Introduction to Alternative Dispute Resolution - Module 1 of 5

Module 1: Introduction to Alternative Dispute Resolution

Overview

Alternative Dispute Resolution encompasses various techniques and strategies aimed at helping disputing parties resolve their conflicts without expensive and lengthy litigation. With a history dating back to 1800 BC, ADR was routinely utilized in the negotiation of disputes among ancient kingdoms[1]. Greek philosopher Aristotle praised the use of arbitration over the court systems, while ancient Phoenicians included negotiations as standard aspects of their business transactions.[2]

ADR has also played a significant role in American history. The writing of our Constitution involved extensive negotiations regarding the conflicting viewpoints of the forefathers. In 1923, the Department of Labor was added to the federal government, with one of its chief purposes being the mediation of labor disputes.[3] From there, ADR grew into a widely accepted and utilized tool within the legal system. It is seen as a cost effective and time saving alternative to traditional court proceedings. Lawsuits can take months or even years to conclude. By comparison, most ADR proceedings are concluded in days or weeks. This significantly shorter duration also helps keep costs down for disputing parties who pay for legal counsel.   

In addition to its benefits for the parties, ADR is also beneficial to the court system as a whole. Courts are notorious for backlogs of cases waiting to be heard. ADR provides options for getting these cases resolved outside of the courtroom, which frees up judicial calendars and allows judges to handle other matters.

Arbitration is the most formal type of Alternative Dispute Resolution. In arbitration, a third-party arbitrator makes a legally binding decision at the end of the proceedings. As explained in the Uniform Arbitration Act, disputing parties appear before a neutral arbitrator, who may be a retired judge, an attorney, or a professionally trained arbitrator.[4] They agree to be legally bound by the final decision of the arbitrator, just as they would be legally bound by the final decision of a judge or jury. 

While the arbitration procedure is more formal than mediation, it is still less formal than a court of law. Each side has the option of submitting a written brief to the arbitrator prior to the hearing. During the proceeding, both parties are placed under oath and allowed to present their sides of the dispute. If either side is represented by an attorney, the attorney can speak on behalf of the client and conduct any questioning of witnesses.

At the conclusion of each side’s case, the arbitrator may ask pertinent questions. The arbitrator may also give the opposing party an opportunity to ask questions. The process then repeats for the other side to give his or her statement of the case. Once each side has fully presented its case, the proceedings are closed, with the parties leaving the final decision to the arbitrator.  

The arbitrator typically issues a written decision.[5] Under some circumstances, the arbitrator may ask each side to submit a final written brief. The arbitrator may also request additional information from the parties after the evidence has been presented, if necessary.

The Federal Arbitration Act  

Passed by Congress in 1925, the Federal Arbitration Act authorizes and encourages arbitration, in lieu of court litigation, for all matters involving interstate commerce.[6][7] The FAA was initially intended to enforce valid arbitration agreements involving maritime transactions, but its reach has been broadened by the federal courts to include all industries of business at the federal and state levels.[8] The chief provision of the Act states that, if a party to an arbitration agreement commences a court proceeding related to the contract, the other party or parties may request that the court suspend the litigation and compel resolution of the dispute by arbitration.[9]

Examples of such arbitration provisions include the following, developed by the American Arbitration Association:

If a dispute arises out of or relates to this contract, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure.

Arbitration clauses are commonly tweaked to address the industries or circumstances for which they are being used. For example, an arbitration clause in relation to an international contract may state:  

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules.

In addition to promoting compliance with arbitration clauses, the Federal Arbitration Act also states that, for the arbitrator’s final decision to be binding, all involved parties must agree to participate in arbitration.[10] This mutual agreement requirement is generally met through the signatures of all parties on a contract containing the arbitration provision.       

The Act allows participants to appeal the decisions of arbitrators on grounds that their consents to arbitrate were gained through coercion or fraud. An allegation that the arbitration clause was blatantly improper or unfair to one party may also be grounds for appeal.   

