ARBITRATION / Perspectives on Dispute Resolution

PersPectives on Dispute Resolution—

Vol. II / No. 1

JAN 2012

Also in this issue

ADR in the News 3

Upcoming Events 3

Message from the Editor 3Thomas J. Stipanowich

Eric Epstein

Liz Kramer

FeAtured contributors

He Said, She Said: How Does An Arbitrator Decide Who To Believe? 8

The Year 2011 in Arbitration Law: Whack-A-Mole 12

Discover 22

The Power of ‘And’ by Dale Eilerman

Focus 4

Arbitration Faces Challenges on Two Frontsby Thomas J. Stipanowich

commeNtAry 30

Latin American Water Tribunal,A Unique Approach to ADR

Jeffrey Benz

Scott Van Soye

oN the eDge 24

Why the Law? A Lawyer’s Perspective

Dale Eilerman

Take Control of Your Arbitration Costs 14

Med-Arb May Be Right for Your Business Dispute 18

“Why Can’t We Just Get Along!?!”The Process Psychology of Arbitration and Mediation 26

ADR Times explores mediation, arbitration, negotiation, diplomacy, and peace. ADRTimes.com publishes articles, news and debates, and provides an industry directory, event calendar, job board, and community space for public and professionals to connect and share insights.

Publisher Mark Fotohabadi & W. Timothy PownallDesign / ProductionDana Asper, Melaina Rauen

The content of this publication is subject to Copyright by ADR Times, Inc. 2011-12

Mikita WeaverEditor-in-Chief

Zachary UlrichContributing Editor

Upcoming Events

ADR in the News

- 3 Day Collaborative Divorce Interdisciplinary Team Training: Pomona, CA / Feb 2-4- Mediating the Litigated Case: Los Angeles, CA / Jan 26- Feb 11- Divorce Mediation Training: Brooklyn, NY / Feb 10-12 - 40 Hour Divorce Mediation Training: New York, NY / Feb 22 - Feb 28- 40 Hour Basic Mediation Training: Brooklyn, NY / Feb 29 - Mar 4

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- 1.20 Iran and Foreign Policy: Paying a Premium for Strategic Incoherence- 1.18 Baseball Arbitration Demands: Giants Pitcher Asks For $21.5 Million Salary- 1.18 Mandatory Mortgage Mediation: Another Mortgage Mediation Program Starts in Delaware- 1.17 Unlikely Breakthrough in Karabakh Mediation: Karabakh mediation ‘connected with Medvedev’s future role’- 1.17 DOJ Supports Mediation: DOJ Workshop Finds Mediation a Viable Alternative to Foreclosure

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messAge From the eDitorHappy New Year to each of you!~2011 was an exciting year for ADR Times! As we begin 2012, I’d like to take a moment to thank our readers and contributors for their support and feedback over the past year. Several notable highlights of 2011 were:

(1) the birth of our popular ADR Times Perspectives newsletter;

(2) forging alliances with prominent and proactive dispute resolution bloggers;

(3) the “Daily Dialogue” campaign which delivers hot off the press ADR news to our biggest fans on a daily basis; and

(4) our universal industry directory organizing the world’s ADR information.

We have an even more exciting 2012 planned with unique initiatives to serve practitioners, professionals, scholars, and students alike! Stay tuned!~In our January edition, we focus on Arbitration. Included in the publication is a wide variety of topics ranging from “Med-Arb” processes to the psychology of arbitration. Thomas J. Stipanowich discusses arbitration procedure and its challenges. Arbitrator Eric Epstein highlights what he looks for in making an arbitral decision, and Jeff Benz discusses how to effectively control costs in an arbitration proceeding. Lawyer and blogger, Liz Kramer, from Arbitration Nation outlines the arbitration highlights of 2011 and how it’ll affect our field in 2012.

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For more information, please contact: Ms. Mikita Weaver, Editor-in-Chief (800) 616.1202 / [email protected] www.ADRTimes.com z

Focus

ArBitrAtioN FAces chALLeNges oN tWo FroNtsby Thomas J. Stipanowich

These days arbitration seems to be everywhere. Binding pre-dispute arbitration provisions feature in all kinds of contracts; the Supreme Court regularly issues pro-arbitration decisions; and there has never been more discussion about how to employ arbitration fairly and effec-tively. But these realities underpin and point up twin challenges facing arbitration. First, arbitration has yet to make the most of its role as a valuable choice-based alternative to court adjudication for business disputes. Second, arbitration must be perceived and embraced as a fair method for resolving consumer and employment disputes.

January 2012 | 5

» Challenges for B2B arBitration in the U.s. For the first time in many years we’ve taken a good look inside many of the world’s largest companies to find out how they handle conflict. Pepperdine’s Straus Institute co-sponsored a just-completed landmark survey of general counsel and senior lawyers at Fortune 1,000 corporations through Cornell’s Survey Research Institute, and the results are generally positive for “ADR.” Mediation appears to be as widely used as in 1997, when a similar survey of the For-tune 1,000 was done. More companies are experimenting with “integrated conflict management systems” and many now report experience with early case assessment. But the most striking aspect of the new study is the apparent fall-off in the use of arbitration in every type of dispute: consumer, employment, commercial, environmental, IP, real estate, construction, and other categories. Because the 1997 and 2011 survey groups were not identi-cal, it’s possible that the differences account to some degree for the much lower reported usage of arbitration. And giv-en the strong imperatives to use arbitration in cross-border business disputes (including broad international enforceabil-ity of awards and avoidance of foreign courts), it is hard to imagine that the data reflect international trends. Arbitration in the U.S. domestic market, however, is another matter. During America’s “quiet revolution in dispute resolution,” mediation took, and for some time has held, center stage. Because it affords parties and counsel several potential ad-vantages—privacy, informality, flexibility and, above all, control, mediation has become a normal adjunct of litiga-tion—and usually settles or helps settle cases on the way to court. It’s a natural response to the cost, length, perceived risks and loss of control associated with litigation. Anyone who arbitrates frequently knows that as B2B arbitration has tended to take on more of the characteristics of court trial, parties are using mediation in the same way they use it on the way to court. As an arbitrator, I fully expect most cases to be mediated by someone before I hear the case, and I know that at least half the time the case will settle. That doesn’t fully explain, however, why businesses would go a step further and plan to litigate, not arbitrate, if media-tion fails to resolve the dispute. In a recent article, two GE lawyers explain that in ADR, companies tend to seek, above all, “fairness, efficiency (including speed and cost) and cer-tainty in the enforcement of contractual rights and protec-tions.” These same themes and concerns are reflected in the reasons Fortune 1,000 survey respondents gave for not using arbitration: the difficulty of appeal, the concern that arbitra-

tors may not follow the law, the perception that arbitrators tend to compromise, lack of confidence in neutrals, and (not surprisingly) high costs. In a nutshell, it seems that business lawyers are worried, one way or the other, about not having enough control in arbitration. For some, this means turning to litigation. This state of affairs is truly ironic. In 2009, the American College of Trial Lawyers co-sponsored a published report that concluded that the “one size fits all’ approach of litiga-tion under current federal and many state rules is not work-ing. Arbitration, on the other hand, is inherently a choice-based process. It offers the potential of fitting the process to the problem; the key is better choice-making based on business goals and priorities. Thus, if a business believes that, at least for major disputes, there is a need to make sure arbitrators follow the law and do not “split the baby,” it’s possible to structure contract pro-visions and arbitrator selection processes that minimize the likelihood of either. If there is a desire to have a “second look” at the legal or factual underpinnings of an arbitration award, there are options in the form of appellate arbitration processes such as those sponsored by CPR and JAMS. (In California, of course, one can contract for expanded judicial review of arbitration awards, though the author and many experienced arbitrators urge great caution in adopting such an approach.)For those concerned about cost-effectiveness and efficiency, a variety of options have been developed. The recent Col-lege of Commercial Arbitrators Protocols for Cost-Effective, Expeditious Commercial Arbitration, available at http://ssrn.com/author=846541, offer a host of useful guidelines for busi-ness users, advocates, arbitrators and arbitration institutions.

