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In thinking about whether and how to regulate dispute resolution processes, one must take into account a variety of factors. Two prominent factors are the types of parties involved and how the parties came to be involved in the process. The first factor relates to Marc Galanter’s frequently cited distinction between one-shot and repeat-players. In this context, for analytic purposes it is probably better to think of this factor as a dichotomy between sophisticated and unsophisticated parties (in the real world, there is undoubtedly a continuum here rather than a simple dichotomy). There are three combinations of types of parties: both unsophisticated, both sophisticated, and one of each.
This issue of Dispute Resolution Magazine focuses on the potential regulation of private dispute resolution. Understandably, our Section’s members are divided on the need for – and the potential dangers of – regulation. The articles in this issue present the arguments “for” and “against” regulation, but they also demonstrate that a “pro” and “con” debate is not sufficient. Rather, the articles in this issue suggest we must now ask the “next generation” questions: When and where is regulation needed? How can it best be accomplished? Who should be responsible for it? What, for example, is the place of self-regulation?
As we consider these issues, we might want to think of the dispute resolution field as a marketplace, one in which A and B may be viewed as shoppers choosing among various dispute resolution products and services. A and B presumably will take into account their own preferences, the costs of the alternative processes (e.g. in money, time and emotion) and the prospective benefits of those processes (e.g. in terms of likely result, money, reputation, emotion, future relationships and furtherance of justice). In this model, the “sellers” of mediation, arbitration and even perhaps judicial dispute resolution services compete to be selected by disputants. Although the government does not actually sell dispute resolution services, except through a heavily subsidized filing fee, at least some court administrators and judges aspire to provide services that will be attractive to disputants.
Regulations, no matter how well meaning, inevitably limit and constrain. In sharp contrast, the primary benefits of private dispute resolution include flexibility, creative evolutionary change and customization. This article will serve as a cautionary tale against the unintended negative consequences of misdirected regulation in the ADR field. While ADR may have moved into “mainstream” legal practice, it continues to develop and change in the United States and abroad. We will explore how the ADR profession effectively polices itself, and how any ADR regulations that use a one-size-fits-all approach could have negative long-term effects on ADR’s further development and acceptance.
Mandatory pre-dispute arbitration has been a divisive issue for many years, particularly since the Supreme Court began enforcing the arbitration clauses that businesses and employers impose on consumers and employees, respectively, in contracts of adhesion. In 2009, the Dispute Resolution Section’s Council proposed to weigh in on this issue through the vehicle of an ABA House of Delegates resolution. The compromise position developed by the Section, expressing support for pre-dispute mandatory arbitration clauses provided they offer a meaningful opt-out, generated such a firestorm of opposition from both pro-arbitration and anti-arbitration advocates that the Council ultimately chose to abstain from expressing any position at all.
UNCITRAL convened the ODR Colloquium in 2010 as a first step toward the goal of creating a cross-border ODR system for e-commerce. Speakers at the colloquium confirmed that the number of disputes arising from low-value e-commerce transactions could annually amount to the multi-millions. Other than credit card chargeback protection, which is not available in a majority of countries, few, if any, legal redress mechanisms are currently available, leaving a wide legal gap in the online marketplace. More than one expert urged system designers and legislators to think outside the box and not necessarily resort to traditional ADR models. The rapidly developing online marketplace and emerging new payment structures, they argued, need a correspondingly progressive ADR system or systems. Speakers also recommended that any set of rules accommodate transactions made over mobile phone devices, possibly using mobile payment options, as well as other electronic commerce platforms. Finally, given the nature of the online marketplace, speakers asserted that there was no reason to distinguish between business-to-business (B2B) and business-to-consumer (B2C) transactions for the purposes of developing model ODR rules and processes for low-value transactions.