Other provisions of the FAA include authorization for arbitrators to call third-party witnesses and compel their appearance at arbitration proceedings. It also outlines the process for prevailing parties to enforce the decision of arbitrators and the process for a non-prevailing party to pursue voiding the decision.

Federal courts have interpreted the Federal Arbitration Act in a number of cases. One of the most commonly cited cases is the 2011 case of AT&T vs. Concepcion,[11]  where the Supreme Court mandated the use of arbitration for a dispute arising out of a contract that included an arbitration clause. 

Vincent and Liza Concepcion contracted with AT&T for the purchase of mobile phones advertised as free with service contracts. When the Concepcions learned that they would be required to pay taxes on the phones, they filed a lawsuit that eventually grew into a class action against AT&T. The contract between AT&T and Concepcion required the settlement of claims through arbitration and forbade class arbitration.

Relying on the language of the contract, AT&T requested that the court compel each of the class action plaintiffs to pursue arbitration separately. The Supreme Court ruled in favor of AT&T, declaring that the FAA superseded a California state law that forbade contractual restraints on class arbitration. They also ruled that the arbitration clause of the contract was fair to all parties.  

This ruling was significant because it solidified the ability of businesses to compel arbitration with consumers, a practice which has become common in today’s marketplace.

Epic Systems v. Lewis[12] was a 2018 Supreme Court decision that weighed the provisions of the FAA against the provisions of another piece of federal legislation, the National Labor Relations Act. The issue centered around the FAA’s enforcement clause and whether it conflicted with a clause in the NLRA, which grants employees “the right … to engage in other concerted activities for … mutual aid or protection.”  

In each of the cases consolidated under the proceeding, the disputed employment agreements contained language requiring employees to participate in work-related arbitration individually, instead of as a group.[13] The main issue before the court was whether the NLRA’s protection of “other concerted activities” protected workers’ rights to pursue legal action as a group, which would supersede the FAA’s enforcement of class action waivers when included in arbitration agreements.[14]

The Court ruled that the phrase “other concerted activities” did not displace the FAA and did not guarantee the right of employees to undertake group arbitration against their employers.[15] Instead, the phrase only guaranteed employees the right to join together in the workplace to address working conditions and disputes with their employers.[16] The decision further strengthened the reach and enforcement of the FAA.

The Uniform Arbitration Act was created in 1955 by the National Conference of Commissioners on Uniform State Laws to create a uniform manner of conducting arbitrations under US law.[17] The Act has been adopted in most states with minor variations. Provisions of the UAA include guidance on such arbitration procedures as choosing an arbitrator, initiating arbitration, attorney representation during arbitration proceedings, witness testimony and arbitration awards.

Mediation

Mediation is an informal type of ADR negotiation occurring between opposing parties. Though it is generally done on a voluntary basis, an increasing number of domestic and civil courts have started requiring mediation. This exemplifies a preference for people to work out their conflicts without relying on the courts for resolution.   

As explained by The Model Standards of Conduct for Mediators, the parties meet with a neutral mediator, who works with the parties to identify the root cause of the dispute and help them craft a mutually acceptable resolution.[18] Unlike arbitration, the mediator does not make any determinations about the legalities of the case. There is no declaration regarding which party is right and there is no placement of blame. The mediator’s sole purpose is to guide the process by helping to properly define the issue to remove the impediments that stand in the way of resolution.

While mediators do ask questions to progress negotiations, the mediating parties are not put under oath and they are not formally questioned as you would see in a courtroom setting. The proceeding is more of a conversation, with each side taking turns to speak and be heard.  

The Model Standards of Conduct for Mediators also states that mediation proceedings are confidential, and both sides agree to maintain that confidentiality at the outset of the process. That means that any admissions or statements made during the mediation proceeding cannot be used against the party in a later court proceeding, should the mediation fail. Even if one party admits liability or confesses to acting in an improper manner, neither the disputing party nor the mediator can divulge that information to the court in a later proceeding.

