Last month, CPR’s Employment Disputes Committee presented a Zoom discussion highlighting ombuds programs. The panel focused on how ombuds are set up, the services they provide, and their roles within organizations.
Natalie C. Chan, an associate in Sidley Austin’s Chicago office, moderated the June 16 discussion between Joan C. Waters, the University Ombuds Officer at Columbia University in New York, and Timothy Shore, former ombuds at Pfizer Inc.
The event began with a short presentation introduced by the CPR committee chair, Aaron Warshaw, a shareholder in the New York office of Ogletree, Deakins, Nash, Smoak & Stewart, on CPR’s recently released Administered Employment Arbitration Rules, which are available here.
A rules discussion was led by veteran committee members Alfred G. Feliu, a neutral based in New Rochelle, N.Y.; Christopher C. Murray, a shareholder in the Indianapolis office of Ogletree, Deakins, Nash, Smoak & Stewart’s Indianapolis office, and Wayne N. Outten, chair and founding partner of New York’s Outten & Golden. It highlighted Rule 1.4 (Due Process Protections) and Rules 3.12-3.13 (Joinder and Consolidation).
The due process rule is in place to provide fairness, and link to the separate Due Process Protections established by CPR, which can be found at https://bit.ly/3hELLQa.
CPR also created an innovative procedure through the joinder and consolidation rule, which uses an Administrative Arbitrator to address those issues.
The rules were developed by counsel from the plaintiff’s bar, in-house employment counsel, corporate defense attorneys, and neutrals to ensure fairness throughout the rules. For example, the rules provide detailed guidance to address cases where a party has refused to pay required fees, including guidance on preserving the rights of the defaulting party. The rules also provide factors to consider for discovery, early disposition and remote hearings.
The discussion noted that the rules are specifically designed to avoid ambiguity and interpretative disputes.
The discussion also emphasized the importance of the arbitration rules on addressing imbalances between employees and employers. A CPR Speaks post devoted to the rules can be found here.
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After the arbitration rules presentation, Natalie Chan opened the discussion about ombuds programs, their function, and their benefits . Panelists Joan Waters and Tim Shore provided insight into their experience as ombuds from an academic and corporate perspective.
An ombuds is an official appointed to hear individual concerns regarding issues that may arise in the workplace—Shore emphasized the session’s focus on “organizational ombuds,” as opposed to, say, consumer advocate ombuds jobs. In comparison to human resources professionals, ombuds have an obligation to keep the employee information provided confidential. This method creates a safe space and helps to surface workplace conflict or concerns.
As an ombuds in academia, Joan Waters explained that her role at Columbia University is to serve faculty, students, staff, and any affiliates connected to the institution, including parents and alumni, to hear concerns, act as a referral source and help with conflict negotiation.
Waters explained confidentiality is the most significant contributor to her work. As an ombuds, Waters is not authorized to accept notice on behalf of the university or to keep records of any interaction with the individuals who seek guidance. Specifically, individual’s identities are not disclosed unless there is an imminent risk of serious harm. Waters explained that if an ombuds is presented with information that seems to cause an imminent risk of harming an employee, she can use her discretion to disclose the information.
Tim Shore provided perspective on the responsibilities and role of a corporate ombuds. In his former longtime role at Pfizer—where he was the company’s first ombuds–Shore had the responsibility to oversee the operations of the Ombuds Office. In this capacity, Shore reported administratively to the chief compliance officer but had direct access to the company’s chief executive officer and board of directors.
Shore explained that an ombuds provides employees with a place that they can raise issues confidentially.
Ombuds help individuals get to the roots of their issues. If appropriate, the ombuds can also help workers understand the formal steps to be taken if the employee decides that he or she wants to formally report the issue to the company. The process allows employees to control their conflicts and decide if and how that want to take steps to resolve the matter.
To help attendees better understand ombuds programs, moderator Natalie Chan proposed a hypothetical from an employee’s perspective, stating on behalf of a complainant, “I just feel like I’m not being treated properly. My manager doesn’t seem to take my suggestions seriously . . . and I don’t like his tone. . . . I feel like my male counterpart in the same department is getting preferential treatment and better opportunities.”
Joan Waters explained that the hypothetical is typical of what she often hears from employees. As an ombuds, the mission includes helping employees refine their concerns and understand the process of resolving their dispute. Shore explained that often, people will label their issues, such as, “I’m being bullied” or “I’m being discriminated against,” instead of explaining in detail the core issues at hand.
The ombuds’ goal, said Shore, is to identify the specific issues an employee is facing and help provide the employee with the tools he or she needs to resolve those issues. During these conversations, ombuds may walk employees through constructive meetings with their managers about their issues or discussing the formal internal process if an employee wants to escalate the situation.
The question of whether ombuds must report potential discrimination claims that come to their attention was raised. The panelists explained that an ombuds is precluded from reporting unless there is an imminent risk of serious harm.
As ombuds, however, their mission is never to let an employee walk out of the office without a plan to resolve the situation, especially when dealing with a discrimination or harassment issue.
Waters stated that her goal when individuals discuss their situations is to help them specifically identify the problem. She believed once employees understood their options, the individuals would be better equipped to move forward with their concerns if they choose.
Shore stated that his former organization does not track the specific identity of individuals. But, he reported, it does track demographic information such as race or gender of the individuals that came to the ombuds office. This allows the ombuds office to identify trends across the organization. When the data reveals a pattern in a location or department, an ombuds can bring that issue to the attention of the appropriate leadership without revealing the identity of any of the individuals involved.
Shore also stated that the employee’s perceptions should not be ignored. He said that perceptions are real, and if there are numbers of employees with the same perception, the problems the perception reveal must be addressed.
Shore added that formal employment claims have declined at the company since the launch of Pfizer’s ombuds program. Additionally, he emphasized the cost of an ombuds resolving an employee dispute is a fraction of the time and money spent resolving more formal claims.
Shore said that, despite their effectiveness, ombuds programs are not common in corporations, with less than 10% of U.S. companies having a program.
Finally, panelists highlighted training programs for individuals interested in becoming ombuds. Both panelists suggested training from the International Ombudsman Association. Waters also suggested Columbia University’s masters’ program in Negotiation and Conflict Resolution.
To learn more about ombuds, Tim Shore has a video on the CPR Speaksblog. Additionally, for training opportunities, you can access the Columbia Ombuds Office masters’ program here and IOA training here.
The June 16 CPR Employment Disputes Committee video on the panel discussion can be viewed by individuals at CPR members after logging into CPR’s website here.
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The author, entering her second year at Washington, D.C.’s Howard University School of Law, was a CPR 2021 Summer Intern.
Multiple parties have filed briefs concerning arbitration discovery rules in a case now before the U.S. Supreme Court for fall argument, Servotronics v. Rolls Royce, No. 794(see the Court’s official docket at https://bit.ly/3ysbMrL).