» Challenges for ConsUmer and employment arBitrationThe other set of challenges confronting arbitration are as-sociated with concerns about binding pre-dispute arbitration provisions in consumer and employment contracts. While properly constructed arbitration programs may in some cases afford consumers or employees a fair—and even an optimum—method of adjudication, there are real concerns about the operation of private arbitration systems and cur-rent limits on judicial oversight. Thanks to a series of expansive interpretations by the Su-preme Court, the Federal Arbitration Act, a federal statute designed to promote private, choice-based alternatives to court trial is the basis for enforcing dense boilerplate in

6 | ADR Times Perspectives

mass-produced contracts to which “assent” is often fictional in all but the most formal sense. State statutes and common law are preempted by federal law across the broad swath of issues surrounding enforceability of agreements involv-ing interstate commerce, which means that legislatures and courts have very few tools for the purpose of regulating ar-bitration agreements in contracts of adhesion. The Supreme Court recently declared dramatic new limits on judicial use of unconscionability defenses with respect to arbitration agreements. These limits were reinforced by the Court’s strong support of “delegation” provisions that take oversight of arbitration agreements away from courts and give it to the arbitrators themselves. Practically speaking, the only time consumers or employees may be able to raise concerns about procedural issues in arbitration is at the conclusion of the arbitration process, through a motion to vacate. This, of course, creates a tremendous barrier for individuals. The Court has also made arbitration agreements a vehicle for un-dercutting consumers’ and employees’ ability to take collec-tive action through class actions.In our broadly polarized Congress, there seems to be little room for nuanced responses to these realities. Most Demo-cratic proposals are founded on the belief that binding ar-bitration under pre-dispute clauses is inherently unfair and should be outlawed in consumer and employment transac-tions. Currently, Congress is considering different versions of a proposed Arbitration Fairness Act that would effective-ly outlaw pre-dispute arbitration agreements in consumer,

employment and franchise agreements—even including arbitration provisions in brokerage agreements that are al-ready subject to oversight and regulation by the Securities & Exchange Commission. Republicans have sought to undo consumer legislation aimed, among other things, at closer review of the operation of arbitration under consumer finan-cial services contracts and investor/broker contracts. Meanwhile, binding arbitration agreements continue to be very widely used in consumer contracts and individual em-ployment contracts. Because fundamental fairness hinges on many different characteristics of dispute resolution systems, arbitration programs may or may not provide an appropri-ate substitute for civil litigation. While, again, it is entirely possible for binding arbitration to effectively serve this role, there are also many ways in which private programs of ad-judication may fall short of public expectations about civil justice. A number of potential solutions have been posited, including statutory due process guidelines for consumer and employment arbitration and a public rating system for consumer and employment arbitration programs that would broaden public awareness. There are also efforts to conduct a facilitated conversation among leading scholars, lawyers, advocates and policy makers at a National Roundtable on Consumer and Employment Dispute Resolution. The inau-gural session of the Roundtable will be held at Pepperdine University, and co-sponsored by the Straus Institute and Penn State University Dickinson School of Law. z

Thomas J. Stipanowich

Thomas Stipanowich is William H. Webster Chair, Professor of Law at Pepperdine University School of Law and Academic Director of the Straus Institute for Dispute Resolution. He is also an active arbitrator and mediator. See his writings on the Social Science Research Network (SSRN) at: http://ssrn.com/author=846541.Read more articles by Thomas Stipanowich at: www.adrtimes.com/articles/author/thomasstipanowich

January 2012 | 7

Promote your ADr PrActice orgANizAtioN AssociAtioN schooLContact ADR Times for advertising opportunities800.616.1202 [email protected] www.adrtimes.com/advertise

8 | ADR Times Perspectives

“he sAiD, she sAiD”How Does an Arbitrator Decide Who to Believe?by Eric Epstein

January 2012 | 9

Focus

It is common at an arbitration hearing for each side to present diametrically different versions of the dispute. This is especially true in cases of sexual harassment in which the accuser tells one story and the accused tells a completely different story. In such cases, it is the Ar-bitrator’s responsibility to determine who is telling the truth so that a fair and equitable determination can be made. However, that is far easier said than done. As an Arbitra-tor who has handled numerous such hearings, I would like to provide you with some factors that I consider useful in ascertaining the truth. Although an evaluation of these factors certainly cannot guarantee that the Ar-bitrator will make the right call, I believe that in most circumstances it tilts the odds substantially in favor of a correct outcome. Although the “weight” to be given to each factor may vary, here are the top ten factors that I consider in trying to separate fact from fiction.

An Arbitrator’s Guide to Employment Disputes:1. The Background and History of the Accuser: If the accuser has a relatively unblemished background, and, most importantly, has not previously filed a complaint of sexual harassment against anyone, this is a factor in her favor. [1] On the other hand, if the accuser has a his-tory of making allegations of sexual harassment then some caution may be warranted.2. The Background and History of the Accused: If the accused is a long term employee, and was never previously accused of any type of sexual harassment, then that is a factor in his favor. Conversely, if he has previously been accused of sexual harassment, or has a reputation within his company of making inappropriate remarks of a sexual nature, or inappropriate touching, or other inappropriate conduct of a sexual nature, then this is a factor to consider as to whether or not he did what he is accused of doing in the present case.3. Contemporaneous Complaints: If the accused made a contemporaneous complaint either to a co-worker or to a supervisor, or even to a friend or rela-tive, that would be a factor in her favor. The immediate reporting of the complained-about conduct is an indi-cation that such conduct took place, although certainly not conclusive. Conversely, the lack of a contempora-neous complaint may mitigate against the accuser, but

there are often reasons why a complaint may not be im-mediately made (e.g., fear of retaliation, etc.).4. Motive to Lie by the Accuser: There are various reasons why an accuser might lie. An arbitrator there-fore must consider the context of complaints about sex-ual harassment particularly if the accuser has received a negative performance evaluation, the accuser has been warned that she is subject to termination for a perfor-mance related issues, the accuser believes she may be in danger of being im-minently fired, or she has in fact been terminated. In certain contexts, she may have a motive to exaggerate the circumstances of what happened. The accuser may be more likely to interpret events in a manner that is not consistent with a reason-able person, in order to place herself in a “protected” category. In certain instances, accusations are a way to retaliate against the company for perceived mistreat-ment or termination.5. Motive to Lie by the Accused: The accused always has a motive to lie. If he is found to have committed the offending conduct, he is subject to being disciplined, suspended, transferred, or terminated. Furthermore, if he is married or in another committed relationship, sub-stantiated charges of sexual harassment may seriously affect his other relationships. Therefore, the accused al-ways has some motive to either justify his behavior or deny that it occurred. Therefore, such denials must be taken in that context.6. Independent Witnesses: This is the holy grail of de-termining who is telling the truth. If there is truly an independent witness, who has no axe to grind or mo-tive to lie, who supports the version of one side or the other, that independent witness’ testimony is given great weight by me and very likely could tip the scales. In determining if the witness is truly “independent,” the Arbitrator must consider the relationship of the witness to the accused and accuser, whether the witness has any-thing to gain or lose by telling the story that she/he is telling, and whether the witness had the ability to ob-serve, understand, and remember the events in question.7. Documents: Frequently, documents may be relevant to uncovering the truth amidst disputed facts. Often times (especially in large companies) there will be an

10 | ADR Times Perspectives

investigation which will contain written statements and reports. It is important to note whether the statements and reports are consistent with the current testimony. In addition, occasionally there may be emails, text mes-sages, or voice mails which may be consistent or in-consistent with the version of the events that are now being told. If there are major inconsistencies between the documents and the current testimony, that clearly raises serious concerns about the witness’ credibility.8. Prior Statements Regarding the Incident: Similar to the reasoning regarding documents above, there may also be prior oral statements by the accused or accuser to other people relating to the events in question. If such statements are either consistent or inconsistent with the version now being proffered, that would be a factor to take into consideration. Clearly, prior consistent state-ments would lend some credibility to the version now being given, especially if such statements were given at or about the time of the event. On the other hand, prior inconsistent statements would clearly be a factor to be weighed against the person who is now telling a differ-ent story.9. Demeanor of the Witness: Although the demeanor of the witness is a factor, I do not usually give it great weight, as I have learned from experience, that barring exceptional circumstances, it is very difficult to ascer-tain whether or not a witness is telling the truth simply by observing his or her demeanor. Some people (e.g.,

police officers) believe they can tell if a person is lying by whether or not he or she blinks their eyes, changes the tone of his or her voice, fails to make eye contact, or acts nervous. However, such actions are not a reli-able indicator of deception. In a little known study, it was shown that police officers are terrible judges of whether a person is telling the truth or not. This is con-trary to popular belief (and certain television shows) but can be very easily explained. People are often very nervous when being questioned by police and therefore the police often take this nervousness as a sign of guilt. The same may be said for arbitration hearings. Many witnesses are naturally nervous, especially victims of sexual harassment and those who believe they are being unfairly accused. Therefore, a witness’ “nervousness” is rarely a factor that I consider in determining whether such witness is telling the truth. On the other hand, there are occasional telltale signs, which although not infal-lible, can perhaps raise a red flag regarding the witness’ credibility. For example, a witness who shows disre-spect toward another person often will feel less guilty about lying about that person. For example, if the ac-cused refers to the accuser as “that woman,” as opposed to using her name or title, then there may be a greater likelihood that the accused would feel a compulsion to lie about that person. [2]

Another indication of veracity is whether or not the witness’ testimony appears rehearsed. If it appears that

