INTRODUCTION
A. Hypothetical
A bought a house from B. B lived in the house for 10 years. B told A there were no leaks in the basement. Shortly after establishing residence, A discovered the basement leaks profusely resulting in damage.
How could the parties resolve the dispute?
· Lawsuit
· Negotiation – resolve the dispute on their own
Problems:
ü anger
ü harsh feelings
ü objectivity concerns
Benefits:
ü less expensive
ü expediency
ü parties can control the process/standard(s) for decision
ü interest of the parties taken into consideration
ü no requirement that actual disputants negotiate – can use representatives
· Mediation
ü voluntary process
ü parties decide resolution (cf. arbitration)
ü mediator facilitates the process
ü mediator can bring his/her expertise to the dispute (type of dispute or process)
ü mediator can propose creative solutions parties did not consider
ü broad range of resolutions
ü help parties focus on their underlying interest(s)
ü reduce/avoid hostility – use of caucus
ü caucusing – parties likely to be more candid in separate meeting w/mediator
ü to be effective, mediator must gain the parties’ trust
ü concerns for how directive mediator is
· Arbitration
ü finality
ü expertise – area/process
ü arbitrator imposes resolution on the parties
ü “therapeutic effect” cf. w/ litigation
ü parties’ choice in standards
e.g., discovery, rules of evidence, decision standard, etc.
B. Overarching Reasons for ADR
o Provide process superior to or preferable to going to court.
o Avoid court.
C. ADR and its Critics
1. Owen Fiss, Against Settlement, pp. 14-15
Concerns of representation, imbalances of power, no opportunity for court to have ongoing oversight.
Benefits of Court
ü public forum
ü public judge – responsible to the public
ü public law
ü development of the common law
ü focus → social policy (like Brown v. Board)
ü “recalcitrant reality closer to our chosen ideals”
2. Harry Edwards, Alternative Dispute Resolution: Panacea or Anathema, pp. 16-18
Concerns:
ü settlement may not serve public interests
ü evasion of law
ü stifling development of common law
ü opportunity to oppress certain parties
3. Generally
Courts have embraced ADR these days. See Resnik article, pp. 8-10.
§ Change in judicial view of ADR.
§ Appropriateness of ADR in resolving disputes.
Some federal courts require mandatory mediation. Others require mandatory arbitration.
Mandatory v. Voluntary ADR
Concerns for:
o coercion
o standards
o due process
o type of oversight
o level of judicial review
Many cultures outside of US rely on ADR methods to resolve disputes.
II. ARBITRATION – AN INTRODUCTION
A. Hallmarks of Arbitration
§ Expertise of the arbitrator
§ Adjudicatory process
§ Parties have opportunity to choose the basis for the decision
§ Privacy
§ Finality
B. Criticisms of Arbitration
Arbitrators will give compromised decisions.
However:
o process can be structured to limit the ability of the arbitrator to reach a compromised decision
o arbitrators must follow rules established by the parties, e.g., CBA in labor arb.
o vacatur of award in certain circumstances (FAA/UAA)
C. Federal Arbitration Act, 9 U.S.C. §§ 1-16
· passed 1925; basis – NY Arbitration Act
· enacted to overcome judicial hostility to arbitration
· limited grounds for vacating the award
o arbitrator exceeded powers
o bias on part of the arbitrator
o corruption
· final and binding
o fosters relationship between parties
o provides for more efficient service
o judicial eco
Why is a written opinion routinely required?
§irons out ambiguities – lets parties know how the arbitrator was reading the CBA
§opportunity to change agr. during subsequent negotiations
§provides guidance for similar subsequent disputes
§therapeutic effect – foster relations between the parties
2. Commercial Arbitration
ü Broad area – encompasses many types of disputes.
ü Dominant mode of dispute resolution in certain industries.
(e.g., construction industry)
ü Preferred because of privacy; expertise of arbitrator in a specified area.
ü Generally, no reasoned written opinion. Appealability concerns. Even though limited grounds for vacatur, if written, cts. are tempted to interfere.
3. International Commercial Arbitration
ü Concerns over courts in adversary’s country. Provides a means of avoiding domestic substantive law of a given country.
ü International arbitrators usually emphasize fact-based “justice” which typically characterizes arbitration. May also apply an “international blend” of commercial law principles.
ü Process closely resembles conventional litigation – judicialized model of arbitration.
ü Use of reasoned written opinions. Serve as a check against arbitrariness and help to develop common law of international arbitration.
4. Maritime Arbitration
ü Arbitration of ocean shipping claims.
ü Closely resembles international commercial arbitration.
ü Development of common law (lex maritima) which guides future actions.
5. Securities Arbitration
ü Opportunity for some expertise.
ü Quick resolution.