In the case, the Court will decide the question of whether federal district courts can assist with obtaining evidence in foreign arbitration cases at the parties’ request. The argument date has not yet been set.
The U.S. Solicitor General’s office in the Justice Department has filed an amicus brief advocating on behalf of the U.S. government for a narrow interpretation of 28 U.S.C. 1782, a law that has created a split among federal circuit courts. The law allows circuit courts to authorize discovery for litigation originating in “foreign tribunals,” including compelling testimony from witnesses residing in the United States.
But circuit courts have not been able to agree about whether the law pertains to arbitration taking place in foreign countries: The Fourth and Sixth U.S. Circuit Courts of Appeals support court involvement in discovery for these arbitrations under Section 1782, and the Second, Fifth and Seventh Circuits reject this interpretation of the law.
The Fourth and Seventh Circuits both heard the same Servotronics case that is now on the Supreme Court docket. The circuit courts reached opposite conclusions. For background on the cases’ paths and how the current Seventh Circuit case made it to the Supreme Court, see Amy Foust, “The Next Arbitration Matter: Supreme Court Agrees to Decide Extent of Foreign Tribunal Evidence Powers,” CPR Speaks (March 22) (available at https://bit.ly/36cp27K), and “YouTube Analysis: What Happens Next with the 3/22 Servotronics Cert Grant on Foreign Arbitration Evidence,” CPR Speaks (March 22) (available at https://bit.ly/3jLbVT3).
CPR, which publishes CPR Speaks, submitted an amicus brief in support of the Servotronics certiorari request in January, which also was the subject of an amicus brief by the Atlanta International Arbitration Society. Since the petition was granted, 11 additional amicus briefs, including the brief of the Solicitor General’s office, have been filed.
Of the group, two state that they do no support either party–those of Prof. Yanbai Andrea Wang, of Philadelphia’s University of Pennsylvania Carey Law School, who asks the Court to clarify the scope of Section 1782, previously interpreted in the Intel case discussed below; and the International Court of Arbitration of the International Chamber of Commerce, which discusses the ICC’s international law views.
Two briefs support the petitioner, submitted on behalf of Columbia Law School Prof. George A. Bermann; and Palo Alto, Calif.-based ADR provider Federal Arbitration Inc.
Seven of the briefs support the respondent in seeking a narrow scope for Section 1782 discovery to exclude international arbitrations. In addition to the U.S. government’s brief, they include briefs submitted on behalf of China and Hong Kong-based arbitrators Dr. Xu Guojian, Li Hongji, Zhu Yongrui, Tang Qingyang, Chi Manjiao, Ronald Sum, and Dr. Zhang Guanglei; the U.S. Chamber of Commerce and the Business Roundtable; International Arbitration Center in Tokyo; the General Aviation Manufacturers Association Inc. and the Aerospace Industries Association; Halliburton Co., which is facing a Section 1782 issue in a separate case, and the Institute of International Bankers, a New York City-based industry association of international banks operating in the United States.
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In its brief, the government reviews the history of requests for discovery from foreign parties.
According to the amicus brief, prior to 1855, federal courts did not have the authority to compel a witness to testify in a case involving a foreign state party. In 1855, an act was passed by Congress to remedy this, but in a strange twist this law was subsequently “buried in oblivion” due to “a succession of errors in indexing and revising the statutes” and lost to the courts. A similar law was passed in 1877 and, in 1948, the law was broadened to include discovery for non-state parties.
In 1964, the language in the law was broadened again, applying to “a proceeding in a foreign or international tribunal” compared to the previous version’s “any judicial proceeding in any court in a foreign country.” Since then, only one Supreme Court case has discussed the scope of the law, Intel Corp. v. Advanced Micro Devices Inc., 542 U.S. 241 (2004).
The case concerned the distinction between judicial and administrative processes and whether Section 1782 applied to the latter. The Court found it applied. But recently, disagreement has sprung up about whether the “foreign tribunal” language includes arbitrations involving foreign parties. The U.S. government has now taken the position that the law should not apply to private foreign arbitrations.
In its brief, United States argues (1) that such discovery functions were not within the scope of Congress’ intent when it passed 28 U.S.C 1782; (2) that interpreting the law to apply to international commercial arbitrations would create asymmetry with the domestic rules of arbitration incorporated in the Federal Arbitration Act; and (3) such an interpretation would create additional problems if extended to investor-state arbitration.
Noting that previous versions of the law clearly referred to only courts, the government acknowledges that the 1964 revision changed this language from “any judicial proceeding in any court in a foreign country,” to “a proceeding in a foreign or international tribunal.” This change, according to the government, and in contrast to the Fourth Circuit’s interpretation, was “only a measured expansion of the provision’s scope to capture quasi-judicial entities (such as investigating magistrates) and certain intergovernmental bodies (such as state-to-state claims commissions).” As the government points out, at the time the 1964 law was passed, international commercial arbitration was still novel, and thus likely outside Congress’s intent.
The government’s second argument discusses the incongruence of the limited discovery available under the FAA to arbitrators, in contrast to the discovery requests available to parties under Section 1782. Interpreting the law to apply to commercial arbitrations would “[allow] more expansive discovery in foreign disputes than what is permitted domestically,” the government’s amicus brief states.
While the court acknowledges that Section 1782 is not coextensive with domestic discovery rules, the “stake asymmetry” produced by a broad interpretation of the law “should [be taken] into account” in determining the law’s scope.
Finally, the government discusses a particular type of arbitration, investor-state arbitration, which gives investors who have claims against a foreign state in which they held an investment a private remedy for losses allegedly caused by the state. Arbitration in this context replaced a more time-consuming and expensive process, diplomatic protection, involving a government negotiating a resolution on behalf of one of its citizens who has suffered an economic injury.
The solicitor general’s amicus brief argues that investor-state arbitrations would be hampered by additional discovery procedures and “upset settled expectations” of investor and state parties entering contracts.
The U.S. government, in addition to filing a brief, has requested permission from the court to argue the case with the parties this fall The Court has not yet acted on the oral argument request, which is expected to be granted.
Meantime, the underlying arbitration in Servotronics has been conducted in London the week of May 10. If a decision emerges before the Court hears the arguments, the existence of an arbitration award could raise questions of mootness.
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The author, a J.D. student who will enter his third year this fall at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.
Over the past 30 years, the Art World has become the Art Market. Selling and purchasing art has become Big Business for collectors and investors alike. In a mostly unregulated market, new regulations are emerging on resolving disputes between parties involved in art deals.
Described as the first initiative of its kind in Italy, the regulations promote the use of arbitration and provide an alternatives to the Hague’s Court of Arbitration for Art, or CAfA. Established in 2018, the Court of Arbitration for Art was founded to resolve disputes through alternative dispute resolution throughout the art market. Through CAfA, disputes can be arbitrated or mediated with the help of the Netherlands Arbitration Institute.
