CPR Protocol on Disclosure of Documents & Presentation of Witnesses in Commercial Arbitration

By Verlyn Francis

One of the advantages of arbitration over litigation is efficiency. Arbitration does not have to contend with the numerous rules of civil procedure. This saves time and, therefore, cost. However, parties to arbitration still expect and do receive procedural fairness in the adjudication of their disputes.  

The concept of efficiency combined with procedural fairness is sometimes challenging for arbitration counsel from different jurisdictions who argue that, without all the court system’s procedural steps, parties do not receive fairness.

Trained commercial arbitrators would argue they are misconstruing the whole arbitration process.  One of the fundamentals of arbitration is that, at the first pre-hearing conference, the parties have input into the procedural rules that will govern the process before those rules are set out in the first preliminary order.

Unfortunately, document disclosure and witness presentation are two areas that can bedevil the tribunal, arbitration counsel and the parties.

The newly published Protocol on Disclosure of Documents & Presentation of Witnesses in Commercial Arbitration, by CPR, the International Institute for Conflict Prevention and Resolution, will go a long way to providing guidance to tribunals and tribunal counsel on the disclosure of documents and witness presentation in commercial arbitration.  This insightful Protocol, a revision of the first Protocol issued in 2009, is the work product of a CPR Arbitration Committee task force co-chaired by Baker McKenzie of counsel Lawrence W. Newman, in New York, and Viren Mascarenhas, a King & Spalding partner who works in the firm’s New York and London offices.

The Protocol’s stated aims are: (1) to give parties to arbitration agreements the opportunity to adopt certain modes of dealing with the disclosure of documents and the presentation of witnesses; and where they have not done so, (2) to assist CPR or other tribunals in carrying out their responsibilities regarding the conduct of arbitral proceedings. 

The Protocol does not supersede the institutional rules or ad hoc arbitrations.  Instead, it helps tribunals to refer to the Protocol in organizing and managing arbitrations under rules such as those for CPR (for example, CPR’s arbitration rules are available here), other institutions, or ad hoc arbitrations.

In dealing with the disclosure of documents, the Protocol considers the philosophy underlying document disclosure; attorney-client privilege and attorney work-product protection; party-agreed disclosure; disclosure of electronic information, and tribunal orders for the disclosure of documents and information. It provides schedules of the wording that can be adopted by parties in their agreements and tribunals in their orders.

In the section on the presentation of witnesses, the Protocol reminds arbitrators to bring to the attention of the parties at the pre-hearing conference the options for adducing evidence and encourage the exploration of those options with the parties.

The first option is that the parties can agree that the tribunal will decide the arbitration on documents only.  It then sets out guidance on how evidence can be submitted by witness statements, oral testimony, depositions, and presentations by party-appointed experts.  Also included are procedures that may be applied to the conduct of the hearing. 

This does not negate party-agreed procedures for the presentation of witnesses but, of course, the tribunal must be careful not to allow the parties to encumber the arbitration with all the court rules.  The Protocol also includes schedules setting out the modes of presenting witnesses, including experts.

This Protocol contains guidance that most commercial arbitrators know, but it is another important tool that tribunals can use to educate counsel and the parties while bringing efficiency into arbitration procedures. 

I have added it to my toolkit!

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The author, a mediator and arbitrator who heads Toronto-based Isiko, an ADR consulting firm, conducts adjudicative processes in estates, family, civil, and commercial disputes. She is a Professor of ADR at Centennial College, Toronto, Canada, and a member of the CPR Panel of Distinguished Neutrals.

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Notes on Diversity: Princeton’s Ramona Romero on Higher Education; Toronto Consultant/Neutral Verlyn Francis on ADR Ethics

By Arjan Bir Singh Sodhi

Here is a synopsis of the CPR Diversity in ADR Task Force meeting conducted online on Tuesday, Oct. 5, 2021.

Welcome & Introductions

CPR Diversity in ADR Task Force Co-Chairs the Hon. Timothy K. Lewis and the Hon. Shira A. Scheindlin welcomed and thanked the panelists and attendees for joining.

Interview with Ramona E. Romero, vice president and general counsel at Princeton University, in Princeton, N.J.

