Schein Returns: Scotus’s Arbitration Remand Is Now Back at the Court

By Philip J. Loree Jr.

A party fighting to arbitrate under its contract has sought U.S. Supreme Court review of a Fifth U.S. Circuit Court of Appeals case holding that an injunctive action carve-out clause effectively negates the parties’ arbitration contract delegating the decision whether the case should be arbitrated to an arbitrator, not the courts.

If the Court agrees to accept the case, which is the subject of the Jan. 30 petition, it would be the second time in about two years that the nation’s top Court has heard the case.

The decision challenged in the cert petition, Archer and White Sales Inc. v. Henry Schein Inc., et al., No. 16‐41674 (5th Cir. Aug. 14, 2019) (available at http://bit.ly/33Cb78g) (“Schein II”), was a remand of the U.S. Supreme Court’s opinion of a year ago, Henry Schein Inc. v. Archer & White Sales Inc., 139 S. Ct. 524 (Jan. 8, 2019) (available at https://bit.ly/2CXAgPw) (Schein I).

There were several important 2019 cases concerning the application and effect of what are commonly referred to as “Delegation Clauses,” “Delegation Provisions,” or “Delegation Agreements.” These clear and unmistakable undertakings by parties to submit arbitrability issues to arbitration usually are expressly set forth in an arbitration agreement. Other times they are contained in arbitration rules that the parties incorporate by reference into their agreement.

Much of the controversy in the Delegation Agreement cases centers on whether the terms of the arbitration agreement should define or circumscribe the scope of a Delegation Agreement–or even effectively negate it.

These cases have conflated the question of who gets to decide whether an issue is arbitrable with the separate question of what the outcome of the arbitrability dispute should be, irrespective of who decides it.

The most important of the recent cases is Henry Schein Inc. v. Archer & White Sales, Inc., which for discussion purposes is conveniently bifurcated into its two most prominent components, Schein I and Schein II.

Schein I

In Schein I, the Supreme Court, in a 9-0 decision, held that where parties have clearly and unmistakably agreed to arbitrate arbitrability disputes, courts must compel the process even if the argument in favor of arbitrability is “wholly groundless.” Schein I, 139 S.Ct. at 528-531.

The Schein I Court vacated an order and judgment of the Fifth Circuit, which held that, even assuming the parties entered into a Delegation Agreement, the arbitration proponent was not required to submit to arbitration the question whether a dispute concerning injunctive relief was arbitrable because that arbitrability dispute was, according to the Fifth Circuit, wholly groundless.

The Schein I Court remanded to the Fifth Circuit the question whether the parties entered into a Delegation Agreement, an issue that the Fifth Circuit had left open, but which had to be addressed in light of the U.S. Supreme Court’s decision abrogating the so-called “wholly groundless exception.”

And that remand case is Schein II.

Schein II

In Schein II, the Fifth Circuit set out to determine whether the parties had clearly and unmistakably agreed to submit arbitrability disputes to arbitration. The essential facts pertinent to this question can be distilled down to these:

  1. Party A’s and Party B’s contract contained an arbitration agreement, which featured a “carve-out” for certain claims, including “actions seeking injunctive relief”: “Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property of Party B), shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association [the “AAA”].”
  2. Party A commenced an action against Party B that sought, among other things, injunctive relief, which A said was outside the scope of the arbitration agreement.
  3. Party B said that A’s arbitrability argument had to be submitted to arbitration because the parties clearly and unmistakably delegated arbitrability questions to the arbitrator by incorporating AAA Commercial Arbitration Rules into their contract, including Rule 7 of those rules.
  4. Rule 7(a) of the AAA Commercial Arbitration Rules provided:

(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.

On remand, the Fifth Circuit observed that under circuit precedent, incorporating arbitrator provider rules that clearly and unmistakably require arbitration of arbitrability constitute clear and unmistakable evidence of an intent to arbitrate arbitrability. The Court therefore recognized that the parties had entered into a Delegation Agreement.

But here, stated the Fifth Circuit, the “placement of the [injunctive action] carve-out . . . is dispositive[,]” and “[w]e cannot rewrite the words of the contract.”

“The most natural reading of the arbitration clause,” said the Court, is “that any dispute, except actions seeking injunctive relief, shall be resolved in arbitration in accordance with the AAA rules.”

The agreement “incorporates the AAA rules” and therefore delegates arbitrability “for all disputes except those under the carve-out.” (Emphasis is the Fifth Circuit’s.) Because of “that carve out,” wrote Fifth Circuit Judge Patrick E. Higginbotham for the unanimous three-judge panel, “we cannot say that the Dealer Agreement evinces a ‘clear and unmistakable’ intent to delegate arbitrability.”

Accordingly, the Fifth Circuit held that the parties did not clearly and unmistakably agree to delegate the arbitrability decision and affirmed the district court’s denial of the arbitration proponents’ motions to compel arbitration.

On Aug. 28, 2019, the arbitration proponent moved for rehearing en banc. On Dec. 6, the Fifth Circuit denied the motion for rehearing.  That’s when the proponent became the petitioner at the U.S. Supreme Court. Henry Schein Inc., a Melville, N.Y.-based dental equipment distributor, on Jan. 24 obtained from the Supreme Court a stay of litigation pending its petition for certiorari, which it filed on Jan. 30.

You can download a copy of the petition  here. A response from Archer & White Sales, a Plano, Texas, distributor, seller, and servicer of dental equipment, is due March 2.

Schein II was Wrongly Decided

This author believes Schein II was wrongly decided. In “Back to SCOTUS’s Schein: A Separability Analysis that Resolves the Problem with the Fifth Circuit Remand,” 37 Alternatives 131(October 2019), this author argued that Schein II can be reasonably interpreted to mean either:

(a) the parties did not clearly and unambiguously agree to arbitrate any arbitrability issues; or

(b) the parties’ agreed to arbitrate only arbitrability disputes about matters that fall within the scope of the arbitration agreement.

The first interpretation would negate the parties’ incorporation of AAA Commercial Rule 7. The second interpretation would mean that the parties clearly and unmistakably agreed to arbitrate only questions that ask whether a matter that is at least arguably within the scope of the arbitration agreement, but clearly outside the scope of the carve-out, is arbitrable.

Because the presumption in favor of arbitrability deems such matters to be arbitrable as a matter of law, the second interpretation would mean that the parties agreed to arbitrate only arbitrability questions that were not only relatively rare, but also legally uncontroversial.

That makes little sense and would mean the parties’ incorporation of AAA Commercial Rule 7 was of little or no practical significance or effect.

The article proposes a solution to the interpretative problem that a Schein II-Type analysis creates, and under which courts interpret arbitration-agreement terms as overriding or defining the scope of Delegation Agreements that are made part of those arbitration agreements.

It argues that courts instead should use the analytical framework of the separability doctrine—first espoused in Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), and applied to Delegation Agreements in Rent-a-Center West Inc. v. Jackson, 561 U.S. 63 (2010)—to interpret Delegation Agreements as being independent from the arbitration agreements in which they are contained, and not graft upon those Delegation Agreements scope limitations that are based on the terms of the arbitration agreement containing the Delegation Agreement.

It explains in detail why using a separability-based analytical model has a number of advantages over the Schein II approach in that it gives full effect to the terms of the separate arbitration and Delegation Agreements, gives effect to the separate but related purposes that each of those agreements serves, and otherwise helps ensure that the parties’ legitimate contractual expectations are met.

The author hopes that the Supreme Court will grant certiorari, reverse, and clarify how the lower courts should address cases where parties agree to a broad arbitration agreement, incorporate by reference into that agreement a broad, unqualified, Delegation Agreement, but except from the scope of their arbitration agreement certain types of disputes.

There are many other reasons why the author believes SCOTUS should hear and reverse Schein II, but a thorough discussion of them must await another article or post.

The whole point of Schein I was that the merits of an arbitrability question has no bearing on the question of who gets to decide that question. Schein II does not comport with Schein I and should be reversed.

* * *

Philip J. Loree Jr. is a co-founder and partner at the New York law firm, Loree & Loree. The opinions expressed in this post are his own, and not those of the blog publisher, the CPR Institute.

 

 

 

Progress Report: New York Courts’ ‘Presumptive ADR’ Settles In

By Anne Muenchinger and Russ Bleemer

The New York City Bar Association hosted on Wednesday a panel discussion aimed at assessing the progress in the implementation of a new “Presumptive ADR” initiative in the New York State Court System.

The push for conflict resolution processes ahead of litigation is part of New York State Chief Judge Janet DiFiore’s Excellence Initiative, seeking to reduce litigation costs and empower parties by introducing mediation early in the process and increasing settlement rates. See Savannah Billingham-Hemminger, “Update: ADR Breakfast on New York State’s Presumptive Mediation Implementation,” CPR Speaks (July 16, 2019) (available at http://bit.ly/38GeCfx).

Since last summer, thanks to the concerted efforts of administrative and supervising judges and court staffs, as well as ADR practitioners, courts have begun to carry out this initiative by expanding current ADR programs and designing new ones. A May 2019 announcement (see press release at http://bit.ly/32lhjkq) tasked the courts with rolling out “local protocols, guidelines and best practices” by September, re-focusing a task force report on a broader “presumptive ADR” from the report’s focus on mediation.

Administrative judge panelists at the bar association continued that emphasis, discussing a wide variety of ADR processes that courts across the board are or will be deploying for party use.

The panel began by outlining the progress over the past year in their respective courts, followed by a broader discussion on challenges the system is facing with broadening and implementing presumptive ADR.

Judge Anthony Cannataro, the administrative judge of the New York City civil courts, began the discussion by outlining some of the ADR processes traditionally used in civil court, notably binding arbitration and evaluative techniques.

