Thanks to the SCOTUS Blog for the following resources on the upcoming Kagan hearings. Follow SCOTUS Blog all week for commentary.
Why should negotiators be interested in the composition of the Supreme Court? Because the freedom to negotiate requires a strong rule of law culture. And because everything we negotiate assumes the enforcement of certain agreements and non-enforcement of others, of particular interest to negotiators and ADR practitioners - arbitration agreements.
A minor Supreme Court victory this morning in an employment-related arbitration case has left the pro-arbitration camp hopeful that the justices will see things their way in a hotly anticipated consumer-related legal battle the court will hear next term.
This morning's ruling in Rent-A-Center West Inc. v. Jackson saw the court's conservative wing rule in favor of Rent-A-Center's push to have an arbitrator, and not a court, rule on the enforceability of an arbitration agreement between the company and an employee who'd filed an employment discrimination suit. In so holding, the five-justice majority reinstated a ruling from a Nevada federal court judge that had been reversed by the U.S. Court of Appeals for the Ninth Circuit.
Hawkins and Rent-A-Center's attorney Carter Phillips of Sidley Austin may be reading the tea leaves correctly, but the Court's hyper-technical decision-dodging suggests the absence of a plurality on the real issue presented - whether the Court or the arbitrator should be making the decision whether the arbitration agreement is unconscionable or not.
I hereby agree to submit to binding arbitration all disputes and claims arising out of the submission of this application. I further agree, in the event that I am hired by the company, that all disputes that cannot be resolved by informal internal resolution which might arise out of my employment with the company, whether during or after that employment, will be submitted to binding arbitration. I agree that such arbitration shall be conducted under the rules of the American Arbitration Association. This application contains the entire agreement between the parties with regard to dispute resolution, and there are no other agreements as to dispute resolution, either oral or written.
This decision is made more interesting by the recent Parada decision (.pdf) (covered here and here) where the drafter's failure to attach the JAMS arbitration rules cited in the agreement was one of the reasons the Court concluded the arbitration clause was substantively unconscionable. I think it's safe to say at this point in the development of California law on these issues that it's not malpractice for an attorney to fail to draft an enforceable arbitration clause. But as the opinions multiply, you can be sure some employer will be looking around for someone to name its legal counsel as the source of his discontent, blame its law firm for having to bear the expense of litigation, and claim damages as a result.
The best protection for drafters of arbitration clauses (particularly in California where the Courts remain suspicious of adhesion arbitration contracts) is to be familiar with all the case law on the topic in the last five years; to avoid any provision the Courts have used to tip the "sliding scale" in favor of non-enforcement and include those provisions which favorably incline the courts to enforce the clauses.
My own personal 200-year present spans the life of my maternal grandparents who were nine years old in 1909, and that of my step-children’s children, who (assuming they procreate on a reasonable schedule) should be ninety-five'ish in 2109.
My imagined grandchildren,  born sometime between today and 2014, will not be strangers to any of my grandfather’s technologies. Despite the advent of compact fluorescent light bulbs, the early lives of my step-children's children will likely pass under the glow of the same incandescent lights that brightened granddad’s one-room school house. They will be transported to school in cars with internal combustion engines, learn the same alphabet from the same cardboard and paper books (as well as from the "e" variety)  and play many of the same games he did – hop scotch, jump rope and ring-around the rosy.
Change will etch itself into the lives of my grandchildren as surely as it did my own, my parents' and my grandparents'. Hybrids will give way to fully electric (and perhaps hemp-powered) vehicles (effective or defective) and though electricity will continue to be generated by hydroelectric dams, wind farms and nuclear power plants, some new and unimaginable source of power will surely push back the nights of my grand children's children. 
Law, politics, society and culture also exist in the 200-year present of conflict resolution. In my personal 200-year span, the law seems to have changed the most profoundly. Was it the law first and culture later? Or do they weave our future together?
The first U.S. woman lawyer, Myra Bradwell, was admitted to practice a mere ten years before my grandmother was born. Mrs. Bradwell’s legal career was the subject of one of the sorriest U.S. Supreme Court decisions ever handed down, in which the Court opined,
The civil law as well as nature itself, has always recognized a wide difference in the respective spheres and destinies of man and woman. Man is, or should be, woman’s protector and defender. The natural and proper timidity and delicacy which belongs to the female sex evidently unfits it for many of the occupations of civil life. The constitution of the family organization, which is founded in the divine ordinance, as well as in the nature of things, indicates the domestic sphere as that which properly belongs to the domain and functions of womanhood. The harmony, not to say the identity, of interests and views which belong, or should belong, to the family institution is repugnant to the idea for a woman adopting a distinct and independent career from that of her husband … for these reasons I think that the laws of Illinois now complained of are not obnoxious to the charge of any abridging any of the privileges and immunities of cities of the United States.
My grandparents', parents' and step-children's 20th Century was dominated by genocide on a scale and a technological precision unimaginable to our earlier forebears. Mid-century brought with it the threat of nuclear annihilation but also liberated millions of people enslaved by colonialism. We cured polio in my own lifetime with both "dead" and "live" vaccines (neither of them counterfeit) - a singular moment in scientific history during which no one took ownership of the cure and no one tried to stop others from seeking another, a problem Patently O addressed this week in Reverse Payments.
Whether god or satan, heaven or hell, war or peace "won" the twentieth century, the world's greatest peace-making body was created during it -- the United Nations. And here in the U.S., the “living room war,” Viet Nam, coupled with the largest generation of adolescents ever to grace American society, ended the forcible induction of young men into the military. 
With the recent discovery of our earliest ancestor, Ardi, our biological and social lives exist in a 4.4 million year now. Our physical bodies “evolve” in the womb along the same lines as did our species and, once born, we carry with us our earliest organs.  Most critical of these to conflict escalation and avoidance is our “fight-flight” mechanism – the amygdala. And the most pertinent biological agents to promote the collaborative resolution of conflict are our “mirror neurons” which
provide a powerful biological foundation for the evolution of culture . . . absorb[ing] it directly, with each generation teaching the next by social sharing, imitation and observation.
How we’ve manage to survive despite our tendency to misread one another’s actions, intentions and emotions, is often the subject of those who advise us how to choose and move juries -- here -- Anne Reed at Deliberations (explaining why "they" don't see things like "we" do here); and, the Jury Room (explaining why pain hurts more intensely when we believe it's been intentionally inflicted here).
The Most Effective Conflict Resolution Technology is the Oldest
One of our true original gangsters, Al Capone, is reported to have said that “you can get much further with a kind word and a gun than you can with a kind word alone” and one of our greatest Presidents, Theodore Roosevelt said “speak softly and carry a big stick.”
As Robert Wright, author of The Moral Animal explained, had Tit for Tat been tossed into the game with 50 steadfast non-cooperators, there would have been a 49-way tie for first place. But none of the players' programs failed to cooperate in at least some circumstances, leaving Tit for Tat the clear victor. According to Wright, humans, like the programs in Axelrod's competition, are evolutionarily “designed” to cooperate under at least some circumstances. The engine and benefit of cooperation is present in our neurochemistry. When scientists observed the brain activity of volunteers playing the Prisoner’s Dilemma game, for instance, they found that the participants' “reward circuits” were activated and their impulsive "me first" circuits inhibited when they cooperated. Cooperation, retaliation, forgiveness and a return to cooperation. Tit for Tat.
We don't "dis" lawyers here at the Negotiation Blog. We simply remind ourselves that our primary purpose is the promotion of justice, with a stable societal order closely behind. Most people don't understand, for instance, that Shakespeare's famous the first thing we do, let's kill all the lawyerswas not an insult. In King Henry IV, Act IV, Scene II, Shakespeare's sentiment was not his own, but that of a revolutionary who wished to destroy the social order.
The historic "present" of laws and lawyers is in the thousands, not simply the hundreds, of years. Hammurabi (make of his choice for the memorialization of his laws what you will) was the sixth king of Babylon, remembered for creating -- in his own name (and likeness?) - the first written and systematic legal code.
For the wrongful killing of another, for instance, the victim’s kin were paid according to the social status of the deceased party. Thus the ‘man price’ for killing a peasant was 200 shillings and that for a nobleman 1200 shillings. Payments were not, however, tailored to the loss, but fixed according to types of affront, a distinction we continue to make when we punish intentional torts more severely than negligent ones. >
Lawyers, litigators and trial lawyers are too often demonized by the ADR community as if you could get someone to sit down to negotiate without first pointing the gun of litigation at their heads; I salute you (and myself, for that matter!) for bringing us all to the bargaining table. See Steve Mehta's recent post at Mediation Matters, Factors When Peace Makes Sense for a note that touches upon the symbiotic relationship between litigation and mediation, litigators and mediators.
I shouldn't cite single legal blogs twice, but I cannot resist this quote of Scott Greenfield's on another pundit's view of the future lawyers have in store for them, i.e.,
shucking oysters for a living if we don't accept a future of lawyers being piece workers in factories, sending our work off to Bangalore in pdf files and complementing people on their choice of forms at Legal Zoom.
Which came first? Public civil trials or private arbitrations? You’ll be surprised, I’ll wager, to hear that arbitration was one of the earliest forms of dispute resolution, practiced by the juris consults of the Roman Empire. Roman arbitration predates the adversarial system of common law by more than a thousand years. 
Ah, the glory of Rome! The juris consulti were (like too many mediators) amateurs who dabbled in dispute resolution, raising the question whether they (and we) should be certified or regulated as Diane Levin asks at The Mediation Channel this week. The Roman hobbyists gave legal opinions (responsa) to all comers (a practice known as publice respondere). They also served the needs of Roman judges and governors would routinely consult with advisory panels of jurisconsults before rendering decisions. Thus, the Romans – god bless them! - were the first to have a class of people who spent their days thinking about legal problems (an activity some readers will recall Ralph Nader calling "mental gymnastics in an iron cage").
It was Buckminster Fuller who famously opined that the "significant problems we face cannot be solved at the same level of thinking we were at when we created them." If you keep this aphorism in mind for the remainder of this post, you'll likely have some extraordinarily innovative comments to make in the comment section below.
As the Law Guru wiki reminds us, we can trace the adversarial system to the "medieval mode of trial by combat, in which some litigants were allowed a champion to represent them." We owe our present day adversarialism, however, to the common law's use of the jury - the power of argumentation replacing the power of the sword.
The Act abolishing the infamous Star Chamber in 1641 also granted every "freeman" the right to trial by "lawful judgment of his peers" or by the "law of the land" before the Crown could "take or imprison" him or "disseis[e] [him] of his freehold or liberties, or free customs." Nor could he any longer be "outlawed or exciled or otherwise destroyed." Nor could the King "pass upon him or condemn him."
English colonies like our own adopted the jury trial system and we, of course, enshrined that system in the Fifth, Sixth, and Seventh Amendments. Whether this 17th century dispute resolution technology can be fine-tuned to keep abreast of 21st century dispute creation technology (particularly in the quickly moving area of intellectual property) remains one of the pressing questions of legal and ADR policy and practice, particularly in a week in which a Superior Court verbally punished the lawyers before it for filing The Most Oppressive Motion Ever Presented (see the Laconic Law Blog). The motion?
Defendants['] . . . motion for summary judgment/summary adjudication, seeking adjudication of 44 issues, most of which were not proper subjects of adjudication. Defendants’ separate statement was 196 pages long, setting forth hundreds of facts, many of them not material—as defendants’ own papers conceded. And the moving papers concluded with a request for judicial notice of 174 pages. All told, defendants’ moving papers were 1056 pages.
Mediator, author and activist, Ken Cloke, suggests that interest-based resolutions to conflict must replace power and rights based resolutions if we expect to create a future in which justice prevails. As Ken wrote in Conflict Revolution:
Approaching evil and injustice from an interest-based perspective means listening to the deeper truths that gave rise to them, extending compassion even to those who were responsible for evils or injustices, and seeking not merely to replace one evil or injustice with another, but to reduce their attractiveness by designing outcomes, processes, and relationships that encourage adversaries to work collaboratively to satisfy their interests.
Evil and injustice can therefore be considered byproducts of reliance on power or rights, and failures or refusals to learn and evolve.
All political systems generate chronic conflicts that reveal their internal weaknesses, external pressures, and demands for evolutionary change. Power- and rights-based systems are adversarial and unstable, and therefore avoid, deny, resist, and defend themselves against change. As a result, they suppress conflicts or treat them as purely interpersonal, leaving insiders less informed and able to adapt, and outsiders feeling they were treated unjustly and contemplating evil in response.
As pressures to change increase, these systems must either adapt, or turn reactionary and take a punitive, retaliatory attitude toward those seeking to promote change, delaying their own evolution. Only interest-based systems are fully able to seek out their weaknesses, proactively evolve, transform conflicts into sources of learning, and celebrate those who brought them to their attention.
These are the words I leave with the readers of Blawg Review #234 because they are the ones that informed my personal and professional transformation from a legal career based on rights and remedies to one based upon interests and consensus.
Whatever my own personal 200-year present was, is and will be, it is pointed in the direction of peace with justice, with an enormous and probably unwarranted optimism best expressed by the man after whom my law school was named: Martin Luther King, Jr. - the arc of history is long, but it bends toward justice.
Blawg Review has information about next week's host, and instructions how to get your blawg posts reviewed in upcoming issues. Next week's host, Counsel to Counsel, will devote its round-up of the week's best legal posts to the Great Recession.
 Earlier scientific theory posited that each human embryo (see Embryo Mix-Up at the Proud Parenting Blog) passes through a progression of abbreviated stages that resemble the main evolutionary stages of its ancestors, i.e., that the fertilized egg starts as a single cell (just like our first living evolutionary ancestor); as the egg repeatedly divides it develops into an embryo with a segmented arrangement (the “worm” stage); these segments develop into vertebrae, muscles and something that sort of looks like gills (the “fish” stage); limb buds develop with paddle-like hands and feet, and there appears to be a “tail” (the “amphibian” stage); and, by the eighth week of development, most organs are nearly complete, the limbs develop fingers and toes, and the “tail” disappears (the human stage). It turns out that this one-to-one correlation was too simplistic, but it remains safe to say that our biological development still passes through several stages that “recapitulate” the evolution of our species.
 The amygdala is a region of the brain that permits the formation and storage of memories associated with emotional events. It permits us to “read” the emotional responses of our fellows and is thought to facilitated our ability to form relationships and live and work in groups. It is also the source of our “fight or flight” response to danger.
Studies show that some mirror neurons fire when a person reaches for a glass or watches someone else reach for a glass; others fire when the person puts the glass down and still others fire when the person reaches for a toothbrush and so on. They respond when someone kicks a ball, sees a ball being kicked, hears a ball being kicked and says or hears the word "kick."
“When you see me perform an action - such as picking up a baseball - you automatically simulate the action in your own brain,” said Dr. Marco Iacoboni, a neuroscientist at the University of California, Los Angeles, who studies mirror neurons. ”Circuits in your brain, which we do not yet entirely understand, inhibit you from moving while you simulate,” he said. ”But you understand my action because you have in your brain a template for that action based on your own movements. “
 Looking toward the future, the Neuroethics and the Law Blog predicts that in the “experiential future, we will have better technologies to measure physical pain, pain relief, and emotional distress. These technologies should not only change tort law and related compensation schemes but should also change our assessments of criminal blameworthiness and punishment severity” here.
The adversarial system of medical negligence fails to satisfy the main aims of tort law, those being equitable compensation of plaintiffs, correction of mistakes and deterrence of negligence. Instead doctors experience litigation as a punishment and, in order to avoid exposure to the system, have resorted not to corrective or educational measures but to defensive medicine, a practice which the evidence indicates both decreases patient autonomy and increases iatrogenic injury.
(Iatrogenic, by the way, is a fancy term for “we have know idea whatsoever what the source of this ailment is). Chris is looking for comments so run on over there if you’ve been thinking about medical malpractice litigation during the marathon American health care debates.
I recently reported with surprise the Second Appellate District's Burlage opinion in which it refused to vacate the trial court's vacation of a $1.5 million arbitration award based upon the arbitrator's rejection of evidence that the damages sought were not in fact suffered by claimants.
My further thoughts below, which are 180 degrees from my initial thoughts. (As a friend recently said to me "I said THAT? about THAT issue? Did you hit the 'refresh' button?")
The question presented to the arbitrator was whether evidence of a post-escrow remedy was admissible in light of the (apparent) rule of law that damages should be measured as of the date escrow closed. Because the purchaser of the property purchased a lot line adjustment eliminating the encroachment subject of the arbitration two years after the close of escrow, the arbitrator excluded the evidence as irrelevant to the issue of damages. The trial court vacated the arbitration award under section 1286.2, subdivision (a)(5), "which requires vacation of an arbitration award when a party's rights are 'substantially prejudiced' by the arbitrator's refusal to hear 'evidence material to the controversy.'" Two members of the three-member appellate panel affirmed.
When I spoke with attorney Lascher over lunch yesterday, she noted that questions such as "substantial prejudice" would require the trial court to review the entire record. Determining that substantial prejudice existed would also depend upon the application of the law to the facts. How, for instance, could there be "substantial prejudice" if the arbitrator was right about the law, i.e., that because the damages were required to be measured at the date escrow closed, evidence of a post-escrow cure were irrelevant. The appellate court opinion doesn't mention this issue, let alone resolve it.
