2) provides an exception to enforcement where the arbitration clauses are “contrary to the public policy” of the relevant country. Should businesspersons evaluate the policies of different countries before deciding where to arbitrate their disputes?

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20 Enforcement of Agreements to Submit to Arbitration When a dispute arises as to whether or not the parties have agreed to submit a particular matter to arbitration, one party may file suit in court to compel arbitration. The court’s role is essentially interpreting a contract, either the arbitration clause or submission agreement, to determine to what the parties have committed themselves.

21 Case 4.2 Wright v. Universal Maritime Service Corp. Wright was a longshoreman and member of the International Longshoreman’s Association (ILA). The ILA provides workers to the South Carolina Stevedores Association (SCSA), with which they had a collective bargaining agreement. Wright suffered a job-related injury that ended in disability. After recovering, the SCSA would not hire him because of the disability. Wright filed suit claiming discrimination and violation of the Americans with Disabilities Act (ADA). The court ruled in favor of the defendants. Does compulsory arbitration contradict the public policy enunciated in statutes specifically designed to protect employees’ rights, such as the right to be free from discrimination (see Chapt. 18)?

22 Arbitration Clauses in Employment Contracts Arbitration is easier, faster, and less costly than litigation. Therefore, more businesses are including arbitration clauses in their contracts. What happens if a potential employee objects to the clause? Is this mandatory condition enforceable? A majority of courts have followed the Gilmer precedent of the U.S. Supreme Court in Recently, courts have been examining the issue of mandatory arbitration more closely. Why might victims of employment discrimination prefer to litigate their claims in a judicial forum rather than having them arbitrated, even assuming that arbitration proceedings would be unbiased and would not violate due process rights?

23 Setting Aside an Arbitration Award No award will be enforced if compliance with the award would result in commission of a crime or would violate public policy.

24 Setting Aside an Arbitration Award An arbitration award may also be set aside because of defects in the arbitration process.  Award was result of corruption, fraud, etc.  The arbitrator exhibited bias or corruption.  The arbitrator’s actions substantially prejudiced the rights of one of the parties.  The arbitrator exceeded his or her powers.

25 Setting Aside an Arbitration Award Arbitration awards may be set aside for a number of reasons, but courts do not generally look at the merits of the dispute, the sufficiency of the evidence presented, or the arbitrator’s reasoning in reaching a particular decision. Since the parties freely contracted to enter into arbitration, the courts will not interfere simply because one side feels that it received a “bad bargain.”

26 Case 4.3 Orlando v. Interstate Container Corp. After Interstate denied Orlando’s request to return to work and an arbitrator also rendered a decision in favor of Interstate, Orlando brought suit claiming such decision was not final or binding because the agreement to arbitrate failed to state so. The Court of Appeals held that the arbitration award was not binding unless the parties specifically agreed that it should be. Why might the parties to an arbitration agreement prefer that the arbitration award not be final?

27 Case 4.4 Garvey v. Roberts In 1986, 1987, and 1988, the Major League Baseball Players Association complained that the Major League Baseball Clubs had engaged in collusion to underpay some of the players. The grievance was submitted to arbitration before a panel. The association and the clubs entered into a settlement agreement, under which the clubs set up a fund of $280 million to be distributed to victims of the collusion. Steve Garvey, player for the Padres from , filed for damages claiming his contract was not extended due to the collusion. Garvey lost the suit. Is it fair for the courts to give such deference to arbitrators’ findings of facts?

28 Disadvantages to Arbitration Arbitration has some disadvantages:  Unpredictable, since arbitrators are not required to follow prior precedents, but must only follow whatever rules have been provided by the parties.  Expensive, sometimes as expensive as litigation.  Time consuming, since discovery is often unavailable, the parties may have to call more witnesses than they would in litigation.

29 The Integration of ADR and Formal Court Procedures Many jurisdictions at both the state and federal levels are integrating alternative dispute resolution into the formal legal process. Utilizing methods such as arbitration and mediation within the traditional framework may relieve the logjams afflicting most of the nation’s court systems.

30 Court-Mandated ADR vs. Court- Annexed Arbitration Court-Mandated ADR Most states (and about half the federal courts) have adopted programs to encourage the parties to settle their disputes through ADR. Some courts require parties to submit to ADR before proceeding to trial. Court-Annexed Arbitration Some states require the parties to undergo non-binding arbitration before proceeding to trial. Note that in court- annexed arbitration, either party may reject the award.

31 Court-Related Mediation Today, courts are increasingly turning to mediation rather than arbitration as an alternative to litigation. One reason for its popularity is that its goal, unlike litigation, is for opponents to work out a resolution that benefits both sides, resulting in a high rate of satisfaction with the outcome.

32 Summary Jury Trials A kind of trial in which litigants present their arguments and evidence and the jury renders a nonbinding verdict.

33 Other Forms of ADR Mini-trial A private proceeding in which each party’s attorney argues the party’s case before the other party. Often, a neutral third party acts as an adviser and renders an opinion on how a court would likely decide the issue. Rent-a-judge The parties rent a judge to hear their case and render a verdict to which the parties agree to be bound. Several firms now provide for this kind of private justice.

34 ADR Forums and Services Services facilitating dispute resolution outside the courtroom are provided by both government agencies and private organizations. Sources of private arbitration services include:  American Arbitration Association (AAA)  State and local arbitration organizations  Better Business Bureau  Industry-wide programs

35 For Review 1. What roles do attorneys play in resolving disputes? 2. What are some of the similarities and differences between litigation and other forms of dispute resolution? 3. How do the processes of negotiation and mediation differ? 4. What are the steps in the arbitration process? 5. What are the differences between voluntary arbitration and court-annexed arbitration?