Eric Epstein

An accomplished employment law and business litigation attorney and skilled employment mediator and arbitrator, Eric Epstein has a 35-year plus career with more than 100 trials including approximately 70 jury trials. Eric has experience in employment law representing both the employer and the employee in a wide variety of cases, including wage claims, wrongful termination, sexual harassment and disability discrimination. He welcomes your inquiries, and can be reached at [email protected] or (800) 616-1202, Ext. 721. Website: www.ericepstein.agencydr.comRead more articles by Eric Epstein at: www.adrtimes.com/articles/author/ericepstein

the witness is simply reciting something that she or he has memorized—as opposed to telling the story in their own words—then that is a factor that could af-fect my evaluation of the witness’ credibility. Another indication of possible deception that I occasionally see is when a person shakes his or her head, indicating yes or no, but answers differently. So if a person nods their head in an up or down manner generally indicating yes, when asked a critical question, but verbally answers the question no, that sends a confusing signal and gives their answer less credibility since the body language is saying one thing, but the words are saying another. Finally, in extreme cases, if you believe that you have developed a “baseline” of a person’s behavior when telling the truth, and then you see a marked departure from that “baseline” when the witness is asked a criti-cal question, then the answer to the question may not be truthful. For example, as an arbitrator you may begin to notice that a person always answers a question one way, or in a particular tone, or at a particular decibel level, or waits a certain amount of time before answering. Es-sentially, you find a “baseline” over many questions which are not disputed. But, if a critical question gets asked and the witness’ demeanor totally changes from the “baseline,” this may be an indication that the an-swer is not as credible. This is the general way a poly-graph works in that it develops a baseline for answers known to be truthful, and compares them with the dis-

puted questions. These nuances are not easy to pick up on and these techniques are certainly not foolproof, but demeanor is one factor to consider.10. Burden of Proof: When all else fails, I fall back on the burden of proof. There are some cases which are es-sentially a draw, where the above factors even out and there is no clear “winner.” In these cases, in which the he-said/she-said cannot be reconciled, I rely on who has the burden of proof. Simply put, if the person having the burden of proof on a particular issue has not carried his or her burden by a preponderance of the evidence, then I find for the other side on that issue.Until we come up with a foolproof method of determin-ing the truth, the above factors can hopefully assist the trier of fact in reaching the right decision. z

ENDNOTES[1] Throughout this article, I have chosen to use the female pronoun to denote the accuser and the male pronoun to denote the accused. Although there are instances of same-sex harassment or of a male accusing a female of sexual harassment, for the ease of reading I have used the pronouns of the most common situation which is a female accusing a male of sexual harassment.

[2] You may recall that in an interview denying any improper conduct, President Clinton, referring to Monica Lewinsky, said: “I never had sexual relations with that woman.”

Focus

whAck-A-moleThe Year 2011 in Arbitration Lawby Liz Kramer

WhacksThis year’s biggest arbitration “whack” from the Supreme Court was the April decision in AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011). That case held that the Federal Arbitration Act (FAA) preempts a line of California case law that found most “collective-arbitration waivers” in consumer arbitration provisions unconscionable. After Concepcion, circuit courts found similar lines of case law in New Jersey and Florida were preempted by the FAA. I expect that this trend will continue in 2012, with parties who seek to enforce arbitration agreements arguing that any state contract law position on which their opponents rely are preempted by the FAA.Of course, federal and state courts spent much of 2012 still trying to figure out how to deal with 2010’s big whack from the Supreme Court: Rent-A-Center, West Inc. v. Jackson, 130 S. Ct. 2772 (2010). In that case, the Supreme Court held that it could not address an employee’s arguments about the validity of his stand-alone arbitration agreement as a whole because the employee did not challenge the validity of the particular delegation provision within that arbitration agreement. (The Court used “delegation provision” to refer to the part of the arbitration agreement that authorized the arbitrator to decide any dispute about the enforceability of the arbitration agreement.) The four dissenters, however, worried that the majority’s reasoning could result in a situation where a party who seeks to avoid arbitration is required to prove that the specific sentence

calling for arbitration is invalid. (For example, imagine trying to argue that this common phrase is invalid: “Any and all disputes arising under this agreement shall be resolved by binding arbitration.”) In the great majority of 2011 cases that addressed this issue, however, courts interpreted Rent-A-Center as applying only when the arbitration agreement contained a delegation provision. I predict that courts will continue to limit Rent-A-Center’s impact in 2012, although it may lead to some circuit splits about the proper interpretation of the case as well as more litigation to define what is and what is not a delegation provision.

MolesKeeping with the theme here, if those were the whacks, what kinds of moles popped up in 2011? The most interesting fell into these three categories:

• Protecting Nursing Home Residents. This year, West Virginia declared that arbitration agreements executed as part of standard admission packets for nursing home residents are unenforceable, and Florida refused to enforce any arbitration agreement against nursing home residents that curtails their statutory rights. Brown v. Genesis Healthcare Corp., et al, __ S.E.2d ___, 2011 WL 2611327 (W. Va. 2011); Shotts v. OP Winter Haven, Inc., __ So. 3d __, 2011 WL 5864830 (Fla. 2011); Gessa v. Manor Care of Fla., Inc., __ So. 3d. __, 2011 WL 5864823 (Fla. 2011). If the Supreme Court does not

If I were to characterize all the arbitration case law of 2011 in one image, it would be that of the U.S. Supreme Court playing whack-a-mole at the arbitration arcade, trying to tamp down all the different ways that courts around the nation are creatively using state common law or statutes to nullify arbitration agreements that they find inequitable. And the U.S. Supreme Court simply can never keep up (I should specify that the current majority of the Court that reflexively rule in favor of arbitration cannot keep up because there have been vigorous dissents). With that image in mind, here are some of the biggest cases and trends from arbitration case law in 2011.

January 2012 | 13

Focus

Liz Kramer

Liz Kramer is a shareholder at Leonard, Street and Deinard, one of the largest law firms in Minnesota, where she litigates complex business and construction disputes. Liz graduated from Yale Law School and is deeply knowledgeable on arbitration law.Read more articles by Liz Kramer at: www.adrtimes.com/articles/author/lizkramer

intervene, watch for this trend to continue in other state courts, with arbitration exceptions made for particularly vulnerable categories of litigants.

• Finding Legislative Overrides. Another trend this year was for courts to find that Congress intended particular federal statutes (enacted or amended after the FAA) to trump the FAA and require disputes under those statutes be venued in court. The Ninth Circuit did that at least twice this year, with the Magnuson-Moss Warranty Act and the Carmack Amendment. Kolev v. Euromotors West/The Auto Gallery, __ F.3d ___, 2011 WL 4359905 (9th Cir. 2011); Smallwood v. Allied Van Lines, Inc., ___ F.3d ___, 2011 WL 4927404 (9th Cir. 2011). The Supreme Court will either breathe additional life into that type of argument with its forthcoming decision in CompuCredit v. Greenwood (heard on October 11, 2011, the case poses the question: did Congress intend to preclude arbitration of claims under the Credit Repair Organizations Act?) or will the Supreme Court suck the life right out of those legislative preclusion arguments by setting an impossibly high standard for courts to find Congress intended to override the FAA.

• Scope is the New Validity. There are two broad arguments to make about an arbitration agreement -- whether it is a valid agreement and whether the dispute at issue is within the scope of that agreement. Many of the decisions from the U.S. Supreme Court in recent years have related to the validity of arbitration agreements. Because those decisions have made it increasingly difficult to have a court address the enforceability of arbitration, litigators have begun to focus their arguments on the scope of

arbitration agreements. And some of those arguments have been successful. For example, the Second Circuit found that the term “customer”—a person or company who can be compelled to arbitrate under FINRA rules—is not broad enough to include an entity with whom the FINRA member lacked any written or oral contract when there were not enough other facts suggesting a business relationship. Wachovia Bank, Nat’l Assoc. v. VCG Special Opportunities Master Fund, Ltd., 661 F.3d 164, 172-74 (2d Cir. 2011). Furthermore, the Eleventh Circuit found that an employee’s civil sexual assault claims were outside the scope of the arbitration agreement in her employment contract. Doe v. Princess Cruise Lines, Ltd., 657 F.3d 1204 (11th Cir. 2011). Parties who want to evade arbitration are likely to continue making creative arguments about why their dispute is outside the scope of their arbitration agreement in the coming year.Watch for those trends to continue in 2012 and for creative new trends to pop up throughout the year as litigants and courts continue their efforts to determine the appropriate boundaries between courts and arbitrators, as well as between valid and invalid arbitration agreements. y

Follow Liz Kramer’s blog at www.arbitrationnation.com for more information on current arbitration trends and case law.

14 | ADR Times Perspectives

When parties lament the costs of arbitration, I wonder if as an arbitrator I need to undertake a review of what can be done to make things more efficient.

tAke coNtroL oF your ArBitrAtioN costsby Jeffrey Benz

January 2012 | 15

Focus

As we begin 2012, I reflect back on a topic we all (practitioners and arbitrators) read and heard a lot about in 2011, namely managing, or indeed in some cases “trimming”, the costs of arbitration. Surveys and studies demonstrate that the overwhelming costs of commercial arbitrations are not arbitrator fees or fees charged by arbitration providers, but the costs incurred by the parties to present their cases. Generally between 75% and 80% of the total expenses of an arbitration are attributable to the parties’ own legal fees/costs.What can we learn from this? First and foremost, the parties incur the greatest portion of costs themselves as they endeavor to present their case. Second, limiting or making efficient the parties’ presentation of their case can dramatically impact their costs. Third, what the parties choose to present and how to present it impacts arbitrator fees. When parties lament the costs of arbitration, I wonder if as an arbitrator I need to undertake a review of what can be done to make things more efficient. But I also have to balance the parties’ rights to a fair hearing of their dispute and recognize that, as an arbitrator, I am providing the parties with their day in court rather than before a jury or a judge and the bases for appealing my decisions are far more limited.Volumes have been written about this subject, and I am not going to attempt to cover all of the details and nuances that are out there in the literature. But I have devised a handful of observations in the control of the parties that I think could make arbitration far more efficient, and have the potential to make them less expensive, while still affording the parties a fair opportunity to be heard.