Since the Court can't review the decision based upon the law or the findings of fact, the arbitrator could have permitted the evidence to be introduced and granted the identical relief. Presto, the arbitration award would have been made bullet-proof. I understand from reading the rehearing briefs that the arbitrator knew the "facts" that the excluded evidence would have proven, so it's highly unlikely that permitting the facts to come into evidence would have changed the result.
The Lascher rehearing brief suggests that the Burlage holding would incentivize arbitrators to admit all proffered testimony and documents into evidence to insure their awards are not made subject to judicial review, thereby making arbitration lengthier and more burdensome. Lascher also suggests that there is little to disincentivize losing parties from seeking to vacate arbitration awards whenever any evidence is excluded at the arbitration. Both of these results would, she argues, further proceduralize and undermine the utility of arbitration as an alternative to litigation.
She may well convince me that my own initial analysis of the case was wrong. We'll see whether the Court of Appeal rethinks this one. In any event, I believe we can expect to see this one before the California Supreme Court at day's end.
Before I begin to get hate mail from attorneys about this series, let me say that it is meant to sound the alarm, raise red flags, and make attorneys overly cautious so that our clients wouldn't even ever think of suing us for malpractice.
I don't mean to suggest here that drafting an arbitration clause a Court refuses to enforce or to apply to a given claim constitutes malpractice. The way the Courts are dealing with arbitration clauses these days, it's probably not outside the standard of care to fail to satisfy their passing fancies on scope and unconscionability.
I do, however, WANT TO DISCOURAGE ALL LAWYERS FROM USING BOILER PLATE ARBITRATION CLAUSES which is why I'm alerting you to yesterday's opinion by the Fifth Circuit Court of Appeal refusing to apply Halliburton's employment arbitration provision to a sexual assault claim.
Here's the clause.
You understand that the Dispute Resolution Program requires, as its last step, that any and all claims that you might have against Employer related to your employment . . . must be submitted to binding arbitration instead of to the court system.
Pretty broad, but not, according to Jones v. Halliburton, broad enough to include a sexual assault claim that occurred in worker housing. With one Justice dissenting, the Court was careful to limit is opinion strictly to the facts of the case before it. Here's the holding:
The one consensus emerging from [our] analysis is that it is fact-specific, and concerns an issue about which courts disagree. When deciding whether a claim falls within the scope of an arbitration agreement, courts “focus on factual allegations in the complaint rather than the legal causes of action asserted”. Waste Mgmt., Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 344 (5th Cir. 2004) .Here, the allegations are as follows: (1) Jones was sexually assaulted by several Halliburton/KBR employees in her bedroom, after-hours, (2) while she was offduty, (3) following a social gathering outside of her barracks, (4) which was some distance from where she worked, (5) at which social gathering several co-workers had been drinking (which, notably, at the time was only allowed in “non-work” spaces).
* * *
Under these circumstances, the outer limits of the “related to” language of the arbitration provision have been tested, and breached. Halliburton/KBR essentially asks this court to read the arbitration provision so broadly as to encompass any claim related to Jones’ employer, or any incident that happened during her employment, but that is not the language of the contract. We do not hold that, as a matter of law, sexual-assault allegations can never “relate to” someone’s employment. For this action, however, Jones’ allegations do not “touch matters” related to her employment, let alone have a “significant relationship” to her employment contract.
N.B. Review the case law; forecast the types of claims that might be made against your client. Tell the client there's no way you can provide it with any absolute assurances that the arbitration clause will be enforceable in every given situation. Say that in writing. Do your best. Maintain a great working relationship with your clients and you'll be fine. Just fine.
I recently reported with surprise the Second Appellate District's Burlage opinion in which it refused to vacate the trial court's vacation of a $1.5 million arbitration award based upon the arbitrator's rejection of evidence that the damages sought were not in fact suffered by claimants.
As the Court explained, despite the fact that an undisclosed encroachment on the claimants' property was "fixed" after its purchase, the arbitrator nevertheless permitted them to:
present expert testimony about the effect of what had become a nonexistent encroachment. Their experts testified about the cost to move [the encroaching] pool and fence, neither of which had to be moved [and respondent] was not even permitted to refute [claimants'] expert who opined that the encroachment reduced the value of the property $100,000. [Respondent] could not show that the title company solved the encroachment issue through a payment of approximately one-tenth that amount.
Without this crucial evidence, the arbitration assumed the nature of a default hearing in which the [claimants] were awarded $1.5 million in compensatory and punitive damages they may not have suffered.
Respondent's motion to the trial court to vacate the arbitral award was granted under section 1286.2, subdivision (a)(5), "which requires vacation of an arbitration award when a party's rights are 'substantially prejudiced' by the arbitrator's refusal to hear 'evidence material to the controversy.'" Two members of the three-member appellate panel affirmed.
Noting that the Respondent could not receive the benefit of the arbitration bargain if deprived of the opportunity to present material evidence, the majority had no qualms affirming the trial court's order, even in the face of a dissent that the majority opinion "makes suspect every arbitration ruling disallowing evidence."
As the majority concluded:
We agree with the trial court's acknowledgment that not every evidentiary ruling by an arbitrator "can or should be reviewed by a court." We also agree with its comment, "[T]hat's not the same as saying no evidentiary ruling can or should be reviewed by a court. . . . [I]t would have the effect of . . . deleting subsection 5 from the statute [section 1286.2, subdivision (a)(5)]." This answers the dissent's concern that our opinion makes suspect every arbitration ruling disallowing evidence. In our view, should the award be affirmed, arbitration itself would be suspect.
The majority's willingness to draw a line in the sand for arbitration awards based upon the exclusion of evidence that would have flatly disproved the existence of damages awarded is a good thing for arbitration, assuring arbitrating parties that the arbitral tribunal will provide a process that is "due" -- i.e., notice and an opportunity to be heard. I'm hoping the Supreme Court will not depublish this opinion as it sometimes does when it's not ready to deal with an issue, particularly from an appellate panel apparently still smarting over the high court's "reversal" of its Moncharsh decision nearly twenty years ago. /*
*/ The Burlage Court opens its opinion as follows:
In 1991, we wrote what we thought was a routine arbitration opinion. (Moncharsh v. Heily & Blase (Apr. 2, 1991, B048936) [nonpub. opn.].) We relied on decades of precedent in our unpublished decision to affirm the arbitration award because no error appeared on the face of the award. In dicta, we noted that had the error appeared on the face of the award and created substantial prejudice, we would have reversed. To our surprise, our Supreme Court granted review. Our holding was affirmed, but our dicta "reversed." (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1.) Oh well, nobody's perfect.
The subjects covered in this issue include the chaotic state of federal mediation confidentiality protections [by Phyllis G. Pollack]; the dangers of [mediator] class action fairness declarations [by Jay McCauley and Jeff Kichaven] and the difficulties inherent in applying federal conflict of interest laws developed with attorney advocates in mind to attorney neutrals and their law firms [by Robert J. Rose].
Though these issues are of critical importance to daily practice in our federal courts, very few advocates are aware that these problems exist, let alone how they might be fixed. The Resolver’s first mission is to make available to FBA members the highest level of scholarship and best practices in federal mediation and arbitration practice. The second—and perhaps the most important— mission of The Resolver, is to commence a robust and sophisticated conversation among federal lawyers, on the one hand, and district and circuit court mediators on the other, about the means by which we can more efficiently, effectively, and durably help our clients resolve their litigated disputes.
(from the Letter from the Editor by yours truly)
You'll also want to read the Message from the [ADR] Section Chair, Simeon H. Baum, whose energetic leadership is making the ADR Section of the Federal Bar Association a dynamic new force in the ADR field.
As Baum's message notes, we have great things in store for the work of the FBA's ADR Section. Simeon writes:
For those of you who are interested in what you encounter in The Resolver, we welcome you to participate actively in the FBA. Become a liaison to the section on behalf of your local chapter. If you have thoughts on pending or possible legislation that affects the dispute resolution field . . . please feel free to share them with us—publish your piece in the next issue of The Resolver.
Or, reach out to the section and your chapter and look to put your cause at the forefront of the FBA’s legislative agenda. We can take advantage of Bruce Moyer and the FBA Governmental Relations Council to cultivate the best in the ADR field through national legislation, where appropriate.
If you have a CLE program on ADR that you would like to promote, please let us know through the ADR Section, and the section can collaborate with your local chapter [Board member Jeff Kichaven is the CLE Chair this year and you can reach him at the link above].
Along these lines, the section is hoping that FBA chapters will host fireside chats or roundtable discussions featuring the circuit mediator for that area [and local Board members will be reaching out to those chapters to initiate those roundtables.
These CLE events—perhaps accompanied by a breakfast, lunch, or cocktail reception—can provide an excellent opportunity not only to enhance the use of those ADR forums, but also to meet with likeminded neutrals and representatives.
With this first issue of The Resolver at hand—thanks to the efforts of editor Vickie Pynchon, our generous contributors, and FBA sections and divisions manager Adrienne Woolley (email@example.com), we invite you to join us in the unending way of creative service to your clients, the bar, and society via the path of resolution.
No, this isn't becoming an arbitration blog, but the threat of arbitration directly impacts the value of litigation and negotiating the price of a release from litigation is what I spend my days helping attorneys negotiate. So this news from the Second District Court of Appeal (controlling Los Angeles trial court decisions) is yet another shot across the bow of arbitration's efficiency for the resolution of disputes (and did I mention how much better mediation is? No? Well, later on that). An excerpt from the Los Angeles Daily Journal and a link for paying subscribers below:
A California appellate court on Monday upheld a lower court's decision to throw out a $1.5 million arbitration award in a Ventura County property dispute - a decision that some observers said could lead to increased judicial review of arbitration and larger legal bills for litigants.
"As far as I know, it's the first time the Court of Appeal has reversed an arbitration award," said Lisa J. Perrochet, a partner at Horvitz & Levy in Encino, who, along with John A. Taylor Jr., represented land-seller Martha Martinez Spencer.
A 2-1 decision of the 2nd District Court of Appeal determined that JAMS' David D. Perez erred by preventing Spencer from showing that a title company solved the land encroachment problem of a couple that bought a property from Spencer in 2004. Burlage v. Superior Court [.pdf] . . .
The court's decision will do much to dispel the "urban legend" that arbitration awards are bulletproof on appeal, Perrochet said.
But Wendy C. Lascher of the Ventura-based Lascher & Lascher, who represented Ronald and Cheryl Burlage, the couple who sued Spencer, said the court's decision "will do away with many of the advantages arbitration is supposed to have."
Daily Journal subscribers can read more here. My brief of this case appears here.
UPDATE: There's a lively contract drafting discussion going on over at Ken Adams Blog (My Version of the Triple A Standard Arbitration Clause). To the many comments there -- most of which concern the important issue of clarity -- I would add the following: it's a lazy lawyer who uses anyone's "standard" clause in any agreement. Attorneys' fees provisions, integration clauses, venue and arbitration agreements and the like should be tailored to the disputes that are likely to arise in view of the most recent case law. The decision discussed here was published on August 26 of this year. Any arbitration clause that pre-dates that decision should be reviewed and revised to make it as air-tight as possible.
Since posting the holding of the recent Parada decision here yesterday, I've had further thoughts on the matter which I posted to both the AAA LinkedIn and the Commercial and Industry Arbitration LinkedIn Group sites.*/ I provide those thoughts here for anyone who represents businesses struggling to draft enforceable arbitration clauses and attorneys who oppose or are attempting to enforce them.
(above, lawyer on verge of bagging practice to mediate and arbitrate instead)
The California Supreme and appellate courts HATE consumer/employee arbitration clauses. It's almost impossible to draft one that will pass their unconscionability standards -- even O'Melveny failed to get it right.
In this case the Court found the arbitration clause substantively unenforceable even though the Plaintiffs were "investors" and hence neither the "consumers" nor the "employees" for whom prohibitively expensive arbitration alone can render the clause unenforceable. This case does not extend the prohibitively expensive doctrine into non-consumer contracts, but instead uses the expense as one of the factors leading to the conclusion that the arbitration provisions are substantively unconscionable.
This creates a slippery slope for the Courts to import (implicitly rather than explicitly) the prohibitively expensive doctrine into its consideration of arbitration clause enforceability when the contract is "adhesive." For this reason, it wouldn't surprise me if the California Supreme Court de-published it.
This is one of those issues where the Courts' self-interest in clearing their dockets does not defeat a continuing strong bias against arbitration at the appellate level. Of course the appellate courts do not have to deal with the litigation as the trial courts do and the trial courts continue to somewhat reflexively grant motions to compel arbitration.
This leaves everyone who wishes to avoid the Court system and use arbitration to resolve commercial disputes in a position of uncertainty that the law of contracts is designed to prevent.
One solution - the one I suggest - is to use the AAA's expedited commercial procedures for contracts where the individuals signing are likely able to demonstrate an inability to pay for arbitration.
Note that the failure to attach the arbitration rules agreed upon was a factor in the Court's decision that the arbitration clauses were unenforceable. I doubt that any company proffering arbitration to customers attaches the often lengthy rules but they would be wise now to do so if they're operating in California.
The bottom line in California now? If the contract is non-negotiable (form; customer no opportunity to bargain) and the customer will be able to demonstrate an inability to pay AAA or JAMS fees, an expedited procedure should be offered in the arbitration agreement or the business enterprise should assume the cost of arbitration (with a prevailing party clause to recoup the expense should the commercial enterprise prevail). The governing rules should also be attached.
The point is to make the arbitration option as clear and transparent as possible and as inexpensive an option as Court would be. Even those who believe they can distinguish Parada from their own case should know it's in their best interest to adhere to the Parada guidelines or be forced to defend their arbitration clause in Court against strenuous opposition.
*/ I belong to two groups on LinkedIn that any attorney who arbitrates cases or who counsels clients to put arbitration clauses into their contracts should join. They are the Greater AAA Connection, which describes itself as:
a professional and social network of current and former employees, neutrals, and students of the AAAU from around the world. If you have an AAA connection, this might be your connection. Join in!
the open discussion of issues and sharing of information concerning commercial and industry arbitration, mediation and other forms of alternative dispute resolution. Commercial and industry ADR is a broad topic and covers the spectrum from arbitrations and mediations arising out of general, commercial contracts through more specialized forms of dispute resolution used by various industries, including the reinsurance, maritime, telecommunications, securities, financial services, construction industries and others. We also consider labor and employment arbitration and mediation to be within this spectrum.
The arbitration provisions at issue in Parada were contained in a form contract between individual investors and a company called Monex which dealt in precious metals. After suffering investment losses, three customers brought suit in a single consolidated proceeding. The arbitration clause required each party to individually bring a claim against Monex before a panel of three JAMS arbitrators.
The trial court granted Monex's motion to compel arbitration and the Fourth District vacated that Order in response to the Plaintiffs' petition for a writ of mandate. In granting the writ, the appellate court held that the cost of a three-Judge JAMS arbitration panel together with a prohibition against consolidating or joining claims rendered the provisions both procedurally and substantively unconscionable.
The factors upon which the Court premised its unconscionability decision included the following: (1) because Plaintiffs had no meaningful opportunity to negotiate the terms of the agreement, it was an adhesion contract; (2) assuming the arbitration of Plaintiffs' individual claims would require four days of hearing time, JAMS arbitrator and administrative fees would have amounted to a minimum of $20,800 per party; (3) the prohibitions against joinder or consolidation unnecessarily increased the cost to each party of bringing their claims against Monex; (4) the parties demonstrated their inability to afford the JAMS proceeding; and, (5) the provisions requiring arbitration according to JAMS rules -- which provided for sanctions in the event of a party's inability to pay, were not attached to the contract.
As the Court concluded:
Having determined the presence and degree of procedural and substantive unconscionability, we return to the sliding scale measurement to determine whether the Arbitration Panel paragraphs and No Consolidation paragraphs of the . . . Agreements are enforceable. (Morris, supra, 128 Cal.App.4th at pp. 1318–1319.)
We concluded the [arbitration provisions] fall in the low to middle range of the procedural unconscionability scale. Without considering each Petitioner’s ability to pay, the unjustified requirement of a panel of three arbitrators from JAMS and the prohibition on consolidation or joinder of claims render the Arbitration Panel paragraphs and No Consolidation paragraphs substantively unconscionable to a high degree. Consideration of Petitioners’ ability to pay pushes those paragraphs even further into substantive unconscionability territory.
On the sliding scale, this low- to mid–range amount of procedural unconscionability and the high degree of substantive unconscionability render the Arbitration Panel paragraphs and No Consolidation paragraphs of the [arbitration provisions] unconscionable and, hence, unenforceable.
This decision, resting as heavily as it does upon the inability of parties to pay arbitration fees and the failure to disclose the arbitration rules that would govern the resolution of the parties' claims, should give every litigator and transactional lawyer pause when advising their clients concerning the enforceability of arbitration clauses.
In my own mediation practice, I have seen many consumer fraud cases ordered into arbitration based on adhesion contracts requiring arbitration according to the rules of the AAA. None of these contracts included the rules that would bind the parties and in many cases the Plaintiffs would be unable to afford to fees charged by AAA arbitrators. Attorneys resisting the enforcement of such agreements would do well to study Parada as would those who advise clients about the enforceability of standardized form arbitration provisions included in contracts which have not been reviewed for unconscionability under recent court rulings.
