Alternative Dispute Resolutionand Attorney-Client Privilege

HA 8450

Professor Nancy R. Mansfield

Objectives• Identify the purpose of ADR• Compare & contrast ADR methods

– Negotiation, mediation, arbitration, hybrids

• Evaluate alternative ways to settle disputes– Which are best suited to business?– Which are best suited to health care?

• List the advantages and disadvantages of ADR

Why ADR? Litigationis Expensive …

• Total cost of litigation is estimated at $210 billion, equivalent to one-third of the after-tax profit of the Fortune 500– Total cost is increased by

delaying case resolution – Fortune 500 companies

spend an average of 3 years to resolve litigation

– Only 3% of cases are tried John B. Henry, elaw Forum

Metropolitan Corporate Counsel (Feb 2008)

Resolution of Fortune 500 Cases by Trial (Feb 2008)

Reducing Litigation Costs

• How can we reduce the cost of litigation in the US?– Penalize frivolous lawsuits– Cap damage awards– Require mediation or arbitration

• Also reduces congestion in courts

ADR Methods

• In order of party control:– Negotiation– Mediation– Med/Arb– Arbitration– Litigation

Negotiation Med/Arb Litigation

Mediation Arbitration

Classic ADR ModelsNegotiation Mediation Arbitration

How represented By selves or counsel By selves or counsel By counsel

Who decides Parties Parties If binding, arbitrator

Rules and procedures

Parties decide Parties decide Arbitration rules, such as AAA

Standard for resolution

Mutual agreement Mutual agreement Arbitrator’s sense of fairness

How enforced Enforceable contract Enforceable contract By courts

Who pays Each pays his own Parties decide Parties decide

Negotiation• Simplest form of ADR• Parties attempt to settle a dispute

– Attorneys may negotiate on behalf of party– More than 90% of corporate lawsuits are

resolved before trial

• Preparation is essential– Identify BATNA (Best Alternative To

Negotiated Agreement) – Rank issues to identify possible “trade-offs”

Negotiation: Planning

Mediation

• Neutral third party helps parties reach a solution• Role of the mediator

– Help parties identify their interests, positions, and options

– Build trust between the parties to facilitate communication and resolution of their dispute

• Role of parties

Standard Mediation Clause

• “The parties shall endeavor to resolve any dispute arising out of or relating to this Agreement by mediation under the CPR Mediation Procedure. Unless otherwise agreed, the parties will select a mediator from the CPR Panels of Distinguished Neutrals.”

“Mediating Disaster” Problem(page 229 Furrow Health Law text)

• Advantages:

• Disadvantages:

Arbitration Options for Medical Malpractice

A. Mandatory Non-binding Arbitration

B. Mandatory Screening Panels

C. Mandatory Binding Arbitrations

D. Voluntary Pre-Dispute Contract of Binding Arbitration

Arbitrator

Dispute

Decision

A B

Arbitration

Contract

Arbitration

• Resolution of the dispute by a neutral third party– Voluntary (contractual) or– Compulsory (public sector employees)

• Arbitrator’s decision final & binding

Federal Arbitration Act (FAA)

• Enacted by Congress in 1925

- covers any arbitration clause in a contract that involves interstate commerce

• Federal policy clearly favors arbitration of commercial disputes

• Courts are to “rigorously” enforce arbitration agreements

Standard Arbitration Clause“Any controversy or claim arising out of or

relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof.”

Other Arbitration Terms

• Arbitration clause should also specify– Scope – types of issues to arbitrate– Where and when arbitration will occur– Selection of arbitrators, e.g., number, kind,

and source – Procedures, e.g., scope of permissible

discovery, timetable, and types of damages that can be awarded

Arbitration Process• Parties agree to submission • Pre-Hearing phase

-Selection of arbitrator

-Limited discovery

-Parties submit statements and briefs

• Adversarial hearing

- Arbitrator has subpoena power

- Less formal rules of evidence

Judicial Review of Awards

• Under FAA, courts may set aside an arbitrator’s award only if– Award was obtained by fraud or corruption– Arbitrator was “demonstrably impartial or

corrupt” or “manifestly disregarded the law”– Misconduct by arbitrator– Arbitrator exceed his/her authority

• Awards that violate public policy may be struck by courts

Case Discussion—Arbitration in Health Care

Problem: Arbitrating Disaster (Furrow Health Law text p. 228 -229)

Query: Will Consumers suffer if Arbitration is used in a health care setting?