He emphasized a new role that Community Dispute Resolution Centers—the local nonprofits with which the state court system partners to provide mediation, arbitration and other ADR options as a court alternative–are taking on by providing the infrastructure needed to address the great influx of cases that are now being sent to mediation.

Cannataro reported that mediation has been remarkably successful in one category of cases traditionally challenging for judges: those where a party has no representation.  Those pro se cases often have emotions running high over personal issues.

He also pointed to the successful use of judicial hearing officers in cases that are transferred from the Supreme Court (the Supreme Court is New York state’s trial-level court), as well as the increased use of settlement conferencing, and accelerated trial judgments.

Cannataro said he anticipates the need for a strong mentorship program to train new mediators, a greater use of early neutral evaluations, and the development of mass settlement conferences. The conferences would provide speedier resolution for high-volume practices, such as no-fault insurance cases, where thousands of filings presenting almost identical elements could be resolved at once.

The implementation of such a program requires negotiation with larger insurance carriers and providers in order to take a statistical value approach, which may enable a more systematic and speedier resolution, and a significant relief for crowded dockets.

For panel member Judge Jeanette Ruiz, who is administrative judge of New York City’s family court, the new initiative move is much more than a shift toward ADR.  She told the audience of about 100 that it is an opportunity to transform certain aspects of the family law practice that have historically not received much attention.

Child custody practice—particularly, custody visitation cases–Ruiz reported, is an area that will likely benefit from greater mediation use, as exemplified by the success of a small pilot program recently launched in Queens.

One of the key features for Judge Ruiz has been the development of a detailed screening process to determine which cases would better be resolved through ADR processes. This screening, which covers all parties to a dispute, divides cases along three tracks: cases to be sent to mediation, to structured conferences for some of the more complex cases, and those which are best resolved via expedited trial.

This determination occurs according to the presence of certain factors, including domestic violence, mental illness, substance abuse, and a history of litigious behavior. Cases involving these factors will likely fall into the third track.

Ruiz emphasized the importance of engaging the legal community in the transformation in the court system. A planning committee has been set up in order to collect data, get feedback and to remain in touch with community members in order to ensure a successful transition into an ADR-oriented system.

Justice Deborah Kaplan, administrative justice of New York County’s Supreme Court, expressed her enthusiasm for this transition, citing the New York court system benefits from more ADR programs throughout the state’s 62 counties.

She said she believes that efficiency–one of the goals sought through the initiative’s implementation–would be achieved in curtailing discovery to that sufficient for mediation. This will be accomplished in part through strict time limits for document production, during which a mediator would be assigned in order to schedule an initial session within 30 days of filing.

In addition, automatic early referral is a key component to the program’s success, as the parties are encouraged to think about the issues that set the case in motion.

Justice Kaplan cited a laundry list of current ADR programs, including judicial mediation programs, early settlement malpractice, matrimonial early mediation, and “skilled matrimonial early neutral evaluation.” In addition, many programs are currently undergoing expansion, including presumptive matrimonial mediation, the tort neutral evaluation program, tax certiorari cases in which property owners can challenge a real estate tax assessment, and a successful presumptive mediation pilot program for cases in New York County’s non-commercial division–cases involving less than $500,000.

She also discussed programs for summary jury trials in automobile cases and dispute resolution processes for asbestos matters, where Kaplan said more than 3,000 cases were invited to a special settlement day which she suggested would be repeated.

The panel generally agreed that summary jury trials should be expanded, but moderator John Kiernan warned that commercial-side efforts to increase SJTs had been disappointing, mostly due to party resistance.

Justice Kaplan also emphasized the importance of screening from ADR processes in matrimonial cases involving domestic violence or power imbalances, which she said is done by an outside agency.

Finally, she underlined the importance of making public a diverse roster of ADR practitioners—a searchable roster, said Kaplan, that will allow a party to find a neutral directly “so that you will never have to come visit us in the court.”

Moderator Kiernan, a New York-based Debevoise & Plimpton partner who headed the task force that issued the report that the court system used for the presumptive ADR initiative, responded that “the speed of change in the courts is amazing.”

A discussion including all panel members covered concerns about a lack of facilities, significant implementation time requirements, and a severe lack of multilingual neutrals as the challenges in the shift toward ADR moves forward.

Diversity was an important topic of discussion, in response to an audience inquiry.  Lisa Denig, Special Counsel for the ADR Initiative for the state’s Office of Court Administration, spoke at length on the issue, noting that the increased ADR use has ignited a renewed effort to recruit a diverse group of new mediators in order to better address the disputants’ needs. Several projects are in the works to provide better access to mediation training programs, she said.

Another important issue is neutrals’ compensation. Currently, parties are provided with a free 90-minute session, beyond which they may continue for a fee. This practice is particularly important in order to encourage parties to make use of these programs and to encourage higher settlement rates.

Denig acknowledged the need for discussion on this issue, which she said will intensify as programs are up and running. She noted that mediators are paid in successful programs in other states.

Panelist Lisa Courtney, the Office of Court Administration’s statewide ADR coordinator, pointed out that family court mediators already are paid, and a current goal is adding more languages capabilities. She discussed the CDRC’s “gold standard” training as essential in building mediation programs.

Kiernan—who was chairman of Alternatives’ publisher, the CPR Institute, when he organized the task force as part of his initiatives, at the same time, as the NYC Bar Association president–said that the system can expand to “tens of thousands” of mediation cases with existing neutrals and volunteers.  But he said that to get to “hundreds of thousands of cases,” programs in New Jersey and Florida needed thousands of mediators.  “You need paid mediators,” he said.

Kiernan said the court ADR programs ultimately are effective, with “staggeringly low” opt-out rates.

Audience member Roger Juan Maldonado, a litigation partner in New York’s Smith, Gambrell & Russell, LLP. who is the current NYC Bar Association president, returned to the issue of representation, urging the panel to consider the issue of appointed counsel for pro se litigants in light of the huge numbers of such cases.

Panelist Judge Cannataro said he believes all court processes are better with representation on both sides, but suggested that the courts had to address the cases as they come. Cannataro assured Maldonado and the audience that the court system would examine where ADR works with and without representation, and will monitor closely the outcomes.

Finally, the topic turned to a unification of ADR rules for the future. While the task force report initially proposed creating a set of rules, the Office of Court Administration and Chief Administrative Judge Lawrence Marks made the decision not to issue them at the outset. (For more, see “‘Presumptive Mediation’: New York Moves to Improve Its Court ADR Game,” 37 Alternatives 107 (July/August 2019) (available at http://bit.ly/2GbCWdK).

They felt it would be best to let the programs develop and evolve so that future rules would be better adapted to the multiplicity and diversity of ADR programs that were in development last summer for the September 2019 launch.

“Many were surprised about that,” said John Kiernan, but the courts statewide so far have developed “great new plans and programs without it.” He added that he expected uniform statewide rules would emerge eventually.

Lisa Denig agreed, and discussed development of a standard-setting ADR protocol in the state’s matrimonial courts, though she said that she expects it will take some time to develop it as the courts implement their local programs.

For the moment, quality control will be measured by an ADR coordinator and screening processes for newly trained mediators, though Judge Anthony Cannataro said that good mediators are instrumental in recognizing cases that should not be mediated.

 

Anne Muenchinger is a CPR Institute Spring 2020 intern, and an LLM student at the Benjamin N. Cardozo School of Law at Yeshiva University in New York City. Russ Bleemer is the editor of Alternatives.

Tuesday’s SCOTUS Argument: Can Non-Signatories Compel Arbitration in the United States Under the New York Convention?

By Doo-Won ‘David’ Chung and Russ Bleemer

When a party files for arbitration under a contract but it is not a signatory to the contract, sparks can fly.

On Tuesday, the U.S. Supreme Court heard from both sides that non-parties can compel arbitration under the Federal Arbitration Act in oral arguments for this term’s sole arbitration case, GE Energy Power Conversion France SAS v. Outokumpu Stainless USA LLC, No. 18-1048.

But the arbitration falls under the international Convention on the Recognition and Enforcement of Foreign Arbitral Awards, best known as the New York Convention, adopted and implemented as the FAA’s Chapter 2 in the United States.

And on its surface, it appears the treatment may be different.  The Eleventh U.S. Circuit Court of Appeals rejected nonparty GE Energy’s motion to compel arbitration, focusing on the first of four treaty requirements for compelling arbitration— “there is an agreement in writing within the meaning of the Convention.” Outokumpu Stainless U.S. LLC v. Converteam SAS, 902 F.3d 1316, 1325 (11th Cir. 2018) (available at http://bit.ly/2E1eSc0).

The Supreme Court agreed to hear the case last year on whether the New York Convention allows a non-signatory to an arbitration agreement to compel arbitration based on the doctrine of equitable estoppel. See “The Friends Speak: Here’s What Scotus Will Decide in the GE Energy International Arbitration Case,” 38 Alternatives 2 (January 2020) (available at http://bit.ly/2v2pJ3Z).

The Court’s strong historical preference for arbitration appeared to be a tipoff that it took the case to reverse.  But early in the opening argument by GE Energy’s attorney, Shay Dvoretzky, a Washington, D.C. partner in Jones Day, Chief Justice John G. Roberts Jr. showed a concern he focused on repeatedly, that being able to force arbitration against a party who never consented would be inconsistent with “one of the central propositions of our arbitration precedents that arbitration is based on agreements.”

Dvoretzky had urged the Court to permit the use of the equitable estoppel doctrine as part of a group of methods by which nonparties can invoke an arbitration agreement under the New York Convention. Respondent Outokumpu contended that the Convention requires a signed arbitration contract by the party invoking arbitration.