A friend recently reminded me of a book review I wrote for one of those "get rich" books The Go Giver (below) for the sorely-missed Complete Lawyer. I reprint it here in the Negotiation Blog because I talk a lot about the power of reciprocity in bargaining. I'd summarize my response here, but I can't say it any better than I did below.
The Go-Giver, A Guide to a Life Lived Richly
American business people have been writing self-help guides to financial success since Benjamin Franklin penned Advice to a Young Tradesman and Poor Richard’s Almanac. Business consultants Bob Burg and John Davis Mann add to this tradition a new parable -- The Go-Giver, A Little Story About a Powerful Business Idea.
As the title suggests, Burg and Mann recommend that we discard “go getting” -- hard work focused on individual success -- in favor of “go giving” – authentically passionate work focused on the success of others. To demonstrate how material wealth follows generous action, Burg and Mann create an elusive but legendary business consultant “Pindar,” who shares his Five Laws of Stratospheric Success with anyone who promises to practice these principles in all their affairs.
The pilgrim in this progress is “Joe,” an earnest and hard-working salesman on the brink of a third failed quarter. After promising to follow the laws Pindar teaches him, Joe meets a handful of spectacularly successful givers. These include former hot dog vendor Ernesto, who credits his restaurant and real estate empire to giving more than you take; Nicole, who owes her rise from school teacher to educational software titan to giving much to many; former insurance salesman Sam, whose many philanthropies thrive on giving without expectation of return; and, Debra, who learns to succeed in business by giving of her true self. Having quickly learned each lesson, Joe himself exemplifies Law No. 5 – the willingness to receive the bounty that flows from giving.
Unfortunately, as a guide to financial success, The Go-Giver is more fairy tale than instruction manual. All of the business icons Joe visits ascribe their riches to acts of authentic generosity. It is apparent from the context in which these stories arise, however, that the key here is neither virtue nor the inherent satisfaction to be found in giving. The key is choosing the right people to give to – those with wealth, monied connections or the power to create economic opportunities for others.
If we are moved to visit shut-ins; bring recovery meetings to incarcerated felons; or make micro-loans to third-world entrepreneurs, this book is not for us. This is focused giving and the focus is on the “haves,” not the “have nots.” If we are among the unemployed; the sick; or, the elderly, we’ll need another set of “Laws” for success – chief among them laws guaranteeing the education; training; and, health care necessary to enable us to make use of the opportunities created by the Go-Givers’ generosity. 
Walking the Razor’s Edge
Most Complete Lawyer readers are, however, the type of business people for whom The Go-Giver is written. No matter where we appear on the legal economic ladder, as educated people with access to the justice system, we are well poised to engage in random acts of kindness for, and reap rewards from, those who are well situated to spread a little green.  So long as we successfully negotiate the razor’s edge between opportunism and genuine acts of generosity, Burg and Mann’s advice will likely redound not only to our emotional and spiritual well-being, but also to our financial success.
Most readers will, of course, recognize Joe’s spectacular rise from failing salesman to coffee-bean multi-millionaire as the fairy tale the The Go-Giver all but announces itself to be. There is value here, however, in the quotidian acts of kindness in which Joe engages to satisfy Pindar’s requirement that he promptly practice the “Laws” conveyed.
The most credible results of Joe’s baby steps on the road to becoming a generous human being are his improved relationships with his fellows. Practicing “not keeping track,” Joe foregoes telling his wife his own work-a-day worries, focusing his entire attention upon the challenges of her day. His reward? An entirely believable note of love and gratitude on her pillow the following morning. Practicing “giving more value” than he receives, Joe serves coffee to his workmates as they struggle to meet a collective quarter-end deadline. Though Joe reports “feeling like an idiot” in doing so, it is clear that the warmth and bemused surprise expressed by is co-workers is its own reward.
The true lesson of The Go-Giver is not so much that material reward follows an expansive spirit, but that one’s daily pleasure increases with the size of one’s own heart. After all, when financial success eludes us – or crashes with the national economy – what we have to rely upon is not numbers on a ledger sheet, but the family, friends and neighbors who will see us through. If we give authentically without expectation of reward – because we “love to . . . as a way of life” – what we will reap is a life richly lived even if we do not thereby “get rich” in the process.
 As the Labor Department tells us, in the year 2000, “high school dropouts were more than twice as likely as high school graduates to be counted among the 31 million American “working poor” while only 1.4% of that number possessed college degrees. See A Profile of the Working Poor – 2000, U.S. Department of Labor, Bureau of Labor Statistics at http://www.bls.gov/cps/cpswp2000.htm. One’s existing occupation – the job we have been lucky or well-placed enough to be trained to do -- is also highly correlated with financial success or failure. As the Labor Department reports, “[a]lmost 31 percent of the poor who worked during the year  were employed in [low skill] service occupations . . . .,” including “[p]rivate household workers, a subset of service workers that is made up largely of women, were the most likely to be in poverty (20 percent)”. On the other hand, those engaged in executive, administrative, managerial and professional occupations had low incidences of poverty since “[h]igh earning and full-time employment are typical in these occupations.”
Here's the entire text of the triple A's announcement (h/t to Disputing here)
The American Arbitration Association® Calls For Reform of Debt Collection Arbitration
Largest Arbitration Services Provider Will Decline to Administer Consumer Debt Arbitrations until Fairness Standards are Established
New York, NY– (July 23, 2009) – The American Arbitration Association (AAA), the world’s largest conflict management and dispute resolution services organization, today recommended in a House subcommittee hearing that the process surrounding consumer debt collection arbitration needs major reform and recommended a national policy committee to identify and research solutions. AAA said it will not administer any consumer debt collection programs until those solutions are determined.
AAA senior vice president Richard Naimark told the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee that the AAA “has not administered significant numbers of debt collection arbitrations relative to some other organizations,” and has not handled any since June after it concluded a single high-volume program. However, he said that AAA had independently reviewed areas of the process and concluded that it had some weaknesses. As a result of that review, it is evident to the AAA that “a series of important fairness and due process concerns must be addressed and resolved before we will proceed with the administration of any consumer debt collection programs.” According to Mr. Naimark, areas needing attention from the national policy committee include consumer notification, arbitrator neutrality, pleading and evidentiary standards, respondents’ defenses and counterclaims, and arbitrator training and recruitment.
“AAA has been working with the Domestic Policy Subcommittee to review potential improvements in consumer debt collection arbitration procedures for some time. We believe that arbitration can play a major role in consumer debt collection disputes. A national policy committee dedicated to meaningful reform can enhance an array of due process elements so that there is deeper fairness and transparency. Consumers deserve an alternative to litigation, but they also need to be able to trust that option. Our goal will be to achieve that trust,” Mr. Naimark said after the hearing.
“We have been studying this issue for some time. We made our decision to impose a moratorium on administering consumer debt arbitration independently and not at the behest of any outside entity as has been claimed. We commend the Domestic Policy Subcommittee for its initiatives to protect consumers in debt collection cases, and we will continue to work with it willingly and enthusiastically,” Mr. Naimark said.
A Los Angeles Superior Court judge on May 28 affirmed an arbitration award of more than $4.1 billion, sending shock waves through the labor and employment bar in California.
The award went to Paul Thomas Chester, a former executive at iFreedom Communications Inc., who brought a wrongful termination suit against his former employer, its affiliated businesses and the founder, Timothy Ringgenberg.
The case ended up before an arbitrator, William F. McDonald, a retired supervising judge of the Orange County, Calif., Superior Court's complex civil litigation panel, who now works at JAMS.
Michael D. Young, a partner in the Los Angeles office of Atlanta's Alston & Bird, wrote about the award on his firm's labor and employment blog, "Who's the Boss?" Young spoke to The National Law Journal about the lessons that employment lawyers and their clients could learn from the outcome in this case regarding arbitration agreements and the arbitration process.
Young also broke down the award, to explain how the arbitrator came up with such an astronomically high number.
I write concerning the following statement on your website:
I looked this case up on the L.A. Superior Court's website. Assuming I have the right case number (BC353567), this appears to be a default judgment, a fact not mentioned in the press
The statement is incorrect, although I think I understand the source of the error. There were four iFreedom defendants in the case as initially filed: Timothy Ringgenberg and the three corporate
entities. One of those corporate entities defaulted. The other three moved to compel arbitration. The $4.1 billion judgment confirmed the arbitration award against the three arbitrating defendants. It was
not a default judgment against the defaulting defendant.
I would be grateful if you would make the correction.
UPDATE: I looked this case up on the L.A. Superior Court's website. Assuming I have the right case number (BC353567), this appears to be a default judgment, a fact not mentioned in the press release.
UPDATE FROM THE LOS ANGELES DAILY JOURNAL -- FULL ARTICLE FOR SUBSCRIBERS AT LINK WITH COMMENTARY FROM SETTLE IT NOW'S GOOD FRIEND AAA ARBITRATOR JAY MCCAULEY (excerpt of DJ article below):
Arbitrator William F. McDonald, a retired Orange County Superior Court judge, found iFreedom Communications International Holdings Limited, and its founder, Timothy Ringgenberg, liable for more than $975 million in compensatory damages and awarded nearly $3 billion in punitive damages, as well as interest and penalties, to Paul Thomas Chester.
As chief marketing officer for iFreedom, Chester was promised commissions of 5 percent on the company's gross revenue. When he did not receive the compensation and confronted iFreedom, Chester was terminated without cause, according to his attorneys, Scot Bernstein and Steve Buchwalter.
Ringgenberg concealed data on gross revenue during discovery, even after McDonald ordered him to turn it over, the arbitrator found. Chester's award was therefore based on information Ringgenberg presented to the company's shareholders, including monthly revenue of $535,000 and monthly growth rates of 10 percent to 20 percent.
* * *
Bernstein said the award illustrates how quickly damages, interest and penalties against an employer can snowball into a large sum. In arbitration, awards are most often binding.
Some employers, Buchwalter said, might now rethink whether arbitration agreements are in their best interest.
But for many businesses, the benefits of arbitration will continue to outweigh the risks, said Jay McCauley, an arbitrator on the American Arbitration Association's employment panel, who is not affiliated with this case.
With binding arbitration, "the good side is you're done," he said. "The bad side is if the result comes out big and contrary to what you've expected, there's no place to go. You're flying on a trapeze without a safety net.
"Some employers may say, 'We still like the benefits of arbitration - avoid the jury, faster hearings, someone who knows the case - but boy, maybe we should think twice about having no safety net at all, no chance when things go wayward,'" he said.
All I have now is the Plaintiff's attorneys' own press release. Excerpt below.
SACRAMENTO, Calif., June 2 /PRNewswire/ -- Released today by Law Offices of Scot D. Bernstein, A Professional Corporation, and Law Offices of Steve A. Buchwalter, P.C.: In what may be a record, the Los Angeles County Superior Court has issued a $4.1 billion judgment confirming a JAMS arbitration award. The defendants, including iFreedom Communications International Holdings, Limited, and its founder, Timothy Ringgenberg, were found liable for compensatory and punitive damages in an employment dispute with Paul Thomas Chester, their former Chief Marketing Officer.
Mr. Chester became the defendants' Chief Marketing Officer in June 2004. The defendants' promises to pay him certain commissions and overrides on gross revenues, his right to receive company stock, and the other elements of hiscompensation package reflected his experience in building marketing organizations. "When the promised compensation was not forthcoming, Mr. Chester raised the issue with his employers. By then, the employers had obtained the benefits of Mr. Chester's knowledge and expertise, and they quickly terminated him without cause," Scot Bernstein said.
Mr. Chester sought the assistance of legal counsel. Due to the lack of cooperation from his former employers, Mr. Chester was forced to file suit. The defendants, in turn, moved to compel him to arbitrate the case pursuant to an arbitration clause in the employment agreement.
The arbitrator, a retired judge, determined that the defendants had obtained Mr. Chester's services by means of false representations and fraud. In addition to all unpaid salary, commissions, travel expense reimbursements, and compensation for unissued company stock and unreturned intellectual property, the arbitrator awarded statutory penalties, interest, attorneys' fees, and punitive damages equal to three times the compensatory damages.
(I don't imagine this is something JAMS will want to crow about)
Here, by the way, is the 411 on the Defendant against whom this spectacular award was made (from Buisness Week)
IFreedom Communications International Limited provides communication services via the Internet using the Voice over Internet Protocol (VoIP) and Wireless Fidelity (WiFi) technology. The company offers Global Connect (GC), which is a global network providing voice communication services. iFreedom Communications is based in Hon Kong.
O.K., times are tough. And it takes no small amount of courage to face the financial disaster that credit cards can cause to even those who feel themselves to be the most sober of financial citizens. Then it takes real courage to pick up a telephone and make a request to a disembodied and not-likely-friendly voice to ask for help bailing you out of a mess you can barely believe you find yourself in.
I have three things to say about this. First. The country's supposed financial geniuses are unable to pay their debts and are facing bankruptcy. You are not alone. Second. There's nothing to be ashamed of, though there is something to be learned from this painful experience. I know. I was there during the recession of the early '90s. Third. You are not without remedy. Take a look at "How to Negotiate with Your Creditors" at Entrepreneur Magazine this week.
Tips to help you negotiate with a creditor or collection agency:
If you make a request that is denied for whatever reason, ask to speak with a supervisor.
Don’t agree to pay more than you can afford when negotiating. Know in advance what your financial situation really is, then work within those confines. The last thing you want to do is negotiate a settlement or payment plan that you can’t adhere to.
During your negotiating process, figure out what the creditor is willing to accept as a settlement. What’s their absolute bottom line? If you’re looking for a settlement, offering between 50 and 70 percent of what’s owed, either as a lump sum payment or through a payment plan, isn’t unreasonable. Achieving this settlement might take several rounds of negotiation, however.
Avoid becoming intimidated by the person you’re negotiating with, even if they make threats about lawsuits.
Most successful negotiations require several rounds going back and forth with offers and counter offers. The process could take days or weeks.
If you can afford to settle an account by paying one lump sum (as opposed to using a payment plan), you’ll have more negotiating leverage.
The person you’re negotiating with does this for a living and is a trained professional when it comes to debt collections. For them to use legal terminology during a conversation or in writing is a common tactic to confuse or intimidate you. Listen carefully to what’s being said and make sure you understand exactly what you’re committing to. Consult with a lawyer or credit counselor if you have questions.
Make sure everything you ultimately agree to is put in writing, signed, and dated by both parties.
What to Negotiate for When Dealing with Creditors, Lenders, or Collection Agencies
a lower interest rate
the interest accrued to be waived
the late fees, penalties, and/or legal fees to be waived
the loan to be extended or restructured, allowing you to skip one or more payments with no penalty
a payment plan that would allow you to pay off the amount currently owed, but with no added interest or fees added in the future
a settlement that would include a significantly lower balance due (such as 50 to 75 percent of the total)
favorable reporting to the credit reporting agencies or the removal of negative information from your credit report pertaining that to that account
The American Arbitration Association announces a new set of dispute resolution services for businesses and consumers, including new panel members of which I am one.
Mediation and non-binding arbitration are processes that offer parties opportunities to settle their disputes. Pursuing settlement helps clients to reduce the total cost of conflict management in their organizations, provides flexibility and protects valuable relationships with partners
The American Arbitration Association®’s (AAA) Non-Binding Dispute Resolution Services for Businesses and Consumers is a suite of settlement services and solutions that include:
Non-Binding Arbitration and Mediation Contract Clauses Guide
An important element of the suite is access to AAA staff facilitators who stand ready to aid parties in selecting the settlement options most appropriate for their needs and the circumstances at hand. To reach a facilitator, simply select the “Contact Us” option below to send an email requesting information
The National Law Journal's annoying practice of making its "best" content available only with a secret decoder ring forged in the fire of subscription dollars, nevertheless did not stop me from access to an intriguing article about arbitration's "e-discovery conundrum" (here for people with the secret code).
. . . as litigation discovery techniques have become more prevalent in arbitration, arbitration has become just as time-consuming, expensive and burdensome. Without the benefit of an appeal process for the losing party, the primary remaining benefit for binding arbitration -- privacy -- is often outweighed by the other negative factors.
Parties and their litigation counsel have pointed to runaway discovery as one major reason why they have abandoned arbitration in favor of mediation in the United States and even internationally.
So how can "the long-recognized benefits of arbitration -- speed and cost savings -- be restored?"
The author recommends that the process must "address the needs and interests that led them to arbitration in the first place: to balance the need to discover those documents reasonably necessary for a party to prove its case with the cost, burden and time involved in producing such documents, while taking into account the need for fundamental fairness and to avoid surprise and trial by ambush."
Here's where reformers fail to get the direction the law is moving in. It's not about finding a process that fits your needs - it's about creating the process that is tailor-made for your one and only completely unique and unrepeatable dispute.
The beauty of arbitration is not what it is. It is what it can be. The beauty of arbitration is that it allows you to make up your own $%#@^ law and procedure. It restores control of the process to you.
What, you say? Your opponent and you can't agree? This is no longer a good enough reason, particularly because I do not see many attorneys making the effort to craft discovery and case management plans that reasonably addresses the parties' actual need for every document that someone marginally involved in the dispute might have once breathed upon.
I know whereof I speak.