1. Spend more time and devote more attention to drafting the arbitration clause; be purposeful about defining the rules that will govern the parties.

How much effort is spent on drafting or negotiating the arbitration provision in a commercial contract? Litigation and arbitration lawyers almost never know this or have little experience with answering this

question because they are not consulted. On the other hand, in house counsel and transactional lawyers know the answer almost immediately: Relatively little, especially when compared to other agreement provisions. Often the arbitration clause is thrown in as “boilerplate” provision, copied from somewhere, and inserted at the end of negotiations. The main issue discussed between friendly parties trying to get into business together tends to be where the arbitration hearing will occur. Sometimes the parties will discuss the arbitration provider, with very little substance to the analysis, more often than not having had only limited experience with a handful of outcomes using a particular provider as their benchmark. And often very little thought is put into defining the qualifications of the arbitrator, defining the scope of the arbitration procedure, determining whether the decision is to be final or appealable for misapplication of facts or law, the nature of the rules referenced in the arbitration clause, and similar issues. Yet all of these issues can creep into arbitration, engender their own costs, and can substantially affect a party’s outcome or arbitration experience. Commercial lawyers and in house counsel need to become educated on how arbitration works so they can draft better, more thoughtful arbitration clauses that meet that party’s needs when a dispute arises, rather than relying on a form clause picked up from a prior agreement or from another transaction.

2. Actively regulate yourself and your own procedural conduct; exercise judicious restraint.

Don’t go fishing for discovery in arbitration. Many ar-bitration rules are crafted to limit discovery while re-quiring the parties to disclose the evidence, including documents and witnesses, upon which they intend to rely at the hearing. Do not assume you have a right to take depositions of party witnesses. If you are inclined to take a deposition rather than hearing testimony of a third party witness, you better research your views. Arbitrators, in my experience, do not take kindly to ef-

16 | ADR Times Perspectives

forts to uncover every last shred of evidence that might possibly be relevant to your case through the arbitra-tion proceedings. However, targeted discovery focused directly on issues in dispute does not rankle.

3. Insist on the arbitrator(s) being active case managers.

Arbitrators are service providers and their customers, the disputing parties, hire the arbitrators to do one thing: Solve their dispute impartially, fairly, and efficiently. If your arbitrators are not doing this, you should insist on it. Request a preliminary hearing if one is not scheduled. Seek a procedural order that is workable, but tight, and that comprehensively, but practically, addresses the likely issues that will need to be addressed before the parties reach the hearing (after all, much of arbitration is about managing process and procedures). Try to agree with opposing counsel on procedural matters; you are more likely to get what you want if you present it unopposed to the arbitrators. Given the contractual basis for arbitration, rare is the case where arbitrators reject a procedure agreed upon by the parties. Ensure the arbitrators stick to the deadlines they set and do not seek to waive them yourself unless

absolutely necessary to a fair presentation of your case. Of course it goes without saying that counsel should show up for pre-hearing conferences, oral argument, and at the hearing prepared, well-versed in their case, organized, and able to present their position clearly and succinctly to the arbitrators. Likewise, counsel should also insist and observe that their arbitration panel is similarly prepared. Give feedback to the arbitration provider after the case is concluded on how the arbitrators performed their tasks (without regard to the outcome for your client), and demonstrate your views by nominating or not nominating the arbitrators for future cases. In short, view this as a process where you are an active participant in forging an outcome for your client that resolves their dispute as efficiently as possible with leadership from a prepared, impartial, and efficiency-oriented panel.

4. Ask for what the arbitrator can give, and give clear reasons for it.

I cannot count the number of times I have seen a party either ask for relief that the arbitrator cannot grant or fail to ask for the relief that they should have until it was too late. Practitioners must think through carefully

Jeff Benz

Jeff Benz is a Los Angeles-based arbitrator and mediator who serves on the panels for the American Arbitration Association, Hong Kong International Arbitration Center, Beijing Arbitration Commission, Republic of China Arbitration Association, London Court of International Arbitration, International Chamber of Commerce, Court of Arbitration for Sport, the Agency for Dispute Resolution, and others. Jeff has been a client, outside and inside lawyer (including as general counsel of a public company), and a neutral, offering a well-rounded perspective to assist parties in resolving disputes in the commercial, technology, entertainment, sports, and insurance/wrongful death/personal injury areas.Read more articles by Jeff Benz at: www.adrtimes.com/articles/author/jeffbenz

January 2012 | 17

Focus

what relief they seek and provide the bases for it clearly and succinctly. Barring that, arbitrators are going to review that topic extensively because it cuts directly to the scope of the agreement to arbitrate, arbitrator jurisdiction, and the final and binding nature of the arbitral award.

5. Present enough of your case to meet your burden but not so much that it becomes a burden.

How many of us have sat through hours and hours of witness testimony at a hearing that is circuitous, re-dundant, repetitious, or full of irrelevant or unhelpful facts or opinions? How many of us have weathered an opening or a closing statement that has overstayed its welcome, and its effectiveness? Arbitration is simply

not litigation. While a neutral decision maker decides the dispute, arbitration is a process by which the parties have some freedom to define by mutual agreement the way that outcome will be determined (to be contrasted with litigation where a third party decision maker, us-ing mandatory, relatively unchangeable procedures, makes a decision). In sum, don’t just react to being in arbitration as a party. Take control of it. Define it. Mold it to serve the needs of your client or the parties. If that fails, then exercise your consumer choice rights and find new arbitrators or providers to hear the next dispute. y

18 | ADR Times Perspectives

Med-Arb is a long-standing and robust practice that combines the flexibility and self-determination inherent in mediation with the certainty and finality of arbitration. Med-Arb has become widely used in the last decade. A survey performed by David Lipsky and Ronald See-ber found that an astonishing forty percent of respond-ing Fortune 1,000 corporations had engaged in med-arb in the preceding three years. [1] Notably, Med-arb is not a new concept. Professor Derek Roebuck indicates that in ancient Greek and Egyptian traditions, med-arb was the norm rather than the exception. [2] In both ancient and modern Muslim legal practice, the judge must make serious efforts to bring the parties to agreement before trial. [3] Med-arb is very popular in other cultures. In Japan, for example, most cases submitted to arbitration actually undergo “med-arb.” [4] Australia, Canada, Hong Kong, and Japan have actually enacted arbitration laws that contain med-arb provisions. [5] Today, in Canada and Australia, med-arb is used routinely to resolve public sector labor disputes and arbitration statutes expressly permit resolution by this method. [6]

Proponents of med-arb convincingly argue that it elimi-nates the major weakness of mediation – lack of final-ity – while allowing the parties to use an arbitrator with whom they have built up trust during the mediation pro-cess. [7] This allows maximum flexibility and saves the cost and time associated with selecting a separate arbi-trator should mediation fail. [8]

Despite the popularity and obvious usefulness of med-arb, it remains controversial. Some arbitrators treat it as heretical and even unethical. Some observers view it as impossible to fairly combine the two processes, believ-ing that the inherent tension between the neutral’s initial role as a facilitator and her potential role as an adjudica-tor renders the procedure coercive, ineffective, and dis-ruptive of basic due process.[9] However, the med-arb process is alive and well in California. Parties should not be deprived of this alternative given that many of the same risks exist and are deemed acceptable in other contexts. Med-arb’s advantages of finality and swift-ness are obvious. Examining the process’ criticisms can help assist parties in determining whether med-arb is the right process for a particular dispute.

Med-Arb MAy be right for your business disputeby Scott C. Van Soye

January 2012 | 19

Focus

The Due Process / Natural Justice IssuePerhaps the most frequently-cited defect of med-arb is that the neutral hears evidence in private caucus that the non-caucusing party cannot respond to, because he has not heard it. This is often referred to as a “due process or “natural justice” violation. [10] Natural justice has two elements: Parties must be allowed to hear and answer an opponent’s case, and any decision affecting a person must be made by an impartial tribunal. [11] At its most basic, due process requires notice and an opportunity to be heard. [12] Many critics of med-arb doubt whether a neutral will be able to disregard what she learned in the mediation phase while acting as an arbitrator. [13] An arbitral party who was excluded from a private caucus during mediation has not had notice of “new evidence” presented during that session or an opportunity to re-spond to it. This situation is a prima facie violation of fundamental fairness. However, concerns about exposure to improper evi-dence reflect doubts about the neutral’s ability to dis-regard that evidence, rather than a flaw in the med-arb process itself. But judges are routinely expected to dis-

regard inadmissible evidence without any due process concerns being expressed. There is no consensus about a neutrals’ supposed inability to disregard inadmissible evidence. Megan Telford, who surveyed med-arbiters working in Ontario’s Grievance Settlement Board, re-ports that the great majority of the neutrals surveyed felt that the issue was not a practical problem since they were able to disregard inadmissible evidence. [14] The California Court of Appeal in Lindsay v. Lewandowski 139 Cal App 4th 1618, 1620 (2006) expressly autho-rized med-arb, holding:

We do not suggest that parties are prohibited from agreeing that, if the mediation fails, they will proceed to arbitration. And, should they so desire, they may agree that the same person may first act as media-tor and, if he or she fails in this task, act as the ar-bitrator. Whether or not this arbitrator (nee mediator) may consider facts presented to him or her during the mediation would also have to be specified in any such agreement. (Emphasis added)

Clearly, the Court in Lindsay believes that the med-arbi-ter can disregard such evidence.