Task Force co-chair Timothy Lewis, retired Third U.S. Circuit Court judge and counsel in Schnader Harrison Segal & Lewis started the panel discussion on diversity in ADR. He gave a brief introduction for Romero and asked her to share her experience as an immigrant to the United States. Romero started her interview by thanking all the participants of the meeting. She also shared her story of moving to the United States at age 11 from the Dominican Republic. From an early age, Romero said she emphasized the value of working hard. She placed much importance on collaboration and how it helped her learn.

Task Force co-chair Shira Scheindlin, retired New York U.S. District Court judge and of counsel in New York’s Stroock & Stroock & Lavan, led the second part of the interview, asking Romero to share her views on considering characteristics that are fair for admission purposes in law schools and universities. Romero replied that she believes affirmative action is still required due to racial and ethical inequalities in schooling, housing, employment, and policing.  She discussed Students for Fair Admissions Inc. v. President & Fellows of Harvard College, No. 20-1199, which highlights the issues faced by the students regarding their university admissions.

Romero then shared her view on immigration policy, noting, “Immigration is essential to higher education as it is essential to the diverse economy of the United States.” She emphasized the importance of having a diverse U.S. judiciary as it increases trust and perception of fairness. Because, she said, the majority of people who deal with the judiciary are people of color, having a diverse judiciary with more people of color and women will aid in building trust for the judicial process.

Romero concluded her discussion by hoping that corporations, businesses and interested parties can do better in the future by promoting the advancement of women and people of color in the legal profession.

Verlyn Francis, Presentation on “Ethics in Arbitration: Bias, Diversity, and Inclusion.”

Francis is an arbitrator, mediator, and trainer at Isiko Dispute Resolution Consultants, Toronto, and a Professor of ADR at Centennial College, also in Toronto. She started her presentation by talking about the genesis of ethics and impartiality of arbitrators and how we can reduce impartiality bias in arbitration.

She stressed the importance of the code of ethics in the arbitration proceeding. Francis spoke about the consequences of applying those ethical codes to people who didn’t play any role in developing those codes. She said she hopes that many institutions will work on improving rules, ethics, and impartiality in arbitration.

She also spoke about layers of cultural affiliation that can often create stereotypes for other cultures. Hence, she said, an arbitrator should always be aware of implicit bias that can have discriminatory actions towards the parties. She then acknowledged CPR’s recent implicit bias webinar, Imperfect Impartiality: How Neutrals Can Combat Implicit Bias.

She said that often implicit bias operates without awareness of the participants, but the discrimination it produces is visible to those at a disadvantage.

She also expressed concern for the lack of diversity in arbitration that can have its roots in the legal profession, since ADR practitioners are mostly former judges or senior lawyers in law firms where minorities often remain significantly underrepresented.

She also mentioned the Jay-Z case in which the American Arbitration Association roster was challenged due to the lack of available African-American arbitrators. Since that case, the AAA has worked to develop a diverse roster. Francis also noted CPR’s initiatives to further promote diversity and inclusion in the field of ADR. She praised the steps taken by the American Bar Association by passing Resolution 105, which encourages the inclusion of diverse neutrals. She concluded her presentation by encouraging all the panelists to promote diversity in ADR.

* * *

Allen Waxman, CPR’s President and Chief Executive Officer thanked all the panelists for their participation in the discussion. Waxman discussed the importance of understanding dynamics within the tribunal to ensure that all the efforts to increase diversity translate to greater inclusivity.

CPR Announcements closed the Task Force meeting, discussing several events hosted by the CPR Institute, including the 2021 CPR International Conference on Business Dispute Management, which followed the Diversity Task Force event on Oct 6-7 (information at https://www.cpradr.org/events-classes/upcoming/CPR-International-Conference) (Watch CPR Speaks for excerpts from the conference). More events can be found here, and participants were asked to save the date for the 2022 CPR Annual Meeting,  March 2-4.

* * *

The author, a CPR 2021 Fall Intern, is an LLM candidate at the Straus Institute for Dispute Resolution, at Malibu, Calif.’s Pepperdine University Caruso School of Law.

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CPR Employment Disputes Committee: Ombud’s Role in Addressing Worker Complaints Is Analyzed

By Daneisha LaTorre

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.