The solution? Sit down, for goodness sake, with your adversary, for as many days as it takes, to reach agreement about what each side actually needs. Leave your huffing and your puffing, your posturing and your adversarial chops at the conference room door. There will be plenty of time for all of that after the only people who actually understand the dispute -- YOU -- agree upon the type of process necessary to resolve it as efficiently and effectively as possible.
The law firms that do this will survive the recession.
A common question asked by investment fraud victims is whether they should partake in a class action lawsuit of a securities arbitration claim. Often, investors are presented with a choice of either partaking in a class action lawsuit or FINRA arbitration action. As a general rule of thumb, investors are better off avoiding class action lawsuits. The recovery rate in class action lawsuits tend to be paltry. Please realize this is not always the case but it is very common.
The main reasons for why FINRA securities arbitration actions are typically better than class action lawsuits for investors include the following reasons…
Trial court lacked authority to review discretionary, prehearing order by arbitrator, who imposed stay on arbitration of dispute concerning uninsured motorist policy until plaintiff--who was driving on work-related business in company car provided by employer when rear ended--pursued workers’ compensation benefits in light of Insurance Code Sec. 11580.2.
This just in on the same day I attended the AAA's Expedited Case training. As an ADR practitioner I favor party "choice and voice" in all dispute resolution venues, meaning that I frown on adhesion contracts of all types, including those that are unfairly imposed upon consumers and employees. The devil in the detail, of course, is the meaning of the term "unfairly." I am unfamiliar with the proposed law subject of this article and neither support nor oppose it. Just keeping my readers informed.
Democratic Party control could ban mandatory arbitration, expert says
Michael LeRoy, a professor of law and of labor and employment relations, says Democratic Party control in Washington could restore lawsuits as an option for workers and consumers now forced to settle disputes through mandatory arbitration that gives employers and businesses an unfair edge.
CHAMPAIGN, Ill. — Democratic Party control in Washington could restore lawsuits as an option for workers and consumers now forced to settle disputes through mandatory arbitration that gives employers and businesses an unfair edge, a University of Illinois labor law expert says.
Michael LeRoy predicts a bill sponsored by Democrats that would bar companies from imposing arbitration will likely be approved next year when Democrats take over the White House and add to their majorities in Congress.
The measure, introduced last year but stalled by the prospect of a Bush administration veto, would halt a shift that has grown since a 1991 U.S. Supreme Court ruling allowing firms to require arbitration rather than courts to resolve disputes, he said.
Arbitration Fairness Act of 2007 - Declares that no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of: (1) an employment, consumer, or franchise dispute, or (2) a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.
Declares, further, that the validity or enforceability of an agreement to arbitrate shall be determined by a court, under federal law, rather than an arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.
Exempts arbitration provisions in collective bargaining agreements from this Act.
A lessee of commercial office space complains that the common areas are not being properly maintained. The local high school has just banned Catcher in the Rye. Again. A prestigious law firm fires a first year associate because he refuses to remove his new “tongue stud.” These seemingly disparate disputes have one quite obvious but ill understood characteristic in common – they are all examples of unresolved conflicts that have ripened into discrete disputes.
Pretend for a moment that you never went to law school. I know. It's hard. But give it a shot.
Lawyers (those other people who went to law school) are are trained to understand, manage and remedy all disputes, no matter however different they might be, in a single, highly controlled manner.
To help their clients deal with the problems mentioned here, lawyers will read the lease; research the latest Supreme Court rulings ("Fuck the draft"); and, study the statutes. Once they understand the facts that are relevant to the law, they “think like lawyers.”
How do they do that? "Think" like lawyers?
First, they subject the facts and the law to as much scrutiny as any idea can bear before it disintegrates into the dust of first principles. They create a chronology of events, highlighting and tailoring the "story" of the conflict that "fits" the available "causes of action" giving rise to "rights" in their client, obligations in their "opponent" and remedies for the harm suffered.
This "legal" dispute was once about a relationship between people. Now it is an "actionable" claim in an extremely controlled process in which one of the parties will "win."
That, of course, rarely happens because the legal system has become too expensive and the law too uncertain for most people to risk what used to be it's goal -- a jury trial.
Lawyers recognize frivolous or baseless or "defendable" claims by observing just how uncomfortably the “facts” sit inside their opponent's “causes of action.” When called upon to justify their entitlement to get their client's claim before a jury (demurrers, motions for judgment on the pleadings, summary judgment motions, non-suits) the Plaintiff's attorneys can and will simply change the way the story is told. They make the facts fit the law. There's nothing wrong with that. That's their job. If the facts won't "fit" the law, lawyers apply themselves to the law's creative expansion.
What attorneys do not learn in law school is how and why conflict develops into a dispute and then predictably evolves, usually getting more acrimonious and difficult to resolve.
My friends who are lawyers (I never went to law school, remember? and neither did you) tell me that they know how to escalate conflict but not how to de-escalate it. They also tell me that they see a lot of injustice. Sometimes the injustice arises because the laws themselves are unjust. Sometimes the tragic and unfair consequences of human interactions just don't have any legal remedy. And sometimes the legal process itself makes disputes worse -- more protracted, frustrating and expensive -- rather than better.
In common law countries, like ours, where the law is forged in the fire of conflict, shouldn't attorneys be taught not only how to "win the case" but also how to dampen the flame? Most litigators I know would respond with a resounding "no!"
Conflict resolution that is not "handled" as litigation or arbitration is for some other professional to deal with. Therapists come to mind. Don't they help the parties deal with that most uncontrollable aspect of any dispute -- something not only lawyers but the law itself exclude from the legal action?
Feelings. Not just sad or mad feelings. But the type of feelings that make teenagers shoot other teenagers on the streets of Los Angeles. Feelings of loss, tragically unfair outcomes, powerlessness, rage and despair.
The purpose of this post and the new thread that it is meant to begin? To start something radical.
If you're not aware of what I'm about to tell you, you should be.
I was just talking to a friend over coffee the other day about how we're using 18th Century technology (the jury trial) to solve 21st Century problems.
Here's the idea. A legal TED Conference.
If you'll look at what TED accomplishes, you'll know what I don't mean. I don't mean a conference to trot out any new/old "ADR" ideas -- mediate this, arbitrate that, create new rules and forms for the lawyers to use.
I mean creating the highest level think tank we can to first envision and then implement a dispute resolution technology that incorporates what we've learned since we first enshrined the jury trial in our Constitution more than 200 years ago.
I have one man in mind -- Larry Lessig. But surely there are others. The first step would be to suggest names for the coordinating committee.
Why do I think of TED? Because what it envisions cannot be accomplished. It cannot even be envisioned. It's a fool's errand. One I'd be willing to spend the rest of my own life working on.
(while we're walking down memory lane anyway, "Have It Your Way" from 1976)
When I ask litigators why they don't choose arbitration over litigation before unpredictable judges in a crowded court, their answer invariably is "because I can't appeal the ruling." We cling to appellate review even though we appeal fewer cases than we try -- which is a very small percentage of our case load as it is.
Not surprising, however, we litigators, as Max Kennerly recently noted, tend to be risk-averse, not risk-embracing (h/t Blawg Review # 174). To give up that one last chance for our client to be vindicated and for us to be triumphant is generally just too much for us.
Now we can have our arbitration cake and and follow it up with appellate ice cream. Yesterday, the California Supreme Court in Cable Connection, Inc. v. DirecTV held that arbitrating parties' agreement to seek appellate review of legal errors is enforceable in California State Courts despite its uneforceability in federal court. As the Supreme Court explained:
However, the high court went on to say that federal law does not preclude “more searching review based on authority outside the [federal] statute,” including “state statutory or common law.” (Id. at p. __ [128 S.Ct. at p. 1406].) In Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 (Moncharsh), this court reviewed the history of the California Arbitration Act (CAA; Code Civ. Proc., § 1280 et seq.).
The California rule is that the parties may obtain judicial review of the merits by express agreement. There is a statutory as well as a contractual basis for this rule; one of the grounds for review of an arbitration award is that “[t]he arbitrators exceeded their powers.” (§§ 1286.2, subd. (a)(4), 1286.6, subd. (b).)
Here, the parties agreed that “[t]he arbitrators shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error.” This contract provision is enforceable under state law, and we reverse the contrary ruling of the Court of Appeal.
These appear on my statistics page to help me know what type of information potentially repeat readers are looking for. This one has my sympathy and I'll ask around for an answer.
During arbitration but before passing the award if one arbitrator out of three died what is the next procedure?
Maybe arbitrator #3 was actually very young and was hit by a car . . . . . Maybe I'm being age-ist.
Still, I'll check the case law after I run to the grocery story to buy our contribution to one of our favorite Los Angeles summer events -- the Hollywood Bowl with friends who are "chefs to the stars."
Here's the Answer for What Happens when an Arbitrator Dies -- at Least in the Second and Ninth Circuits
Numerous cases hold that . . . . a substitute can be appointed when an arbitrator dies, and the death of an arbitrator does not provide a basis for vacating prior rulings. In Trade & Transport, Inc. v. Natural Petroleum Charterers Inc. [(2d Cir. 1991) 931 F.2d 191], for example, the Second Circuit held that when a panel member died after the panel issued a liability ruling, the parties were not required to rearbitrate the entire dispute from the beginning; the Court had the power to appoint a substitute arbitrator even in pending arbitration. 931 F.2d 194-96. And in the more recent United Government Sec. Officers of America, Local 38 v. Wackenhut Corp., 2005 WL 2104849, 5 (D.Or. August 29, 2005), the district court had no trouble remanding a case to a different arbitrator after the original arbitrator died, with instructions that the new arbitrator should not revisit the arbitrability decision of the first. These and other cases cited by the Union clearly show that when an arbitrator dies, a new arbitrator may be appointed and cannot revisit final decisions like the liability finding here.
TALLAHASSEE, Fla. -- Florida Insurance Commissioner Kevin McCarty welcomed the First District Court of Appeal's decision affirming the Office of Insurance Regulation's denial of United Insurance Company of America's request to include a mandatory arbitration clause in its life insurance contracts.
Arbitration would have forced disgruntled policyholders to bypass the legal system to settle disagreements. United appealed OIR's action and the court affirmed the denial.
"Policyholders have fewer rights and constitutional protections under the more restrictive arbitration process than they would have in a civil court proceeding," said McCarty. "I'm pleased that the Court made it clear that Florida consumers should not be shut out of the traditional legal system to press their grievances against insurance companies."
Although United argued that federal arbitration law superseded the Florida law that allows policyholders to use the courts for contractual disputes, the Court stated that the matter "specifically relates to the business of insurance" and was, therefore, exempt from being superseded by federal law
Not an earth-shaking opinion from the Ninth Circuit but a good one to keep around the next time you want to claim -- or resist a claim of -- waiver. Thanks to the Met News for summarizing these opinions on a daily basis and to LACBA for putting them into my email box every night.
What on earth would we do without them?
Where employment-related dispute arose between employer and employee who had executed employment agreement containing a mandatory arbitration clause, and employee wrote letter requesting arbitration to which employer responded by telling employee that it did not consider his claim ripe for arbitration, district court's order—after employee's termination—denying employer's motion to compel arbitration on ground that employer previously breached its agreement and waived right to arbitrate disputes was error because employee did not properly initiate arbitration under agreement's terms; district court improperly concluded employer waived arbitration where it was debatable whether employer acted inconsistently with right to arbitrate, employer initiated arbitration immediately upon learning of suit, and employer's actions did not prejudice employee.
In late June, the Missouri Court of Appeals addressed the legal enforceability of a program adopted by Hallmark requiring employees to arbitrate employment disputes. The court held that Hallmark's ADR program did not constitute a contract and that there was no consideration to bind the employees to the promise to arbitrate claims.
The employer's arguments in favor of enforcement in this case were very much like those argued by O'Melveny & Myers here in California with the same result in the Ninth Circuit -- the employee was not bound by an agreement by continuing to work after all employees were notified that their continued work for the company would constitute consent to being bound by the arbitration provision.
The idea that an employer can create any legal contract it dares to create (based on a condition of at-will employment) cannot be sustained upon reflection. Imagine, for instance, an employer publishing a memo to employees stating that:
Anyone who continues to work for us through next Monday will be conclusively deemed to have agreed, as a condition of remaining in our employ through that date, that you will contribute twenty dollars per month over the next ten years to the National Association of Manufacturers (NAM), whether or not you remain employed here during that time. If you do not agree, you will need to resign your employment immediately, because by continuing to work, you are agreeing.
The standard residential purchase contract in California is produced by the California Association of Realtors® (CAR). It contains two sections that are easy to overlook or to take as “boilerplate”, but that can be very important if things go awry between the parties. One of those sections deals with attorney fees, providing that, in the event of any proceeding between buyer and seller, the prevailing party shall be entitled to attorney fees and costs from the non-prevailing party. The attorney fee section contains an exception, however, and that exception is spelled out in the portion of the contract referring to mediation. There it is said that, if either party initiates an action “without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees… .” [my emphasis] /*
When Mr. Thrifty and I purchased our house in '02, we were presented with one of these form contracts. I'm a lazy form contract signator myself. Negotiation training or not, I generally assume these contracts are "take it or leave it" and I sign them accordingly. /**
Not Mr. Thrifty.
"What's the procedure?" I recall him pressing our real estate agent. "When is the demand for mediation supposed to be made and how are the parties supposed to conduct it and what happens if the parties can't reach agreement on the mediator to conduct the process?"
He was having none of it.
"I'm crossing it out," he said, as blue ink flowed over the mediation provision and our agent let out of small gasp of dismay.
By that time, everyone was so "bought in" to the sale, that Mr. Thrifty's effort to strike the form language prevailed. No mediation necessary in this household!
Beware of Form Contract Language
As Bob Hunt explains, the Lange Court gave the back of its hand to the contention that it was "too difficult" to make the required demand for mediation.
“If the [sellers] could be found and served with a lawsuit by mail, they could have been sent a mediation demand by mail[,]” [held the Court] All that the plaintiff had to do was attempt to mediate before he filed suit; and he didn't. Quoting a related case, the court noted that the mediation provision “means what it says and will be enforced.”
Though it's not surprising to find bare bones ADR provisions in industry form contracts -- bones so bear that their meaning must be litigated -- defeating the purpose of the summary proceedings provided for -- it is surprising to find attorneys continuing to paste form contract language into their client's negotiated agreements. This is particularly troublesome when what's at stake -- the attorneys' fees -- makes the difference between bringing litigation or not or settling litigation or not.
If it's worth putting a clause into your contract, it's worth spending the time to imagine what might happen if circumstances triggering that clause arise. If you're practicing in a firm with both transactional and litigation attorneys, I highly recommend that the wordsmiths run the "standard" ADR, attorney fee, choice of law, and venue provisions by the litigators who have undoubtedly already tested these provisions in the fire of conflict. You won't be sorry you did.
*/ The case -- Lange v. Schilling -- was originally ordered not not to be published. Had that Order stood, the case would not create precedent under California law. As the reader of the linked opinion can see, however, it was subsequently ordered published and can be cited as authority.
**/ The form contract language at issue reads as follows:
Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action. . . . If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action.
O.K., the subject line was meant to shock you and to draw criticism for what I will admit is my greatest unresolved prejudicial default -- that white men over 65 who didn't participate in the American cultural revolution of the late nineteen sixties and early 1970's did not and will never "get it."
failed to disclose that he'd been censured while on the bench for making "sexually suggestive remarks to and asked sexually explicit questions of female staff members; referred to a staff member using crude and demeaning names and descriptions and an ethnic slur; referred to a fellow jurist’s physical attributes in a demeaning manner; and mailed a sexually suggestive postcard to a staff member addressed to her at the courthouse.”
The majority arbitrators deciding the malpractice case stated that the female claimant was not credible because the "severity of the symptoms to which she testified went beyond what she described to her doctors, adding, “This claimant has had five prior facial surgeries.”
Similarly, in summarizing the claimant's expert’s testimony, these arbitrators noted, “One thing probably everyone can agree upon, after five facial surgeries, [claimant] could have done without a sixth one.”
Back to My Own History as Descriptive of -- But No Excuse for -- My Own Biases
We all have biases that we hide from others and some that we successfully hide from ourselves.
