Alternative Dispute Resolution – Kirgis – Fall 2014
· Progress of conflicts
o Grievance: Any instance in which one person believes another has done something to cause them harm.
§ Happens frequently in real life. We just forget about it instead of suing, normally.
o Claim: When a person brings the grievance to the other’s attention.
o Dispute: The claim has to be rebuffed.
§ In order for there to be a dispute, the person has to refuse to satisfy/remedy the other person.
· Generally we just say “oops, sorry” and move on.
o Lawyers get hired
o Lawsuits: Lawyer escalates the situation by filing a lawsuit after the grievance.
· The disputing pyramid (numbers all approximations):
o 70% of grievances had claims
§ Half of those had disputes
· 10% of those went to lawyers
o 50% of those had lawsuits
o In employment discrimination situations only 30% had claims, almost all of them were disputed, and almost none of them went to lawsuit.
· How are civil lawsuits resolved
o Study from 1986 (and approximations)
§ 7% of lawsuits end in a trial
§ 9% Judicial decision on the merits (summary judgment)
§ 20% Arbitration
§ 18% Default/Dismissal by Judge
§ 63% Settlement (including voluntary dismissal by plaintiff)
o Most disputes are settled through negotiation (which is generally private)
§ Some are settled through mediation and arbitration though.
§ Adjudication rarely happens, but it’s always looming.
· (“The Shadow of Adjudication.”)
· In order to be a good settler-lawyer you MUST be a good trial attorney
o If you can’t try a case, there’s no threat for the other side. They’ll just fuck you up at trial if they don’t get a settlement they like.
o (According to Kirgis, TRIALS are really the “Alternative Dispute Resolution.”)
o Counterpart to ADR
o NY has one of the few court-connected ADR programs
o Often times ADR happens in the context of litigation
§ Litigation takes a long time to resolve (but lawyers like it because it’s expensive?)
· In NY Court, usually takes 5-7 years:
o File a complain
o Defendant files an answer
o Scheduling order is set up by the judge. This sets out when everything will happen. (ex: Sets out when Discovery needs to be completed)
o Motion Practice
o NY allows interlocutory appeals on almost every decision a judge makes
o Then you get put on the trial calendar
· Dispute Resolution Spectrum:
§ More participant control to Less participant control
· Litigation -> Facilitative Mediation -> Evaluative Mediation – Advisory Arbitration -> Binding Arbitration -> Adjudication
o Still a relatively new process
§ Judges used to not even enforce arbitration agreements
§ 1920’s saw a law passed that made arbitration more prevalent
§ There was no contractually binding arbitration, only voluntary arbitration
o A lot easier for lawyers because clients are a pain in mediation/negotiation.
§ “Why can’t you get more? DO YOUR JOB LAWYER.”
§ Easier to lose in arbitration and blame the arbitrator.
o Mandatory Pre-dispute Arbitration:
· Mandatory: You can’t get out of this.
· Pre-dispute: Before a dispute arises
§ Parties that have a contractual agreement and part of that agreement says that if a dispute arises you have to go to arbitration (aka: Arbitration clause)
§ Federal Arbitration Act (FAA) REQUIRES courts to enforce arbitration clauses
o Adhesory Arbitration
§ Consumers and Employment
§ New branch of arbitration
§ Governed by the FAA
§ Motive for this sort of arbitration is to reduce or limit the liability for corporations and firms
o Common areas for arbitration:
§ Securities: Think stockbroker took unreasonable risks, you go to FINRA.
· Pretty much every securities claim goes to arbitration
§ Labor (unions)
§ International Commercial Transactions
· American corporation contracts with supplier in Mexico
o We don’t want to litigate in Mexico because we’ll get fucked, and they feel the same way about American court.
§ So, there’s International Arbitration centers
et an award in Mexico, Mexico has to pay the US firm
§ Parties Agreements
· Parties CANNOT contract around FAA
o But they can provide for anything else
§ Ex: Can contract for panel of 3 arbitrators with specific experience
· Arbitration Rules – Arbitration Providers
o AAA, JAMS, FINA
o If you contract to arbitrate before AAA, AAA’s rules become a part of the arbitration agreement
· State Arbitration Laws
o Largely pre-empted by FAA
§ So now we’re not sure if these even matter anymore
§ First Options of Chicago v. Kaplan
· Kompetanz – Kompetanz
o Arbitrator is competent to decide his own jurisdiction
o Normally this rule is in the International context
§ Which makes sense, because everyone wants to avoid foreign courts
o If you have an arbitration clause, you go to the arbitrator and then he decides if he has jurisdiction to hear the case
· Kaplans have money from First Options for their hedge fund MKI. MKI goes under, so the Kaplans owe First Options.
o First Options and MKI signed an arbitration agreement.
§ Kaplans didn’t though.
· Question of arbitrability
o 3 Issues set out by court
§ 1) Who decides whether dispute is subject to arbitration?
· When the parties have submitted to arbitration, the arbitrator chooses if its subject to arbitration
o How do the parties submit?
§ Need CLEAR AND UNMISTAKABLE LANGUAGE that the parties are submitting to arbitration
§ If there isn’t clear and unmistakable language, then there is a presumption that the parties did NOT submit.
o What if the parties didn’t submit?
§ Court decides.
o If the agreement is vague about arbitration, read in a pro-arbitration way