Disputes that arise in art parallel commercial transactions, but with niche concerns including issues of cultural and religious sensitivity, confidentiality, and authenticity.
The use of these regulations for art arbitration comes with several upsides. The article linked above highlights a prominent advantage where arbitration is efficient and is “freely accessible”–having an arbitration clause already baked in to provide a jumping off point if a dispute arises out of difficult cultural matters or from the uncertainty of fraudulent works.
Another upside discussed in the article that comes with using arbitration is “guaranteed confidentiality,” because art-market players often are sensitive regarding “reputation and discretion,” and there is a heightened importance of privacy for collectors and dealers.
The goal of the Venice Chamber regulations is also to broaden the use and scope of arbitration to the contemporary art context and go beyond the limited definitions of national legislation. By introducing the regulations, arbitration as a means of alternative dispute resolution is promoted as an efficient and effective way to resolve art sector disputes.
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The author, a J.D. student who will enter her second year this fall at Brooklyn Law School, is a 2021 CPR Summer Intern.
On June 30, President Biden signed S.J. Res. 13, overturning a recent U.S. Equal Employment Opportunity Commission rule change that briefly required the EEOC to share more information with employers during the EEOC conciliation process.
CPR Speaks previously discussed the rule reversion, which Congress passed along party lines, and which will bring back the previous higher level of discretion on information to be provided by defendant companies.
Conciliation is a mediation-like process which happens after evidence of discrimination is found by the EEOC. Proponents and opponents of the short-lived rule both argued that their rule preferences would increase efficient settlement of EEOC cases.
The standard emanates from Mach Mining v. EEOC, 575 U.S. 480 (2015) (available at https://bit.ly/2TmuMZg),in which the U.S. Supreme Court granted broad discretion to the EEOC to determine how to proceed with the conciliation process, including the amount of information shared with the parties.
But the Trump-era rule, which went into effect in February, tamped down on this discretion, requiring the EEOC to share factual findings of discrimination such as the identity of witnesses to the discrimination.
In response, governments at the federal, state, and local levels have developed short-term eviction moratoriums and similar measures to help renters keep their homes. But in the long run, eviction proceedings are likely to rise.
Federal, state, and local governments have adopted a variety of temporary emergency measures aimed at helping renters. For example, in September 2020, the U.S. Department of Housing and Urban Development and the Centers for Disease Control issued a nationwide moratorium on evictions. See the Federal Register announcement, since extended, here.
This moratorium was challenged by real estate groups, but a U.S. Supreme Court ruling this week allowed it to remain in effect through the end of the month. Alabama Association of Realtors, et al. v. Department of Health and Human Services, et al., No. 20A169 (June 29); see also analysis at Amy Howe, “Divided court leaves eviction ban in place,” Scotusblog (June 29) (available at https://bit.ly/3xhd74c).
In addition, Congress allocated $46 billion in rental assistance to struggling renters through the American Rescue Plan Act of 2021 and the December 2020 Covid-19 relief package; much of the relief funding, however, has yet to reach struggling renters. See, e.g., “Emergency Rental Assistance through the Coronavirus Relief Fund,” Congressional Research Service (June 8) (available at https://bit.ly/3Ak9vjX). See also Kristian Hernández, “As CDC’s Eviction Moratorium Ends, States Prepare for Flood of Cases,” Pew Stateline (June 22) (available at https://bit.ly/3AqTHw2).
Several states and cities–such as Maryland, New York, Vermont, Hawaii, Philadelphia and Washington, D.C.–have adopted eviction bans or limitations. These moratoriums have sharply reduced eviction filings during the extent of the pandemic.
But eviction restrictions will not remain in place indefinitely. After being extended several times, the federal moratorium is scheduled to expire on July 31. (See the CDC press release on the extension at https://bit.ly/3684qNN.) State and local eviction protections are also expected to end at some point this year. As a result, states and cities are preparing for a potential wave of eviction actions in their housing courts once moratoriums lift.
Some states and local governments have attempted to modify eviction procedures to make the process less burdensome on renters. For example, Maine passed a bill instructing landlords to explain the eviction process, options for legal assistance and rent relief, and eviction notices. Nevada and Illinois each adopted a law requiring courts to seal records of evictions relating to defaults during the pandemic.
One possible solution that could help both the courts and renters adapt to the expected rise in evictions is alternative dispute resolution. These programs aren’t new. But recently, interest has been heightened due to the pandemic, and many U.S. jurisdictions have turned to ADR eviction programs to encourage tenants and landlords to negotiate.
According to the Urban Institute, as of April, there were 38 ADR eviction diversion and prevention programs nationwide. Mark Treskon, Solomon Greene, Olivia Fiol & Anne Junod, “Eviction Prevention and Diversion Programs,” Urban Institute Housing Research Crisis Collaborative (April 2021) (available at https://urbn.is/3qI9C4j).
The states with programs include California, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, Ohio, Oregon, Pennsylvania, Tennessee, Texas, and Washington. See https://bit.ly/3xdHMPP, collected by Chicago’s Resolutions Systems Institute.
ADR eviction programs have been successful in several jurisdictions over the past few years. One example is a St. Paul, Minn., housing clinic. Colleen Ebinger & Elizabeth Clysdale, “Justice Served, Housing Preserved: The Ramsey County Housing Court Model,” 41:3 Mitchell Hamline L.J. of Pub. Policy & Practice: Article 10 (2020) (available at https://bit.ly/2V1DaON).
In July 2018, the Ramsey County court—covering part of the Minneapolis-St. Paul area–launched a housing clinic with the target of reducing eviction by 50% in five years. Eighteen months after implementation, eviction judgments declined, settlements rose, the court trial calendar lightened and expungements doubled.
Another successful eviction mediation program was developed by the Washington University School of Law Civil Rights & Mediation Clinic and the Metropolitan St. Louis Equal Housing and Opportunity Council in St. Louis in 2012. Karen Tokarz, Samuel Hoff Stragand, Michael Geigerman & Wolf Smith, “Addressing the Eviction Crisis and Housing Instability Through Mediation,” 63 Washington U. J. of Law & Policy 243 (available at https://bit.ly/3694AEG).
In the St. Louis Mediation Project, professional mediators and students provide free mediation services for landlord-tenant cases. In 2018, 71% of pro se landlord-tenant cases mediated by the project resulted in a settlement. More than half of these agreements resulted in a dismissal of eviction proceedings.
There is some evidence that even many landlords support ADR in the eviction context. Last month, the American Bar Association and the Harvard Negotiation & Mediation Clinical Program published a report identifying nationwide best practices to divert eviction filings and enhance housing stability. See “Designing for Housing Stability: Best Practices for Court-Based and Court-Adjacent Eviction Prevention and/or Diversion Programs” (available at https://bit.ly/3yn3FN7).
This research revealed that stakeholders generally supported eviction prevention efforts during the pandemic. More than 70% of the landlords surveyed were willing to discuss tenant non-payment outside of court.
