Business Law with UCC Applications, 13e Alternative Dispute Resolution Chapter 4

Learning Objectives Identify the shortcomings of litigation List the advantages and disadvantages of ADR Identify the advantages of mediation Explain the nature of an arbitration hearing Outline the med-arb process Relate the role of an early neutral evaluator

Learning Objectives Describe the process of running a summary judgment trial Clarify the private options available under proactive ADR Specify the governmental options available under proactive ADR Discuss the advantages and disadvantages of the science court proposal

Question? What occurs whenever individuals attempt to resolve disagreements by stepping outside the usual adversarial system? Alternative dispute resolution Substitute resolution Dispute optional resolution Alternative resolution The correct answer is “A” - Alternative dispute resolution. See next slide.

Alternative Dispute Resolution occurs whenever people attempt to resolve disputes by moving outside the traditional adversarial system and using creative settlement techniques State Variations Many state legislatures have enacted alternative dispute resolution programs. Colorado, for example, encourages or mandates ADR in specific subject areas, such as domestic relations and worker’s compensation.

Problems with Litigation Justice often goes to those who can afford it Litigation can be expensive Litigation can be time consuming Some jurisdictions require litigants to submit to hearings before securing a trial date Teaching Tips Before discussing the pros and cons of adversarial litigation, have students form teams of 3–4 learners each. The teams should be assigned the task of defining the adversarial system and developing lists of the advantages and disadvantages for that system.

The ADR Option Time involved in settling a dispute can be shortened and expenses lowered Proactive ADR anticipates and deals with disputes before they occur Depending on the ADR technique employed, the time involved in settling a dispute can be shortened considerably and the expenses lowered significantly. Arbitration and mediation, for example, can be scheduled quickly, even before a lawsuit is filed. When scheduling either a mediation or an arbitration session, the parties need not consult the court’s dockets or worry about any preliminary requirements, such as a case management conference. Moreover, even if the arbitration or mediation session does not end the dispute, it can save time by narrowing the issues or providing an evaluation of the strength of each side’s case. The arbitration or mediation session may also, in some cases, provide a shortcut to discovery, thus saving time and lowering expenses.

Shortcomings of ADR Private administration of justice hampers the development of the law Many critical social issues may never reach the judicial system Limited scope Some legal conflicts, notably employment, contract, and tort cases, are especially well suited for ADR. However, other legal problems, primarily those involving constitutional law, civil rights, and criminal law, could never be brought before an ADR panel.

Early neutral evaluation ADR Techniques Mediation Arbitration Med-arb Early neutral evaluation Summary jury trials Private civil trials

Question? What is the process where a neutral third party works with the parties to reach a mutually agreeable settlement? Arbitration Mediation Negotiation Adjudication The correct answer is “B” – mediation. See next slide.

ADR Techniques Mediation a non-binding process where a neutral third party works with the parties to reach a mutually agreeable settlement The mediator acts as an impartial outsider who can suggest solutions that will please all the parties involved in the dispute Getting Students Involved Use one of the example cases in the chapter to create a mock mediation session. Have one of the students serve as the mediator while the others represent each party to the dispute. If possible, also assign students to play the roles of attorneys for each side in the mediation process.

ADR Techniques Arbitration process by which the parties invite a third party, called an arbitrator, to settle their dispute Required arbitration is called mandatory arbitration Background Information The American Arbitration Association was founded in 1926. It now has ADR employment plans in place that cover more than 3,000,000 workers.

Shortcomings of Arbitration Hearing is run like a trial but without the safeguards that come with the rules of civil procedure, discovery, and motion practice Wide discretion granted to arbitrators can lead to unreasonable decisions and unjustifiable awards One shortcoming is that an arbitration hearing is run like a trial but without the safeguards that come with the rules of civil procedure, discovery, and motion practice. This characteristic may actually extend the time involved in arbitration because attorneys and negotiators must prepare a wide variety of legal arguments, some of which might have been eliminated during motion practice. Discovery also sometimes reveals facts that lead the parties into settlement negotiations that might not otherwise take place. Moreover, the wide discretion that is usually granted to arbitrators has, in some cases, led to unreasonable decisions and unjustifiable awards. Sometimes the decision made by an arbitrator comes under the review of the courts, which may result in a reversal of the arbitration order

ADR Techniques Med-arb process that combines mediation with arbitration If after mediation, a dispute is still unsettled, parties can move to an arbitration hearing Under med-arb procedures, the parties first submit their dispute to a mediation session. If the dispute is settled via mediation, then all of the parties can leave satisfied. If, however, some matters are left undecided, the parties can move on to an arbitration hearing. During the hearing, the undecided issues would be placed before an arbitrator for final deliberation.

Question? What is the process by which the parties permit a referee to assess their case based on the facts and legal arguments alone? Early neutral evaluation Summary jury trial Civil judgment Neutral judgment The correct answer is “A” – early neutral judgment. See next slide.

