Alternative Dispute Resolution
Arbitrability of Disputes
Michael F. Hoellering, 41(1): 125–44 (Nov. 1985)
The parties to a contract may agree to arbitrate almost every kind of dispute that arises or may arise between them. Even so, parties often disagree at the time a dispute arises as to whether the particular controversy is covered in the arbitration agreement. This Article surveys federal and state arbitrability decisions in procedural and substantive areas.
Commercial Disputes and Compulsory Arbitration
Rita M. Cain, 44(1): 65–84 (Nov. 1988)
Shearson/American Express v. McMahon, 483 U.S. 1056 (1987), the Supreme Court ruled that claims under the Exchange Act must be arbitrated, not litigated, if a contract between the disputants provided for arbitration. This ruling reversed a forty-year judicial trend in securities enforcement as well as in antitrust law. This Article discusses the history of compulsory commercial arbitration, the recent judicial trends, and some issues that remain unanswered by the recent cases. It also recommends a legislative response to modify the new state of the law.
Negotiating Settlement of Disputes Provisions in International Business Contracts: Recent Developments in Arbitration and Other Processes
Christine Lecuyer-Thieffry and Patrick Thieffry, 45(2): 577–623 (Feb. 1990)
After reviewing the pros and cons of the various processes for the settlement of international business disputes, this Article focuses on the one that is most frequently used: arbitration, as it has recently been adopted in the United States and abroad. The authors argue that various types of arbitration should be taken into account in the negotiation of international business agreements.
Arbitration of Antitrust Claims: Opportunities and Hazards for Corporate Counsel
Donald I. Baker and Mark R. Stabile, 48(2): 395–436 (Feb. 1993)
Since 1985, the U.S. Supreme Court has eliminated the federal district court as the sole forum for trying antitrust and other federal statutory claims. The Court has created the opportunity for parties to arbitrate the types of antitrust disputes that have been such a prolific source of conflict in distribution, licensing, franchising, and joint-venture relationships. In so doing, the Court also has created the new risk that a party can be forced to arbitrate an antitrust dispute under an old arbitration clause that was never designed for this purpose. In this Article, the authors emphasize that arbitration is a creature of contract. They urge prompt review of existing arbitration clauses and suggest that any arbitration clause either exclude antitrust claims from its coverage or provide procedures suitable for resolution of future antitrust disputes.
Arbitration: The Alternative to Securities and Employment Litigation
Mahlon M. Frankhauser, 50(4): 1333–80 (Aug. 1995)
Alternate dispute resolution mechanisms have been augmenting or replacing judicial litigation in many industries. Binding arbitration has become the preferred ADR forum for claims by investors against their brokers, inter-industry claims, and discrimination and other employment-related claims against securities firms. Many issues remain within the jurisdiction of the courts, however, including the question of which issues are to be decided by the courts and which by the arbitrators. In this resource Article, the author analyzes judicial decisions relating to which claims are arbitrable, standards for enforcing and challenging arbitration agreements, challenges to arbitrators' authority, and the forum in which to assert them, scope of judicial review of awards, and available remedies in arbitration. The author also explains recent and imminent self-regulatory organization arbitration developments.
Filling Mastrobuono's Order: The NASD Arbitration Policy Task Force Ensures the Enforceability of Punitive Damages Awards in Securities Arbitration
John P. Cleary, 52(1): 199–223 (Nov. 1996)
The National Association of Securities Dealers recently released several recommendations made by a specially appointed task force to revamp securities industry arbitration. Although the task force's report contains seventy recommendations, none is more controversial than its endorsement of arbitrator-assessed punitive damages awards. This Article considers this recommendation in light of recent Supreme Court jurisprudence, which provides little guidance on the issue, and suggests that, when adopted, this recommendation will preclude any successful judicial challenge to an arbitration panel's punitive damages award. This Article further suggests that punitive damages awards are inappropriate in a private forum such as securities arbitration because, among other reasons, this type of punishment is exclusively the province of judges and juries.
Time Limits Under Rule 10304 of the NASD Code of Arbitration Procedure: Making Arbitrators More Like Judges or Judges More Like Arbitrators?
Sean M. Costello, 52(1): 283–314 (Nov. 1996)
A split of authority has developed among the U.S. Circuit Courts of Appeal regarding who should determine if a matter has been submitted in a timely manner under NASD Code of Arbitration Procedure Rule 10304. The NASD rule precludes submission of matters to arbitration "where six (6) years have elapsed from the occurrence or event giving rise to the controversy." Some circuits, notably the Third Circuit, hold that courts must determine eligibility under the rule, while other circuits, led by the Second Circuit, allow arbitration panels to determine eligibility. Recently, the NASD Arbitration Task Force, led by former SEC Chairman David S. Ruder, recommended that the NASD suspend the brightline six-year rule in favor of a determination of timeliness by arbitration panels using applicable statutes of limitations, while instituting a more complex system of prehearing motion practice. This Comment argues that resolution of the problem lies in a more definitive statement of arbitral authority by the Supreme Court rather than development of a more complicated and judicialized system of arbitration practice by the NASD.