Mediation resolutions must be agreed to by all involved parties. Otherwise, the parties may choose to litigate instead. It’s also important to note that mediated resolutions are not legally binding unless committed to a signed settlement agreement.   

Neutral Evaluation

Neutral evaluation is a process where an unbiased evaluator reviews the facts and arguments of a dispute and provides each side with a neutral evaluation of each party’s stance.[19] Though an increasing number of states and jurisdictions are mandating Early Neutral Evaluation as a form of ADR, the process is often undertaken on a voluntary basis by attorneys who recognize the complexities involved in their cases. After selection of an evaluator, the parties submit a written brief followed by an in-person meeting between the evaluator, the attorneys and the disputing parties.[20]  

The evaluator then gives an opinion about the strengths and weaknesses of each side’s case.[21] There is no formal determination or finalization of the case. The sole purpose of the process is for both sides to be provided with an impartial evaluation of the matter from a neutral party with legal expertise. These evaluations can be particularly useful for informing attorneys and clients about the weaknesses in their cases, which can ultimately save a lot of time and effort in the courtroom, possibly leading to settlement.

As stated by the United States District Court for the Northern District of California, the objectives of Early Neutral Evaluation are to “(1) enhance direct communication between the parties about their claims and supporting evidence; (2) provide an assessment of the merits of the case by a neutral expert; (3) provide a “reality check” for clients and lawyers; (4) identify and clarify the central issues in dispute; assist with discovery and motion planning or with an informal exchange of key information, and (5) facilitate settlement discussions, when requested by the parties.”[22]  

Settlement Conferences

Settlement conferences occur once a case is filed in the court, but before it actually goes to trial. Typically, it involves the parties meeting with the judge assigned to the case or, in some cases, a retired judge who previously sat on the bench in that jurisdiction. It is an extremely common type of dispute resolution, often mandated by civil and domestic courts. Though the exact process varies by jurisdiction or court, there is generally a conference that occurs between the judge and each side individually, where the judge discusses the merits of the case, pointing out the strengths and weaknesses on each side. The judge will then go back and forth between each side in an attempt to reach a mutually agreed upon settlement.

If the parties come to an agreement, the attorneys draft a settlement agreement that is signed by all parties and the judge. It is then filed with the court and the case is formally dismissed. If no agreement is reached, the case moves back to a traditional court proceeding.   

The subject matter of the settlement conference depends on the issues at hand in dispute. With domestic law cases, courts often mandate settlement conferences in hopes of settling issues like custody, visitation, spousal support and division of property. The neutral party understands that the court will be considering the best interests of the children, so she is well-equipped to point out which side and arrangements have the best chance for success if taken before the court. Settlement conferences are also commonly mandated in employment and labor disputes.

Facilitation

Facilitation is a type of ADR often used in complex cases or disputes involving multiple parties. The general purpose is to adequately prepare each side for effective participation in mediation and/or arbitration. Facilitation is particularly useful where the parties refuse to speak with one another or previous attempts at ADR have been unsuccessful.[23]  This method is often used by governmental entities in an attempt to resolve international conflicts and on the corporate level in disputes involving numerous stakeholders.[24]

During facilitation, a neutral third party works to identify the reasons behind the dispute and make sure that all parties understand what the dispute is truly about. They do this by using various problem-solving techniques.  

The role of the facilitator is not necessarily to focus on the substantive issues of the dispute.[25] Instead, the facilitator focuses on the process by which resolution can be met. By working with all of the participants, the facilitator offers direction for the group to effectively proceed through the steps of problem-solving towards a mutually agreeable outcome. The facilitator offers no opinion and remains impartial about the merits of the competing arguments, solely offering procedural guidance to the group.

In our next module, we will focus in more depth on mediation, its structure and the various types of mediation, including facilitative, evaluative and transformative mediation.