CHAPTER

1. 4 CHAPTER 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. InternationalArbitration • 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. InternationalArbitration • 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.