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April 2011 Part I What Every Executive Should Know About Dispute Resolution


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Part I-What Every Business Executive Needs To Know About Dispute Resolution

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April 2011 Part I What Every Executive Should Know About Dispute Resolution

  1. 1. WHAT EVERY BUSINESS EXECUTIVE NEEDS TO KNOW ABOUT DISPUTE RESOLUTION Part I: Mediation and Arbitration © 2009 by Ronald W. Brown
  2. 2. In the Past, Dispute Resolution Took Many Forms And the Outcome Could Be Uncertain
  3. 3. Today Dispute Resolution Can Also Take Many Forms, The Outcome Can Be Less Uncertain Using Alternative Dispute Resolution <ul><li>Mediation (ADR) </li></ul><ul><li>Arbitration (ADR) </li></ul><ul><li>Negotiation (ADR) </li></ul><ul><li>Litigation </li></ul>
  4. 4. Business Executives Should Understand Four Available Options For Resolving Disputes <ul><li>Mediation </li></ul><ul><li>Arbitration </li></ul><ul><li>Negotiation </li></ul><ul><li>Litigation </li></ul>Remember the 90/10 Rule: 10% is what happens to us and 90% is how we choose to react to it.
  5. 5. Four Processes In Dispute Resolution <ul><li>Mediation: In this private process, the negotiation is conducted by an independent and neutral third party to help the parties reach a mutually acceptable settlement. The parties craft their own solution to the dispute. </li></ul><ul><li>Arbitration: In this process, an arbitrator or arbitral tribunal mutually acceptable to the parties makes a determination (“award”) that is binding on the parties. </li></ul><ul><li>Negotiation: In this process, the parties discuss the dispute among themselves and attempt to reach a negotiated settlement with or without the assistance of a third party. </li></ul><ul><li>Litigation: In this adversarial and public process, the rules of discovery and evidence govern. A judge decides whether the plaintiff or defendant “wins” or “loses”. The decision is binding and enforceable, subject to being appealed. </li></ul>
  6. 6. The Importance of a Future Relationship <ul><li>“Often the choice of an alternative for resolving disputes turns on whether the parties care about the future of their relationship. Negotiation and mediation, for example, are thought to be superior to adjudication (arbitration or litigation) when a future relationship matters.” </li></ul><ul><li>The Effect of 209/11 On The Field of Conflict and Dispute Resolution”, Remarks of Professor Calvin Sharpe, John Deaver Drinko-Baker & Hostetler Professor of Law and Director, Center for the Interdisciplinary Study of Conflict and Dispute Resolution, September 11, 2006. </li></ul>
  7. 7. Some Overlooked “Collateral Damage” Aspects of Disputes <ul><li>Uncertainty is damaging to a company in many, many ways.  Depending on the size of the conflict, it could make lenders less interested in lending, customers concerned about the future, etc. </li></ul><ul><li>It is challenging for the owner-of-a-dispute to compartmentalize a conflict to the point that it does not spill over into the business executive’s personal life and their effectiveness as a leader of the business. </li></ul><ul><li>Any method of dispute resolution can be misused, for example as a delaying tactic or method of preventing forward progress, using up resources such as time and money. Recouping this lost opportunity cost is nearly impossible. </li></ul>
  8. 8. ADR Methods Unassisted Partnering Conciliation Facilitation Mediation Evaluative Arbitration Court Negotiation Methods Control vested in the parties Evaluative Mediation Facilitative Mediation The court system gives a lot of power to judges. ADR techniques return the power to the parties. Some processes return more control to the parties than others. Further, each technique can be adjusted to give more or less control to the parties. Each method has advantages and disadvantages.