We live, I'm told, in a 200 year present. That means that my early life affects your life today. After all, I'm an old white woman, about whom you may well have biases. If I sit on your arbitration panel, you're going to want to understand those biases. That's why I'm giving you a bullet-pointed history of what the world was like when I was forming my essential character at 17 years of age in 1969.
the "want-ads" in the classified section of every major newspaper in American were categorized by gender -- "help wanted - women" and "help wanted - men"
in my senior year in high school, my entire class took "preference aptitude" tests to give us an idea of what our future careers might look like -- the girls were given "pink" tests and the boys "blue" tests -- had I shown an aptitude for, say, math (and no I didn't) I would have been steered into nursing; my male friends into "medicine" as physicians.
women were subject of explicit ridicule in magazine and newspaper cartoons -- we were airheads, bimbos, bad drivers, harpies or -- the "new" stereotype -- communist-longhair-folk-singing-America-hating-hippie-riot-inciting-"girls" who were alternately "men hating" or -- an old phrase -- "of easy virtue."
it wasn't until the 1970's, when I was in college and already planning a career teaching English (after all, nursing required math-skills) that the idea of a career in the law for women as anything other than a secretary began to seem possible.
by the year I graduated from law school in 1980, Columbia's female population had grown to a whopping 32%
although the enrollment of women in my law school class at U.C. Davis was nearly 50% in 1980, when I told my beloved mother in 1976 that I was going to apply to law school she said "why do that, honey? Be a legal secretary, then you can marry a lawyer."
when my husband attended Yale Law School ('67-'70) he had seven women classmates
when I was practicing law (these all from the early '80s)
a partner for whom I worked told me that women weren't permitted at the local "men's only" club because "we don't want our wives there."
a Judge required me to identify myself as Mrs. or Miss and when I said I didn't think it necessary to identify myself by my marital status, asked "what are you some kind of [women's] libber?" (yes, I lost the motion)
I was advised by the few women attorneys senior to me not to get pregnant until after I made partner
secretaries were allowed to refuse to be assigned to a woman attorney
the first woman to make partner at my law firm was quite openly referred to as "the first muff partner" by her colleagues
on the other hand, when a client said (of my assignment to its case) that the company did not want to be represented by a "girl," my partner told the client "then you don't want this firm representing you because she's the best associate I have"
I promise to work on my prejudices. And I advise anyone who is about to appear before any dispute resolver -- be that person male, female, white, black, young or old, GOOGLE THEM FIRST!
In one of the largest wrongful death judgments in Kings County history, relatives of a young couple and three children who died in a devastating apartment fire won $29 million Tuesday.
Derik Faubion and his fiancée, Michell Mattison, both 19, perished in the fire at the Northgate Apartments along with their 2-month-old daughter, Hayden Allison Faubion. Two siblings of Mattison -- Lexus May Bisnar, 4, and her brother Ariel Nel Bisnar, 2 -- also died.
Retired Judge Daniel Pratt, acting as an arbitrator in the case, ruled Lemoore Real Estate and Property Management was negligent in maintenance of the 23-unit apartment complex at 226 E. Hazelwood Drive.
A key piece of evidence was a letter from the property management firm to tenants that stated "smoke detectors are not in place in most units." The letter was written six months before the fatal fire, court records show. . . .
Both sides agreed to let Kings County Superior Court Judge Thomas DeSantos assign the case to an arbitrator to avoid a jury trial. DeSantos chose Pratt, a retired judge in Southern California.
Pratt ruled in favor of the plaintiffs after hearing one day of testimony from Lemoore residents, firefighters and investigators. Pratt also viewed photographs of the plaintiffs who cried as they stood helpless outside the burning units. . . .
"This is one of the saddest cases I have ever seen," said Marderosian, who has been practicing law since 1977. "It not only shocked the city, but wiped out the next generation of two families."
A tremendous effort accomplished today by Blawg Review # 167 at E-Commerce Law, bringing us at least one post from blogs in all 50 states organized by the date of their entry into the union. Blogger Jonathan Frieden must have devoted much of any lawyer's cherished 3-day week-end to this effort, for which all legal bloggers should give him a hearty round of applause.
On the ADR front, Jonathan gives us Oregon, admitted on February 14 (how very Oregonian) 1859 and The National Arbitration Forum Blog entry Americans Increasingly Denied Access to Justice. Here's the attention-grabbing lede. Click on the link for the full post.
The latest California Bar Journal contains an alarming and attention-grabbing piece from the Bar President. In The neglected middle class, Jeff Bleich explained how hard it has become for the hardworking American to get their day in court.
"[O]ur legal system is increasingly serving only the wealthiest interests or the very poorest ones: those who have great resources and those who are lucky enough to get help through legal aid, despite the serious underfunding of that system."
And while we're thinking of the flag and all things patriotic, here are a few random links on patriotism and justice.
Before you run over to Gini's site to read Lande's excellent post or his great article, I'd like to simply bullet-point some observations based upon my four-years of full-time mediation and arbitration practice.
when I co-arbitrate with some of the best commercial arbitrators in the business -- these are Ivy League lawyers with many decades of experience representing Fortune 50 Companies in AmLaw 100 Law Firms, the ultimate decision changes many times during the course of deliberations and almost always could go either way.
having spent a considerable time in the Los Angeles Complex Court as an experienced commercial litigator "externing" for credit to earn my LL.M in '06, I can tell you that the deliberations in chambers of these highly respected jurists is not much different that those in which I have engaged when sitting on an arbitration panel
The take away? No matter who is hearing your case, your chances of winning are 50-50. Flip a coin. Think this doesn't apply to you? I have arbitrated cases being handled by the top ten law firms in the country. I have seen those same type of firms litigate and try cases in the Complex Court. It's 50-50 friends.
Below -- observations on how you and your mediator can be "happy together." (And the Turtles from 1967 so that you can have a little musical accompaniment to this post)
Observations of End-Game Litigation from a Mediator's and Settlement Consultant's Perspective.
Despite years of inquiry and the review of millions of documents, sophisticated parties (Fortune 50) represented by dynamite law firms (AmLaw 50) haven't yet learned the most fundamental information about the following matters -- most of which are more important to the settlement of the case than the cost-detriment-benefit-position-driven-chance-of-victory settlement posture:
what are the hidden interests that your opponent must satisfy before accepting a settlement that is below the number he once told his client should never under any circumstances be accepted?
what are the hidden constraints upon your opponent's authority that must be removed before he can pay more money than he once told his client should never under any circumstances be paid?
why was this litigation initiated in the first instance?
who gave the litigation the "green light"?
what are the probable consequences to the continued financial security of the person who gave the litigation the "green light" in the first place or who has authorized the defense bills for the last 5, 10, or 15 years?
is the person who green-lighted the litigation in the first place still employed by your client?
what are the probable consequences to the financial well-being of the corporation who must pay more than it wishes to pay or accept less than it wishes to recover?
Who is the most frightened person in the room, i.e., whose hide might be sacrificed if the litigation settles for more/less than predicted, or, often worse, actually goes to trial.
There are so many of these settlement-driving and -inhibiting questions that only my own personal time contraints -- I must start my day's work -- make me stop listing them.
Let me conclude with this however. Never underestimate your client's reluctance to settle the case on terms that seem unjust to it. This is the most important function a mediator can play on the day of settlement -- explaining justice issues to the clients and helping the clients de-demonize their opponent -- which occurs most easily in JOINT SESSION yet which most litigators would rather have their teeth drilled than attend.
O.K. I can't conclude without saying this. If you have the courage to try a case, you possess the cajones to participate in at least one joint session to help the parties come to terms with the justice issues -- which are often driven by the conclusion, affirmed over and over again in the course of the litigation, that their opponent is an evil, mendacious, grasping, greedy, malicious, duplicious lying liar with his pants on fire.
This is almost never true. The parties on both sides almost always possess equal parts of good and bad, just like the rest of us.
Let your parties re-adjust their perception of "the enemy" in joint session. I can almost guarantee you that a conversation will ensue in which the parties spontaneously tell each other what interests they really need to satisfy to settle and what constraints they are really working under. And I don't guarantee a lot of things.
Why can't I do this for the parties?
Because often neither side will disclose these matters to me because they don't trust that I won't use that information to help settle the case and because the parties won't believe what I say about their opposition in the first place (obviously, they've pulled the wool over my eyes).
"How do you know he's not lying?" is a question mediators are asked on a regular basis. My answer is "I have no idea." But if you let your client talk to the opposition -- with any constraints, restrictions and control you wish to retain -- which I can orchestrate for you -- your client will be able to elicit the details that give any story a ring of truth (or falsity) while at the same time watching the body language that constitutes between 60 and 80% of all communication.
Would you try a case without 80% of the information you need? Of course not! And yet you're content to avoid a joint session when that session could provide you with between 60 and 80% more information than you had when you arrived on the morning of the mediation or settlement conference?
Suspend your disbelief in the mediator ("who-will-do-anything-to-settle-the-case") for just a couple of minutes. Remember that we're in possession of confidential information we cannot divulge to you.
Take our lead. And if you don't trust us to do so, for heaven's sake find a mediator you can trust!
State courts are reversing arbitration awards for employees at a "statistically significant" rate compared to reversing employer-friendly awards, according to a new study.
Professor Michael LeRoy of the University of Illinois College of Law, a professor of labor and employment, recently released his findings after analyzing arbitration awards from an appellate perspective.
The study, published as a paper, "Do Courts Create Moral Hazard? When Judges Nullify Employer Liability in Arbitrations: An Empirical Analysis," looked at 443 state and federal court rulings on arbitration awards from 1975 to 2007.
While federal courts upheld 85.7 percent of employer wins and 85 percent of awards for employees, LeRoy found markedly different results in the state court system.
There, lower level appellate courts affirmed employer awards 87.2 percent and employee wins 77.6 percent of the time, while the upper appellate courts were even more divergent, with 86.7 percent of employer awards affirmed and only 56.4 percent of employee victories upheld.
These findings suggest a "snowballing futility for employees," LeRoy writes, because the options after being reversed on appeal are limited. Either the employee must start over at the beginning of arbitration, "or worse, be stuck with a useless award and no other recourse."
LeRoy terms this trend a "moral hazard" which is "created by risk sharing contracts or public policies that discourage individuals from avoiding costly behaviors."
Just a quick note on a recent appellate case here holding that where the parties have agreed to conduct their arbitration in accordance with California law, the Federal Arbitration Act does not preempt state law on arbitrability.
You just slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the key, Lee
And get yourself free
Where matchmaking service moved to compel arbitration of clients’ action alleging that "consulting agreements" were fraudulently induced, and agreements were [within a] class of contracts regulated by state law expressly rendering nonconforming contracts void and unenforceable, agreements’ failure to expressly set forth language required under dating service statutes--Civil Code Sec. 1694, et seq.--rendered [them] and [the] arbitration provisions [contained in them] unenforceable. Duffens v. Valenti - filed March 27, 2008, Fourth District, Div. One Cite as 2008 SOS 1811
It’s a long-held rule in California that a defendant sued on a contract may recover attorney fees pursuant to a provision in the contract even if the defendant prevails on a theory that he was not a party to the contract or that the contract is nonexistent, inapplicable, invalid or unenforceable. The rule exists in order to further the purpose of Civil Code section 1717, which is to make unilateral fee provisions reciprocal. . . . .
Consider now whether a similar rule should apply to arbitration provisions. . . . . Should a defendant be able to compel arbitration pursuant to a contractual arbitration provision in a contract alleged by plaintiff even if the defendant denies the existence of that contract?
When we bought our house 6 years ago, Mr. Thrifty struck all ADR provisions from the sales contract. He's come to respect ADR much more in the last few years. Still, I believe he'd choose access to the justice system over its alternatives.
Though Mr. Thrifty -- a litigator -- was bold enough to alter a form contract, few other home buyers would be.
Now it appears that the California courts will protect home buyers from arbitration agreements buried in the voluminous documents all home buyers sign when they purchase a house. See Bruni v. Dideon, just decided by the Fourth Appellate District of California. Summary below courtesy of the Metropolitan News-Enterprise.
Where homebuyers alleged that arbitration clause was contained in preprinted and "voluminous" documents, there was no negotiation, they understood the documents were being presented to them on a "take it or leave it" basis, they [were] generally . . not familiar with real estate documents or with "legalese," were not told to read to read warranty--which contained arbitration provisions . . . . and were not given enough time to read the warranty or any of the other documents [prior to signing, the] issue as to whether homebuyers knowingly agreed to arbitrate was subject to judicial determination regardless of provision requiring that issues regarding enforceability of arbitration clause be submitted to arbitration.
Where . . . plaintiffs had to accept arbitration provisions if they wanted to buy a house, [the]provisions were part of a preprinted form contract, any attempt to negotiate . . . . the terms of the warranty would have been fruitless, the provisions took up one page of a 30-page booklet that was buried in [a] "voluminous" stack of purchase and sale documents, and plaintiffs were never asked to read the arbitration provisions before signing, those provisions were adhesive and unconscionable, and trial court correctly exercised its discretion by refusing to enforce them.
When fists fly at an arbitration proceeding, the arbitrator isn't liable for not averting the altercation, a New Jersey appeals court says in an interpretation of the model Arbitration Act.
The judges, in Malik v. Ruttenberg, A-6615-06, reversed a trial court's refusal to dismiss a suit charging an arbitrator knew of a lawyer's dangerous propensities yet did not remove him from the case, and an assault allegedly ensued when a recess was called.
The appeals court found that decisions relating to control of the arbitral forum are within the immunity accorded by the N.J. Arbitration Act, adopted from the model act devised by the National Conference of Commissioners on Uniform State Laws.
Eric Tuchman, the general counsel for the American Arbitration Association -- a defendant in the case -- says the ruling is the first in the nation to interpret the act's immunity provision.
The act has been adopted in 13 states, including New Jersey, and is under consideration in four others.
"Opinions like this really permit arbitrators and sponsoring organizations to preside over and administer cases in a way that is free and impartial," Tuchman says.
. . . the Honorable Sam Cianchetti, Los Angeles Superior Court Judge (ret.) for his decision awarding $8.4 million in punitive damages, for a total $9 million award, against Health Net In the Arbitration between Patsy Bates and Health Net, et al.
We conclude that the Washington State Supreme Court’s decision in Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007), establishes that T-Mobile’s arbitration provision is substantively unconscionable and unenforceable under Washington state law, and that there is no federal preemption in light of our decision in Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976 (9th Cir. 2007).
Make sure it is worth your time. Generally that means only bargain on big-ticket items.
Don’t fall in love with anything you’re trying to buy — you should care, but not too much.
Do your homework on comparable prices.
Offer cash rather than a credit card.
Remember — you have the power. Money talks, but money can also walk.
Also, keep in mind that the more time a sales representative has invested in a sale, the more he will want to give you a bargain. Mr. Cohen gives the example of trying on three or four suits and deciding on the fifth one.
“They bring in the tailor and the salesman is gleefully writing up the bill. Then I turn to the salesman and say, ‘What kind of tie will you throw in for free?’ ”
If you come out guns blazing, the other side is probably going to respond in kind. Which means that you’re setting the stage for an aggressive negotiation and will be fighting for things along the way. On the other hand, too soft, and you’ll give up everything. This is where some of the experts obviously advise differently. One camp says “play stupid” and seek what you can get through self-depreciating behavior. Another camp (pardon the pun, but it’s actually Jim Camp) says that you should always “Start with No” as a way to encourage discussion.
The net result of Strategic Thinking is an ability to not only see what your path could be, but to also see where your opponent is going to move. For if you play a win-win strategy against someone with a win-lose strategy, who do you think is most likely going to lose? If you’ve considered your various options and thought Strategically, you’ll know how to respond.
make the first offer, having in mind making 3 to 5 concessions to reach my "bottom line" or "reservation price."
I also recognize and attempt to guard against my weaknesses which are:
discomfort when the negotiation appears to be but rarely has actually has reached impasse
Strategic Planning: Setting Ones Reservation Price; Planning the Number and Timing of Concessions; and Deciding Which Information Will Be Strategically Deployed
My own pre-game strategic planning primarily consists of setting my "reservation price" (the number I will not go below); projecting the planned timing and number of concessions; and, deciding on the nature and timing of information disclosures that I believe will enhance my bargaining position. I also make a decision, in a case like this, whether I wish to aggregate or divide the several items subject of the bargain.
So What Was the Actual Plan?
We were lucky to have both several items to negotiate and several preferences for each negotiated item. What were they?
the television itself;
the $100 HD cable;
the furniture on which to place the television; and,
sales tax, which for reasons I'm not entirely clear about, sales people generally are happy to "cut" as part of any retail purchase.
We decided that I would be the primary negotiator with Mr. Thrifty as my back up.
I knew there was a lot of "fat" in the furniture. The purported "retail" price for the "wood veneer" television stand was $598, "reduced" to a "sales" price of $398. Having checked online prices for this piece if furniture, I knew that at least one online store claimed that its "retail price" was $349 -- $50 more than the Ken Crane's claimed "sale" price and that we could purchase it online for $285, $110 less than the store was offering.
Though we were unable to obtain comparables for the Toshiba -- tagged at $2598 -- we knew we could buy a comparable Samsung for $2300 over at Fry's Electronics in Burbank.
Mr. Thrifty and I decided that our reservation price (or bottom line) was $3,000.00 for all of the items listed above, which would be $366 less than "retail."
Although I firmly believe we could have negotiated a deal at that price, we concluded the deal $150 short of our "reservation price." I'll explain why that happened when we cover time management and perception of power in our final post on negotiating consumer purchases.
Is there any negotiation more frustrating than the one you conduct on the telephone with people who won't give you their last names, have no "authority" to do or say anything that deviates from their script and who you are finally connected to only after enduring the "go ahead, try to choose the right numeral to fit your problem" automated phone system.
I'll include some of these conversations in the series on negotiating the purchase of the flat-screen T.V.
This post, however, is an emergency act of mercy for anyone who is upgrading their DirecTV non-HD DVR service to either Dish or DirecTV HD-DVR system.
Information Gathering Cut Short
After at least one full hour of searching online, I found this clear, easily understood, linked resource entitled My Dish Network vs Direct TV Experience. This advice page links to a side-by-side comparison of the HD-TV-DVR "deals" being offered by satellite providers here at the DigitalTVDojo Daily Deal Monitor. The "Deal Monitor" links to the "secret" web deals that you will not be offered on the telephone or the internet unless you find them.
But that's not all.