Roberts seemed to share reservations about nonparties.  Responding to his own hypothetical for Dvoretzky, the chief justice said, “here somebody who never agreed to arbitration is being forced into arbitration, even though he has a clear right to take his dispute to court.”

While admitting that arbitration is a matter of consent, Dvoretzky argued that the consent by the respondent was exhibited by the contract’s existence with its arbitration provision, even if it didn’t name the party.  The scope of that agreement, at least in the context of FAA Chapter 1, had been determined Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630–31 (2009) (available at http://bit.ly/3442FxB), which extends the agreement’s use to nonparties under a variety of doctrines, without restriction to signatories.

The case arose out of a dispute between respondent Outokumpu, a Calvert, Ala., steel manufacturer, and a subcontractor, GE Energy, which agreed to supply nine motors to run three steel mills which failed.

While the contract between Outokumpu and its construction general contractor included an arbitration agreement, subcontractor GE Energy was not yet selected, according to Dvoretzky, and not a signatory.  When Outokumpu filed suit against GE Energy in a state court, the subcontractor removed to federal court and moved to dismiss and compel arbitration under the contract.

Alabama’s Southern District federal court granted GE Energy’s motion to compel arbitration and dismissed the action, but on appeal, the Eleventh Circuit reversed.

The appeals court acknowledged that, for domestic arbitration agreements, equitable estoppel allows the non-signatory to enforce the arbitration clause under Arthur Andersen.  But the circuit court distinguished international arbitration agreements, and held “to compel arbitration, the [New York Convention] requires that the arbitration agreement be signed by the parties before the Court or their privities.”

Shay Dvoretzky opened his argument on GE Energy’s behalf by noting that the New York Convention is silent about enforcement by non-signatories.  “That silence is consistent with the Convention’s design, which sets a floor, not a ceiling, for enforcing arbitration agreements and awards,” he explained.

According to Dvoretzky, since the Convention doesn’t say states can’t do more than what the Convention requires, the rest is left to the states’ domestic arbitration laws. Dvoretzky further contended, “Other contracting states are close to unanimous that the Convention does not preempt domestic law allowing non-signatory enforcement.”

Justice Elena Kagan told Dvoretzky, “It seems odd that Congress would have passed the implementing legislation on the view that another contracting state could compel arbitration without any consent whatsoever.”

“I think this goes to the core question of what the Convention is trying to do,” countered Dvoretzky, adding, “The Convention is trying to set forth minimum standards by which other countries will recognize and enforce arbitration agreements.”

After Justice Neil Gorsuch seemed satisfied by Dvoretzky’s response that there was nothing in the New York Convention preventing the use of the equitable estoppel doctrine in matters under the treaty, Kagan jumped back into the discussion, saying she agreed with the chief justice:

If you’re talking about an alter ego or something like that, or a successor in interest, maybe that person counts as a party, even though it is not the signatory but there is some limit.  . . .

[S]o if it’s a matter of voluntary consent, and everybody thinks that that’s what arbitration is, shouldn’t we read the parties to be, you know, the parties? Nobody else.

Dvoretzky responded with a return to Arthur Andersen. “Certainly under domestic law it is understood to be a matter of voluntary consent,” he said, “but the Court saw no issue with the possibility after an equitable estoppel theory that would allow a nonparty to enforce.”

Jonathan Y. Ellis, Assistant to the Solicitor General whose amicus argument supported GE Energy, explained that the New York Convention’s role is to assist courts in the recognition of international arbitration agreements, but it doesn’t provide a comprehensive set of arbitration rules. He argued that the Convention presumes validity of arbitration agreements, and doesn’t speak to agreements’ scope.

Justice Sonia Sotomayor leaned toward GE Energy’s case during Ellis’s argument, but pushed for a rule. She appeared to agree that there are bases for the argument that contracting states can pick who the parties are, but she also said that there should be limits.  “What’s the limiting principle of equitable estoppel?” she asked, adding, “It can’t be every single type of equitable estoppel is okay.”

She added that if GE is contemplated by the contract as a supplier, the matter “seems like a fairly straightforward case to me.”

Ellis responded that the New York Convention has standards on whether an arbitration agreement was reached between the parties, and signatory states’ limits on recognizing “other types of arbitration agreements” needs to be satisfied.  But, he said he didn’t think the Convention “can be read to impose those limits.”

Jonathan D. Hacker, a partner in Washington D.C.’s O’Melveny & Myers LLP, disagreed with GE Energy’s Convention interpretation in his argument on behalf of the steelmaker Outokumpu. Instead, Hacker asserted that the Convention makes it a ceiling—declaring that a written agreement by the parties is necessary to enforce international arbitration agreements.

After a hypothetical by Justice Stephen G. Breyer that allowed a successor party to arbitrate a contract via domestic law, Hacker contended that allowing domestic law to decide who gets to enforce arbitration “creates a huge problem under the Convention because then the states can begin subjecting parties to arbitration” even without consent, which he said is against the Convention’s requirements.

In closing, Hacker argued that “extension of an arbitration agreement to non-parties” is “supposed to be the exception that you almost never see,” and if GE Energy’s interpretation is adopted, “essentially all subcontractors would suddenly be able to arbitrate, even absent a written agreement.”

The Supreme Court’s decision, expected by the end of the term in June, may be crucial not just for arbitration practitioners, but also for parties engaged in cross-border transactions that involve performance by non-signatories.  If the Court affirms the circuit court’s decision, it may create the need for more detailed participation of potential parties, as signatories, for contracting.

* * *

Tuesday’s GE Energy arguments were the second of two for Chief Justice Roberts who, after the case concluded, walked across the street to the U.S. Capitol from the Court to begin his new second job presiding over the U.S. Senate impeachment trial of President Trump.

* * *

This post is based on the transcript of the arguments, posted Tuesday afternoon, and is available on the Court’s website at http://bit.ly/2RD1JMG.

Chung, a law student at Benjamin N. Cardozo School of Law at New York’s Yeshiva University, is a 2020 spring semester CPR Intern; Bleemer edits Alternatives for the CPR Institute at altnewsletter.com.

CPR Tribute to Peter Kaskell

kaskellparty

By Russ Bleemer

Longtime CPR Institute senior vice president Peter F. Kaskell, who spearheaded the translation of seminal commercial ADR theories into everyday dispute management processes, died Dec. 11 at 94. He lived in West Redding, Conn.

Kaskell joined the CPR Institute in 1983, soon after it was founded, following a lengthy legal career, mostly in-house.  He devoted two decades at the New York nonprofit to devising ADR procedures and leading initiatives that produced still-vital versions ADR tools.

“Peter paved the way for CPR Institute’s committees and task forces continued work on identifying better ways to resolve legal conflict,” said CPR President and Chief Executive Allen Waxman, “producing first-generation, fundamental processes in prominent areas including arbitration.”

Kaskell is best known later in his career for co-editing with Thomas J. Stipanowich, who headed the CPR Institute from 2000 to 2005, an often-cited best practices treatise, Commercial Arbitration at Its Best, a 2001 volume published with the American Bar Association.

But well before the treatise, Kaskell was an organizing force for the CPR Institute.  He set up what became a prototype for CPR Institute annual meetings, establishing cutting-edge agendas and recruiting and moderating numerous panels.

He led committee work that produced key CPR Institute Model ADR Practices and Procedures, for which Kaskell did the bulk of the writing and editing.

The first of his significant works was an analysis of the workings of the minitrial, which brought an informal way of assessing a case into a structured toolbox process for addressing and diffusing litigation.  A minitrial consists of an adversarial information exchange, followed by management negotiations directed to settling a dispute before a full-blown legal proceeding in a public court.

Kaskell wrote the minitrial rules, which were reviewed by an ad hoc committee assembled by the CPR Institute—then, the Center for Public Resources—before they were offered for adaptation to legal conflicts.

They were unprecedented–“the first model rules for minitrials and . . . designed to be flexible enough to be adopted by virtually any company contemplating submitting a dispute to minitrial for resolution.” Model Mini-Trial Agreement for Business Disputes, 3 (5) Alternatives 1 (May 1985) (available at http://bit.ly/2sDJo9k).

Kaskell returned to the subject of minitrials at CPR events and meetings.  The procedure, which was updated and supplemented twice over the years, is still used: You can read the full minitrial procedure and commentary at CPR Institute’s website at http://bit.ly/2sDJo9k.

Even more significantly, CPR’s arbitration rules began on Peter Kaskell’s desk.  When the CPR Institute first looked at arbitration in the 1980s, it saw the process as another independent means for lawyers to assist parties in resolving disputes without courts that could be used more effectively and frequently.  The CPR Institute conceived of arbitration as a nonadministered process run by the attorneys and tribunal as part of the practice of law.

Organization founder James H. Henry tasked Kaskell with heading what has become one of CPR’s longest-running committee projects.  Overseeing the Center for Public Resources’ Committee on Private Adjudication, Kaskell led a blue-ribbon commission in producing the organizations’ first set of arbitration rules in 1989.  The debut constituted a special supplement in the September 1989 issue of Alternatives, and can be found at http://bit.ly/2PD8crc.

Thirty years’ of subsequent history of the CPR Institute Arbitration Committee and rules, both nonadministered and, in this decade, administered rules, most of which included Kaskell’s input, can be surveyed at CPR’s website at www.cpradr.org/resource-center/rules/arbitration.

There were other areas that caught Kaskell’s attention and to which he contributed to making alternative dispute resolution standard practices. For example, in the environmental area, he was staff director in 1985 of a committee that produced the Superfund Multi-Party Site Cost Allocation Procedure. He led as staff director the CPR Institute’s first international committee efforts, as well as antitrust, insurance and technology committee initiatives.