* * *

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 Speaks blog. 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.

* * *

The author, entering her second year at Washington, D.C.’s Howard University School of Law, was a CPR 2021 Summer Intern.

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Arbitration for Art: Regs Seek to Provide a Better Way to Resolve Disputes

By Jacqueline Perrotta

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.

On July 13, 2020, subject-matter experts including lawyers and professors with experience in the art sector and in arbitration, gathered to form these new “Regulations on Arbitration in the Art Sector of the Venice Chamber of Arbitration” as a way to better resolve art disputes.

A January 2021 article, “Art and Arbitration: an overview in light of the new Regulations on Arbitration in the Art Sector of the Venice Chamber of Arbitration,” highlights the context of the regulations in today’s global art market, the advantages of using arbitration for art sector disputes, and the new regulations, including their importance and potential impact on how the art market resolves disputes.

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.

* * *

The author, a J.D. student who will enter her second year this fall at Brooklyn Law School, is a 2021 CPR Summer Intern.

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Enabling Workplace Purpose with Your Values: A Conversation with Wharton’s Richard Shell

Doing your best on the job requires sticking with your conscience and morals, and honing the skills you need to keep on your path, including your conflict management technique.

So says G. Richard Shell, Thomas Gerrity Professor of Legal Studies & Business Ethics and Management and chair of the Legal Studies and Business Ethics Department at the Wharton School in Philadelphia, who joins International Institute for Conflict Prevention & Resolution President and CEO Allen Waxman for a conversation about Shell’s new book, “The Conscience Code: Lead With Your Values. Advance Your Career,” which was published on June 8 by Harper Collins Leadership.

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.

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Another Appeals Court Take on ‘Who Decides’: The Sixth Circuit Overturns Provider’s Ruling to Reject Arbitration

By Mark Kantor

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.”

* * *

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.

* * *

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. 

[END]

Highlights from Harvard Law PoN’s ‘Negotiation and Leadership’ Program (Updated July 23, 2021)

By Mylene Chan

The Harvard Law School Program on Negotiation offers a Negotiation and Leadership program several times throughout the year. Last month, faculty consisting of six Harvard University professors–Guhan Subramanian, James Sebenius, Daniel Shapiro, Debbie Goldstein, Robert Wilkinson, and Brian Mandell–taught the program. About 70 professionals and executives from around the world attended.

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.

[END]

Highlights from the June Session of the Harvard Law School Program on Negotiation ‘Mediating Disputes’ Training

By Mylene Chan

The Harvard Law School Program on Negotiation conducted a June 7-11 program called Mediating Disputes. This is a recurring course that the program has offered to executives for many years.

About 50 professionals from around the world, including judges, lawyers, business executives, and nonprofit managers attended the sessions taught by Robert Mnookin, Samuel Williston Professor of Law at Harvard Law School, Gary Friedman, of Mill Valley, Calif.’s Mediation Law Offices, and Sausalito, Calif., mediator Dana Curtis.

Mediating Disputes provides training in the non-caucus “Mediation through Understanding” model of mediation that Mnookin, Friedman, and, along with Friedman, co-founder of the Center for Understanding in Conflict, Jack Himmelstein, of New Rochelle, N.Y., have developed and promoted as teachers and practitioners for more than 20 years at the Center of Mediation in Law and the Harvard Negotiation Research Project.

The Understanding Model is a transparent approach in which conflicts are resolved through deepened understanding. This approach eschews the risks of coercion and manipulation potentially present in some other mediation models. 

A distinguishing feature is that all parties work together in a mediation with everyone present. There are no separate meetings and no shuttle diplomacy where the mediator alone has information from both sides. This arrangement eliminates the opportunity for mediators to manipulate information asymmetry. Apart from resolving that ethical dilemma, working together fosters more extensive mutual understanding between the disputants.

The model starts from the foundational belief that disputants should not caucus when conflicts arise and that, in fact, embracing conflicts is often the best opportunity to create value. By staying together throughout the mediation, even when emotions are high, the disputants are forced to vet their underlying interests, allowing the true issues to surface and bring about more nuanced appreciation of each party’s perspective and interest.