Scott Van Soye

Scott Van Soye is a full-time mediator and arbitrator working with the Agency for Dispute Resolution with offices in Irvine, Beverly Hills and nationwide. He is a member of the California Bar, and practiced real estate, civil rights, and employment law for over twenty years. He holds an LL.M. in Dispute Resolution from Pepperdine University, where he is an adjunct professor of law. He welcomes your inquiries, and can be reached at [email protected] or (800) 616-1202, Ext. 721. Website: www.scottvansoye.agencydr.comRead more articles by Scott Van Soye at: www.adrtimes.com/articles/author/scottvansoye

The Waiver Issue California Rule of Court 3.823 (a), concerning evidence in arbitration, provides: “All evidence must be taken in the presence of the arbitrator and all parties, except where any of the parties has waived the right to be pres-ent or is absent after due notice of the hearing.” Many scholars recommend obtaining an explicit waiver of the risk that the med-arb neutral will learn confidential information during the mediation process. [15] At a mini-mum, the waiver issue should be discussed with counsel as part of preparation for a med-arb procedure.

The Coercion IssueCritics of med-arb claim that it gives neutrals the pow-er to coerce settlement by (at least implicitly) making it clear in mediation that in the event arbitration goes forward, an unfavorable award will result. [16] Although such a scenario is certainly plausible, it ignores the real-ity that professional mediators do not achieve settlement “at all costs.” After all, they want to maintain a reputa-tion for fairness, without which they will get little busi-ness. While med-arbiters admit pressuring the parties on occasion, for the most part they deny a “directive” approach; in fact, parties are more motivated to settle in the shadow of arbitration. [17] But this is a natural out-come of the process. The parties chose med-arb because they wanted the certainty of a result; otherwise, they would have chosen pure mediation. Further, even outside the med-arb process, the prospect of a looming trial or upcoming arbitration encourages settlement. Therefore, this “weakness” of med-arb is actually a feature of any adjudicative process; it should not be laid at the door of med-arb in particular.

Reluctance to Disclose Information and Posturing for the NeutralA final criticism of med-arb is that the parties will refuse to disclose information as they normally would in me-diation because they are too conscious of the neutral’s future role as an arbitrator. A related argument is that a party will try to spin the facts to make herself look good in front of the med-arbiter.Non-disclosure - Some critics of med-arb suggest that participants are unlikely to share unfavorable facts with the mediator, in view of his or her possible role as an arbitrator. [18] However, participants are actually more forthcoming in med-arb than in other contexts, perhaps out of a desire to avoid appearing uncooperative to the potential arbitrator. [19] Even if there is non-disclosure, this situation is hardly unknown to experienced media-tors. It is not unusual for counsel to withhold extremely useful information – data that would probably settle the case—so that he or she can “save it for trial.” This oc-curs even if the point is expressly made that the settle-ment process is designed to avoid trial altogether.Posturing - Likewise, inflating the merits of one’s case in order to look good to the arbitrator could happen in med-arb, but is not limited to that context. [20] So postur-ing cannot be attributed solely to med-arb. In fact, there is no evidence that non-disclosure or posturing is more likely in the med-arb context than it is in single-process ADR, such as mediation or arbitration.

January 2012 | 21

Focus

ConclusionThe above analysis shows med-arb has a long history of success, and that despite the numerous criticisms of the procedure, any “defect” in the process has been ac-cepted with equanimity in other contexts. For exam-ple, we either presume without thinking that judges can disregard inadmissible evidence, or accept their human frailty with a shrug. Yet we challenge med-arb neutrals for sharing the same frailty. Any coercive behavior by med-arb neutrals is indistinguishable from the gen-eral effect of an upcoming bench trial with a skeptical judge. Yet, it is deemed unacceptable for the neutral to express opinions – but acceptable for the judge. Finally, the problems of posturing and non-disclosure face ev-ery mediator from time to time; not just the med-arbiter. These risks are not enough to disregard the undeniable advantages of the med-arb process: flexibility, finality, cost-savings, and a high probability that the parties will reach a mediated settlement The lesson of the foregoing is not that med-arb is the right answer in every case, but that med-arb is a useful option -- especially where the business relationship is worth preserving, but speed is very important. Just as business executives must learn to navigate the legal sys-tem in order to succeed, they need to be familiar with the full spectrum of ADR methods, to raise their use with counsel, and to intelligently discuss their strengths and weaknesses when the time for a decision comes. Re-tired judge and neutral Lawrence Waddington has said “[M]ed-arb is a valuable addition to the constantly ma-turing world of alternatives to litigation ... the increasing use of mediation by the Bar has developed experienced lawyers who recognize a variety of techniques to settle cases and med-arb is one option. No mediator should ig-nore this potential for resolution of a dispute.”[21] Judge Waddington’s insight is as true for business executives as it is for mediators. Med-arb is a valuable tool, which should be routinely considered, and never ignored. y

ENDNOTES[1] Dykema Gossett PLLC, “Arbitration Expert Predicts 21st Century Trends” available at http://library.findlaw.com/1998/Sep/1/128936.html.

[1] Stipanowich, Thomas J., “ADR and the Vanishing Trial: The Growth and Impact of ‘Alternative Dispute Resolution’” Vol. 1, No. 3 J. Empirical Legal Studies 843.

[2] Limbury, Alan L., “Making Med-Arb Work” (2007) 73 Arbitra-tion 1, 105 at 106. http://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1393&context=adr.

[3] Khatchadourian, Minas, “Arbitra-tion and Mediation between Europe and the Gulf” available at http://shiac.com/Shiacimages/REPORT%20ARBITRA-TION%20EUR.pdf.

[4] See Sato, Y., COMMERCIAL DIS-PUTE PROCESSING AND JAPAN, 283-286.

[5] See CEDR Commission on Settlement in International Arbitration, available at http://www.cedr.com/about_ us/arbitration_commission/Arbitration_Commis-sion_Doc_Final.pdf

[6] See Telford, Megan Elizabeth, “Med-Arb: A Viable Dispute Resolution Al-ternative,” IRC Press, January (2000), and New South Wales Consolidated Acts, Commercial Arbitration Act (1984), § 27.

[7] Brewer, Thomas J and Mills, Lawrence R., “Combining Mediation & Arbitra-tion” DISP. RESOL. J. (1999).

[8] Gerald F. Phillips, “Same-Neutral Med-Arb: What Does The Future Hold?,” 60 DISP. RESOL. J. 24, 26 (2005).

[9] See Telford, supra note 6 for summaries of these concerns. See also Blanken-ship, John T., “Developing your ADR attitude: Med-Arb, a template for adaptive ADR” available at http://www.tba.org/Journal_Tbarchives/200611/TBJ-200611-medArb.html.

[10] See Limbury, supra, note 2. “Natural justice” is a concept used in the British Commonwealth. It is similar to what Americans think of as “due process”

[11] See Telford, supra note 6.

[12] Cleveland Board of Education v. Loudermill, 470 U.S. 532, 545-546 (1985).

[13] Kagel, John, “New frontiers in dispute resolution. Skills and techniques: Comment.” IN New techniques in labor dispute resolution (ed. Howard J. Ander-son, 1976) 185-90.

[14] “Improper Evidence in Nonjury Trials: Basis for Reversal?” 79 HARVARD LAW REVIEW 2, 407 (1965)

[15] See Phillips, supra note 8.

[16] Blankenship, John T., “Developing your ADR attitude: Med-Arb, a template for adaptive ADR” available at http://www.tba.org/Journal_Tbarchives/200611/TBJ-200611-medArb.html

[17] See Telford, supra note 6.

[18] See Limbury, supra, note 2.

[19] See Blankenship, supra n. 3, citing Neil B. McGillicuddy et al.,“Third-Party Intervention: A Field Experiment Comparing Three Different Models,” 53 J. Personality & Soc. Psychol. 104, 110 (1987)).

[20] Forester, John, “Planning and Mediation, Participation and Posturing: What’s a Deliberative Practitioner to Do?” available at http://courses.cit.cornell.edu/practicestories/documents/samples_planning/ParticipationAndPosturing.pdf

[21] See Phillips, supra note 8.

