Tipping the Scales of Justice: The Rise of ADR
To anyone who has been doing trial work for more than 30 years, the ascent of alternative dispute resolution (ADR) processes—especially mediation—is unsurprising; litigation is costly. Combine high cost and high risk, and reasonable litigants are finding alternatives to trial, tipping the scales of justice in favor of mediation, arbitrating, and hybrid forms of ADR processes.
Mediation works. Mediation is a major contributing factor to the vanishing trial phenomenon because it works. If there is an outcome- determinative legal issue, a good mediator can work with the parties before discovery dollars are incurred to assist the parties in evaluating the likelihood of success and the associated settlement value of the case. If there are material factual disputes during mediation, a good mediator can assist the parties in outlining possible outcomes and determining the settlement value of a case. The “silver bullet” in mediation is to get the parties to the courthouse steps without spending the money to get there. Every trial lawyer knows that by the time of trial, a matter will funnel down to a few key issues, often just one or two. In a well-conducted mediation, the funneling process will be expedited. Key issues will be identified quickly and confronted fairly so that parties can meaningfully decide whether there is a mutually acceptable way to resolve differences.
Mediation is not always successful, but to give it the best chance of success, parties have to overcome certain obstacles. First is lack of preparation. When the mediator knows the case better than the advocates, there is a problem. A second obstacle is confusion over the amount in controversy. Parties demanding relief have to be able to articulate the relief being sought. A third obstacle is failure to have decision makers in the room. Often a mediator’s first task is to address complaints by one party that another party will not be represented by a person with “full settlement authority.” Mediation works best when no one in the room has to make a telephone call or reconvene with management to authorize a settlement on behalf of a party.
Creative ADR processes. What I call “mediation plus” works for intrepid parties. In this process, the mediator first facilitates the exchange of information. The mediator then interviews witnesses who can be directed by a party or persuaded by the neutral to appear for the interview. Under the supervision of the mediation, expert presentations are then made to the mediator, counsel, and decision makers for all parties. Sometime thereafter, the mediation is held. A thoughtful process agreement that gives the mediator authority to police the process and to adjust deadlines as reasonably necessary is an important step to ensuring a resolution.
Nonbinding arbitrations, or what some call “early neutral evaluations,” can also be effective ways to assist parties in resolving environmental or other disputes. If there are sufficient amounts in controversy or if there is a pressing need for development of a testimonial record because there are no documents available, an ADR process approved under a case management order (CMO) might make sense.
In a Superfund allocation context, the CMO might, for example, contain the following features: (1) appointment of a third-party neutral to gather evidence, write a report, and mediate the dispute; (2) questionnaires and a process to follow up with individual parties to ensure that questionnaire responses feature equivalent levels of due diligence; (3) creation of a document repository; (4) depositions taken by a neutral with some mechanism to provide for cross-examination of witnesses; (5) preparation of “position papers” and rebuttal or reply papers; (6) an “opt in” or “opt out” provision depending upon a court’s determination of how best to manage the process; (7) a schedule with a mechanism to extend deadlines; (8) hearing processes where oral argument is heard by the neutral; (9) preparation of a preliminary allocation report that will typically address shares of “orphans” or non-ADR participants; (10) a comment period followed by preparation of a final report; (11) a facilitation session with the neutral to attempt to effect a final resolution of the matter; (12) equal contributions to a trust fund by each participant to pay the costs of the process; (13) if appropriate, expert report exchanges and expert presentations; and (14) flexibility in permitting the neutral to issue a nonbinding ruling on liability issues.
Alternatively, similar to litigants who use mock juries to prepare for trial, one side, both sides, or all sides to a dispute may elect to present their cases to a neutral for a written evaluation within limits prescribed by the parties.
Arbitration. Historically, arbitration is the most common ADR process. Arbitration is increasingly used to ensure the involvement of neutrals with experience in the areas to be arbitrated with the expectation that knowledgeable neutrals will give parties the best justice.
A just, speedy, and relatively inexpensive arbitration begins with a good arbitration clause. There are a number of topics contracting parties should think about in drafting an arbitration clause. First is the number of arbitrators, their qualifications, and the selection process. Generally, the arbitrator or the arbitration panel represents the most important component of a successful arbitration process. Scheduling is another checklist item for an arbitration clause. One issue here is whether a failure of a party to abide by the schedule should have consequences. Choice of law issues could become material in the outcome of an arbitration and merit attention. Another question is whether the arbitrators will have the authority to issue sanctions for any reason. Although arbitral processes are confidential, confidentiality may still need to be addressed. If an arbitral institution’s rules govern the proceeding, the parties should determine whether the award will be confidential under those rules. The type of award is another topic that needs to be considered. The choices include an award without reasons, an award stating the reasons without discussion, or an award with a detailed analysis of the reasons underlying the award. The question of deposition discovery is another potential contracting topic. Most arbitral institutions limit discovery, except as allowed by the tribunal. If arbitration parties want to ensure broad discovery rights, they should provide for them in the underlying contract.
The conduct of the arbitration hearing will differ from that of a trial. For example, Rule 12.2 of the Center for Public Resources’ Rules for Non-Administered Arbitration provides that the tribunal “is not required to apply the rules of evidence used in judicial proceedings” but will apply “the lawyer-client privilege and the work product immunity.” A major difference between a trial and an arbitration relates to appellate review. The Federal Arbitration Act provides that an arbitration award may be vacated only where the award was “procured by corruption, fraud, or undue means”; there was “evident partiality or corruption in the arbitrators, or either of them”; the arbitrators were “guilty of misconduct” in refusing to postpone the hearing “upon sufficient cause shown,” or in refusing to hear evidence “pertinent and material” to the controversy, or of “any other misbehavior by which the rights of any party have been prejudiced”; or “where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”
Win or lose, those who have had arbitration experience almost universally endorse the process if the sole arbitrator or the panel is thoughtful, timely, efficient, respectful, fair minded, hard working, and renders a well-reasoned award. Finding these qualities is the challenge.
For More Information About the Section of Environment, Energy, and Resources
- This article is an abridged and edited version of one that originally appeared on page 40 of Natural Resources & Environment, Spring 2008 (22:4).
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John M. Barkett is a partner in the Miami, Florida, office of Shook, Hardy & Bacon LLP. He may be reached at firstname.lastname@example.org.