Kaskell was both an expert in and fascinated by the workings of the corporate law department.  Before joining the CPR Institute as a vice president, he spent 27 years at Olin Corp., a Clayton, Mo., publicly traded chemical company.

In the 1990s, with CPR Institute Vice President Catherine Cronin-Harris, Kaskell conducted a study of in-house attorneys’ views of alternative dispute resolution.  The work charted the increasing awareness through the 1990s of the availability and efficacy of ADR.

The 1997 version of the study found, among other things, that nearly 17% of all cases in the in-house respondents’ portfolios used ADR process, more than double from just four years earlier.  See Catherine Cronin‐Harris and Peter H. Kaskell, “How ADR finds a home in corporate law departments,” 15 Alternatives 158 (December 1997) (available at http://bit.ly/2rZZ4Un).

Later, as a senior fellow at the CPR Institute, Kaskell focused on intellectual property issues.  See Peter H. Kaskell, “Is Your Infringement Dispute Suitable for Mediation?” 20 Alternatives 45 (March 2002) (available at http://bit.ly/2sL6QRV).

Kaskell was born in Berlin, Germany, in 1924, and came to the United States as a child.  He grew up in New York and completed his undergraduate work and his law degree at Columbia University.

He interrupted his Columbia education to enlist and serve in World War II, where he was a war hero.  For details on Kaskell’s wartime efforts, see Jeannette Ross, “Wilton loses war hero Peter Kaskell,” Ridgefield (Conn.) Bulletin (Dec. 17) (available at http://bit.ly/2S6SJRz).

Kaskell was a former trustee of the Aldrich Contemporary Art Museum in Ridgefield, Conn., and served as vice chairman of Connecticut Humanities.

On behalf of CPR, Waxman extends condolences to Kaskell’s wife, Joan Kaskell, who was a frequent presence at CPR Institute events over the years, and his four children and their families.

 

NY State Bar Assoc Issues New Ethics Opinion Confirming that Lawyer-Mediator Acting as Third-Party Neutral is Not in Lawyer-Client Relationship or Providing Legal Services

By Mark Kantor

Kantor Photo (8-2012)

The New York State Bar Association Committee on Professional Ethics issued on Friday its Ethics Opinion No. 1178 addressing the ethics obligations of a lawyer acting as a mediator (https://www.nysba.org/CustomTemplates/SecondaryStandard.aspx?id=98793).  According to this new Opinion, a lawyer-mediator acting as a neutral is not acting in a lawyer-client relationship or providing legal services (“In so concluding, we expressly supersede N.Y. State 678 (1996) insofar as that opinion says that the provision of mediation services by lawyers constitutes the practice of law. ****  Only when a lawyer-mediator engages in services beyond providing neutral services, such as filing papers in court, does the lawyer-mediator cross the line into providing legal services.”).  Therefore, much of the New York Rules on Professional Conduct for New York-qualified attorneys are not applicable to mediation services that do not cross that line.

Thus, the N.Y. Rules of Professional Conduct (the “Rules”) that apply when a lawyer represents a client do not necessarily apply in the context of a lawyer providing mediation services, including Rule 1.5 concerning fees, Rule 1.6 concerning confidentiality, and Rule 1.7 concerning conflicts, although lawyer-mediators should be aware that certain rules will continue to apply even in the absence of an attorney-client relationship.  See Rule 5.7, Cmt. [4].

I quote the entirety of the Opinion at the end of this post.

New York State Rule 2.4, which expressly addresses lawyers as third-party neutrals (including as arbitrator and as mediator), remains of course directly applicable.  That Rule requires the lawyer/third-party neutral to inform unrepresented parties that the lawyer serving as the neutral is not representing them and, where appropriate, to explain to the party the difference between a third-party neutral and a lawyer representing a client.  Rule 2.4 provides that:

(a) A lawyer serves as a “third-party neutral” when the lawyer assists two or more persons who are not clients of the lawyer to reach a resolution of a dispute or other matter that has arisen between them.  Service as a third-party neutral may include service as an arbitrator, a mediator or in such other capacity as will enable the lawyer to assist the parties to resolve the matter.

(b) A lawyer serving as a third-party neutral shall inform unrepresented parties that the lawyer is not representing them.  When the lawyer knows or reasonably should know that a party does not understand the lawyer’s role in the matter, the lawyer shall explain the difference between the lawyer’s role as a third party neutral and a lawyer’s role as one who represents a client.

Newly issued Opinion 1178 also offers advice on issues commonly faced by lawyer-mediators navigating the line between legal services and mediation services, including confidentiality, meeting with parties separately, entering into an alternative fee arrangement, and memorializing an agreement reached in the mediation.

  1. In addition, even though the confidentiality provisions of Rule 1.6 would not apply, a lawyer-mediator may be governed by other confidentiality obligations found in substantive laws (such as statutes or court rules) or private sources (such as ethics codes promulgated by mediation groups).  See Rule 2.4, Cmt. [2] (“the lawyer may be subject to court rules or other law that applies either to third-party neutrals generally or to lawyers serving as third-party neutrals.  Lawyer-neutrals may also be subject to various codes of ethics”); Rule 1.12, Cmt. [3] (lawyers who serve as third-party neutrals “typically owe the parties an obligation of confidentiality under law or codes of ethics governing third-party neutrals”); N.Y. State 1026 ¶ 7 (2014).
  2.  Accordingly, as long as the lawyer-mediator follows Rule 2.4 (and any other applicable rules or laws), the lawyer-mediator would be free to conduct the mediation in the way the lawyer-mediator thinks best, including meeting with the parties separately, and contracting for and structuring her fee however the lawyer-mediator would like.
  3.  We also note that the lawyer-mediator may assist the parties with memorializing in writing the terms to which they agree during the mediation.  Such an aide memoire or Memorandum of Understanding is a common product of the mediation process.

The context of Ethics Opinion 1178 is a lawyer who wishes to act as a mediator in divorce disputes.  However, the scope of the Opinion itself arguably extends to third-party neutral services more generally, and certainly to mediation outside the divorce context.  Since the description in Rule 2.4 of third-party neutrals expressly encompasses arbitrators as well as mediators and the rationale for Opinion 1178 includes the adoption of that Rule to distinguish third-party neutral services from the delivery of legal services, one may easily construe Opinion 1178 to apply to a lawyer’s service as a neutral arbitrator as well.  However, the direct conclusions of the Opinion speak only to mediation services.  I invite comments and corrections in that regard from others who may know more on this subject.

Hat tip to Jill Gross at that wonderful blog Indisputably for bringing this development to the attention of the ADR community yesterday (http://indisputably.org/2019/12/new-nys-ethics-opinion-lawyer-as-third-party-neutral/).

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Ethics Opinion 1178

New York State Bar Association
Committee on Professional Ethics

Opinion 1178 (12/13/2019)
Modifies NY State 678 (1996)

Topic:  Lawyer as third-party neutral

Digest:  A lawyer-mediator engaged in providing third-party neutral services is subject to Rule 2.4 but not the Rules that govern the representation of clients.  As such, the lawyer-mediator is generally free to conduct the mediation in the way the lawyer thinks best, and to charge whatever fee may be appropriate, provided always that the lawyer fully discloses to the parties that the lawyer is acting as a disinterested mediator and not as counsel to any party, including the consequences of that difference.  In the event of an agreement, the lawyer-mediator may memorialize the parties’ understanding in a document and may appear as counsel for one party (but not both) in filing a divorce action if the other party gives informed consent confirmed in writing.

Rules:  1.5, 1.6, 1.7, 1.12, 2.4, 5.7

FACTS

1. The inquiring lawyer intends to become a mediator and plans to focus on mediating cases involving parties who would otherwise seek a contested divorce.  The lawyer-mediator anticipates that the parties may find that meeting individually to discuss the issues that need to be resolved in order to submit their agreement to the court would be beneficial given the antagonistic position between them.

2. The lawyer-mediator intends to charge an upfront, flat rate for the mediation services. The goal of those services is for the parties to resolve all of the issues necessary for the parties to be in a position to submit an uncontested divorce package.  In the event that the parties discontinue using the lawyer as a mediator before all of the issues are resolved, the contract will provide that the parties will pay the lawyer-mediator an hourly rate for the services performed, charged against the upfront payment with any unused amount returned to the parties.

QUESTIONS

3. In connection with setting up a mediation practice, the inquiring lawyer poses several questions:

(a) May the lawyer-mediator meet with the parties individually to inform them of the various issues that need to be resolved in order to have a divorce granted in New York?
(b) May the lawyer-mediator enter into a contract with the parties to provide mediation services?  If so, may the contract provide for the payment of a flat rate by the parties in the event resolution is reached that results in an uncontested divorce packet but otherwise provides for the payment by the parties on an hourly basis if the parties discontinue the lawyer-mediator’s services before all issues can be resolved?
(c) What disclosures does the lawyer-mediator have to provide to parties to the mediation concerning her role as mediator?
(d) May the lawyer-mediator prepare documents, including a divorce action representing the parties, if the parties reach agreement?

OPINION

4. Generally, lawyer-mediators are not engaged in the representation of a client and are not providing legal services to the parties to the mediation.  See N.Y. State 999 ¶ 2 (2014); N.Y. State 1026 ¶ 6 (2014).  Thus, the N.Y. Rules of Professional Conduct (the “Rules”) that apply when a lawyer represents a client do not necessarily apply in the context of a lawyer providing mediation services, including Rule 1.5 concerning fees, Rule 1.6 concerning confidentiality, and Rule 1.7 concerning conflicts, although lawyer-mediators should be aware that certain rules will continue to apply even in the absence of an attorney-client relationship.  See Rule 5.7, Cmt. [4].

