Med-Arb:The Best of Both Worlds May Be Too Good to Be True, a Response to Weisman

Vol. 19 No. 3

By

Hybrid mediation-arbitration proponents claim that Med-Arb joins mediation’s flexibility with arbitration’s finality.[1] Arguing that the benefits outweigh the negatives,[2] proponents believe self-determination is embodied within the initial consent agreement.[3] 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.

Med-Arb Places Mediation’s Core Principles at Risk

Weisman argues that the threat of “Arb” provides an incentive for parties to bargain seriously during the mediation phase. Parties may indeed be encouraged to mediate; however, the Med-Arb process limits self-determination, impartiality and confidentiality – all core principles of mediation. If same-neutral Med-Arb is a form of crack designed to addict new mediation junkies, the product lacks purity and costs too much.  

Med-Arb May Inhibit Candor in Mediation

Mediators rely on free information exchange to identify interests, assist in correcting information asymmetries, reality-test assumptions and build trust between the parties. When they know that the mediator may later assume the role of arbitrator, advocates and parties will not be as candid with the mediator regarding the weaknesses in their arguments or with information that may be detrimental to their positions. Advocates and their clients will carefully guard their statements, for fear they could be used against them in arbitration. Thus the information needed to craft a lasting, reasonable settlement will not be available. 

Confidentiality at Risk

Weisman states that the neutral must be able to disregard mediation communications during the arbitration phase. The weight of psychological evidence, however, suggests people have great difficulty deliberately disregarding information.[4] Evidence, for example, indicates that judges do not disregard inadmissible information when making substantive decisions.[5] Further, and especially relevant for Med-Arb, judges have been found to be less able to ignore inadmissible evidence when making determinations that they consider at low risk of being reviewed by a higher court.[6] If judges are unable to reliably disregard information, how can we expect arbitrators (who face little risk of review) to not consider mediation communications during the arbitration phase? Weisman’s own Med-Arb agreement provides: “Any confidential information received during the mediation will not be used [by him] in rendering a decision as arbitrator,” which seems an aspirational statement at best. Weisman’s Med-Arb agreement further notes, “nothing disclosed in [caucus] may be considered in the arbitration process unless introduced by either party independently during the arbitration.” Being human means that we are not completely in control of our thought processes. Parties should be aware of this limitation and be wary of any neutrals claiming to be able to keep a secret from themselves.[7] 

Mediator-Arbitrator Neutrality is Questioned

While there is a spectrum of mediation styles, legal mediation is most often characterized by the neutral firmly controlling the discussion, engaging in some level of case analysis and providing substantive settlement recommendations based on predicted court outcomes. Mediators accustomed to this style may struggle to reality-test parties’ arguments effectively in caucus without signaling their views about the merits of the claims. The mediator in Med-Arb controls the BATNA (the best alternative to a negotiated agreement), and the parties will naturally examine any clues as to the neutral’s preferences. Instead of the neutral helping parties to determine and examine their BATNA, the parties will attempt to determine from the mediator clues as to their own BATNA. 

This phenomenon occurs in the most common Med-Arb alternative: Arb-Med. The Arb-Med neutral conducts the arbitration first, seals the award and then mediates the dispute. The parties will carefully watch the neutral’s subsequent statements and will attempt to glean information about the award. In Med-Arb, the award is yet to be determined, providing opportunity for the parties to influence the prospective award and determine what that award might be, to see whether a settlement would be preferable. 

In Med-Arb, the neutrality issue survives even after mediation ends. It is likely that the mediator will learn the potential settlement range during the mediation phase. Once in arbitration, however, the neutral is charged with impartially rendering the award according to the evidence, and decisions falling outside the settlement range will naturally be met with displeasure by the disadvantaged party. The arbitrator is certainly acting with impartiality, but to one party’s dissatisfaction. Despite fulfilling the obligations of the role, the neutral will no longer appear “impartial,” even though the parties consented to the process. In sum, the Med-Arb hybrid provides additional pressure for the arbitrator to issue a compromised award that “splits the baby,” a common critique of arbitration.[8]

Parties Relinquish Self-determination

Mediation is unique in its informality and for the ability of parties to speak freely without fear that they can be harmed for their candor. According to the Model Standards of Conduct for Mediators, “Parties may exercise self-determination at any stage of a mediation, including mediator selection, process design, participation in or withdrawal from the process, and outcomes.”[9] According to Weisman, usually the parties do not seek out Med-Arb but consider it at the neutral’s suggestion. While parties do exercise self-determination in agreeing to Med-Arb, the neutral suggesting the process may not effectively detail all the limitations of Med-Arb. Self-determination is more clearly exercised where advocates request Med-Arb. 

What about self-determination beyond the initial agreement? The parties have an incentive to retain self-determination by reaching a mediated settlement. But what if one or both sides no longer see the neutral as impartial? Self-determination in mediation occurs throughout the process, not simply at the initial agreement stage. Parties in some respect are always negotiating for the third party neutral’s perception, but Med-Arb elevates this to a greater degree. Self-determination would be greater in Med-Arb if the parties could each opt out and select an alternative arbitrator. Most Med-Arb agreements require the parties to use the same neutral for both phases and thus leave no recourse if either party is unhappy with the neutral’s performance in mediation. 

Med-Arb Changes the Dynamic of the Mediation

Caucus or Ex Parte Communication?

