REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N The Legal & Regulatory Environment of Business Chapter 5— Negotiation and Alternative Dispute Resolution Systems REED SHEDD PAGNATTARO MOREHEAD McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives To understand why disputing parties seek alternative to the litigation process. To appreciate the importance of effective negotiation and to recognize the basic methods of negotiation. To evaluate the various forms of ADR systems. To be able to explain the differences between arbitration and mediation. To comprehend why courts have a very limited role in reviewing the actions of arbitrators and mediators.

think TANK think TANK think TANK Can a pie be cut in more than one way? Yes No 5-3 3

General Rule 95% or more of the lawsuits filed settle prior to the completion of the litigation process.

Conflict and Disputes Conflict leads to disputes when one party makes claim that other denies. CONFLICT Point of View Point of View

Negotiation Definition The process used to persuade or coerce someone to do what you want them to do.

Negotiation Styles [Insert Side bar 5.1]

Methods Of Negotiations Positional Parties state opinions Begins competitively Involves give and take Principled

Positional Negotiation High Price Buyer’s Resistance Point Zone of Agreement Seller’s Resistance Point Low Price

Positional Negotiation High Price Seller’s Resistance Point No Zone of Agreement Buyer’s Resistance Point Low Price

Principled Negotiation: 7 Elements VII. Commitment I. Communication II. Relationship VI. Alternatives III. Interests V. Legitimacy IV. Options

Range of Alternative Dispute Resolution Options

Reasons for Settlement without Litigation Costs Attorney’s fees Court costs Personal reasons Compromise is instinctive Dislike of trouble Opinion of others Business reasons Bad for business Sympathetic juries

Major Settlements $4.85 Billion $1.6 $1.2 Billion Billion Merck Citicorp Eli Lilly

Arbitration Third party (arbitrator) makes final decision Mandatory v. Voluntary Final decision (award)- binding Reasons Quick/inexpensive resolution Ease court dockets Expert assistance

Arbitration- Submissions Parties agree to arbitration - written Specific matters agreed to arbitrate Matters for arbitration Questions of fact Questions of law Fact & law Trend toward arbitration

Authority- Granted By Agreement Expert Chosen By Disputing Parties Authority- Granted By Agreement Beyond Legal Number = 1- 3

think TANK think TANK think TANK All of the following are advantages of arbitration over litigation except: Right to appeal Takes less time Nonpublic Not as expensive

Arbitration - Awards Court favors award & broad scope of authority Disclosure of findings & reasons Not needed unless required by statute or agreement Parties bound by award Final on submitted Issues – filed with court clerk & enforced by court

Court assumes intention laws under commerce and Federal Arbitration Act “Role” Enacted 1925 & 1947 Covers any Arbitration clause involving Interstate Commerce. “Impact” Court assumes intention May set aside state laws under commerce and supremacy clauses

Mandated Arbitration States adopting Speeds up process Many qualified arbitrators Types of cases <$15,000 Specific subject matter Record of proceedings required

Mandatory Arbitration- Procedures Submit Claim Discovery Arbitrator Determines: Admissibility Of Evidence Law/Facts Of Case Objections 8 Months Hearing

Voluntary/ Contract-Based Arbitration “Pre- Dispute Arbitration Clause” and Parties Agree To Method By: 2) “Post-Dispute Arbitration Clause”

Judicial Review of Arbitration Voluntary/Contract-Based Award is final Findings of fact/law- conclusive Limited review by court Correct fraudulent/arbitrary actions/against public policy Statutorily-Mandated In accord with procedural/due process of law Constitutional challenges De Novo Review

Judicial Review Under Federal Arbitration Act Interstate Commerce issues – FAA Applies Arbitration award may be vacated if: Fraud Arbitrators corrupt Misconduct Exceed powers

Mediation Third party assists in resolving dispute- avoid litigation Parties agree to use Reduces court caseload- no judicial review Settlement = mutual choice

Mediation Advantage To Parties Disadvantage Determine To Pursue Retain Control Of Outcome Disadvantage No Enforcement Selection Mediator- Qualifications

Mediation Procedures Informal- Controlled By Parties Mediator Parties Opening Statement/Rules Parties View Statement Exchange Discuss Options - Caucus Agreement Written/Signed

Other Alternatives Combination Mock trial Minitrial – Confidential Citizen review Reality for Plaintiff Minitrial – Confidential Focus on central issues Back to business problem

pop QUIZ pop QUIZ pop QUIZ If the parties to a mediation sign an agreement at the end, that agreement is usually legally binding (can be enforced in court.) True False