© 2006 Prentice Hall© 2006 Prentice Hall Ch. 4-Ch. 4-11
THETHE LEGALLEGAL ENVIRONMENTENVIRONMENT OFOF BUSINESSBUSINESS
A Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachFourth EditionFourth Edition
Nancy K. KubasekNancy K. Kubasek
Bartley A. BrennanBartley A. Brennan
M. Neil BrowneM. Neil Browne
Nancy K. KubasekNancy K. Kubasek
Bartley A. BrennanBartley A. Brennan
M. Neil BrowneM. Neil Browne
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 2-Ch. 2-22
THE LEGAL ENVIRONMENT OF BUSINESS
CHAPTER 6CHAPTER 6
Alternative Tools of Dispute Alternative Tools of Dispute ResolutionResolution
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THE LEGAL ENVIRONMENT OF BUSINESS
Alternative Dispute ResolutionAlternative Dispute ResolutionAlternatives to LitigationAlternatives to Litigation
Negotiation and Settlement Negotiation and Settlement
ArbitrationArbitration
MediationMediation
MinitrialsMinitrials
Private TrialsPrivate Trials
Summary Jury TrialsSummary Jury Trials
Early Neutral Case EvaluationEarly Neutral Case Evaluation
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Alternative Dispute ResolutionAlternative Dispute ResolutionReasons for increasing popularity:Reasons for increasing popularity:
CostCost
TimeTime
Uncertainty and Uncertainty and riskrisk
Court-ordered ADRCourt-ordered ADR
FlexibilityFlexibility
ConfidentialityConfidentiality
Preservation of Preservation of business relationshipbusiness relationship
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THE LEGAL ENVIRONMENT OF BUSINESS
Alternative Dispute ResolutionAlternative Dispute Resolution
NegotiationNegotiation
P1 P2
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Alternative Dispute ResolutionAlternative Dispute Resolution
ArbitrationArbitration
P1 P2
A
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Alternative Dispute ResolutionAlternative Dispute Resolution
Arbitration-AwardArbitration-Award
P1 P2
A
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THE LEGAL ENVIRONMENT OF BUSINESS
The Arbitration ProcessThe Arbitration Process
Both sides submit briefs of facts and lawBoth sides submit briefs of facts and law
Proceedings are private, not publicProceedings are private, not public
No official record is madeNo official record is made
Witnesses and evidence presentedWitnesses and evidence presented
Rules of evidence are relaxedRules of evidence are relaxed
Decisions rendered within 30 daysDecisions rendered within 30 days
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ArbitrationArbitration
Parties submit their opposing positions Parties submit their opposing positions to a neutral arbitratorto a neutral arbitrator
Arbitrator has power to decideArbitrator has power to decide
Arbitrator is selected by agreement of Arbitrator is selected by agreement of the partiesthe parties
Arbitrator usually has familiarity with Arbitrator usually has familiarity with type of disputetype of dispute
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ArbitrationArbitrationCompromise resolution is expectedCompromise resolution is expected
Results called Award in ArbitrationResults called Award in Arbitration
Arbitrator not required to follow precedentArbitrator not required to follow precedent
Courts routinely enforce awards: appeals Courts routinely enforce awards: appeals notnot favoredfavored
Results are legally binding—few are Results are legally binding—few are challengedchallenged
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Methods of Securing ArbitrationMethods of Securing Arbitration
By Arbitration clause in agreementBy Arbitration clause in agreement
By Submission agreementBy Submission agreement
Concerns have been raised about Concerns have been raised about employees waiver of statutory rights by employees waiver of statutory rights by accepting arbitration clausesaccepting arbitration clauses
See, Securities Industry CasesSee, Securities Industry Cases
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Selection of the ArbitratorSelection of the Arbitrator
Lists of candidates for Lists of candidates for arbitrator provided to arbitrator provided to each partyeach party
Parties select Parties select arbitrator, and time arbitrator, and time and placeand place
Parties agree to follow Parties agree to follow the rules: AAA, ICCthe rules: AAA, ICC
Who are they?Who are they?
