1. 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.

2. 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.

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

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

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

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

7. Negotiation Styles
[Insert Side bar 5.1]

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

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

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

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

12. Range of Alternative Dispute Resolution Options

13. 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

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

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

16. 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

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

18. 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

19. 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

20. 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

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

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

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

24. 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

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

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

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

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

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

30. 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