5. Instead, Rule 2.4 is directed to lawyers acting as third-party neutrals and provides:
(a) A lawyer serves as a “third-party neutral” when the lawyer assists two or more persons who are not clients of the lawyer to reach a resolution of a dispute or other matter that has arisen between them.  Service as a third-party neutral may include service as an arbitrator, a mediator or in such other capacity as will enable the lawyer to assist the parties to resolve the matter.

(b) A lawyer serving as a third-party neutral shall inform unrepresented parties that the lawyer is not representing them.  When the lawyer knows or reasonably should know that a party does not understand the lawyer’s role in the matter, the lawyer shall explain the difference between the lawyer’s role as a third party neutral and a lawyer’s role as one who represents a client.

6. In terms of the required disclosure under Rule 2.4(b) stated above, we have noted that “[t]he precise content of the required conversation, and the exact information the lawyer-mediator will have to disclose to a party about the lawyer’s role, may vary from one mediation to another.”  See N.Y. State 878 (2011).  Comment [3] to Rule 2.4 provides some guidance:

Unlike nonlawyers who serve as third-party neutrals, lawyers serving in this role may experience unique problems as a result of differences between the role of a third-party neutral and a lawyer’s service as a client representative.  The potential for confusion is significant when the parties are unrepresented in the process.  Thus, paragraph (b) requires a lawyer-neutral to inform the unrepresented parties that the lawyer is not representing them.  For some parties, particularly parties who frequently use dispute-resolution processes, this information will be sufficient.  For others, particularly those who are using the process for the first time, more information will be required.  Where appropriate, the lawyer should inform unrepresented parties of the important differences between the lawyer’s role as a third-party neutral and as a client representative, including the in-applicability of the attorney-client evidentiary privilege.  The extent of the disclosure required under this paragraph will depend on the particular parties involved and the subject matter of the proceeding, as well as the particular features of the dispute resolution process selected.

7. “Thus, unless all mediating parties are represented by counsel in the mediated matter, a lawyer-mediator must explain whatever needs to be explained to assure there is no confusion about the lawyer-mediator’s role and the difference between a lawyer’s role on behalf of a client and a mediator’s role as a neutral.”  See N.Y. State 878 (2011).

8. There may also be times when it is not possible for the lawyer-mediator to provide an effective explanation regarding the difference between the role as a lawyer-mediator compared to a lawyer’s role when representing a client.  As we noted in N.Y. State 736 (2001), matrimonial mediation may be undertaken in many circumstances, but sometimes “the complex and conflicting interests involved in a particular matrimonial dispute, the difficult legal issues involved, the subtle legal ramifications of particular resolutions, and the inequality in bargaining power resulting from differences in personalities or sophistication of the parties make it virtually impossible to achieve a result free from later recriminations or bias or malpractice, unless both parties are represented by separate counsel.  In the latter circumstances, informing the parties that the lawyer ‘represents’ neither and obtaining their consent, even after a full explanation of the risks, may not be meaningful; the distinction between representing both parties and not representing either, in such circumstances, may be illusory.”

9. In addition, even though the confidentiality provisions of Rule 1.6 would not apply, a lawyer-mediator may be governed by other confidentiality obligations found in substantive laws (such as statutes or court rules) or private sources (such as ethics codes promulgated by mediation groups).  See Rule 2.4, Cmt. [2] (“the lawyer may be subject to court rules or other law that applies either to third-party neutrals generally or to lawyers serving as third-party neutrals.  Lawyer-neutrals may also be subject to various codes of ethics”); Rule 1.12, Cmt. [3] (lawyers who serve as third-party neutrals “typically owe the parties an obligation of confidentiality under law or codes of ethics governing third-party neutrals”); N.Y. State 1026 ¶ 7 (2014).

10. Accordingly, as long as the lawyer-mediator follows Rule 2.4 (and any other applicable rules or laws), the lawyer-mediator would be free to conduct the mediation in the way the lawyer-mediator thinks best, including meeting with the parties separately, and contracting for and structuring her fee however the lawyer-mediator would like.

11. We also note that the lawyer-mediator may assist the parties with memorializing in writing the terms to which they agree during the mediation.  Such an aide memoire or Memorandum of Understanding is a common product of the mediation process.

12. Beyond this, however, that lawyer-mediator may not cross the line between acting as a neutral arbiter and acting as counsel to the parties.  N.Y. State 1026 ¶ 10 (the lawyer performs legal services when the lawyer drafts and files divorce papers in court on behalf of the parties).  In that event, all of the mediation services would then be covered by the Rules as the non-legal mediation services would not be distinct from the legal services.  See Rule 5.7.  Nevertheless, Rule 1.12(b) expressly permits the lawyer-mediator, at the conclusion of the mediation, in the event of an agreement between the parties, to represent one of the parties in filing a divorce action in court, provided the other party gives informed consent, confirmed in writing.  At that point, the erstwhile mediator owes all the duties accompanying the attorney-client relationship under the Rules to the represented party.  Rule 1.7(b)(3) forbids a lawyer from representing adverse parties in a proceeding, even with informed consent, and so the lawyer-mediator may not represent both parties in the filing of a divorce action.

13. In so concluding, we expressly supersede N.Y. State 678 (1996) insofar as that opinion says that the provision of mediation services by lawyers constitutes the practice of law.  That opinion was issued before adoption of Rule 2.4, which specifically governs a lawyer’s provision of neutral services and which had no equivalent in the predecessor N.Y. Code of Professional Responsibility.  We have earlier so hinted:  Following adoption of the Rules, we noted the possibility that our conclusion under the Rules might change on this issue. In N.Y. State 979 (2013), we said that there were conflicting opinions concerning whether the provision of mediation services was the practice of law and that “[t]he case that such services are not the practice of law was arguably bolstered by New York’s adoption of the Rule specifically governing a lawyer’s service as a mediator.”  We now make explicit that Rule 2.4 ousts our conclusion in N.Y. State 678 that the provision of mediation services invariably constitutes the practice of law.  Only when a lawyer-mediator engages in services beyond providing neutral services, such as filing papers in court, does the lawyer-mediator cross the line into providing legal services.

CONCLUSION

14. A lawyer-mediator engaged in providing third-party neutral services is subject to Rule 2.4 but not the Rules that govern the representation of clients.  As such, the lawyer-mediator is generally free to conduct the mediation in the way the lawyer-mediator thinks best and to charge whatever fee the lawyer-mediator thinks appropriate and must provide disclosure to the parties concerning the lawyer-mediator’s role as a mediator compared to that of a lawyer representing a client.  If, however, the lawyer-mediator engages in an activity that constitutes a legal service, that legal service would not be distinct from the non-legal mediation services and the Rules would then apply to both the legal and non-legal services provided by the lawyer-mediator.  At the conclusion of the mediation, the lawyer may represent one (but not both) of the parties in filing a divorce action, provided the other party gives informed consent, confirmed in writing.

(08-19)

You May Be Interested In…

New York State Bar Association Committee on Professional Ethics Opinion 1178 (12/13/2019) Modifies NY State 678 (1996) Topic: Lawyer as third-party neutral Digest: A lawyer-mediator engaged in providing third-party neutral services is subject to Rule 2.4 but not the Rules that govern the representation of clients. As s

Lawyer?mediator may not draft and file separation agreement and divorce papers on behalf of spouses as joint clients unless the lawyer can satisfy the “disinterested lawyer” test of DR5?105(C)

New York State Bar Association Committee on Professional Ethics   Opinion 999 (3 28 14)   Topic    Marital Mediation and referrals.

Lawyer may not ethically enter into arrangement with a non-lawyer to accept referrals for a fixed monthly fee for each case referred where case has been obtained by telephonic solicitation.

A lawyer may not participate in a divorce mediation referral service that is not operated, sponsored or approved by a bar association

_______________________________________________

Mark Kantor is a CPR Distinguished Neutral. Until he retired from Milbank, Tweed, Hadley & McCloy, Mark was a partner in the Corporate and Project Finance Groups of the Firm. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). Additionally, Mr. Kantor is Editor-in-Chief of the online journal Transnational Dispute Management.

This material was first published on OGEMID, the Oil Gas Energy Mining Infrastructure and Investment Disputes discussion group sponsored by the on-line journal Transnational Dispute Management (TDM, at https://www.transnational-dispute-management.com/), and is republished with consent.

Ninth Circuit, Overturning an Award, Backs More Arbitrator Disclosure

By Daniel Bornstein

The Ninth U.S. Court of Appeals ruled this week that arbitrators are required to disclose their ownership interests in the organizations they are affiliated with and the organizations’ business dealings with the arbitration parties.

In Monster Energy Co. v. City Beverages LLC, Nos. 17-55813/17-56082 (9th Cir. Oct. 22)  (available at http://bit.ly/2PjmXzq), a 2-1 appellate panel vacated an arbitration award because the arbitrator, retired California state judge John W. Kennedy, failed to disclose both his ownership interest in JAMS and the fact that JAMS had administered 97 arbitrations for one of the parties.

The decision has important implications for arbitrators’ disclosure of their financial interests. Under the majority decision by Circuit Judge Milan D. Smith Jr.–joined by Oregon-based U.S. District Court Judge Michael H. Simon, sitting by designation–it isn’t sufficient for arbitrators to vaguely state that they have an economic stake in the success of their organization, and to merely note that their organization has done business in the past with one of the parties.

Rather, arbitrators must make clear the specific nature of their economic interest—that is, their ownership–and the scope of those past business ties.