Another distinctive characteristic of the Understanding Model is the emphasis on placing ultimate responsibility for whether and how the conflict is resolved on the disputants, not the mediator. It is the parties, rather than the professionals, who ultimately have the best knowledge of what underlies their disputes. Although the intensity of the conflict can obscure their views, the parties hold the key to reaching a resolution of their dispute that best serves them.  When the parties take the lead in resolving the conflict, coercion and manipulation can be eliminated from a mediation, according to the course. 

Mnookin, Friedman, and Curtis presented together during the five-day course. The faculty members engaged the participants in two full mediation stimulations–a personal dispute and a complex business dispute–using the Understanding Model. Each day was dedicated to one of the model’s phases, including contracting, defining the problem and dealing with conflict, understanding law and interests, generating options, and exploring interests and packages.

The faculty demonstrated how each phase should be conducted.  They sent the participants to breakout rooms to roleplay, with guidance and critique, followed by debriefing.  After the day concluded, the three faculty members held office hours for follow-up questions.

The attendees participated in about four hours of simulated mediations using the Understanding Model so they could understand its impact and effect cognitively and viscerally.  

On the final day, the faculty showed a mediation training video produced by the International Institute for Conflict Prevention & Resolution, the host of CPR Speaks, illustrating the caucus model to compare and contrast the different styles. See “Resolution Through Mediation: Solving a Complex International Business Problem” (updated version on YouTube at https://www.youtube.com/watch?v=xTbj-eHwX-w and available from CPR at https://bit.ly/3cFEkW5).

* * *

Reflecting on the processes reviewed in the Program on Negotiation training sessions, Prof. Robert Mnookin noted, “Many lawyer-mediators primarily rely on separate meetings or caucusing for understandable reasons:

(1) it is more comfortable for them because it avoids their having to deal with heated conflict between the parties;

(2) they believe they will be told things in secret that will allow them to create alternatives that facilitate resolution. Besides, many lawyers (who typically select the mediator) prefer it because it gives them more client control.”

“But in my view,” Mnookin continued, “there is far too much reliance on caucusing. The Understanding Model puts the focus on the parties themselves and provides a much greater opportunity for them to take responsibility for helping shape a resolution that may provide a foundation for repairing a damaged relationship.”

Faculty member and Understanding Model developer Gary Friedman noted in an email,  “The model is premised on the idea that the power of understanding is an underutilized power as opposed to the power of coercion, and has the ability to help people find agreements that are more responsive to what’s personally important to them. Understanding in the form of agreements about how the mediation proceeds as well as the ultimate result give the parties control not just over the outcome, but provides them with participation in designing the process as well.”

Faculty member Dana Curtis, like Robert Mnookin, also had misgivings about relying on caucuses in mediation. She stated, “Unfortunately, the caucus model has eclipsed the Understanding Model, especially in recent years. I believe this has occurred for two reasons. Lawyers prize their role as legal adversaries and protectors at the expense of their role as collaborators and problem-solvers. And mediators, especially retired judges and lawyers brought up on settlement conferences, have not acquired the skills and understandings to enable them to offer parties and lawyers an alternative that can lead to a satisfying and meaningful process and, hopefully, resolution, rather than simply a ‘deal.’”

Concluded Curtis: “We would like to change that!”

Details of the Understanding Model can be found at the links above, and in Beyond Winning: Negotiating to Create Value in Deals and Disputes by Robert H. Mnookin, with Scott R. Peppet and Andrew S. Tulumello (Harvard University/Belknap Press 2004).  A mediation training video illustrating the Understanding Model titled Saving the Last Dance: Mediation Through Understanding, with Robert Mnookin and Jack Himmelstein as narrators and Gary Friedman as mediator, is available at the Harvard Program on Negotiation website at https://bit.ly/35hbdEE.  

And for more on recent views of mediation joint sessions and caucusing, see “Decline of Dialogue? Galton, Love & Weiss on Joint Sessions, Caucuses, and the State of Mediation,” CPR Speaks (June 2) (available at https://bit.ly/3daRBGe).

* * *

The author, an LLM candidate, at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.