  9. 9. AN ALTERNATIVE DISPUTE RESOLUTION Continuum http://www/ ADR.shtml
  10. 10. Alternative Dispute Resolution MEDIATION
  11. 11. Forms of Mediation: Facilitative Mediation <ul><li>Facilitative Mediation—”Is based on the belief that, with neutral assistance, people can work through and resolve their own conflicts. In facilitative mediation the mediator will take an active role in controlling the process, asks questions to identify interests of the parties, helps the parties explore solutions that are win/win” </li></ul><ul><li> </li></ul>
  12. 12. Forms of Mediation: Transformative Mediation <ul><li>Transformative Mediation—”Is based on the belief that conflict tends to make parties feel week and self-absorbed. Transformative mediators try to change the nature of the parties conflict by helping them appreciate each other’s viewpoints (‘recognition’) and strengthening their ability to handle conflict in a productive manner (‘empowerment’). The mediator will intervene in the conversation between the parties in order to call attention to moments of recognition and empowerment. Ground rules for the mediation are set only if the parties set them. The mediator does not suggest solutions.” </li></ul><ul><li> </li></ul>
  13. 13. Forms of Mediation: Evaluative Mediation <ul><li>Evaluative Mediation—”Is based on the belief that mediators with expertise in the issues I conflict can help the parties to assess the strengths and weaknesses of their legal or other positions and work to achieve settlements. The mediator controls the process and suggests solutions for resolving the conflict. Individual meetings between the mediator and one party at a time (called ‘caucuses’) are a major component of evaluative mediation. The mediators will make their best efforts to get the parties to compromise, if necessary, to achieve a result.” </li></ul><ul><li> </li></ul>
  14. 14. Observation About Types of Mediation <ul><li>Some mediators prefer to use only one style while other mediators prefer to use a blend of styles. </li></ul><ul><li>If you have a preferred style, ask the mediator if he/she uses your preferred style. </li></ul>
  15. 15. Each Mediation Is Unique <ul><li>“Each mediation presents its own set of challenges with its unique issues, personalities, sensitivities and impediments to settlement. Who is at the table, what is on the table, when the discussions should take place, the sequence and manner in which parties and issues are addressed, all have tremendous impact on the likelihood of a successful resolution.” </li></ul><ul><li>Edna Sussman, “The Reasons for Mediation’s Bright Future” </li></ul>
  16. 16. NINE GOOD THINGS THAT MEDIATION DOES <ul><li>“ Encourages direct communication between the parties.” </li></ul><ul><li>“ Helps people decide for themselves.” </li></ul><ul><li>“ Allows for the expression of emotions.” </li></ul><ul><li>“ Defuses anger.” </li></ul><ul><li>“ Explores creative means of solving problems.” </li></ul><ul><li>American Bar Association, Division for Public Education, Mediation, </li></ul>
  17. 17. NINE GOOD THINGS THAT MEDIATION DOES <ul><li>“ Promotes cooperation.” </li></ul><ul><li>“ Preserves the strengths of an ongoing relationship.” </li></ul><ul><li>“ Helps people accept the consequences of their own decisions.” </li></ul><ul><li>“ Develops a model for resolution of future conflicts.” </li></ul><ul><li>American Bar Association, Division for Public Education, Mediation, </li></ul>
  18. 18. Five Advantages of Mediation Over Litigation <ul><li>Mediation is voluntary and takes significantly less time than litigation. </li></ul><ul><li>Mediation is less costly than litigation. </li></ul><ul><li>Mediation is private, not public, and thus more confidential than litigation. </li></ul>
  19. 19. Five Advantages of Mediation Over Litigation <ul><li>4. In mediation, the parties have greater control over the resolution of the dispute because they negotiate their own settlement, facilitated by a neutral and impartial mediator. In litigation, the rules of civil procedure apply and the outcome of the dispute is determined by the trier of fact applying legal principles and rules. </li></ul>
  20. 20. Five Advantages of Mediation Over Litigation <ul><li>5. Mediation enables greater creativity in exploring solutions to the dispute. </li></ul>
  21. 21. Eight Things You Should Look For In Selecting A Mediator. Someone: <ul><li>Who is an experienced facilitator. </li></ul><ul><li>With whom you are comfortable and that you feel will maintain the trust and confidentiality of the mediation process. </li></ul><ul><li>Who listens well. </li></ul>
  22. 22. Eight Things You Should Look For In Selecting A Mediator. Someone : <ul><li>Who has demonstrable strengths that are the “right fit” for resolution of your dispute. </li></ul><ul><li>Who is intelligent. </li></ul><ul><li>Who is insightful. </li></ul>
  23. 23. Eight Things You Should Look For In Selecting A Mediator. Someone: <ul><li>Who gives you her/his focused attention, maintains eye contact when you speak, and actively listens. </li></ul><ul><li>Who recognizes and is able to fulfill their responsibility to stay neutral, who does not take sides and try to decide who is “right” and who is “wrong”. </li></ul>
  24. 24. Five Things A Mediator Needs A Party To Be Able to Do <ul><li>Listen to the mediator explain the mediation process. </li></ul><ul><li>Understand the role of the mediator and what is expected of each party. </li></ul><ul><li>Be willing and able to communicate a position but also be able to focus on interests and needs and options in seeking resolution </li></ul>
  25. 25. Five Things A Mediator Needs A Party To Be Able to Do <ul><li>Be honest, open, not interrupt the other party. </li></ul><ul><li>Send someone to the mediation who has the authority to reach a settlement or who is able to reach someone by phone who has that authority. </li></ul>
  26. 26. Mediation: How Long and How Much? <ul><li>How long depends on many factors including the type of mediation, and positions of the parties. The time can range from hours, to days, or longer. </li></ul><ul><li>Costs can range from an hourly rate to a flat fee per day. </li></ul>