City Beverages had alleged that Monster Energy had committed a breach of contract. After an almost nine-year business relationship, Monster Energy terminated the distribution contract without cause, an act that was permitted by the contract as long as it made a severance payment. But City Beverages rejected a $2.5 million payment, invoking the Washington Franchise Investment Protection Act, which prohibits termination of a franchise contract absent good cause.

Monster Energy’s move was upheld in arbitration, and it was awarded $3 million in attorneys fees. City Beverages appealed to the Ninth Circuit on the basis that the arbitrator had not adequately disclosed his ties to JAMS, and his and his firm’s relationship with Monster Energy. See By Savannah Billingham-Hemminger, “Not Just the Arbitrator: Ninth Circuit Looks at Provider Disclosure Obligation,” 37 Alternatives 119 (September 2019) (available at http://bit.ly/2WmriUh).

As the panel opinion noted, an arbitrator is required to disclose when he has a “substantial interest in a firm which has done more than trivial business with a party.” Commonwealth Coatings Corp. v. Cont’l Cas. Co., 393 U.S. 145, 151-152 (1968). In turn, vacating an arbitration award is appropriate when the arbitrator neglects to disclose “any dealings that might create an impression of possible bias.” Id., at 149.

Judge Smith’s analysis of Arbitrator Kennedy’s “evident partiality”—a Federal Arbitration Act standard for overturning awards–is contained in two parts. First, it reasoned that the arbitrator’s ownership interest in JAMS was “sufficiently substantial” to warrant disclosure. A JAMS arbitrator who is a co-owner of the organization is entitled to a share of the profits from all arbitrations administered by JAMS, not merely the ones the neutral undertakes personally.

Because only about one-third of JAMS’ more than 400 neutrals are owners, Kennedy’s ownership interest “greatly exceeds the general economic interest that all JAMS neutrals naturally have in the organization.”

Second, the appeals court determined that JAMS and Monster Energy were engaged in “nontrivial business dealings” that were not disclosed to City Beverages. Over the past five years, JAMS had administered 97 arbitrations in which Monster Energy was a party. This is largely because the energy drink maker’s form contracts contain a provision identifying JAMS’ Orange County, Calif., office as its arbitrator source.

Kennedy submitted a disclosure statement, which read:

I practice in association with JAMS.  Each JAMS neutral, including me, has an economic interest in the overall financial success of JAMS.  In addition, because of the nature and size of JAMS, the parties should assume that one or more of the other neutrals who practice with JAMS has participated in an arbitration, mediation or other dispute resolution proceeding with the parties, counsel or insurers in this case and may do so in the future. “

The majority opinion considered this statement inadequate because it failed to mention Kennedy’s ownership interest in JAMS, and JAMS’ business relationship with Monster.

Judge Smith wrote

We thus hold that before an arbitrator is officially engaged to perform an arbitration, to ensure that the parties’ acceptance of the arbitrator is informed, arbitrators must disclose their ownership interests, if any, in the arbitration organizations with whom they are affiliated in connection with the proposed arbitration, and those organizations’ nontrivial business dealings with the parties to the arbitration.

The opinion notes, “Prospectively, arbitration organizations like JAMS, which are already well-accustomed to extensive conflicts checks and disclosures, will have no difficulty fulfilling, and even exceeding, the requirements described here.”

Judge Smith concluded that failing to disclose the extensive business relationship with Monster Energy and the arbitrator’s JAMS ownership interest “creates a reasonable impression of bias and supports vacatur of the arbitration award.”  The panel also overturned the fees.

Circuit Judge Michelle T. Friedland dissented, noting that she disagreed that in evaluating “whether the Arbitrator might favor Monster, the additional information the majority believes should have been disclosed would have made any material difference.”

She writes that the majority opinion is unclear on the nature and extent of disclosure, and “[a]s these lingering questions demonstrate, . . . is likely to generate endless litigation over arbitrations that were intended to finally resolve disputes outside the court system.”

In addition to her view that the Monster Energy attorneys fees arbitration award should be upheld, Friedland looked extensively at the repeat-player issue regarding the relationship between JAMS and Monster Energy.  She noted

Owners of JAMS have an interest in maximizing JAMS’s amount of business, because they share in JAMS’s profits. Likewise, non-owner arbitrators have an interest in advancing their professional careers and maintaining their status with JAMS, which creates similar incentives to decide cases in a way that is acceptable to repeat player customers—otherwise, JAMS might terminate the nonowner’s JAMS affiliation.

In her dissent’s final paragraph, Friedland took a dim view of arbitration:

To the extent that the private arbitration system favors repeat players, I think it is unfortunate that so many parties forgo the protections of Article III and turn to arbitration instead. It is especially unfortunate when arbitrations involve a non-repeat player party that had no choice but to agree to arbitration in order to acquire employment, purchase a product, or obtain a necessary service. The majority laudably seeks to mitigate disparities between repeat players and one-shot players in the arbitration system. But I disagree that requiring disclosures about the elephant that everyone knows is in the room will address those disparities. It will only cause many arbitrations to be redone, and endless litigation over how many repeated arbitrations there will be.

 

The author, a 2L at St. John’s University School of Law in Jamaica, N.Y., is a CPR Institute Fall 2019 intern.

Understanding the Mediation Process to Assist Mediators, Self-Represented Litigants and Attorneys

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By:  Judge Steven I. Platt (Ret.)

The following guest post is a transcript of a speech that the author presented to the meeting of The Legal Research Institute of the Law Library Association of Maryland (LLAM), on October 11, 2019 at the University of Maryland School of Law. It is reprinted here with permission.

INTRODUCTION:

Good afternoon.

I appreciate this opportunity to discuss the role of the legal researcher in the 21st Century profession of dispute resolution from the perspective of what I now call myself, “a Recovering Judge.” I spent a total of 29 years from 1978 to 2007 on three different Trial Courts. I was also assigned to Maryland’s intermediate appellate court on multiple occasions. For the last 17 years, I have engaged in the world of private dispute resolution as an arbitrator, mediator, neutral case evaluator, Special Magistrate and Consultant on dispute resolution system design and implementation.

What I see is vastly different from what I saw from the Bench in the last quarter of the 20th Century, 1978-1999 and the first decade of the 21st Century, 2000-2007. Like every other institution of government, The Judiciary, as well as the private dispute resolution sector is rapidly changing. “Evolving” connotes too slow a process to be an accurate description of what is going on. Technology and globalization are rapidly transforming the forums and techniques of dispute resolution and with them the paradigms of the administration of civil justice.

These modifications of existing governmental institutions, corporate organizations as well as new financial products and devices, result from rapid technological development and globalization. These trends will, notwithstanding some of the subliminal messages from our recent elections, not be reversed. So, therefore, the work and role of the legal researcher must necessarily expand and diversify to accommodate these changes and trends.

I recognize, that it is ironic that almost contemporaneous with these changes and my remarks, we just recently witnessed a not-significant portion of the electorate in the country, and if you want to count “Brexit”, indeed the world, revolting at the voting booths against “elites.” Legal researchers are, at times, in the business of identifying and defining what and who are “elite.”

CHANGES IN THE METHODS OF DISPUTE RESOLUTION:

Traditionally, our citizens have had their disputes (legal and factual) resolved by a judge or jury in a courtroom. There, the role of the legal researcher has historically focused on assisting the trier of fact, and the arbiter or authority on the law, be it a judge or jury, to locate and understand the evidence and the law which applies to it. Traditionally, those legal researchers except for law clerks, staff attorneys, and law librarians have not worked for the court and are not paid by the court. Rather, they work for and are paid by the parties and/or counsel. Therefore, in many instances, their research and the advocacy based thereon are, at least initially, viewed by both judges and juries as suspect. I am sure that almost everyone in this room has encountered that barrier if not overt cynicism to your research and arguments based thereon being received and found persuasive.

That is changing. For one thing, the appointment by the Court of its own experts and reliance on its own research frankly as a reaction to the diffusion of the “mainstream” media and social media particularly in cases involving valuation issues is on the rise. Most state courts have the authority to do that and more and more are open to exercising it. Judges and Court Administrators who do not always know or understand “who you are, what you do, how you do it.” I encourage you to reintroduce yourselves to judges and court administrators who you may think you need further introduction. In doing so, however, you must educate them. As a caution, do not assume a basic knowledge except among a very few experienced judges of the terminology produced by your research including valuation techniques, particularly of intellectual property, businesses (distressed and other) as well as intangibles and other forensic accounting issues.

Courts are also increasingly relying on their own appointed Financial Forensic Experts as Receivers and Special Magistrates. In doing so, they expect their experts to be able to access complex legal research as well as multi-disciplinary research. Most state courts and all federal courts give their Judges the authority and discretion to appoint whomever they want including non-lawyers. The standard is “abuse of discretion.” Appointing someone with knowledge of the issues and industry before the courts and who can make informed and educated recommendations or even run a company for the Court, having the experience to do so, is clearly not an “abuse of discretion.”  The judges will increasingly depend on you and your research to identify who those individuals are and their methodologies.

Finally, The Courts are increasingly utilizing Special Magistrates and Settlement Administrators a/k/a “Claims Adjudicators” to administer and manage settlements of high stakes, multi-party litigation particularly Class Action cases and Mass Tort cases. Court Appointed Special Magistrates and Settlement Administrators are most of the time authorized by Rule and/or Court Order to employ “such professionals, experts and consultants as they deem necessary” to carry out their court ordered duties, which likely will include recommending the allocation of damages, expert fees, and attorney’s fees to The Court. That is you! Those Settlement Administrators, Special Magistrate, and Receivers are a market which, if currently unexplored, should be on your marketing screen shortly. They need your cutting edge multi-disciplinary research.