22 | ADR Times Perspectives

Discover

Many of us use the word “but” when attempting to compare two differing points of view. For example, “I understand what you are saying, but I don t agree with you.” This statement focuses on the disparity between the two people and is likely to engender division and defensiveness. The word “but” is sometimes called the eraser word, as it erases the phrase that came before it while focusing on the phrase that comes after it. This discounts the statement made by the first party in favor of that made by the second party. The result of a response that includes the word “but” are often unproductive.The word “and” is inclusive. It accepts that there may be some truth or validity in the first person’s statement and then indicates that there are also other perspectives. This statement would go like this, “I understand what you are saying, and I don’t agree with you.” The change in one word, from use of the word “but” to the word “and”, makes an important shift in the relationship by demonstrating an acceptance of the first person’s

statement while also indicating that there is a second point of view as well. It allows the person to be heard and understood, which is essential if efforts are being made to work together in resolving differences.Ambivalence is a common characteristic in mediation - there are often mixed feelings and desires. The use of the word “and” provides juxtaposition between the two simultaneous dynamics. “On the one hand you want to reach a quick decision to get this over with, and on the other hand you know that doing this too quickly may not get you what you want.” Simply reflecting this duality can clarify the two competing perspectives and help determine the next steps to take in the process.Use of the word “and” allows for both support and confrontation in the course of collaboration or negotiation. Confrontation alone typically engenders resistance and rebuttal. An approach which starts with support will reduce defensiveness and open the door to exploration of alternatives.

the Power of “AND”by Dale Eilerman

The word “and” is short but powerful. It connects as well as includes. It adds rather than negates. The word “and” provides energy in collaboration and contributes momentum toward synergy. This word enables people with differing perspectives to find common ground. It can supply motivation when opposing parties may be losing hope of achieving their goal. When used effectively the word “and” can move a disagreement toward resolution. This tiny word is one of the most important communication terms we can use when doing mediation.

January 2012 | 23

“I can tell that your beliefs are important to you from your perspective and I hope that you will be open to considering some additional ideas so that we can come up with the best possible plan.”This approach can be even more effective through use of pauses and reinforcement phrases such as “I hear you saying that doing things your way will work best. I really do see how that makes sense for you based on the points you are making and I have another way of looking at this which is different from yours. Can I explain more about my point of view?” There is an art in the use of reflective listening where the word “and” can demonstrate empathy while also communicating a differing choice. Reflective statements that help the person feel truly understood will lower resistance and increase the likelihood that they will, in turn, try to understand an alternative. Using a question to seek permission to provide more information is also a helpful technique.Using the word “and” invites another person to add to your thoughts our ideas. Making a statement such as “My preference is…and I want to hear yours” demonstrates receptivity to consideration and inclusion of another point of view. There is still room for comparison, debate, or negotiation related to differences, only now the discussion contains a spirit of respect and openness which increases the likelihood of satisfactory resolution. It is also helpful to acknowledge thoughts that have

merit while seeking additional ideas. “I like what you just said and I want to keep brainstorming to see what else we can discover. I am feeling very hopeful about where this is going.”Collaboration in managing differences is best achieved by focusing on both the issue/agenda and the relationship - the thoughts and the feelings. Communication that is accepting of the person and objective about the data will encourage creative and expansive thinking, leading to optimal outcomes. “I recognize that this plan is not what you initially desired and I want you to be satisfied. Now that we have had a chance to discuss the facts thoroughly, and examined the pros and cons of your ideas along with some new ones, I hope you can see the benefit in making some changes to your original proposal. What are your feelings about this now?”As you can see, the use of the word “and” can enhance problem solving by demonstrating inclusion while also serving to keep discussion open and progressive. It can be a powerful term in managing differences, creating openness to new ideas and movement toward resolution of conflict. Be mindful of incorporating this word into your mediation practice. Doing so will be helpful to your clients and to you. z

Dale Eilerman

Dale Eilerman operates Conflict Solutions Ohio, LLC working with individuals and organizations to improve performance. He specializes in the dynamics associated with the management of differences and conflict and provides clinical counseling, consultation, training, coaching, team-building, and conciliation work including mediation.Read more articles by Dale Eilerman at: www.adrtimes.com/articles/author/daleeilerman

24 | ADR Times Perspectives

oN the eDge

i first entered a CoUrtroom as a lawyer almost thirty years ago. Since then, I have always known that I chose the greatest profession in the world, particularly for me. I remain energized and engaged; there is no “burn out” in sight even after many years of late nights, emergency motions, difficult clients, less than civil opposing counsel and the never ending quest for a “balanced life.” Why? Lately this is something I have pondered. I have had trouble articulating a largely visceral reaction that I would never want to do anything else and finding adequate words to explain the thrill I feel each time I get to tackle a thorny legal problem and work my way toward the solution. As I thought about this in recent months, the words to express the “why” always eluded me.Then, I got the monthly email blast from my high school drama teacher, Jim Gilchrist. He always intersperses pithy quotes with the updates from our various classmates and teachers now scattered around the globe. I read the missives religiously as much for the inspiration as for the news. Recently, one of the quotes set my fingers flying. It was from Elisabeth Niebuhr Sifton, the daughter of

theologian Reinhold Niebuhr (author of the Serenity Prayer), and she said,

“[A]ll the goodwill in the world gets you nowhere un-less governmental interven-tion brings the proper legal sanctions to bear. Civil society needs a rule of law even more than it needs compassionate priests.”There it was, the “why,” in a few short words, distilled to its essence. I was immediately taken back to a conversation I had years ago with a relatively new lawyer who had been with my litigation practice for only a few months.“Everyone’s always so angry and hostile,” she said. “I really don’t like all of this contentiousness all of the time, how do you handle it?” She was genuinely and deeply distressed.I sat down across from her, “You need to understand that this is really civilized war. We intentionally interject ourselves into peoples’ disputes. That is our role, to help them sort things out and get the dispute behind them, one way or another, within the bounds of the law. In the course of that endeavor, missiles will be fired and some may land in your

back yard. There needs to be an intensity and a detachment at the same time. It is not an easy balancing act to master.” She left the firm with my blessing and went into tax planning shortly thereafter. The life of a litigator was not for her.So there it is, in a nutshell, we lawyers, whether transactional or litigation practitioners, go forth to our various battles, the works of Sun Tzu in one hand, the writings of the Dalai Lama in the other. We seek resolution more than justice since we toil mostly in the gray areas and the legal questions we are called on to address involve issues of the human psyche as much as or more than the dollars and cents at issue in the transaction or dispute. Even in the realm of criminal law, we must constantly ask; do we seek retribution, rehabilitation, or simply deterrence? Each case cries out for its own justice, each dispute for some vindication of human dignity and our continued ability to live with each other in a “civil society”. It is our job and our privilege as lawyers to seek what is best for our clients and for our community.

Why the law? I could not imagine doing anything else!

Why the Law? A Lawyer’s Perspectiveby Linda Northrup

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linda northrUp, a founding partner of Northrup Schlueter, was admitted to the California Bar in 1981 and founded the firm as a sole practitioner in 1996. She has been representing individuals and institutional clients in sophisticated business, real estate, and construction matters for her entire legal career. Ms. Northrup regularly acts as lead trial counsel and handles related appeals in the California state and federal courts. She is admitted to and has appeared before the United States Supreme Court and was successful in preserving a defense judgment in favor of her client handed down by

the trial court and affirmed in the Ninth Circuit Court of Appeals. Ms. Northrup has been involved in real estate transactional work for over 20 years and has represented clients in both residential and commercial purchase, sale, lease, and finance transactions ranging from single family homes to multi-story commercial buildings and developments.

Read more articles by Linda Northrup: www.adrtimes.com/articles/author/lindanorthrup

Have an article, story, comment, or topic suggestion you would like to share with ADR Times? Email [email protected] or contribute online at: www.adrtimes.com/contribute

26 | ADR Times Perspectives

Have you ever had someone in your life with whom you just couldn’t seem to get along?

A family member, perhaps? Maybe a colleague? A customer, supplier, or client? All of us have had seemingly “conflict-laden” relationships, and those relationships can be the sources of some of our most painful stress. Sometimes these conflict-laden relationships can escalate into legal battles – for instance, when spouses seek divorce or when business partners decide to part ways. While both mediation and arbitration are processes designed to help people move past conflicts such as these, it’s important for us as ADR practitioners to remember that the ways by which these two processes deal with conflict have fundamentally different psychological consequences on our clients. In order to explore this distinction, it is helpful to first review how conflicts tend to develop.

Conflict Comes in ScriptsMany conflicts in our everyday and professional lives are caused by the “scripts” we develop with those around us. It’s inevitable that as we deal with other people, we begin to form judgments and perceptions about who they are and their intentions toward us. This is especially true when there are emotional attachments involved in the relationship, or when we have repetitively gone through the “scripts” of conflict interaction with a person over a long period of time. “He says ‘x,’ then I say ‘y,’” and then the process repeats the next time a disagreement occurs.In extreme form, these conflict scripts can become habitual – literally as strong as any other habit. Sometimes, when conflicts between individuals have persisted over many years or over multiple generations, these conflict scripts become part of how people see themselves and others. A modern-day example is the Israeli-Palestinian crisis, where multiple generations of people on both sides have in many ways become so

“Why Can’t We Just Get alonG!?!”The Process Psychology of ArbiTrATion And MediATion

by Zachary Ulrich

commeNtAry

January 2012 | 27

used to the “script” of the conflict that many now derive their identity almost solely in relation to the fight. “I am Palestinian,” or, “I am not Israeli”… instead of, “I am a banker,” or, “I am a father.” Perhaps even more unfortunate than the progressive nature of conflict is the fact that many of the judgments we make about others tend to be wrong. Many studies have shown that the impressions we form about others are often incorrect – either because of generalizations when they aren’t warranted, or because of misattributions about why others behave the way they do. Moreover, the process of stopping to consider the accuracy of our judgments is not a natural one, and many people never learn to question their assumptions. And only rarely are issues themselves the sole source of legal disputes. Yes, often there are intractable differences

of opinion or motivation that force parties into conflict, but more often than not the underlying source of conflict includes a relational dysfunction; a lack of trust; a sense of loss or abandonment; ego; a relative callousness by one or more parties; or, a combination thereof. Understanding how conflict scripts evolve is important for both neutrals and counsel, because these dynamics play out in significantly different ways depending upon the ADR method we choose.