  27. 27. An Example: The Mediation Process In Ten Steps <ul><li>The parties agree to mediate. </li></ul><ul><li>A mediator, time, place, and location are selected. </li></ul><ul><li>The parties meet and the mediator explains the process (including confidentiality; nothing in mediation can be used outside mediation, etc.) and insures the parties understand that process and agree to it. The process may include separate caucusing with each party. </li></ul>
  28. 28. An Example: The Mediation Process In Ten Steps <ul><li>Party “A” makes an opening statement about the issues as Party “A” sees them, the position of Party “A” on those issues, and solutions Party “A” would accept. </li></ul><ul><li>Party “B” makes an opening statement about the issues as Party “B” sees them, the position of Party “B” on those issues, and solutions Party “B” would accept. </li></ul>
  29. 29. An Example: The Mediation Process In Ten Steps <ul><li>Using neutral language, the mediator attempts to summarize the statements of the parties. </li></ul><ul><li>The mediator next attempts to prepare a topic agenda of issues so that the parties can try to start talking about issues and options. The mediator reminds the parties to try to focus on interests and options, both “within” and “outside” the box of the parties positions. </li></ul>
  30. 30. An Example: The Mediation Process In Ten Steps <ul><li>As explained by the mediator in step #3 above, the mediator may ask the parties to go to separate rooms where the mediator will meet with one party and then go to the other room to meet with the other party. In caucus a party may discuss with the mediator something the party is not prepared to discuss in the joint meeting and may authorize the mediator to air a proposal to the other party on behalf of the authorizing party. The mediator may also suggest solutions in caucus. </li></ul>
  31. 31. An Example: The Mediation Process In Ten Steps <ul><ul><li>Options are explored and solutions are offered, either in the separate caucus or in session where both parties and the mediator are in the same room. </li></ul></ul><ul><ul><li>If the parties agree on a solution, that solution is memorialized in a writing signed by the parties. </li></ul></ul>
  32. 32. Sidebar: To Caucus or Not To Caucus <ul><li>Some mediators and parties are comfortable with using a sidebar caucus and others are not. </li></ul><ul><li>Selecting which party to caucus with first can be perceived as favoring that party. Also taking longer to caucus with one party can result in the same perception. Logistics of where one party waits while a caucus takes place can also present a challenge, for example one party waiting in a hallway while the other party is in a caucus room. </li></ul>
  33. 33. An Example of Institutional Mediation: The American Arbitration Association <ul><li>If a matter submitted for mediation is withdrawn or cancelled or results in a settlement after the agreement to mediate is filed but prior to the mediation conference the cost is $250 plus any mediator time and charges incurred. </li></ul><ul><li>Parties are billed equally for all costs unless they agree otherwise. </li></ul><ul><li>All expenses of the mediation, including required traveling and other expenses or charges of the mediator, are borne equally by the parties unless they agree otherwise. The expenses of participants for either side are paid by the party requesting the attendance of such participants. “ </li></ul>
  34. 34. Alternative Dispute Resolution Arbitration
  35. 35. Arbitration (JAMS) <ul><li>“ Arbitration is the most traditional form of private dispute resolution. Arbitration is a binding procedure. It is often “administered” by a private organization that maintains lists of available arbitrators and provide rules under which the arbitration will be conducted. Such organizations can also manage the arbitration in whole or in part. Parties often select arbitrators on the basis of substantive expertise. </li></ul><ul><li>Arbitration is adjudicatory, as opposed to advisory, because of the fact that the arbitrator (usually a retired judge or attorney) renders a decision at the end of an arbitration hearing, and that decision is final and binding, subject only to a very limited court review. Arbitration is sometimes referred to as “non-binding” if the parties agree to make it so, but that is really a misnomer. Think of arbitration as a binding, adjudicatory process.” </li></ul>
  36. 36. Ten Steps In Arbitration <ul><li>Dispute arises. </li></ul><ul><li>Initiation of Arbitration. A contract clause may require settling a dispute through arbitration. </li></ul><ul><li>Selection and Appointment of arbitrator(s). The parties may have pre-determined the number of arbitrators and how the arbitrator or arbitrators will be selected and appointed. </li></ul><ul><li>Scheduling and holding a preliminary hearing. This may be done through a telephone conference call. </li></ul><ul><li>Date, time, and place of first arbitration meeting set. </li></ul><ul><li>Statement of Claim and Response </li></ul><ul><li>Discovery, production and inspection of documents </li></ul><ul><li>Hearing and Offering of material and relevant evidence. The arbitrator determines the admissibility, relevance, and materiality of evidence. </li></ul><ul><li>Award </li></ul><ul><li>Enforcement </li></ul>
  37. 37. Arbitration vs. Mediation <ul><li>Arbitration </li></ul><ul><li>Arbitrator decides the matter. </li></ul><ul><li>Formal. </li></ul><ul><li>Less expensive than litigation. More expensive than mediation. </li></ul><ul><li>Relationships can become strained. </li></ul><ul><li>Binding resolution, upheld by courts except in very narrow circumstances. </li></ul><ul><li>Mediation </li></ul><ul><li>Parties select mediator and decide the matter. </li></ul><ul><li>Informal. </li></ul><ul><li>Less expensive than litigation or arbitration. </li></ul><ul><li>Relationships likely to be maintained. </li></ul><ul><li>Parties participate in process and shape resolution. If mediated resolution, parties can reject it. </li></ul>
  38. 38. ARBITRATION:PROPOSED LEGISLATION IN CONGRESS <ul><li>More than 30 Bills have been proposed dealing with arbitration. </li></ul><ul><li>Proposals included: (A) Senator Russell Feingold’s The Arbitration Fairness Act of 2007 which “Declares that no pre-dispute 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.” (B) Senator Sessions Fair Arbitration Act (and would cover all arbitrations, domestic as well as international.) </li></ul>