Report author Deanna Parrish, Clinical Instructor and Lecturer at Harvard Law School’s Dispute Systems Design Clinic, wrote in an e-mail:
Effective eviction prevention and/or diversion programs use a multi-sector and holistic approach to provide parties with a combination of legal representation, quality mediation, cash or rental assistance, and self-help or supportive services. Investing in eviction prevention and/or diversion programs is not just urgent, it is doable. These programs enjoy wide support across landlords, court staff, and tenants. Over 81% of property owners surveyed reported being less likely to pursue eviction if their tenant had access to rental or cash assistance.Court staff and judicial stakeholders reported eviction diversion programs as essential to helping lighten what they described as an “oncoming tsunami” of eviction filings once the CDC moratorium lifts. Tenant advocates have long been calling for legal representation and easily accessible rental and cash assistance, among other interventions, to help increase housing stability. Legislatures and courts should act swiftly to formalize eviction prevention. Doing so would be nothing short of a lifeline for millions of Americans, landlords and tenants alike.
As the Covid-19 pandemic winds down and emergency measures are lifted, alternative dispute resolution eviction programs may soften the blow to tenants as eviction moratoriums end. Although these ADR programs are in the early stages of adoption, there are promising signs that they might help the U.S. economy’s housing segment return to normalcy without significant housing disruptions.
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The author, an LLM candidate, at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.
Shell tells Waxman that “late” millennials and early Gen Z-ers may have a tough time in the workplace. “These are people for whom values are nonnegotiable, in a different way than some of the earl[ier] generations,” says Shell, noting that he has been seeing MBA candidates who are seeking to escape from what they view as unethical work environments.
But, he explains, these employees have insufficient skills to “move the organization toward the good” and to navigate workplaces that push and test their moral codes.
That, says Shell, is the inspiration for “The Conscience Code.”
Shell and Waxman discuss workplace conflicts that fall on middle management arising from a variety of sources, and how managing the conflict can “enable purpose,” in line with CPR’s mission of fostering a dispute resolution culture.
Shell adapted a self-test from “The Conscience Code” on conflict management skills for the new July/August issue of Alternatives to the High Cost of Litigation. The test advises users on how they face conflict, with the scoring pointing the user to the personal style categories of Advocate, Problem-Solver, Compromiser, Avoider or Accommodator. The article can be found here.
Please share the video on social media, linked below, and directly on YouTube.
CPR’s new Y-ADR Interview Series returns with another discussion on in-house work, law practice development, and careers in dispute prevention and resolution.
This week, Y-ADR Steering Committee member Elizabeth Chan, an associate in the London office of Three Crowns, discusses conflict resolution with Kelly Xing, Legal Counsel at General Motors Co. in the Jing’an District, in Shanghai, China.
Kelly discusses her career path and conflict resolution experience, including how she approaches the drafting of dispute resolution clauses, and how the company uses a multi-tiered approach to dispute resolution that focuses on resolving disputes at management level.
She also talks about the business, discussing in detail the GM joint ventures she works on.
Lizzie Chan’s interview is her fifth in the CPR Y-ADR Interview series. The previous interview, with Mathias Goh, can be viewed on CPR Speakshere. Previously, Lizzie spoke with Timothy Shore on working as an ombudsman, which can be viewed on CPR Speakshere. The second interview in the series, with CPR Y-ADR co-chair Jason Klingensmith, Assistant General Counsel, at General Motors Co. in Detroit, is available on CPR Speakshere.
Lizzie’s kickoff interview in the series, with Jason’s GM colleague Brittany Mouzourakis, is available on CPR Speakshere.
You can watch the new Kelly Xing interview above, and share it on YouTubehere.
CPR’s Young Leaders in Alternative Dispute Resolution educates the next generation of leaders on the full spectrum of dispute prevention and resolution mechanisms, and offers unique networking and professional development benefits to participants. Through periodic seminars and other initiatives, participants are introduced to CPR and gain an insider’s view into how CPR’s community of corporate counsel, law firm counsel, and other experts in the field are using dispute prevention and resolution techniques to manage conflict.
Y-ADR is open to the conflict prevention and resolution community–attorneys, professionals, academics and students–45 years old and younger, or those with less than eight years of professional experience in international or domestic ADR practice or other areas of conflict prevention and resolution.
The Y-ADR Steering Committee is the leadership group for Y-ADR. Jason Klingensmith’s co-chair is Ulyana Bardyn, counsel in the New York office of Eversheds Sutherland.
Follow CPR’s social media at the links at the bottom of this page for developments, and connect with Y-ADR’s LinkedIn page here.
Last week, the Sixth Circuit U.S. Court of Appeals issued one of the rare rulings addressing the authority of an arbitral institution to make decisions.
In the case, the appeals court considered the authority of an American Arbitration Association administrator to make what the court considered a “gateway” decision under the AAA’s Healthcare Policy Statement and rules rather than allowing that decision to be made by arbitrators.
The 2-1 majority opinion ruled that only an arbitrator could make the decision, not the administrator. That ruling has significant implications for the administrability of due process protocols and policy statements in patient healthcare, consumer and employment disputes.
In Ciccio, et al. v. SmileDirectClub LLC, No. 20-5833 (6th Cir. June 25, 2021) (available at https://bit.ly/2U8OqZ8), Senior Circuit Judge David W. McKeague authored the majority Sixth Circuit panel opinion overturning an AAA decision to apply the AAA’s policy against accepting a claim that “implicated various AAA policies that precluded arbitration unless the parties signed a post-dispute arbitration agreement or a court otherwise ordered arbitration.”
The AAA’s Consumer Arbitration Rules, Healthcare Policy Statement and Healthcare Due Process Protocol bar the AAA from arbitrating a patient healthcare dispute unless either (1) all parties have agreed to submit the matter to arbitration after the dispute has arisen or(2) a court has ordered the disputing parties to arbitrate the matter. The AAA Healthcare Policy Statement describes this policy succinctly:
In 2003, the American Arbitration Association (“AAA”) announced that it would not administer healthcare arbitrations between individual patients and healthcare service providers that relate to medical services, such as negligence and medical malpractice disputes, unless all parties agreed to submit the matter to arbitration after the dispute arose. . . . However, the AAA will administer disputes between patients and healthcare providers to the extent a court order directs such a dispute to arbitration where the parties’ agreement provides for the AAA’s rules or AAA administration.
The dispute in this case arose out of a false advertising claim brought by plaintiffs and former patients Dena Nigohosian, Dr. Joseph Ciccio, Dr. Arthur Kapit, and Dr. Vishu Raj, and joined by Dana Johnson and others, against SmileDirect, originally in federal court. The U.S. District Court first held that an arbitration agreement in SmileDirect’s customer contract applied and ordered Nigohosian to arbitrate. The other plaintiffs then voluntarily dismissed their court claims.