Conflict Processes in Arbitration Even though arbitration was designed as a means of avoiding court, the psychological consequences of arbitration in many ways play out similarly to that of trial. In both situations parties are generally discouraged from communicating outside of hearings, and within hearings parties do not communicate directly with one another. Instead, attorneys are expected to conduct all communication, and all communication is bound by local codes of evidence and procedure (in the case of court) or by local and organizational laws and rules (in the case of arbitration). There is no room for parties to spend time discussing their positions with one-another, let alone

any chance for parties to re-examine the assumptions or “scripts” they may have developed over time. Another fundamental characteristic of arbitration is that the focus of both parties and counsel naturally lies on maximizing the individual interests of both sides, rather than on finding common ground for resolution.

Perhaps even more unfortunate than the progressive nature of conflict is the fact that many of the judgments we make about others tend to be wrong. Many studies have shown that the impressions we form about others are often incorrect – either because of generalizations when they aren’t warranted, or because of misattributions about why others behave the way they do.

28 | ADR Times Perspectives

Taken in light of our discussion on conflict scripts above, that’s akin to the Palestinians and Israelis side-stepping attempts at agreement in favor of focusing solely on convincing an arbitrator who should get the West Bank, who should get the Golan Heights, etc. Neither party is likely to have full buy-in to the eventual deal, and so both parties are likely going to walk-away with an element of disappointment. But, at least, they’ll walk away. Many parties seek arbitration for the same reason they seek court – to have a final determination. To move on, regardless of the outcome. And of course arbitration has many known benefits, for instance parties’ ability to tailor discovery proceedings and hearing formats, to avoid local court systems, and to choose respected topic-experts as neutrals. It’s not that there aren’t myriad uses for arbitration today, but those uses don’t come without psychological ramifications.

Conflict Processes in MediationOf course, in mediation the conflict profile is quite different. Parties don’t have rules or codes guiding how they express themselves, and the focus lies in finding

resolution both parties can agree with. Moreover, the parties are free to communicate – even to argue, or at least to openly disagree. And open disagreement can be a very healthy thing. It means the parties still care about trying to align their views of the conflict, even if one or all sides are convinced they are “correct.” It means parties haven’t conceded that resolution is impossible only to have a neutral “chop up Jerusalem.” As long as parties are still talking,

there’s still a chance of finding common ground.And as I discussed above, often the assumptions parties have made about their conflict or about other parties’ actions contain at least shades of misperception. It’s only human. In fact I observe clients articulate unfounded assumptions in mediation all the time, and I consider that a good thing. It means that parties are expressing the reasoning behind their decisions, which allows me as a mediator to interact with those assumptions. Unlike in arbitration, as a neutral in mediation I am free to guide and facilitate new ways of thinking, and to allow parties to generate new conclusions about their situation. Often, this sort of “creative destruction” of underlying assumptions allows clients to let go of their conflict scripts and to begin focusing on moving forward. It’s a

Zachary Ulrich

Zachary Ulrich is a Contributing Editor at ADR Times and professional neutral and writer on mediation, psychology, and business practices. He is currently working towards his Juris Doctorate, Masters in Dispute Resolution, and Masters in Clinical Psychology from Pepperdine University. Zachary is a graduate of the two-year General Electric Financial Management Program, where he held several financial analysis positions and studied business operations and strategies from executives within the organization. He is a graduate of American University in Washington, D.C., where he obtained his BS in Finance and his BA in both Economics and International Studies.Read more articles by Zachary Ulrich at: www.adrtimes.com/articles/author/zacharyulrich

Conflicts are inherently psychologically impactful events, which means that the processes we choose to handle them are going to create lasting psychological change in our clients. As ADR professionals our goal is to help clients move forward in the best way possible...

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beautiful process that allows understanding to replace enmity, and that allows working relationships to move forward past whatever agreement is reached. All this is not to say that all conflicts should be mediated – far from it. Many conflicts are never going to settle without the intervention of a judge or arbitrator. But for the rest – for the conflicts where there’s still hope to address the old “scripts” that may have brought parties to the table in the first place – mediation or one of its derivatives (med-arb, or mediation with a mediator’s agreement) should be considered. At the end of the day, mediation and arbitration are processes meant to bring closure, albeit by vastly different means. True “closure” can take time and healing – the ability for parties to move on, to regroup, and to re-shape their identities beyond the conflict itself. Especially when conflicts go beyond simple dollar figures and include relationships. Conflicts are inherently psychologically impactful events, which means that the processes we choose to handle them are going to create lasting psychological change in our clients. As ADR professionals our goal is to help clients move forward in the best way possible, and we should consider the lasting psychological effects our ADR processes might create before attempting to do so. z

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mark grossman, esq.Neutral | Mediator

I can see a time when Dispute Resolution is the primary way people resolve disputes and

Court Trial is known as ALR - Alternative of Last Resort. “”

“

800.616.1202 x713 [email protected] www.markgrossman.agencydr.com

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The LATin AMericAn WATer TribunAL

AN iNNovAtive APProAch to ADrby Mikita Weaver

[This article includes select portions of an article previously published in its entirely at the Pepperdine Dispute Resolution Law Journal available at http://law.pepperdine.edu/dispute-resolution-law-journal/issues/volume-eleven/]

One of the most eye-opening experiences of my life was the many months I spent working and living among the Mazahua people in Mexico. This tight-knit community of indigenous people had maintained a coherent community until the Mexican government created the oppressive water regime known as the Cutzamala System. This system ships water from the Mazahua lands to Mexico City to quench the thirst of the people in the capital. With the powerful Mexican government commandeering the water from the Mazahua land, the Mazahua people are relegated to destitution.

Working with the Mazahua, I became familiar with this ongoing conflict between the Mexican government and the Mazahua people. I later learned of the Latin American Water Tribunal (LAWT) and how it helps communities like the Mazahua people to have a voice in disputes involving limited resources and powerful players. The LAWT offered the Mazahua community an innovative alternative where they would otherwise have none. As a meaningful alternative dispute resolution method, the LAWT employs a creative and unique approach to resolve environmental and water disputes. The tribunal combines various dispute resolution approaches in such a way that the disadvantages and drawbacks of traditional arbitration are eliminated.

how the lawt worksThe LAWT provides a forum for communities to expose environmental problems in a semi-legal context. The tribunal is “standing on the shoulder of giants” in that it has been educated and inspired by previous tribunals in Europe and South America.1 In the past three decades, there have been various environmental tribunals.2 Laying the groundwork for the Latin American Water Tribunal, these tribunals pursued justice by promoting solutions to severe contamination that threatened water systems and access to water.3 First known as the Central American Water Tribunal, the tribunal was created in 1998 “with the purpose of contributing to the resolution of conflicts related to water ecosystems in Central America.”4 In an attempt to respond to the “democratic deficit in water management,” the founders of the tribunal created a new venue that could resolve water disputes, promote cleaner technologies, and promote adequate water resource management.5 The tribunal also created an outlet for democratic participation, allowing the marginalized groups

who do not typically have access to traditional avenues for justice to have a forum to voice their complaints.6 The LAWT has held six hearings, received fifty-eight cases, and handled more than 250 consultations since its inception in 1998.7

aBoUt the Case seleCtion proCessCommunities, individuals, or an organization may file an action with the tribunal against public institutions, individuals, or industries that contaminate, misuse, or threaten water resources.8 The LAWT Technical Commission, composed of professionals and technicians, selects those cases best supported by scientific and technical evidence demonstrating a negative impact on the environment.9 In making a determination, members of the Technical Commission may make site visits to evaluate a case, and ultimately select cases that pose the greatest hazard to the largest population in a utilitarian sort of way.10 After a case is chosen, the LAWT formally notifies the opposing party accused of environmental degradation so that it may respond to the allegations at a public hearing.11

the pUBliC hearingThe public hearing itself is a high-profile event, where civic organizations in Latin America expose and allege water mismanagement, the accused have the opportunity to respond, and a jury evaluates the situation.12 The actual structure of the hearing is much like any other case where the plaintiffs present their case (in thirty minutes), the accused present their defense (in thirty minutes), testimony from witnesses is given, cross examination occurs, and plaintiff and defendant give a closing arguments (in ten minutes). 13 Jurors—consisting of members from various professional backgrounds with expertise in the public, educational, or scientific fields from predominantly Latin American countries—are given the opportunity to examine the evidence and question the witnesses before deliberations.14 The verdict is then announced publicly. Unlike most proceedings, however, this verdict does not assign guilt or designate responsibility; instead, the verdict contains detailed recommendations for each side and offers a list of responsibilities of each party to resolve the water conflict and to achieve environmental justice. 15 Notably, the verdict itself has no judicial power, and the verdict is not binding on the parties; however, it becomes a baseline for future negotiations between involved parties.16 Because the judgment is not based on legal fault, the LAWT cannot apply financial sanctions or administrative penalties.17 However, the tribunal can propose a “moral sentence” or encourage a social refusal by Latin-American citizens against those who harm the water resources of the community.18