The best-known example of this relatively recent phenomenon and “The Man” is of course, Ken Feinberg of 9-11 Fund, BP Gulf Oil Spill, and Virginia Tech fame, to name a few. In each of these cases, and others, the roles of Financial Forensic Experts and the legal and multi-disciplinary researchers they employ, has been to perform among other functions:

  1. Research and Develop formulas and algorithms to determine the allocation of economic damages based on severity indexes established by the terms of the settlement agreement and data collected to support it.
  2. Explain to the Special Magistrate, The Administrator, and/or The Court, those formulas and the allocation of damage awards based thereon.
  3. Explain to the recipients of the different categories and amounts of damage the basis for the differentiations in the size of their distribution or award.
  4. Supervise the transfer and application of data from investigations, interviews and records to the administrators formulating and implementing the settlement.

I, myself, have been involved in this process more than once as a Special Magistrate and Settlement Administrator, and I can tell you that the research needs of these Financial Forensic Experts who are qualified to, and willing to perform these functions are growing, but the number of potential legal researchers who understand those needs, and can meet them and are qualified to do so by education and experience is not large or at least not known.

THE USE OF EXPERTS IN ADR:

Furthermore, the non-traditional use of Experts, particularly Financial Forensic Experts in what is known as Alternative Dispute Resolution (ADR) is growing. As I have said, these new roles derive from the traditional role of assisting a judge or jury but are expanded to include or substitute persuading other players in the dispute. For example, in Mediation, the legal researcher can be most effective by assisting the opposing party, opposing counsel, or even the opposing expert in understanding the issues from the opposing parties’ perspective or how a court would understand it. There’s an old saying in the litigation world – “Don’t play in the other guys analytical ballpark.” However, in a Mediation, you DO play in the other guy’s analytical ballpark. That’s how you persuade him/her. If successful, it is likely that your research will result in the desired resolution of the dispute.

In an Arbitration, explaining to a single arbitrator or a three-arbitrator panel the methodology which is appropriate to value market share in order to determine as in asbestos cases the percent of allocation of damages, between defendants or in the newly emerging cannabis industry, with which I am familiar, the percentage of revenue or profits to which a consultant is entitled are examples. Here the success of the expert’s client will very much depend on the legal researcher’s ability to persuade the Arbitrator that the methodology utilized is appropriate and individualized to the valuation of the real, personal, or even intellectual property at issue in the case and not just a one size fits all over formula developed by the industry particularly the insurance industry.

Finally, it is useful to understand that in the new “Administration of Justice” paradigm, the data, opinions and related experience and information that will be sought from you will, to a certain extent, depend on the dispute resolution forum and technique being utilized by the parties and Counsel. In litigation and arbitration, your opinion as to how to determine the specific quantification of damages will be sought utilizing the theory of the case, and the valuation theory selected by the hiring authority. In a Mediation or Neutral Case Evaluation, your opinion is most likely to be sought to aid in a risk analysis designed to leverage the possible settlement of the case.

I hope I have been helpful and have adequately described the comparatively new world that you, as legal researchers have been or will shortly be operating in. As we look to the future of the field of dispute resolution and the administration of justice and specifically to your role as experts in that system, perhaps the best guidance that I can provide in conclusion is the advice of Abraham Lincoln which we would all do well to heed today, “The dogmas of the quiet past are inadequate for the stormy present and future. As our circumstances are new, we must think anew and get anew.”

 ~

Judge Steven I. Platt (Ret.) is the Founder and Managing Member of The Platt Group, Inc., a professional Alternative Dispute Resolution Firm. He is also a member of The Maryland Board of Directors of The National Academy of Distinguished Neutrals (NADN), which, after a thorough peer review by the Board of Directors of that “invitation only” organization, selects only the top 10% of Neutrals in the country. He is also on the Judicial, Commercial, Employment, Large Complex Case, and Construction Panels of the American Arbitration Association (AAA), the International Institute for Conflict Prevention and Resolution (CPR), The International Mediation Institute (IMI). The Association for resolving business disputes to judges and lawyers both in Maryland and nationally through both The Judicial Education Program of the American Enterprise Institute (AEI) Brookings Joint Center for Regulatory Studies (served on Judicial Advisory Board), and through The American College of Business Court Judges (Past President).

Judge Platt may be reached at info@theplattgroup.com or at 410-280-0908.

His writings and other background information can be found on his website, www.theplattgroup.com and his Blog at  www.apursuitofjustice.com.

Any opinions expressed in this post are solely those of the author and do not necessarily constitute the opinions of The CPR Institute.

 

 

New California Law Prohibits Pre-Dispute Employment Arbitration Agreements

By Andrew Garcia

California last week enacted a new law that prohibits employers from requiring job applicants, or any existing employee, to enter into pre-dispute arbitration agreements as a condition of employment.

California Gov. Gavin Newsom signed the bill into law Oct. 10. It also criminalizes any retaliation against an employee who refuses to enter into a pre-dispute arbitration agreement.

Assembly Bill 5, introduced by Assemblywoman Lorena Gonzalez, D., San Diego, says that a violation of the amended California Labor Code is a misdemeanor. Despite the law’s harsh prescriptions for violators, the bill clarifies that it does not purport to invalidate any existing arbitration agreement that is consistent with the Federal Arbitration Act.

The California Chamber of Commerce identified AB 51 as a “job killer.” (See the chamber’s press release ahead of the first major hearing on the bill in March at http://bit.ly/2pmYYEu.)  The chamber said that the new law conflicts with the U.S. Supreme Court’s decision in Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S.Ct. 1421 (2017), among many cited cases that it notes are part of the Supreme Court’s jurisprudence favoring arbitration agreements. The chamber predicts that the law will be challenged and overturned, preempted by federal law. (You can read the chamber’s statement in opposition to the California Legislature, joined by 41 local chamber and specialized industry groups, at http://bit.ly/33zTLIz.)

As other jurisdictions wrestle with local restrictions, courts are beginning to see challenges.  A New York federal court last spring stuck down a New York state pre-dispute mandatory arbitration bar in a decision that was mirrored by the California Chamber’s view. See Latif v. Morgan Stanley & Co. LLC, No. 18-cv-11528, 2019 WL 2610985 (S.D.N.Y. June 26, 2019), where the U.S. District Court held that a newly enacted New York state law that invalidated pre-dispute employment arbitration agreements was preempted by the Federal Arbitration Act. See also, Andrew Garcia, “Update: Legislatures on Invalidating Pre-Dispute Arbitration Agreements,” CPR Speaks blog (Aug. 1) (available at http://bit.ly/2IPg6dd).

AB 51 is one of three bills signed by Gov. Newsom, a Democrat who took office in January, that expanded California’s workplace protection laws.  “Work is about more than earning an income,” he stated, adding, “For many, a job can provide a sense of purpose and belonging–the satisfaction of knowing your labor provides value to the world. Everyone should have the ability to feel that pride in what they do, but for too many workers, they aren’t provided the dignity, respect or safety they deserve. These laws will help change that.”

That move is a big change from Newsom’s predecessor. The new law is a reintroduction of an identical 2018 bill that was vetoed by then-Gov. Jerry Brown, also a Democrat–the second time Brown vetoed legislation restricting arbitration.  The California Chamber of Commerce opposition letter quotes Brown’s 2018 veto extensively, including the Kindred Nursing decision, which noted, “A rule selectively finding arbitration contracts invalid because improperly formed fares no better under the [Federal Arbitration Act] than a rule selectively refusing to enforce those agreements once properly made. Precedent confirms that point.”

An August California court decision, however, shares the new law’s skeptical arbitration view. In OTO LLC v. Kho, 447 P.3d 680 (Cal. 2019) (available at https://stanford.io/2ON8f3x), the California Supreme Court rejected the validity of an arbitration agreement because, among other reasons, the defendant required plaintiff Kho to sign the agreement as a condition of his employment.

The court found that the porter who delivered the agreement remained at Kho’s place of work until he signed the agreement, which created an impression that he had to sign it immediately. Therefore, the court ruled that since Kho had no choice but to sign the arbitration agreement or lose his job without an opportunity to review the agreement in his native language, it could not be enforced.

To view the bill in its entirety, click here.

The author, a Summer and Fall 2019 CPR Institute intern, is a law student at Brooklyn Law School.

 

 

Committee Q&A: A Conversation with Mediation Committee Co-Chair, Marjorie Berman 

marjorieberman

As part of our continuing “Committee Q&A” series, we sat down recently with Mediation Committee Co-Chair, Marjorie Berman of Krantz & Berman (pictured), to learn more about what this committee has been up to and has planned for the future.

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The Mediation Committee consists of CPR members throughout the world and aims to enhance the quality and effectiveness of corporate mediation practice, both domestically and internationally.  The Mediation Committee recently released Mediation Best Practices Guide for In-House Counsel: Make Mediation Work for You, a CPR members-only guide with insider tips from in-house counsel on how to navigate every step of the mediation process (digital copies available to CPR members at no cost).  The Mediation Committee meets quarterly to collaborate and share best practices and put on programs of interest.   In addition, the Committee works to identify qualified neutrals to serve on CPR’s Panels of Distinguished Neutrals. You may find online, CPR’s Mediation ProcedureFast Track Rules for Mediation, and International Mediation Procedure (2017), as well as other industry-specific protocols.

Q. What are some of the specific issues that the Mediation Committee has focused on recently, and how?

A. I am a relatively new add to the committee but, looking back at just the past two meetings we’ve held, the first was on the Singapore Convention. We worked to fashion a program that would be meaningful – and useful – to people at all levels, including some who may not be as familiar with international law.  And at our most recent meeting, we focused on the very timely topic of confidentiality in mediation.

