© 2006 Prentice Hall Ch. 4-1 THE LEGAL ENVIRONMENT OF BUSINESS A Critical Thinking Approach Fourth...

© 2006 Prentice Hall© 2006 Prentice Hall Ch. 4-Ch. 4-11

THETHE LEGALLEGAL ENVIRONMENTENVIRONMENT OFOF BUSINESSBUSINESS

A Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachFourth EditionFourth Edition

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne


THE LEGAL ENVIRONMENT OF BUSINESS

CHAPTER 6CHAPTER 6

Alternative Tools of Dispute Alternative Tools of Dispute ResolutionResolution



Alternative Dispute ResolutionAlternative Dispute ResolutionAlternatives to LitigationAlternatives to Litigation

Negotiation and Settlement Negotiation and Settlement

ArbitrationArbitration

MediationMediation

MinitrialsMinitrials

Private TrialsPrivate Trials

Summary Jury TrialsSummary Jury Trials

Early Neutral Case EvaluationEarly Neutral Case Evaluation



Alternative Dispute ResolutionAlternative Dispute ResolutionReasons for increasing popularity:Reasons for increasing popularity:

CostCost

TimeTime

Uncertainty and Uncertainty and riskrisk

Court-ordered ADRCourt-ordered ADR

FlexibilityFlexibility

ConfidentialityConfidentiality

Preservation of Preservation of business relationshipbusiness relationship



Alternative Dispute ResolutionAlternative Dispute Resolution

NegotiationNegotiation

P1 P2





P1 P2

A




Arbitration-AwardArbitration-Award

P1 P2

A



The Arbitration ProcessThe Arbitration Process

Both sides submit briefs of facts and lawBoth sides submit briefs of facts and law

Proceedings are private, not publicProceedings are private, not public

No official record is madeNo official record is made

Witnesses and evidence presentedWitnesses and evidence presented

Rules of evidence are relaxedRules of evidence are relaxed

Decisions rendered within 30 daysDecisions rendered within 30 days




Parties submit their opposing positions Parties submit their opposing positions to a neutral arbitratorto a neutral arbitrator

Arbitrator has power to decideArbitrator has power to decide

Arbitrator is selected by agreement of Arbitrator is selected by agreement of the partiesthe parties

Arbitrator usually has familiarity with Arbitrator usually has familiarity with type of disputetype of dispute



ArbitrationArbitrationCompromise resolution is expectedCompromise resolution is expected

Results called Award in ArbitrationResults called Award in Arbitration

Arbitrator not required to follow precedentArbitrator not required to follow precedent

Courts routinely enforce awards: appeals Courts routinely enforce awards: appeals notnot favoredfavored

Results are legally binding—few are Results are legally binding—few are challengedchallenged



Methods of Securing ArbitrationMethods of Securing Arbitration

By Arbitration clause in agreementBy Arbitration clause in agreement

By Submission agreementBy Submission agreement

Concerns have been raised about Concerns have been raised about employees waiver of statutory rights by employees waiver of statutory rights by accepting arbitration clausesaccepting arbitration clauses

See, Securities Industry CasesSee, Securities Industry Cases



Selection of the ArbitratorSelection of the Arbitrator

Lists of candidates for Lists of candidates for arbitrator provided to arbitrator provided to each partyeach party

Parties select Parties select arbitrator, and time arbitrator, and time and placeand place

Parties agree to follow Parties agree to follow the rules: AAA, ICCthe rules: AAA, ICC

Who are they?Who are they?

Generally, lawyers, retired Generally, lawyers, retired judges, professors or other judges, professors or other professionals in the fieldprofessionals in the field



Common Uses of ArbitrationCommon Uses of Arbitration

Labor DisputesLabor Disputes

Business conflictsBusiness conflicts

Consumer complaintsConsumer complaints

Various matters typically Various matters typically found in civil litigation: found in civil litigation: tort, contract casestort, contract cases



Problems with ArbitrationProblems with ArbitrationConcerns with discrimination casesConcerns with discrimination cases

Concerns with Arbitrators’ backgroundConcerns with Arbitrators’ background

Absence of written opinionsAbsence of written opinions

Costs typically shared in arbitration—poses Costs typically shared in arbitration—poses greater impact on employee than on employer—greater impact on employee than on employer—may have a ‘chilling effect’may have a ‘chilling effect’