Med-Arb allows parties to have ex parte conversations with their future arbitrator in confidential mediation caucus sessions. Ideally, the mediation and the arbitration processes are distinct and in mediation the parties are focused on working to avoid the arbitration phase. However, there is the potential for advocates to use the mediation, and the caucus sessions in particular, offensively in anticipation of arbitration. Because parties cannot possibly address arguments made by the other side during a confidential mediation caucus, mediation’s core principle of confidentiality may then be in direct conflict with a fundamental tenet of arbitration and due process: the ability to know of and confront the other side’s arguments.  

Incentives to Arbitrate the Mediation

Mediation communications in private caucus sessions provide the opportunity for advocates to “poison the well.”[10] Advocates may utilize these separate caucus sessions to reveal unfavorable information about the other side, knowing that the other side will not know of these communications and be able to rebut them. The mediation session may be far more formal and adversarial than it might be otherwise. The impending arbitration phase may provide a carrot to “behave” that leads to settlement, but it also creates a competing incentive for the “Arb” to leak into the “Med.” Placing the prospective decision-maker in the room changes the dynamics: Instead of mediation, the “Med” in Med-Arb may perilously become more akin to a judicial settlement conference.

Illusory Time and Cost Savings

The ideal Med-Arb neutral will be equally skilled in both facilitative mediation and arbitration, but these are vastly different skills and mindsets, and finding the right neutral may take considerable time. Further, to be prepared for this process, an advocate should be thoroughly prepared for both the mediation and arbitration. Finally, incentives towards formality and the resulting adversarial tactics may increase time and cost. Same-neutral Med-Arb may take more time and money than different-neutral Med-Arb.

Sparse Institutional Administration of Med-Arb 

The American Arbitration Association (AAA) recommends same-neutral Med-Arb only in unusual circumstances.[11] JAMS does not recommend same neutral Med-Arb but will administer cases if it is within the contract or the parties have stipulated to it,[12]  and JAMS’ ADR clause-drafting guide neither mentions nor provides suggested language for same-neutral Med-Arb.[13] The International Institute for Conflict Prevention and Resolution cautions that “to ensure the integrity of the arbitration process, Med-Arb agreements should provide that the arbitrator shall not be the same person who served as mediator in the matter.”[14] These organizations allow for different-neutral Med-Arb, but they do not have specific Med-Arb rosters. Med-Arb is not a new phenomenon, and these organizations exist to administer and settle disputes. If this is such a good idea, why have they not endorsed it and moved to develop Med-Arb as a part of their business models?  

 

Conclusion


To conduct same-neutral Med-Arb correctly requires an individual with the substantive expertise to serve as the arbitrator and the facilitative skills to remain neutral during the mediation. The consent agreement must include confidentially waivers and an explicit explanation and waivers of the risks discussed above. Ideally, the mediation would not include caucuses to avoid confrontation issues and would include an opt-out clause to allow the parties to utilize a different neutral for arbitration. Med-Arb is not conducted this way, resulting in risk to the quality of both the “Med” and the “Arb.” Without question, the ability of parties to design a creative and individualized dispute process is an important feature of ADR. Parties are free to select Med-Arb, but given the same-neutral hybrid’s inherent deficiencies, why choose to do so? Stick with different neutral Med-Arb. It is an excellent way to have your cake and eat it, too.

Brian A. Pappas, LL.M., J.D., M.P.P., is Assistant Clinical Professor of Law and Associate Director of the ADR Program at Michigan State University College of Law. A civil and domestic relations mediator and mediation trainer, Pappas teaches a variety of dispute resolution courses. He serves as the co-chair of the ABA Section of Dispute Resolution’s Law Schools Committee, co-chair of the Washtenaw County Bar Association’s ADR Section, and as a member of the state bar of Michigan ADR Section’s Governing Council. He can be reached at pappasb@law.msu.edu.

 


 

[1] Edna Sussman, Developing an Effective Med-Arb/Arb-Med Process, N.Y. Disp. Resol. Law., Spring 2009, at 71-74.

[2] Kristen M. Blankley, Keeping a Secret From Yourself? Confidentiality When the Same Neutral Serves Both as Mediator and as Arbitrator in the Same Case, 63 Baylor L. Rev. 317, 325 (2011). 

[3] Gerald F. Phillips, Same-Neutral Med-Arb: What Does the Future Hold?,

Disp. Resol. J., May/July 2005.

[4] Andrew J. Wistrich, Chris Gurthrie & Jeffrey J. Rachlinski, Can Judges Ignore Inadmissible Information? The Difficulty of Deliberately Disregarding, 153 U. Pa. L. Rev. 1251, 1323 (2005).

[5] Id. 

[6] Id.

[7] Blankley, supra note 2.  

[8] Douglas Shontz, Fred Kipperman, & Vanessa Soma, Business-to-Business Arbitration in the United States.  Perceptions of Corporate Counsel 11 (2011), available at http://www.rand.org/pubs/technical_reports/TR781.html

[9] Model Standards of Conduct for Mediators Standard I(a) (2005).

[10] Jeff Kichaven, Med-Arb Should Be Dead, N.Y. Disp. Resol. Law., Spring 2009, at 80. 

[11] American Arbitration Association, A Guide to Drafting Dispute Resolution Clauses. 

[12] Conversation with JAMS Office of General Counsel, on April 25, 2013.

[13] JAMS, Jams Clause Workbook.

[14] International Institute for Conflict Prevention & Resolution, ADR Primer: An Introduction to ADR Terms and Processes (Jan. 15, 2013), http://cpradr.org/Resources/ADRPrimer.aspx.

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