The arbitration clause in question read:
AGREEMENT TO ARBITRATE – I hereby agree that any dispute regarding the products and services offered [b]y SmileDirectClub and/or affiliated dental professionals, including but not limited to medical malpractice disputes, will be determined by submission to arbitration and not [b]y lawsuit filed in any court, except claims within the jurisdiction of Small Claims Court . . . . I agree that the arbitration shall be conducted by a single, neutral arbitrator selected by the parties and shall be resolved using the rules of the American Arbitration Association.
Johnson thereafter filed a class arbitration claim against SmileDirect with the AAA on behalf of consumer claimants who had been SmileDirect patients.
At that point, the AAA itself became involved in deciding whether the class arbitration should proceed in light of AAA policies and rules. An AAA administrator advised the parties that that AAA’s Healthcare Due Process Protocol and Healthcare Policy Statement in the circumstances required healthcare providers and their consumers to sign post-dispute arbitration unless a court order has compelled arbitration, according to the Sixth Circuit opinion:
An AAA administrator informed the parties that AAA’s Healthcare Due Process Protocol and Healthcare Policy Statement applied, which require healthcare providers and their patients to sign an arbitration agreement after a dispute arises in certain cases unless a court order has compelled arbitration. SmileDirect’s counsel asked the AAA administrator to reverse this decision but the AAA administrator maintained his “initial, administrative determination [that] the Protocol [and the Healthcare Policy Statement] appl[y].” . . . SmileDirect’s counsel objected again, noting that the district court had already compelled Nigohosian to arbitrate “whether the claims themselves are arbitrable” and argued that “AAA’s administrative decision to apply the Protocol [and the Healthcare Policy Statement] to these consumer claims is erroneous. ***
The AAA administrator “reaffirm[ed] [his] administrative determination” that the Healthcare Policy Statement applied to Johnson’s claims. . . . He concluded that arbitration could only proceed following a court order (seemingly like the court order already entered for Nigohosian) or a post-dispute arbitration agreement.
Johnson refused to sign a post-dispute agreement consenting to arbitration, while Nigohosian (who was bound by the earlier District Court order compelling arbitration) never initiated arbitration herself. When claimants renewed their court proceedings in the U.S. District Court, however, “SmileDirect responded that they couldn’t rejoin the case because the Agreement required an arbitrator to decide the merits of any dispute, including any gateway issues about whether the dispute was arbitrable.” (Emphasis added.)
The district court, though, decided that SmileDirect and Johnson “got what they bargained for” because the dispute had been “resolved using the rules of the [AAA].” Consequently, the court determined that Johnson could renew the dispute before the judicial forum:
The district court interpreted the Agreement to fully incorporate Rule 1(d), the Consumer Due Process Protocol, and the Healthcare Policy Statement. The court’s interpretation of these rules and policies next led it to conclude that Johnson had discharged his obligations under the Agreement and could “submit [his] dispute to the appropriate court for resolution.” . . . Under the district court’s reasoning, Rule 1(d) incorporates the Consumer Due Process Protocol, which in turn states that AAA has subject-specific policies (incorporating the Healthcare Due Process Protocol and Healthcare Policy Statement by implication), and the Healthcare Policy Statement requires a post-dispute arbitration agreement or a court order. Therefore, the court held that “the AAA process to which the parties mutually agreed ha[d] been completed in Johnson’s case.”
With respect to Nigohosian, however, the Court decided that she was bound by the existing Court order compelling arbitration. The District Court therefore stayed her claims, pending arbitration.
SmileDirect thereafter appealed the decision regarding Johnson to the Sixth Circuit Court of Appeals.
The Court of Appeals did not resolve the substantive arbitrability issue. Rather, Judge McKeague held on behalf of a majority of a divided appellate panel that “The text of the [parties’ arbitration agreement] confirms that the parties didn’t intend to allow an administrator to short-circuit arbitration by refusing to appoint an arbitrator to answer this initial gateway question. Accordingly, we don’t have anything further to say on the matter until and unless a party asks us to review an arbitrator’s decision under 9 U.S.C. § 10.”
To reach this result, the appellate panel started with basic principles in U.S. arbitration jurisprudence that “[w]hether the parties have agreed to arbitrate or whether their agreement covers a particular controversy” are gateway arbitrability questions.” The parties may decide to send these gateway issues to an arbitrator rather than a court, but only upon a showing of “clear and unmistakable” evidence that the parties did indeed intend to delegate those issues to an arbitrator under the ruling in the U.S. Supreme Court’s First Options v. Kaplan, 514 U.S. 938 (1995).
In the Sixth Circuit, like almost all other federal circuit courts, the incorporation of AAA rules authorizing the arbitrator to decide on the scope or validity of the arbitration agreement or the arbitrability of a claim satisfies the First Options standard.
Thus far, the Court of Appeal’s reasoning paralleled the U.S. District Court’s reasoning on gateway arbitration questions. But, stated the McKeague opinion, “What remains is the related question of whether the parties intended to allow an AAA administrator to apply the Healthcare Policy Statement before sending any gateway-arbitrability questions to the arbitrator,” explaining that
The Agreement dictates that “any dispute . . . will be determined by submission to arbitration,” not by litigation, and “that the arbitration shall be conducted by a single, neutral arbitrator selected by the parties.” The parties never got that far here because an AAA administrator “ma[d]e an initial, administrative determination [that] the [Healthcare Policy Statement] applie[d].”
The appeals court read the arbitration agreement between the parties to show that they intended to send gateway questions of arbitrability “exclusively” to an arbitrator, not to an AAA administrator. Senior Circuit Judge McKeague expressed confusion as to the basis relied upon by the AAA administrator to take this decision rather than referring the question to an arbitral panel:
It is unclear what the administrator was doing. There are two ways to view his decision. Perhaps the administrator independently interpreted the Agreement and read it to incorporate the Healthcare Policy Statement, which led the administrator to conclude that the parties did not intend to arbitrate the instant dispute without a post-dispute agreement or court order. Or perhaps the administrator was simply applying AAA’s Healthcare Policy Statement because he concluded that this case concerns healthcare and the AAA follows this policy no matter what a particular agreement says or what particular parties intended.
“Either way,” wrote Judge McKeague, “the end result was contrary to the text of the Agreement and the FAA.” Arbitrators and arbitral administrators “are distinct.” Under AAA instruments, he wrote, administrators do not decide the merits of a dispute.