Gathering Information about the Dish Service
Preface: After the Dish representative dodged the following question four times, I gave her one last chance, telling her she would lose my potential business unless she answered it. She didn't. I called DirecTV for the second time that day.
The question: will you provide me with a 5 LND dish free with the HD service?
What the question means: I have no idea. My rocket scientist neighbor told me that's what I needed.
Back to DirecTV
If you, like us, are existing DirecTV customers, you cannot get the "deal" linked above online. If you sign in to your account (or create an existing user account) the only "deal" available to you is to pay $299 for a new HD DVR (which you understand you are leasing, not purchasing).
Here's who you have to call to get the same deal being offered to new customers: The Customer Retention Department.
How do you get there? Press 0 even though you're not given this option, which may not directly connect you to a human operator, but will lead you to one more quickly than any other means I tried.
How I Got to the Customer Retention Department
I spent a lot of time appealing to DirecTV's "higher value" of customer service and its interest in retaining customers. I said the words "Dish" alot. I said, you're not a monopoly and you have the power to lose a customer today. That sort of thing.
But all this effort bought me was access to the Holy Customer Retention Department.
So don't bother negotiating your way there. Just ask to be directly connected.
The Deal the Customer Retention Department Will Give the Existing Customer
(please let me know if you do better -- Thad Employee # U2179 represented to me "as a matter of fact" that this was absoutely the best deal any existing customer could get on an HD-TV DVR upgrade. I'm hoping no one proves to me that Thad misrepresented the available deals because I'd like to continue to believe that when directly asked this question, my negotiating partner will either say -- I cannot guarantee that -- or tell me the truth. I'll provide a link for misrepresentations during negotiations and negotiation ethics later).
Here it is: DirecTV will:
provide you with an HD-DVR for $199
it will install the needed 5 LNB dish
though the cost of HD service is an additional $9.99/month, DirecTV will waive that fee for the first year ("that's a $120 value" says Thad)
free handling and shipping
That's it. Happy shopping and thanks to all the selfless TV service bloggers who helped along the way.
(the Toshiba 46LX177 46" REGZA™ Cinema Series® 1080p LCD HDTV with 120Hz refresh rate; our vendor - Ken Crane)
I have long complained that high definition television is the triumph of form over the "content" our 500-plus channels deliver to us.
Nevertheless, the February 2009 deadline to go digital is, more or less, looming. Not to mention the fact that today is our first wedding anniversary and the seventh day of Hanukkah. Christmas is just around the corner.
That confluence of events provided the rationale, the justification for me and Mr. Thrifty to finally bite the H.D.T.V. bullet and negotiate the purchase of technology that would likely cost us more than each of us paid for our first automobiles.
There's not a lot that's new in the Telegraph's report of a five-day Oxford negotiation program for seasoned professionals -- first "identify what you want, what the other side is likely to want, what you can discover from the public media [and then] build relationships with the other party, picking up intelligence which couldn't be gathered in advance such as his personality, mood, style of negotiating, constraints."
What struck me as noteworthy was the article's expressed surprise that people 'at the top of their game' professionally would feel the need for a course in negotiation.
This is not news to someone like me who realized on my first day of mediation training that I'd been negotiating the settlement of litigation for 25 years as crudely as Cullen, director of the Oxford Programme, said sophisticated business people tend to do. They "negotiat[e] fairly crudely," he said, and "hadn't realised how they could do it so much better."
As I sit at home today waiting for delivery of the TV at the top of this post, I'm going to take my readers on a step-by-step guide to buying the high-end technological gee-gaw of your choice this holiday season. Or, because we don't watch television all that much, the mid-market Flat Screen High Definition LCD T.V., with accessories and furniture.
High-market, mid-market or low-end, one negotiation is as easy or tough as another depending upon your negotiation skills. And to tell you the absolute truth -- those lawsuits with the least in controversy are generally the most difficult to negotiate.
Want an angry tax attorney serving as the arbitrator on your personal injury case? Then head on down to Arizona where the Ninth Circuit has just held that he can be forced by State law to serve as your neutral for $75 per day -- all without violating the U.S. Constitution.
The indentured tax attorney? Mark V. Scheehle, to whom you might throw a little tax planning work out of collegial fellow feeling.
The facts below. Link to Scheehle v. Justices of the Supreme Court here.
Arizona law requires that each superior court, by rule of court, provide for the arbitration of cases in which the amount in controversy does not exceed $65,000. Ariz. Rev. Stat. § 12- 133. At the time this action was filed, the Local Rules of Practice for the Superior Court of Maricopa County required that all attorneys who reside in the county and have been active members of the Arizona Bar for five years serve as arbitrators.
Attorneys who served as arbitrators under the Appointment System were paid a flat fee of $75 for each day in which they actually conducted an arbitration hearing.
Scheehle has been a member of the Arizona Bar since 1981, and a certified tax specialist since 1988. In September 1996, Scheehle was appointed as the arbitrator in a motor vehicle personal injury action. He served as an arbitrator and submitted a report to the Maricopa Superior Court in December 1997.
In July 1997, Scheehle was appointed as the arbitrator in a second motor vehicle personal injury suit and accepted the appointment. In October 1997, while still serving as the arbitrator in the second action, Scheehle was appointed as the arbitrator in a third personal injury action.
Scheehle decided to challenge the authority of the Arizona courts to require that he serve as an arbitrator. He returned the file to the Presiding Arbitration Judge of the Maricopa County Superior Court with a letter declining to serve as an arbitrator. He also expressed his unwillingness to serve as an arbitrator in any subsequent case, and his belief that the Appointment System was unconstitutional and violated Arizona law.
The judge responded by holding a telephone conference at which Scheehle placed his objections on the record. The judge further encouraged Scheehle to apply for relief for good cause shown from the particular assignment, but Scheehle declined, choosing to challenge the Appointment System as a whole.
Scheehle was allowed to file a brief in support of his position. In January 1998, the Presiding Arbitration Judge entered an order rejecting Scheehle’s arguments and imposing a $900 sanction on Scheehle for refusing the arbitrator appointment.
The heart of Professor Cole's concerns is quoted below. The questions from the Supreme Court giving rise to those concerns may be found in the linked post above.
(our earlier posts on the case -- which we referred to as the "Mattel" -- are here and here)
It may be that the[ Court is] considering whether substantive judicial review provisions contained in an agreement among parties transforms what the parties think is arbitration into a procedure governed by common law (contract law) rather than the FAA.
If that is the case, then the question becomes whether parties can ask courts to review their contracts on grounds that courts normally don’t use to review contracts. Then, the district court judge would have to look at whether he or she had authority to grant the parties’ request — in past cases, courts have used their inherent authority to grant or deny such non-traditional requests.
But, because courts’ inherent authority is discretionary, courts might reject the parties’ requests. That level of uncertainty might doom these kinds of agreements.
Courts and scholars have traditionally ignored the distinction between vacatur (as to which section 10 limits the grounds, and there should not be any additional, non-statutory grounds) and appeal, about which the FAA is silent (other than perhaps section 9 which conditions the confirmation of an award on whether the parties have agreed that judgment on the award can be entered, arguably leaving that until later if they have agreed on an appeal to a court or a panel of appeal Arbitrators).
Sadly, the petitioners have also ignored this distinction, so the chances are that the Supremes will come out against appeal. As I have pointed out in the past, the clearest example of appeal next to vacatur as two distinct remedies can be found in the English Arbitration Act of 1996.
This case tests the limits of the power of contracting parties to curtail the power of their arbitrator. Section 10 of the Federal Arbitration Act (i.e., the provision stating the grounds for vacatur) already provides that an award may be vacated if the arbitrator exceeds his or her powers. The question before the Supreme Court is whether parties may contractually define those powers by specifying that the arbitrator exceeds them if he or she fails to base his or her decision on the law.
There appear to be five lines of argument supporting the proposition that such contracts should not be enforced:
1. Congress intended the grounds for vacatur to be limited to those expressly set forth in Section 10, and none of those permits vacatur based on the content of the award.
2. Part of the ethos of arbitration is that it shall be quick and efficient (not slow and accurate), regardless of what the contracting parties desire.
3. Contracting parties should not be able to dictate to courts what courts should do.
4. Allowing vacatur on the basis of the content of the award will put too big a burden on trial courts handling vacatur motions, who are not used to the reviewing function.
5. Judicial review is often not in the parties' interests. We need to prohibit review to save the parties from their own bad judgment.
I think each of these arguments is faulty.
As to Argument 1: Congress expressly said Courts may vacate when the arbitrator exceeds his power. It never prohibited the contracting parties from defining what those powers are. There is no reason to consider the four Section 10 grounds for vacatur as exclusive. As long ago as 1953, the Supreme Court itself added a content based non-statutory basis for vacatur ("manifest disregard of the law") without an excuse as great as we have here, i.e., that the parties asked for it.
The agreement at issue in Mattel calls for a deeper level of review than manifest disregard of the law. Nevertheless, the Supreme Court would be hard pressed to say that such a review would contravene Congressional intent. The Court long ago broke that supposed barrier. In any event, what Congress said it intended was to put arbitration agreements "on the same footing" as all other agreements. That should mean "carry out what the parties contracted for" so long as their contract is neither illegal nor contrary to public policy.
As to Argument 2: There is no ethos to Arbitration other than the ethos of parties' freedom to customize their own adjudication process in any way they see fit. There are many in the ADR community who think about, and advocate for, arbitration as if it were an institution that must conform to a Platonic ideal. The largest arbitration provider in the world, the American Arbitration Association, filed an amicus brief in the Mattel case, arguing that the customized arbitration the parties contracted for in this case should not be permitted because, inter alia, it runs afoul of the ethos of arbitration (i.e., quick, efficient and un-litigation-like). I have no idea why AAA, a neutral provider, would put its oar in this water at all. Nor can I fathom why they did so to pull against the direction of contractual freedom.
As to Argument 3: It is the Courts that should not be able to dictate what they do or do not do. It is Congress that has that power. And Congress already used that power to dictate to Courts what they should do in this instance: that is, "enforce the parties' agreement as written."
As to Argument 4: The best of the arguments against permitting the parties to include judicial review in their private dispute resolution process is the long recognized common law limitation on contractual freedom: impossibility or impracticability. The kind of judicial review called for here, however, is not onerous or novel. District courts have been conducting content based reviews of administrative decisions as a significant part of their ordinary duties since the 1930s.
As to Argument 5: I am the first to admit that judicial review of an arbitration award is usually, maybe even almost always, a bad idea. But those who oppose enforcement of contracts calling for judicial review are saying something more: that it is always a bad idea, and that it is such a bad idea that parties themselves should not be able to decide for themselves just how bad an idea it is for them.
It turns out that this case is the very worst scenario for judicial paternalism. Not only were the parties sophisticated players engaged in a commercial dispute, they entered into the agreement after the dispute arose (i.e., it was a true "submission agreement"), so they had reason to know precisely what they were getting into.
Something extra to watch: Just as the U.S. Supreme Court is now reviewing the Mattel case, the California Supreme Court is reviewing the Crowell case. The Crowell arbitration arose under the California Arbitration Act and raises the identical issue as that raised by Mattel.
But here is the real irony in California: One of the reasons trial courts are already experienced with vacating arbitration awards for legal error is that they have already been told to do so by the California Supreme Court in employment cases (Armendariz). They must do so even though the California vacatur statute (CCP section 1286.2) like the federal vacatur statute (FAA section 10), does not include legal error as a ground for vacatur.
Under Armendariz, California courts are not permitted to enforce an arbitration agreement if it does not provide a mechanism for judicial review. If California now prohibits private contracts requiring judicial review of commercial arbitration awards, it will be imposing two directly contrary limitations on contractual freedom: Parties may neither limit the power of commercial arbitrators (by requiring judicial review) nor expand the power of employment arbitrators (by failing to provide for judicial review).
Imposing both limitations would not be a contradiction -- they arise in different contexts. But such a decision would starkly elevate the policy of protecting employees over the policy in favor of the freedom to contract. That is, the California court would be saying that employee protection is a good enough reason to override all of the arguments against thejudicial review of arbitration awards, but freedom of contract is not.
While some might argue that judicial review would add transparency to the arbitration process by opening up the private proceeding to public judicial review would fuel the notion of a tailored private system for the rich and powerful using public resources.
Suppose the parties contract for judicial review under seal; is that OK?
If we like contract so much, why not let the parties "rent" an appellate panel? Maybe the Supreme Court will review arbitrations as well?
If we go down this road, we would need new rules as well as Congressional authority.
Who will pay for this potential new burden on the appellate system?
I doubt that mere contract alone will cut it under the current law but I predicted a Gore victory and a Supreme Court abstention so what do I know?
There you have it. Three lawyers. Three very good opinions. Don't you LOVE the law?
Geek heaven!! My two obscure specialties -- environmental insurance coverage and arbitration law -- have converged in a case to be decided by the U.S. Supreme Court this term. To confirm my total nerd credentials, I give you the news not from the New York or L.A. times, but from Yahoo! News, excerpted with link below:
High Court Weighs Role of Judiciary in Arbitration Case Involving Toymaker Mattel
WASHINGTON (AP) -- The outcome of an environmental cleanup dispute now before the Supreme Court could determine the future of arbitration as an alternative to lawsuits.
Tens of thousands of disagreements in the business world are resolved through arbitration each year, a process often regarded by the business community as a cost-saving, time-saving substitute for going to court.
The risk in arbitration is that the losing side cannot appeal to the judiciary except in limited circumstances. That's the subject of Supreme Court arguments on Wednesday.
The Supreme Court will consider whether the parties in arbitration can agree to take their cases to court for review of arbitration awards.
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I have Christina Doucet at the National Arbitration Forum to thank for summarizing some of the most recent statistical literature available on differences between procedure, cost, duration, outcome and party satisfaction of litigated and arbitrated consumer and employee disputes.
Time and Cost Differences Between Arbitration and Litigation
Employment claims take 650 to 720 days to be resolved in court, according to the National Center for State Courts.
The median time to resolve an employee dispute by arbitration is 104 days
the median cost of resolving employment disputes by arbitration is $870.
Yesterday, I promised to provide a little "pro" arbitration wisdom in response to my speaking partner's "con" since that's our ALFA Seminar topic here in beautiful Half Moon Bay.
And yet it's 4 a.m. before I realize I can't sleep because I've been mediating too long to seriously launch one side of any debate. Everything and everyone has become so much more three-dimensional, multi-layered, and textured as a result of three full-time years of ADR practice.
So let me share the first of my non-scripted thoughts on the matter.
I'm Unwilling to Prejudge the Court's, the Arbitrator's or the Jury's Biases.
If you read yesterday's post, you'll recall that several of the anti-arbitration arguments were based upon the presumption that the arbitrator will more likely than not be biased in favor of the plaintiff because:
Arbitrators have a vested interest in their case load persisting, whereas the courts are interested in purging their dockets, thus making early termination in court more likely than in arbitration.
Arbitrators' [presumed] self-interest in maintaining and expanding their own ADR practices encourages a "split the baby" mentality and reluctance to terminate the case short of a full hearing.
The "repeat" player bias will favor the Plaintiffs' bar who the arbitrator will see far more often than counsel for any particular employer.
Having spent 25+ years with attorneys, judges, mediators and arbitrators, I simply can't assume bias. A few bad apples aside, the men and women of the legal profession are among the most ethically-minded of any professional or business people I have known -- by many, many, many degrees of magnitude.
The only thing we can put our fingers on is the increase in mediation. We think all the attention put on ADR in California has made a difference in companies that are drafting contracts and including arbitration clauses.
The increase, Powell was reported as saying, was especially prevalent in the entertainment and health care industries.
By a 4-3 majority, the California Supreme Court reversed an order compelling arbitration and remanded the case to the trial court with instructions to use a multi-factor test in determining the enforceability of a class action waiver. The ultimate question for the trial court is whether class-wide proceedings would be “a significantly more effective practical means of vindicating the [statutory] rights” of the employees who belong to the putative class. Parties who prefer the simplicity of one-on-one arbitration should not be overly concerned by the majority holding because this decision has no application outside of the employment context.
You'll have to get up early for this one -- it's scheduled from 8:45-10:00 a.m. on October 3 -- but we promise you a lively debate and fresh perspectives on an issue that might make corporate and litigation counsel want to rip those arbitration clauses out of their and their clients' employment agreements. Then again, you might just decide to rewrite those ADR Clauses altogether so that you get the best possible dispute resolution mechanism for your and your clients' work-force.
Either way, the time is ripe for reconsidering and revising the way in which you and your clients handle disputes with their employees.
For the business, rather than a strictly legal, analysis of the recent Ninth Circuit and other California rulings on the unconscionability of consumer arbitration clauses, see the excerpt and link to Business Week's article on the issue below.
Read almost any cell-phone contract and you'll discover that the longest passage deals with dispute resolution. While seemingly important matters like billing get only one paragraph, Verizon Wireless devotes six paragraphs to dispute resolution. At AT&T (T), the dispute section takes up 10 fat paragraphs and states: "You agree that, by entering into this Agreement, you and AT&T are each waiving the right to a trial by jury or to participate in a class action."