ADR Techniques Early neutral evaluation process by which the parties permit a referee to assess their case based on the facts and legal arguments alone At the outset of an ENE process, an independent, objective referee is provided with an overview of the facts involved in the dispute and a summary of the legal arguments on which each side has built his or her case. The evaluator, after examining the facts and the law, renders an impartial assessment of the legal rights of each party and a determination of the amount of the award that should be rendered, if any.

ADR Techniques Summary jury trial shortened version of a trial conducted in less than a day before an actual jury which then renders an advisory verdict in the case Offers litigants a chance to see how a jury would react Background Information One of the first summary jury trials in federal court involved a product liability case. The case focused on an allegedly defective football helmet. The summary jury trial, which was held in 1980, led to a settlement of the case.

ADR Techniques Private civil trial Advantages parties hire a retired judge or magistrate to hear their dispute following the same rules used in an official trial Advantages parties can hold trial at a time and place of their choosing parties can choose their own judge Background Information One private firm that will arrange private jury trials is known as Judicial Alternatives of Ohio, Inc. The firm is located in Columbus, Ohio.

Proactive ADR Partnering ADR contract clauses Settlement week Negotiated rule making Post-Appellate procedures International arbitration agreements Science court proposal Since ADR has become so popular in recent years, some business people are taking a proactive approach to the situation by agreeing in advance to submit to one of the alternative dispute resolution tools should a disagreement between the parties arise at a later date.

Proactive ADR Partnering process that establishes supportive relationships among the parties to a contract in order to head off disputes before they occur Best used when a contract involves complex interrelationships among a wide variety of different parties Partnering attempts to deter the disorder that can arise during a dispute by drawing up certain ground rules that all the parties agree to observe. The entire process begins with a meeting held after the contract has been finalized but before the project has begun. The meeting is held at a location that is unrelated to the business of any party to the contract. In this way, the process can proceed in an uninterrupted fashion.

Proactive ADR ADR contract clause specifies that the parties to the agreement have promised to use an alternative resolution dispute technique when a disagreement arises rather than litigating the issue Like partnering, the drafting of ADR contract clauses is a proactive attempt to ensure that litigation will be avoided should a dispute arise. Unlike partnering, which is best suited to long-term construction contracts, ADR clauses can be included in just about any contract.

ADR Contract Clause Advantages helpful when two or more parties have an extended affiliation that may involve numerous contracts beneficial to those parties with the weakest position in a contractual relationship Like partnering, the drafting of ADR contract clauses is a proactive attempt to ensure that litigation will be avoided should a dispute arise. Unlike partnering, which is best suited to long-term construction contracts, ADR clauses can be included in just about any contract.

Question? What is the five day period during which a court’s docket is cleared of all business, except for settlement hearings? A. Mediation week B. Settlement court C. Settlement week D. Arbitration week The correct answer is “C” – settlement week. See next slide.

Proactive ADR Settlement week five day period during which a court’s docket is cleared of all business, except for settlement hearings Cases are matched with mediators and a schedule is established Getting Students Involved One state trial court that has a very successful record with settlement week is the Delaware County Court of Common Pleas. Have students write to the court at 91 North Sandusky Street, Delaware, Ohio, for details of the process.

Proactive ADR Negotiated rule making (reg-neg) process by which an agency invites the people and the organizations to be affected by a new rule to have input into the writing of that rule All representatives have the opportunity to present their point of view in relation to the proposed rule. Discussions follow, during which all of these issues are examined. Eventually, the team is expected to formulate a rule that reflects a consensus of the representatives.

Proactive ADR Post-appellate procedures involve taking a case that has been rejected or dismissed by a domestic court to an international organization The post-appellate case is brought against the government of the aggrieved party for allegedly failing to provide an appropriate legal remedy to redress the grievances of the victim.

Proactive ADR International arbitration agreement involves a pledge to use arbitration should the parties find themselves in disagreement as to the enforcement rights under the original contract. There are several clear advantages to entering an international arbitration agreement. First, because the parties to the agreement are incorporated in different nation states, they are free to specify whatever forum they can agree upon as the place to hold an arbitration hearing, should that become necessary. Second, when negotiating an arbitration agreement, the parties are also free to specify the identity of the arbitrators or leave open the option to choose the arbitrators at the time of the dispute from a large pool of potential experts.

Question? Which court acts as a forum for disputes involving scientific and technological controversies? Technology court Science court Science resolution body Technology appellate board The correct answer is “B” – Science court. See next slide.

Proactive ADR Science court acts as a forum for disputes involving scientific and technological controversies Judges on the science court are scientists educated in the areas under investigation, allowing them to use their expertise Individuals and institutions with concerns about certain scientific activities, such as genetic engineering, nuclear energy research, and so on, might ask the court to act as an impartial arbitrator in the evaluation of those concerns. Teaching Tips To get students involved in a lively discussion of the science court concept, have them read, discuss, and write a report on the novel Brothers by Ben Bova (New York: Bantam Books, 1996).