Under the Alternative Dispute Resolution Act of 1998, all federal district courts had to adopt a dispute resolution program, but there was no template; the thousand flowers bloomed. How do these designs compare? Without consistent data, there is no way to know. In 2003, the Research and Statistics Task Force of the American Bar Association Section of Dispute Resolution embarked on a project to help courts use their information technology systems to collect data for ADR program evaluation. Through an email survey to court administrators, the Section sought to create a list of data fields that all courts could collect. If state and federal courts collected the same data comprehensively and longitudinally, the Section’s Task Force members reasoned, researchers might be able to quantify more effectively the impact of different dispute system designs on the justice system. The survey asked respondents to rank the importance of 56 data collection fields on a scale from one (not at all important) to seven (very important). An initial version of the survey also asked respondents to indicate whether their court currently collected any of this data.
Should there be a public rating system for arbitration programs tied to consumer goods and services or for individual employment contracts? Like it or not, we live in a society that is obsessed by, and makes key choices on the basis of, ratings. Recently I proposed the idea of an “Arbitration Fairness Index,” a multi-dimensional system to rate and rank consumer and employment arbitration programs. Building on many years of pro-arbitration precedents, recent Supreme Court decisions support broad enforcement of class action waivers, permit companies to give arbitrators virtual plenary authority over challenges to arbitration agreements and place new limits on the ability of courts to police arbitration agreements in standardized contracts of adhesion. Meanwhile, although binding arbitration agreements are widely used in consumer contracts and individual employment contracts, most individuals probably have little or no understanding about what an arbitration agreement entails. Because fundamental fairness hinges on many characteristics of dispute resolution systems, arbitration programs may or may not provide an effective means of achieving an appropriate remedy.
Much of our practice, especially since Concepcion, has involved advising companies on how to implement arbitration agreements that are practical, fair and enforceable. Because there are many different types of businesses – and because the nature of the relationships between those businesses and their customers and employees varies significantly – there is no “one-size-fits-all” arbitration clause. But we have identified some core principles that should help companies, and those advising them, tailor arbitration programs to fit their needs and those of their customers or employees.
The Task Force on Credentialing included practicing mediators, academics, a system administrator and other experts. The question posed to the Task Force was whether to support credentialing activities by others, not whether the ABA should offer credentialing services itself. After fact-gathering and discussion, the members reached the following conclusions and recommendations about the need for credentialing and the characteristics of credentialing programs.
The combination of mediation and arbitration (Med-Arb) is an often-overlooked alternative dispute resolution vehicle. Med-Arb is a hybrid mechanism in which the parties attempt to reach a voluntary agreement with a third-party neutral first through mediation, and if that is not successful, through arbitration. San Francisco lawyer and arbitrator Sam Kagel is often credited with developing Med-Arb to settle a nurses’ strike in the 1970s; today it is still most commonly found in the labor and international arenas, but it is also increasingly being used in commercial settings.
Hybrid mediation-arbitration proponents claim that Med-Arb joins mediation’s flexibility with arbitration’s finality. Arguing that the benefits outweigh the negatives, proponents believe self-determination is embodied within the initial consent agreement. Yes, Med-Arb results in settlement, but the adage “if something sounds too good to be true, it probably is” applies: “Med” and “Arb” occur in forms detrimental to the best qualities of each. This article discusses the most common Med-Arb model, where the same neutral mediates and then, if the mediation does not produce an agreement, arbitrates.
Hong Kong has taken full advantage if its unique status in many areas, not the least of which is its continuing leadership in the field of dispute resolution. In just the past few years, there have been major developments in the law and practice of both mediation and arbitration in Hong Kong. Among a number of important changes, a new statute (called an “ordinance” in Hong Kong) governing mediation and another new statute applicable to all arbitrations seated in Hong Kong have been enacted. Both the Hong Kong government (through the Department of Justice) and the Hong Kong judiciary have been major catalysts in bringing about these and other significant changes.
In State of Washington v. James River Ins. Co., 292 P.3d 118 (Wash. 2013), the Supreme Court of Washington affirmed the trial court ruling that a mandatory arbitration clause in an insurance contract was unenforceable under state law. Generally, state statutes prohibiting arbitration agreements are preempted by the Federal Arbitration Act. However, the court noted that the McCarran-Ferguson Act provides an exception to this general rule when the state statute was enacted “for the purpose of regulating the business of insurance.” Here, the state statute regulates the “business of insurance” directly because it regulates the insured-insurer relationship. Thus the McCarran-Ferguson Act shields the state statute from preemption by the FAA.