There has been a recent vintage of challenges to the confidentiality of mediation in the courts. Eugene Farber and Professor Nancy Rogers of the Ohio State University Moritz College of Law spoke, and the meeting was super lively and chock full of information. The event also inspired a very strong dialogue among the participants with respect to both knowledge and practice tips on anticipating that such issues could arise.

Q. Can you give us a preview of some of the important issues the Mediation Committee will be focusing on in the coming year?  

A. One long-term focus of the committee is an even closer look at this issue of confidentiality in mediation. Because candor between a mediator and parties is essential, mediation depends upon the privileges and confidentiality that protect those communications. The law protecting mediation communications is a patchwork of federal and individual case statutes, case law and rules of conduct that vary across jurisdictions.

This project will inform practitioners of the law and rules governing mediation confidentiality by jurisdiction so they can prepare themselves in the event they need to mediate in an unfamiliar locale. In fact, as people are reading this, and they have personal experiences with challenges to confidentiality and being put in the spotlight in a litigation – not where mediators wish to be! – I encourage them to share those stories with the committee.  

Q. What have you personally gotten out of participating in CPR’s committee structure, and what would you say to busy CPR members about why they should become more involved?

A. Even in the short term in which I’ve been intensely involved, participation in the committee has given me exposure to a wide variety of mediators working in many different contexts, and to a breadth of mediation practices. We can all so easily develop a narrow focus in our work, so it is especially valuable to get perspective from all angles – including from inside and outside litigators using mediation, mediators doing mediation, mediators working both in the US and around the world and academics studying mediation.

Q. Why would you encourage people to join CPR’s Mediation Committee in particular?

A. To some degree mediators tend to be in a bit of a closed world. They mediate cases and its often just them, in a room as a mediator. Being a part of such a dynamic and interactive group expands your view and allows you to process and grow both your perspective and your practice. This is valuable whether you’re a mediator trying to develop your own practice, or a litigator from a corporation or a law firm who is involved as a participant, trying to get a perspective of where mediators are coming from – because you can’t have that kind of conversation with your own mediator.

Committee participation also provides the broader opportunity to act as a thought leader, helping to improve the effectiveness of mediation and to shape best practices. Mediation is a very dynamic area where small changes can produce big results in terms of outcomes, and this committee offers an opportunity to become a meaningful part of that.

Marjorie Berman of Krantz & Berman LLP represents civil litigants in business disputes, employers and employees in employment conflicts, and individuals in white-collar criminal matters.

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CPR committees are always looking to increase membership and participation, and there are no extra fees or costs associated with joining. Learn more about CPR’s other industry and subject matter committees here. To become a committee member, log in and join the committee(s) of your choice or email a note of interest to Richard Murphy at rmurphy@cpradr.org.

Take your seat at the table, along with
other thought leaders in your industry.

JOIN A CPR COMMITTEE TODAY

 

 

A Report on the 2019 CPR European Congress on Business Dispute Management (Part II)

EU flagBy Vanessa Alarcón Duvanel and Kathleen Fadden

On 15 May 2019, CPR held its third annual European Congress on Business Dispute Management, in London. Organized by CPR’s European Advisory Board (the “EAB”) and kindly hosted once more by SwissRe in the magnificent Gherkin building, the Congress inspired thought provoking considerations on topics of dispute prevention and resolution. As with last year’s summary, we have split this reporting in two parts; Part I sharing the morning panel sessions can be found HERE

The afternoon’s session began with a keynote address by Teresa Giovannini of LALIVE in Geneva, Switzerland.  Teresa Giovannini has a wealth of experience in international arbitration having served as an arbitrator in over 200 arbitrations and held leadership positions in various institutions.  In a captivating speech entitled “what happens behind the curtains”, she gave the audience a glimpse of how arbitral tribunals operate.  The integrity of the arbitral process has often been criticized and bias, in particular, be it unconscious or conscious, can impact throughout the process.  Complete elimination of bias may be difficult and Teresa Giovannini outlined some simple steps that can minimize bias: adopting the screen selection process in the CPR Rules whereby the arbitrators do not know which party has appointed them; ensuring that the issues to be determined are identified at the outset of the proceeding and put to the parties; and strictly adhering to the principle that a case must be put aside if a party does not adduce sufficient evidence to support its case.

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“Master Mediators Answer the Most Intriguing Mediation Questions”

The first panel of the afternoon proved to be a lively discussion about mediation challenges.  The panel was moderated by Isabelle Robinet-Muguet (Orange) and Alexander Oddy (Herbert Smith Freehills).  The panelists were: Eileen Carroll (Mediator and CPR Neutral), Renate Dendorfer-Ditges (Ditges and CPR Neutral), Diego Faleck (Mediator and CPR Neutral) and Birgit Sambeth Glasner (Altenburger and CPR Neutral)

The panel addressed three intriguing mediation questions:

What are the challenges when dealing with cross border mediation and what advice would you offer?

Obviously good preparation is table stakes.  It is essential to take time to talk to the clients in order to understand what might be driving the dynamics, including whether the parties are being guided by lawyers and – in either joint or evaluative sessions – what the expectations are including how active they expect the mediator to be.  The mediator must establish the process and set a substantive agenda for the clients.  In this respect, another challenge that often arises in cross border mediations is that cross border frequently means cross-cultural.  Mediators must therefore be sensitive to, and familiar with, cultural differences as such awareness can guide the mediator in selecting negotiation strategies/tactics that are more likely to be successful.

A second challenge is one of timing of the mediation hearing.  Increasingly, mediations are being forced into short time frames, typically a day and no more.  Master mediators however criticized the efficiency of this template – check the box – practice.  It has proven helpful to require the parties to resume the following day because the interim night often provides valuable time for reflection.  Where does this 24-hour model come from?  The audience contributed suggestions pointing the finger to mediators who in most cases are lawyers and have other cases to attend to or at the insurers who tend to drive the 24-hour template.

Is the concept of a mediated settlement changing?

The concept itself may not have changed but its implementation suffers difficulties.  In line with its remarks to the first question, the panel noted that the purpose of mediation is unfortunately too often gravitating towards setting the stage for arbitration rather than settling the dispute.  It may be a function of the compressed time frames in which mediations increasingly take place (see above).

How do you deal with a conflict within a conflict?

There was no question that conflicts within conflicts impact the mediation process and therefore it is critical they be addressed effectively.  It is not an easy situation to navigate.  Good mediation process management and managing expectations are key as each case is different.  Master mediators on the panel shared illustrative examples of what can generate a conflict within a dispute such as the imbalance in the parties’ levels of sophistication and/or resourcing.  One often finds the weaker party being aggressive and/or irrational.  From a process perspective, a mediator should be equipped to handle such situation proactively by taking the time to understand the concerns (the party may be missing information or believing that its interests are unmet) and by warning the stronger side to be patient.

Mediation is an art – it requires skills, training and practice!

“The Resolution of Complex, Multi-Stakeholder, Multi-Jurisdictional Disputes”

The final panel of the day examining the use of ADR tools in large complex disputes was moderated by Cliff Hendel (Hendel IDR) and the panelists were: Gavin Chesney (Debevoise & Plimpton), James Cowan (Shell International), Ania Farren (Vannin Capital), Albert Hilber (Swiss Reinsurance) and Richard Little (Eversheds Sutherland).

Setting the stage for the discussion, Cliff Hendel offered a couple of interesting preliminary remarks.   Firstly, he reminded everyone that in large and complex disputes culture eats process for breakfast.  In other words, culture counts!  Failures often stem from the inability to understand one another.  Engaging in active listening is therefore key.  Secondly, there are of course trade-offs inherent to the co-existence of different legal systems.  Notwithstanding some European laws in the ADR field, national laws are not particularly harmonized, leading to the risk of forum shopping (among others).

This panel addressed two main issues:

What are your views on the use of co-mediation in complex disputes?

The overall view was that generally mediation, per se, remains difficult in many jurisdictions and that is for cultural reasons. For many Europeans resorting to non-binding ADR is still perceived as a sign of weakness and many parties adopt a mindset whereby if they are to spend money on a dispute resolution process, they want a binding result.  It is important to work to help parties overcome this hurdle.  There is really no substitute for having all the parties in one room and giving all stakeholders visibility as to the whole picture.  In the panel’s experience, this tends to produce more creative solutions.  On co-mediation specifically, experience shows that it works well when all involved mediators are well prepared and even better if they have worked together in the past.

Does litigation/arbitration funding have an impact on mediation?

There is an often referred to “traditional” view that third party funder involvement will make settlement less likely.  The panel did not entirely agree with that.  Ania Farren, offering a funder’s perspective, explained that having a funder on board signaled a strong case.  Funders typically do not influence the dispute resolution process and do not normally attend settlement discussions.  Funders in fact do favor early settlement often preferring less money early than more money later. That said, and unsurprisingly, different third-party funders have different risk appetites. This diversity while beneficial to parties seeking funding for their case brings uncertainty and raises concerns as to the funders’ impact on the parties’ ability to settle or mediate the dispute.  In international arbitration there is no formal regulation of the use of third-party funding and the panel agreed on the need for more transparency concerning funder involvement particularly given the potential for conflicts of interest.

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The Conference concluded with closing remarks from Noah Hanft, CPR’s outgoing President and CEO and James South, Managing Director of CEDR.  This was an opportunity to outline the fruitful collaboration between CEDR and CPR.

Noah was thanked profusely for his phenomenal contribution to CPR.

 

 

Vanessa Alarcon Duvanel is an attorney admitted to practice in New York and Switzerland and specializing in international arbitration. She is based in Geneva and serves as the Secretary to the European Advisory Board.

Kathleen Fadden is a legal consultant and member of the CPR’s European Advisory Board.