Anatomy of a Split-Up: Mediating the Business Divorce
James C. Freund, 52(2): 479–530 (Feb. 1997)
When business partners become estranged, the best solution to their problem may be a divorce. They often need the help of an independent mediator, however, to negotiate the terms and steer them through this difficult passage. This Article, by following the course of a hypothetical business divorce mediation from start to successful finish, presents an in-depth look at what is involved. This is a different type of mediation than the one-shot dollar dispute because many of the issues are nonlitigable business matters that nevertheless must be resolved in order for the split-up to occur. It is a unique blend of dispute and deal considerations, and, because negotiating skills and business sense are crucial here, this type of dispute is very well-suited to business lawyers acting either as the mediator or representing a party. Many of the principles discussed are also relevant to other commercial situations. Viewed more broadly, this type of mediation represents a move away from narrowly defined litigable disputes and toward a more comprehensive approach to resolving conflict in tense business situations.
Beyond Precedent: Arbitral Extensions of Securities Law
Lewis D. Lowenfels and Alan R. Bromberg , 57(3): 999 (May 2002)
In two landmark decisions in 1987 and 1989, respectively, Shearson/American Express, Inc. v. McMahon and Rodriguez de Quijas v. Shearson/American Express, Inc. , the U.S. Supreme Court in effect mandated that disputes in the securities industry that are the subject of predispute arbitration agreements be resolved by arbitration panels rather than by the courts. At the time these two decisions were issued, most knowledgeable people shared the belief that the securities industry had worked diligently to achieve this result and looked forward to the protections and benefits that the new litigation forum would provide. Indeed, it was widely accepted that the businesspeople, lawyers, and securities industry representatives who comprise the majority of the pools from which arbitrators are drawn would be conservative in their decisions and, in general, would favor the industry's positions. There was also widespread concern that these securities arbitration panels might begin to erode or effectively limit certain legal positions in favor of public investors adopted by the courts. Interestingly, these anticipated results did not come to pass. Indeed, after fourteen years of experience with securities arbitrations it is possible to reach certain tentative conclusions that are not at all consistent with the anticipated results. In a number of important areas, instead of favoring defendant brokerage firms and their personnel, securities arbitration panels appear to have stretched or reached beyond existing legal authorities in order to expand the rights and the protections accorded to members of the investing public.
Attorneys' Fees in Arbitration
Henry F. Minnerop and Kimberly A. Johns, 61(2):589—606 (February 2006)
It is a long–standing principle of American law, the American Rule, that a prevailing party in a litigation is not entitled to an award of attorneys' fees except (i) where authorized by statute, (ii) where the parties have agreed that the prevailing party should be awarded attorneys' fees, or (iii) where the court concludes that one of the litigants has acted in bad faith. Although this principle is well established and applied with consistency in court actions, it is often stretched, modified, or ignored in arbitration proceedings. This article focuses on the vagaries of attorneys' fees awards in arbitration proceedings and the decidedly hesitant review of such awards by the courts under the doctrine of manifest disregard of the law. The authors conclude with a number of recommendations aimed at avoiding the issuance of unintended attorneys' fees awards in arbitration proceedings.
Calling All Deal Lawyers—Try Your Hand at Resolving Disputes
James C. Freund, 62(1): 37–54 (November 2006)
This article is intended as a wake-up call to deal lawyers, inside corporate counsel, and others who negotiate agreements in the commercial world—urging them to become more involved in resolving business disputes by negotiation and, where appropriate, through mediation. The author makes the case that deal lawyers—who too often defer to litigators to handle these matters—ought to apply their problem-solving skills, ability to strike advantageous compromises of tough transactional issues, and negotiating prowess to the resolution of disputes. The article includes a discussion of why settlement usually makes more sense than going to trial, why resolving disputes is so difficult, the reasons that many deal lawyers don't get involved, why they should, early steps to prevent disputes from ending up in litigation, and how mediation can be helpful to reach negotiated solutions.
