Select Page

Alternative Dispute Resolution
Santa Clara University School of Law
Spitko, E. Gary

1)      ADR
a)      Why ADR?
i)        Expense: Usually less, b/c no trial; but takes away from doing business and sometimes drags out
ii)      Compromise: both sides reach agreement.
iii)    Expediency: Can be done quicker.
iv)    Informality/Autonomy: rules of evidence, other rules might not apply. More accommodating. Potentially less stressful.
v)      Administration: Reduce court backlog. Especially in employment cases, get them out of the system.
vi)    Selection: Parties can pick their mediators: pick someone with expertise, resulting in a more informed decision, and parties more likely to accept decision.
vii) Tactical Advantage, w/ Arbitration in particular. May get a better outcome: in employment arbitration, rare to award punitive damages, whereas jury might. 
(1)   Arbitrators tend to be older, white males, while juries are not. Avoid Class Actions if you have a system to preclude them.
viii)Preserving Relationships: less hostile.
b)      Why do most cases that settle do so very late in the game?
i)        Outlast opponents: one side is bigger and feels it can outlast.
ii)      New info comes to light.
iii)    Poor work by attorney, realizing late that case is weak.
iv)    Emotions
v)      Interest in not setting precedent: take asbestos or cigarettes. 
(1)   Some say we can win, but will cost $50k; pay him $25k to end.
(2)   If we let this case go to trial, 50 more will sue us.
c)      How can ADR help?
i)        ADR: early mutual evaluator: not binding, but gives parties an idea of what an expert thinks about the value of the case. Helps parties get an idea of how strong case is.
ii)      People want their day in court: but may feel like they have if resolution. 
iii)    Why useful to have court order parties to mediate? Parties not inclined to be first to suggest settlement b/c it may show weakness. In 11th Cir. one can ask the Ct to anonymously require it. 
(1)   Criticism? How can you order a good-faith mediation? Some simply refuse to participate in the process.
d)      Criticisms:
i)        How might Employment Arbitration harm the public interest?
(1)   Opinions not published. Privacy is also a draw-back. 
(2)   Commercial Arbitration: can work, but may be expensive.
(3)   But general deterrence function.
(4)   Procedural protections not there.
(a)   Develop the law, tho. Title VII was a big step in 1964.
2)     State Law prohibiting courts from enforcing Arb Agreements:
a)     With respect to certain claims:
i)       Southland v. Keating, 1984, CB 451.
(1) F: seeks to enforce arb agreement, CA St SC says arb agreement void b/c not arbitrable: the franchisees’ tort & K claims were arbitrable, but their CFIL (CA Franchise Inv Law) claims were not.
(2) I: whether CA §, as interpreted by CA’s highest court, was federally preempted by the FAA? (Whether arb under the FAA is impaired when a class action structure is imposed on the process by state courts?)
(3) H: FAA preempted CA §, as interpreted.
(4) FAA §2: arb agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any K.”
(5) The Dse to arb in the CFIL is not a ground that exists in law ‘for the revocation of any K’ but merely a ground … for the revocation of arb provisions in K’s subject to CFIL.
(6) I.e., the FAA req’s parties who attack an arb agreement to find weapons in K law, not somewhere else. 
(a) Many states’ laws prohibit enforcement of pre-dispute arb agreements for certain claims, e.g. personal injury; these laws are preempted by the FAA b/c they create a ground for denying enforcement to arb agreements that is not a ground for the revocation of any K.
(7) Maj: Burger: Sees the act as substa

doesn’t preempt.
(4) Rat: Parties can K for any type of arb they want; i.e., under Volt, parties can K out of FAA preemption, and form an enforceable arb agreement providing that any dispute will be governed by state arb law instead of the FAA.
(a) Cg didn’t occupy the field.
(b) If CA law said they had to wait until litigation to arb, that would be contrary to FAA, and would be preempted.
(c)   Here, the parties chose CA law; in Southland and Terminix, it was state law.
(5) R: the Volt test: would application of statute frustrate/ undermine the goals of the FAA? I.e., both sides must be aware of the agreement.
d)     Review:
i)       Hypo: Smith w/ house in Atlanta built by Acme, FL corp. Agreed to GA law; GA has § requiring arb clause to be initialed by parties. How to analyze a motion to compel assuming they didn’t initial?
(1) Arb agreements are valid; FAA applies to most arb agreements (b/c Cg was trying to enact its interstate commerce powers)
(2) To extent GA § conflicts w/ FAA, it would be preempted.
(3) But here, the parties expressly agreed to GA law; under Volt, the FAA would not be offended by that agreement.
(4) Still, the FAA would likely compel arbitration.
(5) Parties do have right to incorporate provisions they want; their strongest arg is that it wouldn’t make sense to compel: why would they have a K that they then made void?
e)     Mastrobuono v. Shearson Lehman, 1995, CB 479
i)       Since Volt, only case involving whether parties had K’ed out of FAA.