Generally, lawyers, retired Generally, lawyers, retired judges, professors or other judges, professors or other professionals in the fieldprofessionals in the field
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THE LEGAL ENVIRONMENT OF BUSINESS
Common Uses of ArbitrationCommon Uses of Arbitration
Labor DisputesLabor Disputes
Business conflictsBusiness conflicts
Consumer complaintsConsumer complaints
Various matters typically Various matters typically found in civil litigation: found in civil litigation: tort, contract casestort, contract cases
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Problems with ArbitrationProblems with ArbitrationConcerns with discrimination casesConcerns with discrimination cases
Concerns with Arbitrators’ backgroundConcerns with Arbitrators’ background
Absence of written opinionsAbsence of written opinions
Costs typically shared in arbitration—poses Costs typically shared in arbitration—poses greater impact on employee than on employer—greater impact on employee than on employer—may have a ‘chilling effect’may have a ‘chilling effect’
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Alternative Dispute ResolutionAlternative Dispute Resolution
MediationMediation
P1 P2M
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MediationMediation
Instead, mediator facilitates the parties Instead, mediator facilitates the parties themselves in reaching agreementthemselves in reaching agreement
If the parties reach agreement, the matter If the parties reach agreement, the matter is settledis settled
If not, the parties can go on to arbitration If not, the parties can go on to arbitration or litigationor litigation
Mediator is not empowered to impose Mediator is not empowered to impose a decision on the partiesa decision on the parties
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The Mediation ProcessThe Mediation ProcessMediator points out strengths and weaknesses Mediator points out strengths and weaknesses of each sides’ case, privatelyof each sides’ case, privately
Mediator shuttles between opposing parties, Mediator shuttles between opposing parties, conveying informationconveying information
Offers and disclosures made in mediation Offers and disclosures made in mediation cannot be used as evidence at trialcannot be used as evidence at trial
Very flexible and creative processVery flexible and creative process
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THE LEGAL ENVIRONMENT OF BUSINESS
The Mediation ProcessThe Mediation ProcessMediators available via private ADR companiesMediators available via private ADR companies
Often, former judges serve as mediatorsOften, former judges serve as mediators
PRO:PRO: They have legal knowledge.They have legal knowledge.
CON:CON: Judges find it hard to stop being judge!Judges find it hard to stop being judge!
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THE LEGAL ENVIRONMENT OF BUSINESS
Advantages of MediationAdvantages of MediationApplicable to almost all disputesApplicable to almost all disputes
Useful for multi-party disputesUseful for multi-party disputes
CreativeCreative
Non-adversarialNon-adversarial
Avoids win-lose outcomeAvoids win-lose outcome
Allows for continuing relationshipAllows for continuing relationship
Usually less expensive and time-Usually less expensive and time-consumingconsuming
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Criticisms of MediationCriticisms of Mediation
Glosses over Glosses over fundamental structural fundamental structural conflictsconflicts
Misleading impression of Misleading impression of equality of partiesequality of parties
Subject to abuse by bad Subject to abuse by bad faith of one partyfaith of one party
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MinitrialsMinitrials
Relatively new ADR methodRelatively new ADR method
Abbreviated trial arguments submitted Abbreviated trial arguments submitted to adviserto adviser
Adviser renders opinion as to probable Adviser renders opinion as to probable outcome at trialoutcome at trial
Executives meet without attorneys to Executives meet without attorneys to try and settle casetry and settle case
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Other ADR MethodsOther ADR MethodsEarly Neutral Case EvaluationEarly Neutral Case Evaluation
Similar to minitrialSimilar to minitrial
Private TrialsPrivate Trials
Like an actual trial, but tried to a private Like an actual trial, but tried to a private judge selected by agreement of the partiesjudge selected by agreement of the parties
Summary Jury TrialsSummary Jury Trials
Streamlined, 1-day, actual trials leading to Streamlined, 1-day, actual trials leading to 95% settlement rate95% settlement rate
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Court-Annexed ADRCourt-Annexed ADR
Implemented by court ruleImplemented by court rule
Many jurisdictions require ADR as a pre-Many jurisdictions require ADR as a pre-condition to access to courtroomcondition to access to courtroom
Requirements vary from state to state, and Requirements vary from state to state, and in federal courtin federal court
Usually, court-annexed ADR is NOT Usually, court-annexed ADR is NOT binding…the parties may go back to court binding…the parties may go back to court
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The Future of ADRThe Future of ADR
Concerns include:Concerns include:
Is it really ‘voluntary’?Is it really ‘voluntary’?
Subject to bias?Subject to bias?
Loss of rights?Loss of rights?
Continuing growth of ADR is expectedContinuing growth of ADR is expected
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Global Dimensions of ADRGlobal Dimensions of ADRADR is widely-used in ADR is widely-used in international contractsinternational contracts
Arbitration awards are Arbitration awards are easily enforceable in easily enforceable in other countries due to other countries due to UN TreatyUN Treaty
Only limited defenses to Only limited defenses to enforceability are enforceability are allowed under the rulesallowed under the rules