The opinion notes, “The arbitrator decides the merits of a dispute. And if an administrator could preempt a final merits ruling by an arbitrator, the administrator would effectively run afoul of the provision that administrators ‘cannot overrule or change an arbitrator’s decisions or rulings.’” It continues later:
Under AAA’s rules, an arbitrator and an administrator are distinct. “The [a]dministrator’s role is to manage the administrative aspects of the arbitration, such as the appointment of the arbitrator. . . . [T]he [a]dministrator does not decide the merits of a case or make any rulings on issues such as what documents must be shared with each side.” . . . Unsurprisingly, the administrator helps disputes get to an arbitrator and doesn’t make merits rulings. On the other hand, “[a]rbitrators are neutral and independent decision makers who . . . make the final, binding decision on the dispute. . . . The [a]rbitrator makes all the procedural decisions on a case not made by the administrator.” …. The arbitrator decides the merits of a dispute. And if an administrator could preempt a final merits ruling by an arbitrator, the administrator would effectively run afoul of the provision that administrators “cannot overrule or change an arbitrator’s decisions or rulings.”
Therefore, concluded the Sixth Circuit, “the arbitrability of Johnson’s claim, thus should’ve gone to an arbitrator for a ‘final, binding decision.’”
The appellate court also considered whether the issue of compliance with the AAA’s post-dispute agreement requirement for consumer healthcare arbitrations is a “procedural decision” delegated to an AAA administrator rather than an arbitral panel. The appeals panel stated, “We don’t see how it could be.”
In so deciding, the appellate judges reminded the parties that contract interpretation is a legal question. Procedural decisions, stated the Court of Appeals, are more like administrative aspects of the arbitration such as appointment of arbitrators, location of hearings and fees:
The procedural decisions AAA administrators make, in turn, are more akin to “administrative aspects of the arbitration, such as the appointment of the arbitrator, . . . preliminary decisions about where hearings might take place, and . . . handl[ing] the fees.” *** So it generally wouldn’t make sense to require clear intent to delegate arbitrability questions to an arbitrator but then allow either arbitrators or administrators to decide that legal question. [Citation and footnote omitted.]
The appellate court distinguished in this regard a Fourth Circuit decision upholding resolution by AAA administrators of a dispute as to how many arbitrators would be appointed, Dockser v. Schwartzberg, 433 F.3d 421 (4th Cir. 2006).
Not only were the clauses in the two disputes different, said the Sixth Circuit majority, but the issue in that latter case was procedural. “Dockser dealt with ‘what kind of arbitration proceeding the parties agreed to,’ whereas here the relevant question is arbitrability—what the Agreement itself means.”
If, instead of interpreting the parties’ arbitration agreement, the AAA was applying its own “sound policy,” then according to Judge McKeague that conduct too would contravene applicable law. Nor did the arbitration agreement grant the AAA administrator the authority to make this policy choice for the parties. The majority opinion states:
Although the AAA may choose for itself which claims it will arbitrate, it is not at liberty to “impose its own view of sound policy” regarding when or how parties should be allowed to arbitrate independent of the parties’ own choices in their contract.
We also see nothing in the Agreement that gives the administrator the right to make this policy choice for the parties. To be sure, the Agreement incorporates the AAA rules, which perhaps could be read to include the AAA’s due process review under Consumer Rule 1(d). And Consumer Rule 53 says that “[t]he arbitrator shall interpret and apply these Rules as they relate to the arbitrator’s powers and duties” but that “[a]ll other Rules shall be interpreted and applied by the AAA.” . . . But Consumer Rules 1(d) and 53 must be read together with the Agreement and the other rules to ascertain the parties’ intent. . . . When an arbitration agreement and its incorporated rules seem to conflict, our job is to find the “best way to harmonize” them. [Emphasis is the court’s.]
“We won’t,” stated the appellate majority, “interpret this agreement to arbitrate to permit Johnson to avoid arbitration.”
Moreover, the appeals panel pointed out that its decision to require an arbitrator to decide the gateway question, rather than an administrator, was not inconsistent with AAA policy. The court’s resulting order would satisfy the AAA Healthcare Policy alternative that the AAA will arbitrate consumer healthcare disputes if so directed by a court order. The opinion notes:
The Healthcare Policy Statement also does not stand in the way of such an appointment. It makes clear that “the AAA will administer disputes between patients and healthcare providers” either when the parties enter into a post-dispute agreement or when “a court order directs such a dispute to arbitration where the parties’ agreement provides for the AAA’s rules or AAA administration.” . . . Our decision will lead to such a court order—seemingly clearing the administrative path. Here, to give effect to both the parties’ agreement that “the arbitration shall be conducted by a single, neutral arbitrator” and that the arbitration “shall be resolved using the rules of the American Arbitration Association,” we can’t read the AAA rules to preclude decision by an arbitrator.
.The Sixth Circuit opinion also drew attention to the fact that the approach taken by the majority will result in a different, narrower judicial review standard by the federal courts–review for vacatur of an arbitral decision rather than de novo review:
The district court effectively reviewed the Agreement de novo. In doing that, the district court relied on a court’s interpretation of the same set of AAA rules and policies to hold that the AAA rules effectively nullified an arbitration agreement. . . . But by agreeing, clearly and unmistakably, to send the arbitrability question to the arbitrator, the parties here bargained for the narrow 9 U.S.C. § 10 review, not de novo review. . . .
This is where the Agreement’s requirement that the dispute would not be determined by litigation comes in. The district court determined the contract-interpretation question, so the dispute was determined by litigation contrary to the intent of the parties. But once an arbitrator interprets the Agreement, any judicial review under 9 U.S.C. § 10 wouldn’t be review of the arbitrability question de novo but under the limited grounds identified (for fraud, corruption, etc.). Because the parties bargained for an arbitrator to interpret the Agreement and for the courts to have a very limited role, it wouldn’t make sense to allow an administrator’s preemptive contract interpretation to be a portal to de novo judicial review.
Circuit Judge Eric L. Clay dissented, noting “I agree with the majority’s statement at the onset of its opinion that “this case is about whether the Agreement incorporates the Healthcare Policy Statement,” even though it then proceeds to repudiate the Healthcare Policy Statement.” The parties, Circuit Judge Clay reasoned, “made their decision to abide by the rules when they signed the contract incorporating rules that included the Healthcare Policy Statement.” He added:
Turning to the plain language of the agreement, the threshold question of what the agreement incorporated is readily apparent: [disputes] shall be resolved using the rules of the American Arbitration Association. . . . As part of the AAA rules, the AAA maintains consumer protocols that ensure a fair process in healthcare disputes. The Healthcare Policy Statement’s incorporation into the agreement was clear to anyone who read the AAA’s rules. The parties made their decision to abide by the rules when they signed the contract incorporating rules that included the Healthcare Policy Statement, but in my colleagues’ view, those rules may simply be disregarded if they interfere with requiring the parties to proceed with the arbitration.
Here, the AAA determined that proceeding to arbitration would violate their due process rules without its mandatory post-dispute agreement. When the parties agreed that the dispute “shall be resolved using the rules of the AAA,” they were aware that those rules called for an administrator to render the AAA’s initial determination regarding the requirements of the organization’s own rules before proceeding to arbitration. That was not an unusual decision, nor a decision out of lockstep with the rules of the AAA. Quite the contrary, that decision followed the process by which the AAA typically administers all of its arbitrations. That provides the “clear and unmistakable” evidence that the parties intended to have these gateway issues decided in accordance with the AAA’s procedures and policies.