An Uninvited Guest: Class Arbitration and the Federal Arbitration Act's Legislative History
David S. Clancy and Matthew M.K. Stein, 63(1): 55–80 (November 2007)
In recent years, there has been an explosion of "class arbitrations"—arbitration proceedings in which the claimant purports to represent a class of absent individuals. In this Article, the authors examine the legislative history of the Federal Arbitration Act ("FAA"), and argue that, in enacting the FAA, Congress intended to open the door to non–judicial dispute resolution proceedings with particular fundamental characteristics, and that class arbitration proceedings do not have those characteristics. The authors argue that class arbitration is therefore a novel type of non–judicial dispute resolution neither reviewed nor approved by Congress, and that, as a result, this "uninvited guest" should be subjected to close legal and public–policy scrutiny. The authors also identify multiple areas of particular concern, including, for example, that courts have been reviewing class arbitration decisions under the traditional standard of review highly deferential to arbitrators, suggesting that we are on a path toward the quiet establishment of a forum that adjudicates disputes involving hundreds, thousands, or even tens of thousands of individuals in decisions that are effectively unreviewable.
Consumer Arbitration: If the FAA "Ain't Broke," Don't Fix It
Alan S. Kaplinsky and Mark J. Levin, 63(3): 907–920 (May 2008)
During 2007, Congress showed significant interest in mandatory pre–dispute consumer arbitration agreements. Some in Congress focused on whether to prohibit them altogether. This Article argues that such legislation is unnecessary because the current system of consumer arbitration works well and needs no fix. The authors review case law and empirical studies showing that the current system of checks and balances in the area of consumer arbitration law is sufficiently protective of consumers' rights. These protections emanate from: (1) the Federal Arbitration Act ("FAA") itself, (2) the careful drafting of arbitration agreements, (3) the use of third–party arbitration administrators, and (4) the rigorous enforcement of the FAA by state and federal courts.
Three's a Crowd—How to Resolve a Knotty Multi-Party Dispute Through Mediation
James C. Freund, 64(2): 359-386 (February 2009)
The most difficult negotiating situation business lawyers face is trying to settle a multi-party dispute, especially when some facet of the resolution calls for making a forward-looking deal. The premise of this Article is that mediation offers the best hope of crafting a compromise outcome reasonably satisfactory to all parties that terminates all litigation. The author offers readers an in-depth inside look at how a mediator goes about this task, in the context of a knotty hypothetical four-sided dispute. The Article focuses on the skills and techniques required of both the mediator and the party representatives involved.
The Enforceability and Effectiveness of Typical Shareholders Agreement Provisions
Corporation Law Committee of the Association of the Bar of the City of New York, 65(4): 1153–1204 (August 2010)
An Overview of the General Counsel’s Decision Making on Dispute-Resolution Strategies in Complex Business Transactions
E. Norman Veasey and Grover C. Brown; 70(2): 407-436 (Spring 2015)
This Article is an overview of the hard choices that face a general counsel (GC) when weighing the pros and cons of whether and when a particular complex business dispute is better suited for litigation in the public courtroom or through a carefully constructed alternate dispute-resolution (ADR) process, including mediation and/or arbitration. Is either choice inherently more expensive, time consuming, or problematic than the other? The obvious answer is that each of these decisions is fact-intensive, dependent on myriad factors, and neither choice is “inherently” better or worse than the other.
We have focused exclusively on complex commercial disputes between businesses and we analyze the issues that would likely be considered by the GC and other corporate decision makers in choosing and navigating the route that provides the best opportunity for optimal results in resolving a domestic or international business dispute. These dispute resolution choices often must be faced in the negotiation of the terms of a business transaction, and thus before there is a dispute.
We explore the pros and cons of how the panoply of dispute-resolution mechanisms may play out down the road. In doing so, we are mindful of the complicated job of the GC in foreseeing at the negotiation stage how the optimal dispute-resolution process should be analyzed and drafted.
We have learned through our experience, current discussions with GCs, and the abundant literature on the subject that there are divergent views about the efficacy of domestic arbitration, in particular. We believe that the bad anecdotal experiences of some general counsel with arbitration should not pre-ordain a generally negative bias. Nor should good experiences dictate a generally positive bias. Like many questions, the common-sense answer is that “it depends.”
Through the Decades: The Development of Business Courts in the United States of America
Lee Applebaum, Mitchell Bach, Eric Milby, and Richard L. Renck, 75(3): 2053-2076 (Summer 2020)
This article interprets the meaning of the term “business court” as it has developed through the variety of implementations and describes the successful development, and occasional failure, of those courts across the country.
Essay: The ABA’s Contribution to the Development of Business Courts in the United States
Christopher P. Yates, 75(3): 2077-2084 (Summer 2020)
More than a quarter-century ago, the ABA Business Law Section made a commitment to the development of business courts across the United States. From the formation of its Ad Hoc Committee on Business Courts in 1994 through the engagement with state officials and business-court judges for more than two decades, the Section has become a driving force behind the adoption and refinement of the business-court concept by an overwhelming majority of the states. In this article, the innovators and champions of business courts who took up the cause on behalf of the Section tell the story of how the Section played a central role in the success of business-court initiatives and how the Section works diligently today to maintain and build upon that success.