The small print keeps expanding in response to an influx of court cases—at least 10 of them in California over the past few years—questioning a wireless carrier's right to block consumers from suing or filing class-action claims. In late June a California appeals court reaffirmed a lower court's order that (T-Mobile USA) could not enforce a clause requiring arbitration of disputes with customers. And on Aug. 17, the U.S. Court of Appeals for the Ninth Circuit in California ruled that AT&T's prohibition against subscribers banding together in class actions, "is unconscionable, and, thus, unenforceable."
According to the ABA Journal Law News two Democratic lawmakers have introduced legislation that would prevent the inclusion of mandatory arbitration clauses in consumer contracts as well as those contracts implicating the consumer's civil rights.
Though the parties could still agree to arbitrate their disputes after they arise, the bill would make unenforceable pre-dispute arbitration provisions within the scope of the legislation. Article here and except below:
Two Democratic lawmakers have introduced legislation that would bar enforcement of some mandatory arbitration agreements.
The Arbitration Fairness Act would bar mandatory arbitration agreements involving employment, consumer rights, franchises or civil rights, according to a press release.
Agreements to arbitrate in these areas could be made after a dispute arises, but not before.
The law is designed to prevent consumers from being forced into arbitration.
First, the scope of review available for an arbitrator's ruling is significantly limited. . .
Second, the conventional time and cost-savings of arbitration may be lost in class proceedings, since each of the interim phases related to class- and merits- arbitral awards will carry with them potential burdens relating to discovery, briefing, hearings, and time, money and effort spent in obtaining judicial review at each of the various phases, which will not necessarily be present in individual arbitrations.
Third, the parties' arbitrator selection process will likely be guided by different factors in a class arbitration proceeding than in an individual arbitration, since the fate of all of the class claims will be decided by a single arbitrator or panel.
Fourth, the specter of class arbitration disposes of the presumption of privacy and confidentiality in arbitration.
Part II of this two-part article will address potential means for companies and practitioners to attempt to avoid these and other pitfalls of class arbitration.
Don't let this summary lead you to believe that this article is not extensive, thorough and deep. If this is a topic of interest to you, this is one of the best articles on the topic I've seen. Do click on the above link and take a peek.
What Does a Class Action Lawyer See (right)? CLIENTS!
The AP reports a proposed class action settlement (pending judicial approval) of $10.5 million. If you read between the lines of the report, you'll see that this was apparently a good deal for the defendants.
Why? Because the Board of Directors charged with encouraging their employees to place their pension funds in risky investments (ENRON ring a bell?) did not simply hunker down in a defensive posture when sued, but instead provided the company's former employees with "numerous enhancements" to their pension benefits.
According Plaintiffs' counsel Steven Krasner, "[t]hose benefits were very substantial If you add the $10.5 million to that, they did a pretty decent job to make people whole."
The defendants' public statement was the usual -- "[i]t's always more efficient to resolve the issues in a case rather than follow through the courts" -- according to spokesman Al Butkus.
Though the public generally sees a statement like this to be corporate %$^#, as we all know, it also happens to be the actual verifiable truth.
The Strategic Defensive Use of the California Consumer Legal Remedies Act
The California Consumer Legal Remedies Act, by the way, is a good face-saving device to bring your clients into strict compliance with consumer demands, thereby sharply reducing the settlement value of the class action or 17200 suit that invariably follows.
The CLRA requires a pre-suit demand by the plaintiffs, thereby giving the defense an opportunity to mend its ways.
In my own litigation experience, compliance with a CLRA demand to change the way a product or service is advertised is a relatively pain-free way to drastically reduce your clients' damage exposure. My client did this in response to an accusation that its advertising was misleading. Though we disagreed, the client nevertheless changed its advertising to reveal the allegedly concealed transaction fee.
As a result, Plaintiffs' counsel accepted an unprecedented injunction-only remedy coupled with a few hundred thousand dollars in attorneys fees to settle the case -- a far better deal than the dozens of other defendants in this national class action were able to achieve.
First, because our compliance with the CLRA demand made our client look like a good guy -- ruining the Plaintiffs' "spin" that all defendants were evil profit hungry businesses preying upon innocent victims (cf. the new Glenn Close series Damaged).
Second, because the Plaintiffs' attorneys (who are, remember, people) were favorably impressed and kindly disposed to us after we complied with their demand rather than simply burying them in paperwork -- well, we did also bury them in paper by strictly complying with their document demands, but that's litigation -- speak softy, carry a stick and remember the rule of reciprocity.
Bills introduced by Sen. Russ Feingold (D-Wis.) and Rep. Hank Johnson (D-Ga.) would make pre-dispute arbitration agreements invalid and unenforceable. Mr. Johnson called mandatory arbitration an “albatross” for investors. “Despite what companies may say, it is not more affordable than going to court,” he said.
Zach Lowe, a spokesman for Mr. Feingold, said the legislation reflected concern over a push in the corporate world to allow mandatory arbitration and the overuse of such clauses in broker-dealer contracts. The Senate bill said that mandatory arbitration “undermines the development of public law for civil rights and consumer rights because there is no meaningful judicial review of arbitrators’ decisions.”
This legislation, if enacted, would affect so many powerful corporate instances that I wouldn't hold my breath for its passage any time during this century. Still, it will be interesting to follow the debate.
As I've often said here, I favor negotiated agreements, not obligations imposed by a party with superior bargaining power on a take it or leave it basis. This is particularly true in consumer contracts where the print is fine, located only on web sites and/or imposed in the middle of a contract term by way of notice contained in a consumer's bill.
Because self-regulation often follows Congressional regulatory trial-balloons, the best consumers can likely hope for will be increasing attempts by service providers of all stripes to make arbitration a genuine choice for its customers.
Friday the thirteenth was (temporary) bad luck for Canadian consumers. I say temporary because Ontario and Quebec have forbidden mandatory arbitration clauses and class action waivers. The Canadian Supreme Court in the two cases discussed below held that in the cases before it those statutes could not be applied retroactively.
Ironically, when the Dell and Rogers cases are placed in a larger social context, the public’s interest in securing the class action as a vital aspect of the public justice system could hardly have been rendered clearer. The Rogers case received much less of the court’s attention, having been carried through on Dell’s slipstream; however it is the features of Rogers’ mandatory arbitration/class action waivers on its consumer contracts that highlight the hollowness of off-the-bench judicial laments about access to justice for ordinary Canadians.
Both cases turned on the sublimely procedural question of whether an arbitrator or a Quebec superior court judge should have first kick at the can in deciding whether a mandatory arbitration clause on a consumer contract was enforceable or not. Such clauses preclude consumers from pursuing corporations in any kind of court action, including class action.
In both Ontario and Quebec the question has been rendered moot by amendments to consumer protection legislation which prohibit such clauses, underlining the public order aspect of the class action.
Read the rest of the article here (emphasis added).
In this federal case, the Ninth Circuit held that the addition of an arbitration clause to the cell phone service contract, imposed by way of the posting of a revised contract on its website with no pre-existing notice to its subscribers was unenforceable. The class action plaintiffs were therefore not required to arbitrate their claims and the class action waiver (also imposed upon subscribers in this same manner) was unenforceable. Douglas v. United States District Court for the Central District of California.
from Slash Dot we learn that the Washington Supreme Court has held that
[c]lass action waivers included in cell phone companies' contracts with customers are invalid in Washington State because they violate the state's Consumer Protection Act . . . .
Five plaintiffs accused Cingular of overcharging customers between $1 and $40 per month in roaming and hidden charges.
Cingular had an arbitration clause that required individual arbitration and prohibited class action litigation or class action arbitration.
We keep track of these class action waivers in consumer contracts because they are always coupled with an arbitration clause and must therefore overcome the strong federal preference for arbitration and the Federal Arbitration Act's preemption of most state laws that might restrict a party's "right" to compel private binding dispute resolution.
See our previous posts on Sprint's arbitration clause here and here.
Ascertaining All of the Terms and Conditions of Your Cell Phone Service
(I'm using Sprint as an example only because the question posed to me related to Sprint -- I'm assuming most cell phone service agreements are the same, or at least substantially similar)
Because a reader asked, I learned today that the Sprint Cell Phone Service Agreement contains an arbitration provision.
How did I gain this valuable knowledge? Read on.
A Trip to the Grocery Store
On my way to the grocery store this morning , I drove by a Sprint outlet. So I stopped, ran in, and had the following conversation with the Sprint representative.
"Can I get a copy of Sprint's service contract?"
"You know, the terms and conditions of the Sprint cell phone service plan."
"Uhhhhhhhhhhhhhh -- you mean the, uh, Plan Brochure?"
"Does it have all of the plans' terms in it?"
"You know, the FINE PRINT? the contract? the parties' agreement if I sign up for service."
Smiling, "sure," she replies, handing me the brochure and graciously validating my parking ticket (the one with the waiver of the car park's legal responsibilities to me or my car printed on the back in 3-point type).
Now that I've Read ALL the fine print in the Sprint brochure, I can tell ou that there is nary a mention, hint, suggestion or covert reference to "dispute resolution" or court or jury trials or arbitration.
Nothing, Nada, Nichts.
I Should Have Gone On-line in the First Place to Find the Sprint "Terms and Conditions" of Service
At the very bottom (left hand corner) of Sprint's Plan Page you will find a link titled "Terms and Conditions."
Your Agreement with Sprint Solutions, Inc. . . . includes terms of your service plan . . . and the most recent Sprint Nextel Terms and Conditions of Service . . . carefully read these all terms which include, among other things, a MANDATORY ARBITRATION of disputes provision.
The dispute resolution clauses are at the end of the Terms and Conditions (T&C's). They provide as follows:
(For non-lawyers, an "adhesion" contractis one you didn't really agree to because, for instance, it came as an insert with your monthly cell-phone or credit card bill or appears on the back of the ticket you pull when you enter your local mall's parking lot. It's an asymmetrical contract. The party imposing the agreement on you has all of the power and you have none. Take it or leave it. That's an adhesion contract and it's not necessarily -- in fact is often not -- invalid).
That said, it appears that most cell phone contracts contain a clause permitting you to terminate your service before the expiration date without a cancellation fee (a real boon if you want to change plans!)
You may generally do so "in response to a materially adverse change [the cell phone company] makes to the Agreement . . . (Sprint Contract language). The imposition of an arbitration provision that wasn't part of the contract when you sign it would be a material adverse change (I'm actually willing to go out on a limb here and say that's my actual legal opinion).
Sprint requires you to provide it with notice of cancellation within thirty days of their notice to you of the change (as I suspect all the other cell phone services do). So if you want to take advantage of this, you'd have to begin reading those inserts that come with your cell phone and credit card bills.
I recently had the distinct pleasure of interviewing IP litigator and mediator Jay Gordon Taylor about the arbitration and mediation of intellectual property disputes, the first part of which follows Jay's short bio below.
Mr. Taylor is a partner with the Indianapolis, Indiana law firm of Ice Miller. His primary practice area is intellectual property law with a focus on patent, trademark, copyright, and trade secret litigation and mediation.
He also concentrates in business aspects of intellectual property law such as acquisition, sale and licensing of intellectual property assets, and computer hardware and software sale and licensing.
Part I: Arbitration of Intellectual Property Disputes
MS. PYNCHON: Do you find that IP cases benefit from arbitration or is arbitration becoming so burdened with discovery, motion practice and the like that it’s little better than litigation?
MR. TAYLOR: I have never been a big fan of arbitration except in the case of international disputes. In my experience, arbitration has been only slightly less costly and time consuming. The absence of a right to appeal if the result is erroneous would caution me against arbitrating a patent infringement dispute again.
I once had a client who faced a potential $450 million infringement exposure after an arbitrator reached a very dubious interpretation of a license clause. Because the arbitral award was binding, there was no way to challenge the opinion. Luckily, we ultimately won by proving a combination of non-infringement and invalidity. That, however, came after years of litigation and tremendous cost, most of which could probably have been avoided if there had been an appellate process after the arbitral decision.
MS PYNCHON: Do you believe the parties would likely have agreed to an appeal by one or more arbitrators before the arbitration commenced?
MR. TAYLOR: No, the license clause which had been negotiated years before required binding arbitration. The parties were locked into that clause.
MS. PYNCHON: Would arbitration be more attractive to you today if your opponent would agree to arbitral "appellate" review?
MR. TAYLOR: No. I do not think arbitration with an appeal is appreciably more appealing (quicker, less disruptive and less costly) than litigation in federal court.
MS. PYNCHON: Would you arbitrate any patent infringement cases today?
MR. TAYLOR: I think arbitration can be beneficial in international disputes. Most foreign companies distrust the US court system and are accustomed to resolving disputes without litigation. There is the additional problem of enforcing a judgment against a foreign entity. If the foreign entity has no US presence or assets, the judgment can only be enforced only by initiating an action in the courts of the country where the entity is located. Courts of most industrial countries will enforce an arbitration decision without question whereas they might not enforce a foreign court decision.
In tomorrow's post, we'll continue our interview with Jay Taylor about the mediation of IP disputes.
Just as you’re asking yourself, “If a high-powered law firm can’t draft an enforceable arbitration provision for its own contracts, then who can?” comes Gatton v. T-Mobile USA, Inc., case no. A112082 (June 22, 2007), in which the arbitration provision in T-Mobile’s customer agreement gets similar treatment in California state court. The First District Court of Appeal holds that T-Mobile’s arbitration provision in its customer agreements is unenforceable because of the minimal degree of procedural unconscionability arising from its adhesive nature and the “high degree of unconscionability arising from the class action waiver.”
I’m going to go out on a limb and say that T-Mobile probably had pretty good lawyers draft its agreement, and that the lawyers who drafted the provision for O’Melveny were no slouches, either. Who will fall next?
Aside from arbitral inefficiencies caused by lawyers doing what lawyers do (discovery and pre-trial motion practice) we suspect that a lot of the dissatisfaction comes not from arbitration as a method to resolve disputes, but from ill-advised pre-dispute boiler-plate arbitration provisions that prevent those who are handling the dispute from altering the way in which it is resolved.
We favor post-dispute arbitration agreements in which the parties can resolve the problems created by the skeletel provisions found in most contracts. Post-dispute arbitration contracts can:
provide for the type and extent of discovery and pre-trial practice necessary for the type of dispute that has arisen under the parties' agreement -- a dispute the contract's drafters may well have been unable to predict;
provide for the composition of the arbitration panel best suited for the dispute, a single arbitrator with specialty industry knowledge, for example, or a three-arbitrator panel with two party and one neutral arbitrator, or any other combination or permutation that the parties' needs and creativity can give rise to;
provide for an appellate process if the parties are afraid of a "runaway" arbitrator who provides neither rationale decision-making authority nor decisions tempered by the realities with which the parties must deal;
place limitations on -- or expand -- available remedies, including all equitable relief otherwise available in a court of law; and,
just about any other provision the parties' needs makes sensible and efficient.
Here's the good thing about both mediation and arbitration. If the parties can sit down together and craft the best way to resolve their dispute (and a mediator might help with this process) they can make the law fit their needs rather than trying to put the square peg of their conflict into the round hole of local, state, national or international procedures.
And if you could use a contract drafting tune-up, do check out AdamsDrafting. I'd say it's the best, but I believe it's the only web site devoted to clarity in the drafting of contracts. Had Ken Adams existed a generation before I went to law school, I could likely have done something better with at least 5 years of my life when I was litigating this burning insurance coverage question -- does sudden mean quick or only unexpected -- upon which hundreds of millions if not billions of dollars of coverage for environmental clean-up rested.
Finally, we've seen a great draft of Eric Van Ginkel's article on this topic for intellectual property disputes that will appear soon in the IP ADR Blog. Keep a lookout for it.
When it comes to employment arbitration agreements, it seems like the more bases you try to cover, the less likely a Court is to enforce them.
Even the highly respected Los Angeles-based international law firm of O'Melveny & Myers has proved itself unable to draft an employment arbitration agreement that satisfies California's procedural and substantive conscionability requirements.
Just today, the Ninth Circuit Court of Appeal in Davis v. O'Melveny & Myers held that the law firm's attempt to impose an arbitration agreement upon existing employees with a three-month notice period was both procedurally and substantively unconscionable. (For a criticism of the opinion, click here).
In finding that O'Melveny's attempted imposition of the agreement on its employees was procedurally unconscionable, the Court stressed the firm's "overwhelming bargaining power" and the "take-it-or-leave-it" basis upon which the agreement was proffered. Although the Court distinguished provisions that might permit an employee to negotiate a different deal, given its characterization of O'Melveny's bargaining power, we don't imagine this Court would have read such a clause as anything other than illusory.
As the Ninth Circuit stressed, however, a procedurally unconscionable agreement must be "analyzed in proportion to evidence of substantive unconscionability." It thereupon went on to find four provisions substantively unconscionable: the “notice,” confidentiality and, “business justification” provisions, as well as the limitation on initiation of administrative actions.
The challenged notice provision required the aggrieved employee to "give . . . notice of a Claim [within the year it arose] along with a demand for mediation" or it would be "lost forever." Quoting Richards v. CH2M Hill, Inc., the Court held this provision substantively unconscionable because it would deprive the employee of the right to assert the "continuing violation doctrine available in FEHA suits" a benefit that flows only to the employer.