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not yoUr “typiCal” arBitrationIn order to understand how the LAWT stands out as an innovative ADR system, it is important to consider the shortcomings of arbitration proceedings generally. Many prominent scholars contend that arbitration undermines the effective administration of justice in several ways, particularly (1) its confidential nature, (2) its binding nature, and (3) its inability to protect the disadvantaged. However, the LAWT is uniquely designed to avoid these so called “pitfalls” of traditional arbitration. Instead, the LAWT’s innovative format addresses these potential shortcomings in the following ways:

Confidential natUre of arBitration proCeedingsThe confidential nature of arbitration is a big concern. Precedence cannot be created when the result of arbitration is confidential. Originally, a company that created a product dangerous to the public would be held accountable through multiple lawsuits from injured plaintiffs; now, however, the company can quietly resolve each dispute in arbitration. The accountability factor slowly vanishes the more arbitration is used. Likewise, the company that continues to pollute can quietly pay off the local farmers or fishers without the threat of multiple lawsuits which might otherwise provide a real reason to stop polluting. The LAWT is not confidential. Instead, it is a public forum for individuals to voice their concerns and challenge the companies and governments to clean up their act. While LAWT findings do not create legal precedent, the public nature of the dispute allows verdicts to serve as deterrents against future misdeeds. LAWT verdicts are publicly announced so that both parties can be held accountable while impartial monitoring is guaranteed. Mass media plays a role in spreading the tribunal resolution to various parts of the world and in inducing action from the international realm. Within the international arbitration community, more and more parties have consented to having public hearings and posting their awards. Although the confidential nature of arbitration is typically an advantage because it removes the matter from the public eye and shields both parties’ international reputation, many parties agree to public arbitrations for the sake of transparency and public diplomacy.19 There are benefits to public arbitration, but these options have not yet been fully explored. Transparent arbitrations have the potential to create national healing after diplomacy and negotiations have failed. Transparent arbitrations can also be used by public institutions, NGOs, and individuals to put moral, political, and public pressure on accused polluters who refuse to follow LAWT recommendations. Furthermore, the public nature of the tribunal ensures dissemination of information to the public regarding the water management problems in Latin America.

Binding natUre of arBitrationThe binding nature of arbitration is also a great concern. Typically, arbitration is binding, and there are few ways to appeal the dispute.20 The finality of arbitration is one of the many advantages of arbitration, depending on the vantage point. In many fields, arbitration is also less formal, so the rules of evidence and other formal aspects of discovery and litigation—that typically protect individual due process—are absent. The LAWT is nonbinding, and the fact that the LAWT is non-binding ensures that the parties still have a litigation alternative. Moreover, companies do not have to substitute LAWT arbitration for litigation since litigation is still possible according to the parameters of the LAWT tribunal. The arbitral format of the LAWT allows plaintiffs to hold defendants accountable to existing environmental laws. The non-binding nature of the LAWT means that a different kind of justice is served—a kind of justice that feeds the moral outrage and the public’s need to speak out against injustice. The LAWT empowers the communities that bring grievances because, through the tribunal’s resolution, individuals can make positive change to protect precious water resources. Furthermore, both parties are strengthened if they can come together and resolve the dispute. Many might consider the non-binding nature of the LAWT to be a hindrance to its success. The verdict becomes a tool in negotiations and a way for the community to pressure and raise concerns globally using mass media. This type of social pressure can work with governments and can even become successful with big corporations.21 Given the non-binding nature of the verdict, a glaring error of the tribunal is how difficult it is to persuade both parties to submit to the tribunal. Although the power is in the defendant’s hand as to whether or not to heed the tribunal’s recommendation, it is the “right” thing to do—or at least that is the underlying message the tribunal hopes to achieve. To be successful, the tribunal must appeal to each individual’s sense of ethics.

inaBility to proteCt disadvantagedADR has been criticized for its failure to create judicial precedence. Many critics worry that it could even become a “tool for diminishing the judicial development of legal rights for the disadvantaged.”22 Despite the rising popularity of ADR, scholars and academics have asserted various concerns about whether negotiation, mediation, and arbitration are particularly appropriate alternatives in areas such as family law, civil rights, and environmental law. Although there may be concerns about resolving environmental disputes between big business or big government and weaker communities outside the Courtroom, the LAWT does not bar the parties from taking subsequent legal action. Alternative dispute resolution (ADR) methods attempt to settle disputes between parties outside of the courtroom. One of the purposes of the LAWT is to

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produce recommendations and moral sanctions that can be used later in negotiations; thus, the result of the arbitration ideally furthers the negotiation process. In contrast, in collective bargaining situations, arbitration tends to discourage negotiations because parties often defer to the arbitrator instead of trying to resolve the issues between themselves.23 Because the LAWT still permits subsequent legal action, there is no likelihood that the parties will solely defer to the decision of the tribunal. Instead, the outcome of the tribunal becomes a tool in future negotiations, instead of the converse.

ConClUsionsBecause the tribunal is young and the LAWT has heard relatively few cases, it is difficult to gauge the effect that the verdicts and recommendations have had given the relatively short life of the tribunal. However, the tribunal utilizes a creative approach by employing a combination of various dispute resolution tools. The LAWT operates much like arbitration yet it circumvents the typical concerns that accompany arbitration including (1) the confidential nature of arbitration, (2) the binding nature of arbitration, and (3) arbitrations inability to protect the disadvantaged. The hearing is public to ensure that the parties are held accountable through impartial monitoring and social pressure. The verdict is nonbinding, so the right to pursue future litigation is not waived. The tribunal verdict carries a moral force in the community that raises awareness of injustice around the globe. While still maintaining its effectiveness as essentially a de facto institution of social pressure, the tribunal avoids the typical disadvantages of traditional arbitration, creating a unique and powerful way to deal with water disputes.

ENDNOTES[1] See The Fundamentals, THE LATIN AMERICAN WATER TRIBUNAL[2] See A River Made Up in a Long Journey to Istanbul, THE LATIN AMERICAN WATER TRIBUNAL[3] See id.[4] Carmen Maganda, The Latin American Water Tribunal and the Need for Public Spaces for Social Participation in Water Governance, in WATER AND URBAN DEVELOPMENT PARADIGMS: TOWARDS AN INTEGRATION OF ENGINEERING, DESIGN AND MANAGEMENT APPROACHES 688 (Jan Feyen, Kelly Shannon & Matthew Neville eds., 2009). [5] Id., [6] See id., [7] Id. [8] See Procedures, THE LATIN AMERICAN WATER TRIBUNAL.[9] See id., [10] See id. [11] See Denounce, THE LATIN AMERICAN WATER TRIBUNAL.[12] See Procedures, supra note 8. [13] See Maganda, supra note 4, at 690.[14] See id., [15] See id., [16] See Procedures, supra note 8. [17] See Fundamentals, supra note 1. [18] See Procedures, supra note 8; see also River to Istanbul, supra note 2. [19] A recent example is the Abyei Arbitration involving an intra-state dispute between two parties in Sudan regarding the implementation of the 2005 Comprehensive Peace Agreement, involving the Abyei land territory. See Government of Sudan v. Sudan People’s Liberation Movement/Army, Abyei Arb. (Perm. Ct. Arb. 2009)[hereinafter Abyei Arbitration]. In a rare decision to publicize the Abyei arbitration, the parties chose to broadcast the Abyei arbitration live on the web, which allowed the public to follow the details of the arbitration, including the expert testimony and the contribution of the five-panel tribunal. See Videotape: Rendering of Final Award (Abyei Arbitration, 2008) (on file with the Permanent Court of Arbitration). [20] See JAY FOLBERG ET AL., RESOLVING DISPUTES: THEORY, PRACTICE, AND LAW 707, 537 (2010).[21] For example, Starbucks recently adjusted farmers’ wages in some countries like Ethiopia. Kim Fellner, Starbucks v. Ethiopia, ETH. REV., Sept. 16, 2008. Starbucks’ policy shifted toward including more fair trade products due to the significant pressure of consumers and NGOs. [22] Harry T. Edwards, Alternative Dispute Resolution: Panacea or Anathema?, 99 HARV. L. REV. 668, 679 (1986). [23] Theodore J. St. Antoine, Arbitration and the Law, in ARBITRATION IN PRACTICE 9 (Arnold M. Zack ed. 1984).

Mikita Weaver

Mikita Weaver is the Editor-in-Chief of ADR Times, a premier online dispute resolution community. As an associate at Northrup Schlueter APLC, she focuses predominantly on litigation and arbitration in the field of construction insurance defense. She received her Juris Doctorate at Pepperdine University School of Law and received a Masters in Dispute Resolution from the Straus Institute. Mikita has been published on the Pepperdine Dispute Resolution Law Journal and worked at the Centre for Effective Dispute Resolution in London. As an avid traveler, she continues to explore various dispute resolution issues and how they vary from region to region. She graduated magna cum laude from Berea College with a philosophy degree and her favorite things include yoga, cooking, photography, and singing with the Legal Voices of Los Angeles and Lawyer’s Philharmonic.Meet Mikita— www.adrtimes.com/editor-in-chief

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