The majority opinion addressed Circuit Judge Clay’s dissent in footnotes 3 and 4. Notably, in footnote 4 the Court of Appeals stated, “we interpret the words of this Agreement in conjunction with AAA’s rules without deference to AAA’s ‘typical’ practice.” The footnotes state:
3The dissent agrees that AAA’s rules specifically assign arbitrability questions to the arbitrator while reserving AAA’s “administrative duties” for the administrator as detailed in the arbitration agreement and the AAA’s rules themselves. . . . Where we differ is whether the AAA rules include an initial arbitrability decision among these “administrative duties.” The dissent points to no rule granting the administrator such authority, but instead locates the authority in the general requirement that “the AAA will administer the arbitration.” . . . Our decision to follow the AAA’s rule granting such authority to an arbitrator doesn’t mean that the parties “contract[ed] the AAA’s administrator out of the process,” but instead means the parties intended the administrator to have the role the AAA’s rules mandate: “to manage the administrative aspects of the arbitration, such as the appointment of the arbitrator, preliminary decisions about where hearings might take place, and handling the fees associated with the arbitration.”
4The dissent suggests that requiring an administrator to determine arbitrability “was not an unusual decision” but is rather “the process by which the AAA typically administers all of its arbitrations”—a fact that “any party doing their due diligence would have seen.” . . . But we interpret the words of this Agreement in conjunction with AAA’s rules without deference to AAA’s “typical” practice. The Agreement or the AAA Rules could grant the administrator that authority, but in this case they do not.
Judge Clay volleyed back at the majority by arguing in his own footnote 1 that “The majority claims that we agree that the AAA’s rules assign arbitrability to the arbitrator, and ‘administrative duties’ to the administrator, but that is not the case. To the contrary, the AAA’s rules do not clearly delineate these roles as the majority alleges. Instead, as stated in the rule cited above, the AAA has the final decision on who administers cases under its rules.”
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Whether one agrees with Senior Circuit Judge McKeague’s opinion on behalf of the majority or with Circuit Judge Clay’s dissent, this ruling has significant implications for many disputes in the U.S. involving healthcare, consumer and employment matters.
The AAA has adopted due process protocols for those areas, as well as making policy statements regarding how the AAA will handle applications for arbitration in many areas. The reasoning by the Ciccio majority could vitiate the authority of an AAA administrator to apply those instruments to decline to accept cases that do not comply with those protocols and policy statements.
Instead, application of those instruments would be allocated to an arbitral panel, resulting in significant delay and expense while the panel is constituted and briefed before a decision on the applicability of due process protocols and policies crystallizes.
Given the dissent, it is worth wondering whether this case is headed toward en banc review by the Sixth Circuit Court of Appeals or will be the subject of a certiorari petition to the U.S. Supreme Court.
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Mark Kantor is a member of CPR-DR’s Panels of Distinguished Neutrals. Until he retired from Milbank, Tweed, Hadley & McCloy, he was a partner in the firm’s Corporate and Project Finance Groups. 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). He also is Editor-in-Chief of the online journal Transnational Dispute Management. He is a frequent contributor to CPR Speaks, and this post originally was circulated to a private list serv and adapted with the author’s permission.
The U.S. Supreme Court this morning declined to hear a case that would have covered two issues that are familiar arbitration turf at the nation’s top court—whether rules incorporated into an ADR agreement are a specific-enough designation for the arbitration to go forward, and whether arbitrators can invoke class processes.
The court denied cert in Shivkov v. Artex Risk Solutions Inc., 20-1313, where an appeals court, compelling arbitration, also held that “the availability of class arbitration is a gateway issue that a court must presumptively decide,” but because the agreements “do not clearly and unmistakably delegate that issue to the arbitrator,” and “[b]ecause the Agreements are silent on class arbitration, they do not permit class arbitration.” Shivkov v. Artex Risk Sols. Inc., 974 F.3d 1051 (9th Cir. 2020) (available at https://bit.ly/3y6e9jL).
The issues presented challenging the Ninth Circuit petition to the Supreme Court by the petitioners—more than 80 individual and business plaintiffs who had filed suit against insurance management companies that set up captive insurance firms for the petitioners that were audited and held liable for unpaid federal taxes—covered the incorporation by reference rules question, and class arbitration. The specific questions presented by the petitioners that the Court declined today were:
1. The parties’ arbitration clause expressly designates the American Arbitration Association (“AAA”) as their default dispute-resolution method. The clause did not also specifically mention the AAA Rules themselves, which, according to the AAA, apply whenever parties select a AAA arbitration. Must an agreement that specifies arbitration before the AAA as the default dispute-resolution method also specifically mention the AAA Rules to avoid being considered ambiguous about whether the parties intended to apply the AAA Rules?
2. Under the plain text of the Federal Arbitration Act, courts—not arbitrators—decide gateway issues, such as whether there is an agreement to arbitrate and what controversies does it cover. Procedural questions, however, are reserved for arbitrators. Is the availability of class arbitration a matter for an arbitrator to decide, or for a court to decide?
The Shivkov cert denial isn’t surprising because the incorporation of AAA rules issue that the petitioner attempted to have the Court examine already was rejected, indirectly, in a startling move earlier this term. The Court heard arguments in December in Henry Schein Inc. v. Archer and White Sales Inc., No. 19-963 on whether a contract’s delegation agreement sending a matter to arbitration “clearly and unmistakably” designated the case for arbitration because the contract had a carve-out provision from arbitration for injunctions.
But in January, just a month after the oral arguments, the Court dismissed the case as improvidently granted, after justices at the hearing appeared to get stuck on whether the incorporation by reference to the AAA rules was sufficient for the clear and unmistakable delegation to arbitration.
The Court a year ago, in focusing on the Henry Schein contract carve-out language in granting certiorari, had denied a cross petition in the case on the incorporation-by-reference issue. The cross petition had asked the Court to address the AAA rules that encompassed a provision that arbitrators decide arbitrability. That denial appeared to have a hand in the Court’s January dismissal of the carve-out language interpretation issue.
At the same time in Shivkov, on the petitioners’ second issue, there have been attempts to revisit class arbitration at the U.S. Supreme Court periodically since the Court’s recent seminal cases reviewing and restricting arbitrators’ power to use a class process without a contract authorization. See Lamps Plus Inc. v. Varela, 139 S. Ct. 1407 (2019); Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013); Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010).
The Shivkov petitioners contended that the Court has left open the class arbitration determination. They urged the Court to preserve the decision for judges.