Outline the Arguments:

• in support of the agreement

• in opposition of the agreement

Unconscionable Agreements

• When is an agreement “unconscionable?”– If its terms are harsh and oppressive, grossly

unfair and/or one-sided

• Unconscionable arbitration clauses will not be enforced

Engalla v. Permanente Medical Group Inc.

64 Cal. Rptr. 2d 843 (Cal. 1997) The CA. S. Ct. held

1. HMO fraudulently induced pt. to agree to arbitrate

2. HMO waived rt. To arbitrate through dilatory tactics

3. Arbitration agreement was not per se unconscionable

Mediation vs Arbitration

MEDIATION ARBITRATION

Objective Compromise Adjudication

Authority None: Parties must agree

Decision is legally binding

Scope of

Authority

Free to fashion solution agreeable to both parties

Must remain within “four corners” of agreement

Mediation vs Arbitration (cont’d)

MEDIATION ARBITRATION

Role Facilitator Judge-like decision-maker

Qualifications None Labor exper. &/or

Academic creden.

Selection Criteria

Acceptable to

both parties

Acceptable to both parties

Hearing

Format

Less structured; informal

Similar to a trial

Hybrid Forms of ADR

• Med-Arb– If settlement isn’t achieved, parties agree to

binding arbitration– Agreement should specify that the same person

doesn’t serve as mediator and arbitrator

• Mini-trials– Summary presentation of case in trial format after

discovery and submission of briefs– After hearing adversary’s case, parties may settle

or third party may issue non-binding opinion

Hybrids (cont’d)• Summary jury trials

– “Real” jury hears abbreviated case and renders non-binding decision

– Attorneys “debrief” jurors to understand why they reached a decision

– Parties often able to negotiate a settlement

Advantages of ADR over Litigation

• Less adversarial – Win-win solutions possible

• Less formal discovery, procedure

• Less costly• Faster, less time-

consuming• More control over

outcome• Agreements & awards

can remain private• Favored by legal system

Additional Advantages of Arbitration

• Professional arbitrators can hear specialized disputes– Labor arbitrators– Commercial arbitrators– Health care

• Produces binding, final result

• Can include punitive damages

Is arbitration always the answer?

• If prior rulings are NOT precedent, are the results less predictable?

• If the parties establish the rules that govern the proceeding, is there any guarantee that they will be fair to both parties?

• Is arbitration always cheaper than litigation?

Arbitration Fairness Act of 2011

• http://www.govtrack.us/congress/bill.xpd?bill=s112-987• Similar legis. introduced in 2009 by Senator Russ

Feingold (WI) and Representative Hank Johnson (GA)• Would amend FAA by invalidating pre-dispute agreements

that require arbitration of– an employment, consumer, or franchise dispute, or – a dispute arising under any statute intended to protect civil rights

or to regulate contracts or transactions between parties of unequal bargaining power

• Would give the courts (under federal law) final authority to determine the validity or enforceability of an agreement to arbitrate (not the arbitrator)

• Referred to House and Senate Judiciary Committees

Supporters of the Legislation

• Earlier versions of the bill were favored by Public Citizen and consumer groups who say– We can’t trust companies

“to do the right thing”– AFA “supports people over

profits” and– “levels the playing field” for

average Americans

– Arbitration clauses in everyday contracts force individuals to forgo their right to court/jury, pre-trial discovery, etc.

Opponents of the Legislation• Earlier versions of the bill were opposed by US

Chamber of Commerce, Consumer Bankers Association, etc

• Their arguments:– If enacted, the bill would eliminate “efficient, less

costly means of resolving consumer disputes”– By casting doubt on arbitration agreements, it would

cause “widespread uncertainty” and higher costs (discovery, legal fees, and court costs)

– Unnecessary as current law protects against unfair and unconscionable contracts

• What are your thoughts?

Attorney-Client Privilegeand

Physician –Patient Privilege

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What are the elements of the privilege?

What is the scope of protection?

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Attorney - Client Privilege

Communications are privileged if made:

• With an attorney (acting as counsel for the clients)

• For the purpose of gaining legal advice

• In confidence

Attorney Work Product

Documents are privileged if developed

• By or under the direction of an attorney

• In anticipation of litigation

• In confidence

Recent Developments

• SOX section 307—requires reporting “up the ladder”

• “noisy withdrawal”—withdraw from representation and inform the SEC

• ABA Model Rules now permit attorneys to reveal client confidences

• Federal Sentencing Guidelines may require waiver of attny-client privilege

Policy Issues

• What are the benefits of the privileges to the client?

• What is the benefit to society of these rules?