1. Alternative Dispute Resolution
CHAPTER 4
Alternative Dispute Resolution

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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.