For example, last year, the Court declined to hear a case asking whether an arbitrator may compel class arbitration—binding the parties and absent class members—without finding actual consent, instead based only on a finding that the agreement does not unambiguously prohibit class arbitration and should be construed against the drafter. See Cristina Carvajal, “Supreme Court Rejects Decade-Old Class Arbitration Employment Discrimination Case,” CPR Speaks (Oct. 5, 2020) available at https://bit.ly/35WsvHm) (discussing the Court’s second cert denial in the history of Jock v. Sterling Jewelers Inc., 942 F.3d 617 (2d Cir. 2019) (available at https://bit.ly/30yP3eZ)).
The Shivkov petition contended that the agreement to use the AAA means agreeing to the AAA rules, which put the arbitrability question in the arbitration tribunal’s hands–a cousin to the Jock argument, and which achieved the same cert-denied result.
The Ninth Circuit Shivkov decision linked above stands, and the case, at least for now, is headed for arbitration under the AAA rules, with the appeals court, not the arbitration tribunal, determining that there will not be a class process.
The program provided training in Interest-Based Bargaining, which was developed by Roger Fisher and William Ury in the 1980s through the Harvard Negotiation Project. The classic popular guide to this Harvard model of “win-win” negotiation and a value-creating mindset is “Getting to Yes: Negotiating Agreement Without Giving In,”by Roger Fisher, William Ury, and Bruce Patton (Penguin Books 2011).
In this approach, parties negotiate based on their interests and not their positions, as in traditional bargaining. Parties shift their view of the opposition from adversaries to collaborators, and by doing so, they can then explore the deeper interests underlying their positions to identify potential trade-offs and win-win opportunities.
The Interest-Based Bargaining model can apply in any cultural setting because the core negotiation principles are universal despite variations in communication and presentation styles.
The May 2021 session took place over the course of six half days. Each day, a different teacher presented a new topic and assigned a negotiation exercise adapted from real-life Harvard case studies to practice implementing the concept. After each negotiation exercise, the faculty tabulated the results for a plenary debrief.
Guhan Subramaniam opened the interactive sessions by introducing the fundamentals of value claiming, also known as single-issue negotiation. Successful value claiming starts with mastering the use of anchors and strategic concessions, while identifying the zone of possible agreement and shaping the counterpart’s perception of it.
Subramanian explained that one must ensure that the negotiating counterpart perceives the process of negotiation as fair, but at the same time, one must deploy concessions at an appropriate rate and scope. Being aware of the influence of the midpoint rule–predicting the final deal price as the midpoint of the first semi-reasonable offer and counteroffer–will make anchors and concessions more effective.
Negotiators can also leverage social proof–the tendency to look at how others behave when making choices–to add pressure on counterparts to conform to articulated norms.
Moving from claiming value, James Sebenius introduced how to create value in multiple-issue negotiations. Sebenius emphasized that parties must overcome the zero-sum mentality to expand the negotiation pie. Another paramount lesson, he explained, involves understanding the power of probing for information on each side’s underlying interests and valuations. This would lead to discovery of uncommon grounds that negotiators could leverage to strengthen cooperation.
Sebenius continued by explaining that negotiators should seek strategic moves that offer high value at low cost so both sides are better off. To maximize value creation, negotiators can also employ multiple equivalent and simultaneous offers.
An unusual technique that Sebenius outlined as a way to overcome sufficiency bias–believing that parties have already done everything to strike the best deal–is to engage in post-settlement settlements. These are settlements in which parties negotiate better and novel terms that were not considered during the initial deal-making process.
Meanwhile, the existing deal remains unaltered unless both deem the post-settlement terms superior to the agreement just signed. Post-settlement settlements capitalize on the trust and goodwill generated during the negotiation to increase joint value creation.
Dan Shapiro presented negotiation from a psychological standpoint through discussing five core concerns of emotions and relationships. Each of the core concerns (appreciation, autonomy, affiliation, status, and rule) serve as a lens to understand and as a lever to improve negotiation.
Shapiro explained that, for example, if a negotiator and the opposing side appreciate one another, the negotiator is more likely to reach a wise agreement. Being appreciated, the opponent will feel more at ease and become more cooperative. Shapiro laid out details of this framework in Beyond Reason: Using Emotions as You Negotiate, which he co-wrote with Roger Fisher (Penguin Books 2005).
Debbie Goldstein exhorted negotiators not to underestimate the importance of emotions in driving negotiation outcomes. Emotions affect thinking and perceptions of what is happening, shift reservation values, and narrow zones of possible arrangements. The critical lesson is to develop one’s capacity to be a neutral observer of the negotiation so that one can analyze interactive interdependencies, adapt, and deploy appropriate strategies to further the negotiation.
Goldstein and the instructors emphasized listening skills. If one feels stuck with counterproductive behaviors in negotiation, developing a listening stance to check the understanding of the counterpart’s intentions would help.
Robert Wilkinson built on the concepts covered to bring in more complex organizational challenges. Complex negotiations contain unfamiliar interacting and interconnected elements that challenge negotiators’ abilities to satisfy their interests. Veteran negotiators often wrestle with commonly encountered obstacles such as cultural differences, leadership/organizational problems, spoilers, and radical changes in circumstances. To make progress in complex negotiations, Wilkinson suggested many techniques–such as generating a sequencing strategy with convincing objectives–to build a winning coalition conducive to reaching a fruitful resolution.
Wilkinson expanded in an email to the author. “When you enter into more complex negotiations, the way in which you manage the process matters far more,” Wilkinson noted, adding, “People often don’t realize the influence they can exert in a negotiation simply by thinking through their process choices. I always encourage people to ask themselves ‘Who am I privileging in this process?’ ‘Who am I excluding?'” Wilkinson’s latest thoughts on negotiation can be found in a recent paper and a podcast available at https://bit.ly/2Uwhgn1 and https://bit.ly/2WcWedx.
Brian Mandell concluded the program by integrating concepts from the previous sessions and offering tactical advice to participants on their real-life negotiation dilemmas. In response to a question regarding how to manage a repeated liar in negotiation, Mandell suggested employing tactical retorts to guide the opponent into revealing the truths, asking questions such as “ Help me understand . . .”; “Walk me through your logic and thinking . . .”; “How do you come to that conclusion?” and “What do you think of that scene?”
Dan Shapiro, who is founder and director of the Harvard International Negotiation Program, commented in an email: “We negotiate all the time–but rarely as well as we could. So PON offers frameworks and tools to help participants hone their negotiation skills. I present a potent method to help negotiators leverage the power of emotions to build authentic relationships, promote information exchange, and achieve value-optimizing outcomes. We’ve applied the model successfully to business and political conflicts around the world, and I love exploring the framework with the exec ed participants, who bring substantial perspectives to our conversations, making for an edifying learning experience!”
The ideas covered in the program are creative and practical. The faculty helped the participants think through habits and behaviors that may not be helpful and how to get unstuck in the moment. Participants left the program with four to five sentences written in small print on a notecard with the essential takeaways from the program. Brian Mandell asked the participants to memorize this aphorism: “Negotiation is the art of letting other people have it your way.”
The author, an LLM candidate, at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.