The challenged confidentiality provision -- prohibiting mention of the mediation or arbitration "to anyone not directly involved" - was also found to be unduly favorable O'Melveny. As the Court explained:
Such restrictions would prevent an employee from contacting other employees to assist in litigating (or arbitrating) an employee’s case. An inability to mention even the existence of a claim to current or former O’Melveny employees would handicap if not stifle an employee’s ability to investigate and engage in discovery. The restrictions would also place O’Melveny “in a far superior legal posture” by preventing plaintiffs from accessing precedent while allowing O’Melveny to learn how to negotiate and litigate its contracts in the future. Id. Strict confidentiality of all “pleadings, papers, orders, hearings, trials, or awards in the arbitration” could also prevent others from building cases. . . It might even chill enforcement of Cal. Labor Code § 232.5, which forbids employers from keeping employees from disclosing certain “working conditions” and from retaliating against employees who do so.
The challenged exemption for alleged breaches of confidentiality was also found to be unenforceable. "As written," held the Court, the provision permitting a "non-mutual exception allowing [O'Melveny] a judicial remedy to protect confidential information" was “one-sided and thus substantively unconscionable.”
Finally, the Court held that the agreement's preclusion of employee complaints to agencies charged with the well-being of California's citizens such as the Department of Labor, was contrary to public policy and therefore substantively unconscionable as a matter of law.
There you have it. One of the best law firms in the country was unable to draft an employment arbitration agreement that could pass public policy muster.
The big news in the arbitration world this week is the request made to the S.E.C. by Senators Leahy and Feingold to ban the mandatory arbitration of claims made by customers against their brokers. An excerpt from the New York Times article Dear S.E.C., Reconsider Arbitration, with a link below.
ARGUING that it is wrong to force investors into arbitration when resolving disputes with their brokers, two prominent United States senators have asked the Securities and Exchange Commission to ban the Wall Street practice of requiring customers to sign away their rights to bring their grievances to court.
Last Friday, Patrick J. Leahy, the Vermont Democrat who heads the Senate Judiciary Committee, and Russell D. Feingold, the Wisconsin Democrat and a committee member, wrote to Christopher Cox, the S.E.C. chairman, asking that it ban mandatory arbitration “in fulfillment of its statutory duty to protect individual investors.”
Arbitration is fine for straightforward disputes involving modest claims, the senators said. But for many investors, the courts are preferable. Arbitration not only lacks a court-supervised discovery process, they wrote, it does not require panelists to follow rules of evidence or provide written opinions justifying their decisions.
Thank you to our friend Alicia Freundlich, a Straus LL.M candidate, for passing along this case summary copied verbatim from the Newsletter of the Business Law Section of the State Bar of California.
(right) More serious balloon popping by the ever popular Charles Fincher of LawComix.com, who every so graciously lets me use these fabulous lawyer cartoons for free. Do support him by paying cold hard cash for a signed copy, or better yet, a custom-made print for your favorite partner, judge, client, administrator, legal assistant, or associate.
COURT UPHOLDS ARBITRATOR’S ABILITY TO USE “MULTIPLE INCREMENTAL OR SUCCESSIVE AWARD PROCESS” AS A MEANS OF FINALLY DECIDING ALL ISSUES
This case arose from a dispute between the sons of a decedent and his second wife over distribution of the estate. The dispute was arbitrated and the arbitrator issued an award on March 1, 2004 concerning most of the issues in controversy. Among other things, he ruled that the wife had a 75% interest in the decedent’s home and that the sons had a 25% interest, which should be distributed to them because the wife was still living in the home.. The arbitrator indicated that the home was valued at $575,000 based on a November 2003 appraisal which covered the home and some other assets. He ruled that the appraisal would be the basis for distribution “unless the trustee determines that changes will be needed…if…in light of new developments since [November 2003], a somewhat different distribution of assets would benefit the estate” and he offered to work with the trustee to ”review any questions he may have concerning the orders and findings made by the arbitrator”.
The wife died one week after the award was issued. The wife’s niece, her successor in interest, successfully moved to confirm the award and that decision was affirmed on appeal in an unpublished decision. While the appeal was pending, the trustee petitioned the arbitrator for instructions on several issues, including whether to value the home as of the time of the award or as of the time of the distribution of the estate assets. In October 2005, the arbitrator issued a second award in which he, inter alia, valued the home at $1,050,000. Because this would lead to a larger distribution to the sons, the wife’s niece opposed confirmation of the award on the ground that this was a correction or amendment of the original award and thus beyond the arbitrator’s power because it occurred long after the time allowed to correct or amend.
The trial court confirmed the award, the niece appealed, and the Court of Appeal affirmed. It ruled that the arbitrator, by allowing for an opportunity by the trustee to amend the valuation, plainly left the matter of the value of the home up for future consideration if the trustee determined that changes were needed.
Note: It can sometimes be difficult for a party to discern whether an arbitrator is correcting an award, amending it, or issuing an incremental or successive award and that is what happened in this case. Code of Civil Procedure 1284 provides that a party must apply to the arbitrator for correction of an award no later than ten days after service of a signed copy of the award on the applicant, other parties must object within ten days after the application is delivered or mailed to them, and the arbitrator must issue any corrected award not later than thirty days after service of a signed copy of the award on the applicant.
But, in Delaney v. Dahl, 99 Cal App 4th 647, 659 (2002), the Court of Appeal held that an arbitrator may amend the award at any time prior to confirmation of the award so long as the amendment is consistent with other findings on the merits of the controversy and does not cause demonstrable prejudice to the interests of a party. And in Hightower v Superior Court, 86 Cal App 4th 1415, 1431 (2001), the Court of Appeal affirmed an arbitrator’s ability to use “a multiple incremental or successive award process as a means, in an appropriate case, of finally deciding all submitted issues”.
Thanks to the National Arbitration Forum for this update on proposed legislation governing debt settlement and management service providers and credit counselors.
Verbatim: Enacts the Uniform Debt Settlement Services Act, the Debt Management Act, and the Credit Counselors Law to provide for the licensure and regulation of providers of debt settlement and debt management services. Relating to arbitration, the bill states:
Except as permitted by the California Arbitration Act (Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure), [the agreement shall not] contain a provision that modifies or limits otherwise available forums or procedural rights, including the right to trial by jury, that are generally available to the individual under law other than as provided in this division.
The bill would also forbid agreements from containing a choice of law provision other than California or applicable federal law.
This is taken straight from the Met News. I will read this case and provide my analysis at the beginning of the coming week.
Where it was discovered after arbitration that the judge who granted order compelling arbitration had, prior to granting such order, engaged in discussions concerning possible employment as a dispute resolution neutral, it was proper to disqualify judge who granted the order compelling arbitration and vacate that order, but it was premature to vacate arbitration award. Where order compelling arbitration is void because judge was disqualified from granting it but is not set aside until after arbitration is concluded, award may stand if newly assigned judge makes a de novo determination that the parties were contractually bound to arbitrate, that acts of disqualified judge did not taint the arbitration, and that no other grounds exist to vacate the award.
Maryland's highest court has approved an amendment to the state's Rules of Procedure that encourages lawyers to inform clients of alternative dispute resolution options when a new case is likely to be headed to court.
[T] Hon. Joseph F. Murphy, Jr. . . . said that the change would "highlight for counsel what they should be doing if ADR could work in their case," explaining . . . . the comment . . . that "where ADR is appropriate, lawyers should advise their clients of that fact."
* * *
Rule 2.1, which addresses the lawyer's role as a counselor, states, "In representing a client, a lawyer should exercise independent judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors that may be relevant to the client's situation."
* * *
The amendment adds the following new sentence to Comment 5: "[W]hen a matter is likely to involve litigation, and in the opinion of the lawyer, one or more forms of alternative dispute resolution are reasonable alternatives to litigation, the lawyer should advise the client about those reasonable alternatives."
"The amended Comment is intended to encourage informed discourse between the lawyer and client whenever ADR may be an appropriate option," the Reporter's Note says.
An earlier proposal to amend Comment 5 had suggested requiring lawyers to inform clients about ADR options. But a mandatory requirement was dropped out of concern that it would lead to litigation by clients against their attorneys.
Murphy noted that Comment 5 says that attorneys "should advise," instead of "shall advise," and that this was a "compromise." He said that as revised, Comment 5 imposes no "automatic" requirement to inform clients about ADR options.
Some other states have ADR-related provisions in their rules of professional conduct. Vermont has the "shall advise" language, while Alaska, Colorado, Hawaii, Massachusetts, Tennessee, and Virginia have the "should advise" language.
The change in Comment 5 will take effect July 1, 2007.
Thirty years ago (more or less) my law school trial advocacy professor taught me this:
Trial is not about ascertaining the truth. Nor is it about justice. It is simply one way to finally resolve a dispute.
I have to admit that my legal career was probably more marked than others by the belief that I was working on the side of truth and justice.
But then, I was working small.
Did the word "sudden" mean "quick" or only "gradual" and "unexpected" within the meaning of the pollution exclusion contained in a policy of comprehensive general liability insurance?
Was it misleading to omit the exchange rate from advertising for the transmission of money to foreign countries?
Could you negligently conspire to drive a medical provider out of business? (answered affirmatively, believe it or not, by the trial court).
Now that my view of the adversarial system is one of mediator and sometimes arbitrator, what the "truth" is seems murky again, the way it did when I was clerking for a federal district court judge during law school.
So this post is the beginning of a series of posts about "justice" and fact-finding. A series that will follow the path of my interest and discovery. A series that raises questions that might never be answered.
To begin the exploration, I borrow freely from the excellent article by Professor Lisa Blomgren BinghamWhen We Hold No Truths to Be Self-Evident: Truth, Belief, Trust and the Decline in Trials. This article, from a 2006 Symposium Issue for the Journal of Dispute Resolution, can be found on Westlaw and Lexis-Nexis and likely elsewhere on the internet. I do not, unfortunately, have a free link to the article itself.
We start with JUSTICE.
Distributive justice has its roots in social equity theory. It posits that social behavior occurs in response to the distribution of outcomes. Distributive justice emphasizes fairness in the allocation of outcomes. Thus, in mediation research, distributive justice suggests that satisfaction is a function of outcome, specifically the fact and content of a settlement or resolution. In theory, participants are more satisfied when they believe that the settlement is fair and favorable. There is a substantial body of empirical research that supports the distributive justice model as an explanation of satisfaction. The research suggests that distributive justice is a better explanation for satisfaction related to conflicts over resource allocation, such as wage disputes than other cases in which fairness matters.
Procedural justice refers to participants' perceptions about the fairness of the rules and procedures that regulate a process. In contrast to distributive justice, which suggests that satisfaction is a function of outcome (the content of the decision or resolution), procedural justice suggests that satisfaction is a function of the process (the steps taken to reach that decision). Among the traditional principles of procedural justice are impartiality, voice or opportunity to be heard, and grounds for decisions.
Procedural issues such as neutrality of the process and decision-maker, treatment of the participants with dignity and respect, and the trustworthiness of the decision-making authority are important to enhancing perceptions of procedural justice. Extensive literature supports procedural justice theories of satisfaction in a variety of contexts involving both courts and dispute resolution. In general, research suggests that if organizational processes and procedures are perceived to be fair, participants will be more satisfied, more willing to accept the resolution of that procedure, and more likely to form positive attitudes about the organization.
Beginning in the 1980s, organizational justice researchers developed the notion of interactional justice, defined as the quality of interpersonal treatment received during the enactment of organizational procedures. In general, interactional justice reflects concerns about the fairness of the non-procedurally dictated aspects of interaction. Research has identified two components of interactional justice: interpersonal justice and informational justice. These two components overlap considerably. However, empirical research suggests that they should be considered separately as each has differential and independent effects upon perceptions of justice.
Informational justice focuses on the enactment of decision-making procedures. Research suggests that explanations about the procedures used to determine outcomes enhance perceptions of informational justice. Explanations provide the information needed to evaluate the structural aspects of the process and how it is enacted. However, for explanations to be perceived as fair they must be recognized as sincere and communicated without ulterior motives, be based on sound reasoning with logically relevant information, and be determined by legitimate rather than arbitrary factors.
Interpersonal justice reflects the degree to which people are treated with politeness, dignity, and respect by authorities. The experience of interpersonal justice can alter reactions to decisions, because sensitivity can make people feel better about an unfavorable outcome. Interpersonal treatment includes interpersonal communication, truthfulness, respect, propriety of questions, and justification, and honesty, courtesy, timely feedback, and respect for rights.
What all of this means in the "lay" terms of this blog, will be the subject of later posts, all labeled, "Truth, Justice and the American Way" if the topic is of interest to you and you'd like to follow it (and comment upon it!)
A California appeals court has opened the door to the enforcement of pre-dispute arbitration agreements between attorneys and their clients, ruling that once a client waives the right to non-binding arbitration under the state’s Mandatory Fee Arbitration Act, a court may compel binding arbitration based on the agreement of the parties.
California’s Second Appellate District rejected the notion that language in the MFAA requiring a post-dispute binding agreement to arbitrate bars enforcement of a pre-dispute binding arbitration agreement, ruling that the statutory language only prohibits enforcement of pre-dispute arbitration agreements governed by the MFAA ( Ervin, Cohen & Jessup, LLP v. Steven H. Kassel et al., No. 191761, 2/14/2007).
One of my former law partners, Cyberspace Attorney Extraordinaire and the King of Business Development, Eric Sinrod, now of Duane Morris, reports that domain name disputes are being arbitrated in greater and greater numbers.
Since the inception of the program, the NAF has presided over more than 7,600 Internet domain name disputes. A number of famous trademarks have been at stake in the proceedings, such as trademarks relating to the New York Yankees, George Foreman, Vin Diesel and Louis Vuitton.
What's the upshot? Trademark holders are more than willing to go after and seek the transfer of domain names that incorporate their marks. Meanwhile, domain name registrants at times are digging in their heels and are trying to keep the domain names they have registered. There seems to be no let-up in this fertile dispute area. In fact, there appears to be a real uptick in such cases.
One such case surrounded the use of "Mr. Charbucks" in the sale of a rival coffee brand to Starbucks.
Thanks to Blawgletter for reporting arbitration case law updates in Oregon with an eye for the literary as follows:
Striking down as unconscionable a ban on class actions in an "arbitration rider" to a loan agreement, the court in Vasquez-Lopez v. Beneficial Oregon, Inc., No. A125270 (Ore. Ct. App. Jan. 31, 2007), rejected the lender's argument that the ban favored neither side:
We are reminded of the observation by a character in an Anatole France novel that "the majestic equality of the laws * * * forbid[s] rich and poor alike to sleep under the bridges, to beg in the streets, and to steal their bread." Anatole France, The Red Lily, 95 (Winifred Stephens trans., Frederic Chapman Ed. 1894). Although the arbitration rider with majestic equality forbids lenders as well as borrowers from bringing class actions, the likelihood of the lender seeking to do so against its own customers is as likely as the rich seeking to sleep under bridges.
The National Arbitration Forum in its 2006 Law and Policy Year in Review Reminds Us of last year's United States Supreme Court Ruling that a challenge to the validity of a contract containing an arbitration clause must be decided by the arbitrator.
NAF's conclusion -- "this 7-1 Buckeye decision is clear, convincing, and conclusive support for arbitration by this country's highest court. The Supreme Court Justices trust the judgment of arbitrators to decide disputes, and more and more parties and their lawyers will similarly entrust arbitrators to do justice."
(left: Bansky! as shot by Goatgirl: it says: . . . for silence is a fragile thing . . . )
Silence (confidentiality) in mediation is what makes mediation possible; what permits the parties to take time out from the battlefield where everything we say and every move we make can and will be used against us.
Private, confidential mediation time is a time when the parties can come together as people rather than as combatants. And this is true no matter how many zeros follow the first number by which they identify the "value" of their dispute (it could be land or women or rubies; furs or hunting grounds; fishing rights or that most evanescent of properties -- the product of the creative human spirit -- music, poetry, film, video, web cam.)
Mediation time is a time when the law allows people to recognize that they share a mutual problem, one that yokes them together. It is a time when they can give up carrying the conflict's burden alone and recognize that by drilling a hole in the other guy's side of the boat, they will sink their own.
On the other hand, silence and secrets are death to the spirit. The terrible tragedy of the evangelical minister who was finally unable to keep his sexual preference silent is a good example for World AIDS Day. The magnitude of the tragedy following his public "outing" makes the word "preference" seem weak and far too, well, preferential, as if one were ordering a meal in a restaurant or choosing a new suit of clothes. We are, I hear, only as sick as our secrets.
But the digression seems to have become the entire post. I nevertheless stick with my original plan to pass along, from the ADR Forum, the holding of the below-referenced appellate opinion on the mediation privilege in the context of an arbitration For the World AIDS Day page, click here. For the (red) campaign and a video message from Bono, click here
Confidentiality Protections Apply to Hybrid Procedure Consisting of Arbitration and Mediation
Society of Lloyd's v. Moore, No. 1:06-CV-286, 2006 WL 3167735 (S.D. Ohio Nov. 1, 2006)
A federal district court in Ohio ruled that the confidentiality protections of the Uniform Mediation Act applied to an email sent during the mediation phase of a hybrid dispute resolution procedure that first started with arbitration.
In Society of Lloyd's v. Moore, No. 1:06-CV-286, 2006 WL 3167735 (S.D. Ohio Nov. 1, 2006), Lloyd's sued Moore for alleged fraud. After the Court granted partial summary judgment, the parties agreed to submit the remaining matters to arbitration and mediation...Full Story