MediationMediation

P1 P2M



MediationMediation

Instead, mediator facilitates the parties Instead, mediator facilitates the parties themselves in reaching agreementthemselves in reaching agreement

If the parties reach agreement, the matter If the parties reach agreement, the matter is settledis settled

If not, the parties can go on to arbitration If not, the parties can go on to arbitration or litigationor litigation

Mediator is not empowered to impose Mediator is not empowered to impose a decision on the partiesa decision on the parties



The Mediation ProcessThe Mediation ProcessMediator points out strengths and weaknesses Mediator points out strengths and weaknesses of each sides’ case, privatelyof each sides’ case, privately

Mediator shuttles between opposing parties, Mediator shuttles between opposing parties, conveying informationconveying information

Offers and disclosures made in mediation Offers and disclosures made in mediation cannot be used as evidence at trialcannot be used as evidence at trial

Very flexible and creative processVery flexible and creative process



The Mediation ProcessThe Mediation ProcessMediators available via private ADR companiesMediators available via private ADR companies

Often, former judges serve as mediatorsOften, former judges serve as mediators

PRO:PRO: They have legal knowledge.They have legal knowledge.

CON:CON: Judges find it hard to stop being judge!Judges find it hard to stop being judge!



Advantages of MediationAdvantages of MediationApplicable to almost all disputesApplicable to almost all disputes

Useful for multi-party disputesUseful for multi-party disputes

CreativeCreative

Non-adversarialNon-adversarial

Avoids win-lose outcomeAvoids win-lose outcome

Allows for continuing relationshipAllows for continuing relationship

Usually less expensive and time-Usually less expensive and time-consumingconsuming



Criticisms of MediationCriticisms of Mediation

Glosses over Glosses over fundamental structural fundamental structural conflictsconflicts

Misleading impression of Misleading impression of equality of partiesequality of parties

Subject to abuse by bad Subject to abuse by bad faith of one partyfaith of one party



MinitrialsMinitrials

Relatively new ADR methodRelatively new ADR method

Abbreviated trial arguments submitted Abbreviated trial arguments submitted to adviserto adviser

Adviser renders opinion as to probable Adviser renders opinion as to probable outcome at trialoutcome at trial

Executives meet without attorneys to Executives meet without attorneys to try and settle casetry and settle case



Other ADR MethodsOther ADR MethodsEarly Neutral Case EvaluationEarly Neutral Case Evaluation

Similar to minitrialSimilar to minitrial

Private TrialsPrivate Trials

Like an actual trial, but tried to a private Like an actual trial, but tried to a private judge selected by agreement of the partiesjudge selected by agreement of the parties

Summary Jury TrialsSummary Jury Trials

Streamlined, 1-day, actual trials leading to Streamlined, 1-day, actual trials leading to 95% settlement rate95% settlement rate



Court-Annexed ADRCourt-Annexed ADR

Implemented by court ruleImplemented by court rule

Many jurisdictions require ADR as a pre-Many jurisdictions require ADR as a pre-condition to access to courtroomcondition to access to courtroom

Requirements vary from state to state, and Requirements vary from state to state, and in federal courtin federal court

Usually, court-annexed ADR is NOT Usually, court-annexed ADR is NOT binding…the parties may go back to court binding…the parties may go back to court



The Future of ADRThe Future of ADR

Concerns include:Concerns include:

Is it really ‘voluntary’?Is it really ‘voluntary’?

Subject to bias?Subject to bias?

Loss of rights?Loss of rights?

Continuing growth of ADR is expectedContinuing growth of ADR is expected



Global Dimensions of ADRGlobal Dimensions of ADRADR is widely-used in ADR is widely-used in international contractsinternational contracts

Arbitration awards are Arbitration awards are easily enforceable in easily enforceable in other countries due to other countries due to UN TreatyUN Treaty

Only limited defenses to Only limited defenses to enforceability are enforceability are allowed under the rulesallowed under the rules

© 2006 Prentice Hall Ch. 4-1 THE LEGAL ENVIRONMENT OF BUSINESS A Critical Thinking Approach Fourth...

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