[END]

#CPRAM21: Committing to More Diversity in ADR

If you missed the 2021 CPR Annual Meeting in January—the first free public meeting held online in the organization’s 40-year history—the videos are being posted on CPR’s YouTube Channel. While additional videos will be posted for CPR members only, the first, linked here on CPR Speaks, is open access and features the keynoters, CNN Anchor and Chief Political Correspondent Dana Bash and General James Mattis, who is former U.S. Defense Secretary. Click the Subscribe button at YouTube for alerts and for more CPR content. For information on full access and joining CPR, please visit CPR’s Membership webpage here.

By Amy Foust

The CPR 2021 Annual Meeting’s final panel presentation encouraged participants to take action for a more equitable alternative dispute resolution community, and focused on CPR’s Diversity Commitment

The Jan. 29 third-day panel was hosted and moderated by CPR’s Anna M. Hershenberg, who is Vice President of Programs and Public Policy, as well as CPR’s Corporate Counsel.

The discussion, “Time To Move The Needle! CPR’s Diversity Commitment and Model Clause–and How to Track for Accountability,” included panelists

  • Hannah Sholl, Senior Counsel, Global Litigation & Competition at Visa Inc.;
  • Brenda Carr, Chief Diversity & Inclusion Officer at Arnold & Porter Kaye Scholer in Washington, D.C.;
  • Tim Hopkins, a senior consultant at McKinley Advisors, also in Washington; and
  • Linda Klein, a partner in the Atlanta office of Baker, Donelson, Bearman, Caldwell & Berkowitz.

The panel offered insights, simple practice changes, neutral selection templates, and diversity tracking tools for promoting diverse ADR panels.

Moderator Hershenberg kicked off the presentation with a poll of attendees, which asked, “What is the number one reason holding you back from selecting a diverse arbitrator or mediator for your matters?” The most popular answer, with 26% of the audience, was “I’m too nervous to select a neutral I don’t know or who my colleagues haven’t recommended.”

Hershenberg also reviewed the requirements under the CPR Diversity Commitment, including recruiting and hiring diverse neutrals.  She noted early Commitment adopters, including  Baker Donelson, ConocoPhillips Co., KPMG LLP, Shell Group, and Visa, among many others.  (Companies and law firms may sign the commitment on CPR’s website at www.cpradr.org/about/diversity-commitment.) Hannah Sholl discussed Visa’s process of managing diversity in light of adopting and signing the commitment.

These efforts, of course, raise the question of why practitioners don’t know more diverse neutrals.  Linda Klein, acknowledging research into affinity bias, said that in ADR, “the parties choose their judges, the arbitrators, and most people are comfortable with people who come from similar backgrounds.” 

Klein recommended applying the Mansfield Rule, which suggests ensuring that any slate of candidates includes at least 30% candidates who self-identify as diverse in some way. See, e.g., Homer C. La Rue, “A Call—and a Blueprint—for Change,” Dispute Resolution Magazine (Feb. 17 (available at http://bit.ly/2ZZ3zvJ).

The panel agreed that an easy way to identify diverse candidates is to request a slate from an institution like CPR, which strives to include diverse candidates.  Klein suggested that it is appropriate to complain if an institution provides a slate that is not diverse, and to request a substitute slate that includes a significant number of diverse candidates. 

The panel agreed that it might be helpful to reach beyond customary contacts to seek input on a neutral, but noted that inclusion on a provider institution panel alone is an indication that the proposed neutral has been vetted.

The audience and the panel repeatedly noted a variety of resources available to identify and research diverse candidates in addition to CPR Dispute Resolution, including the National Bar Association, the Metropolitan Black Bar Association, the African Arbitration Association, the American Bar Association, JAMS, Arbitral Women, the American Arbitration Association, and REAL-Racial Equality for Arbitration Lawyers.  The panel also provided extensive advice for potential neutrals on entering the field and for current neutrals on increasing their exposure and, ultimately, appointments.

Tim Hopkins and others noted that it can be helpful to sign the CPR Diversity Commitment or a comparable business pledge, and then checking to see if other parties to the dispute have signed similar diversity or corporate pledges.  It might be easier to convince other stakeholders to enlist an unfamiliar neutral if they have made a commitment to advance diversity–especially a specific commitment to advance diversity in ADR.

A simple, practical tip the panel provided was adding diverse neutrals clauses to organizations’ standard contract templates, so that there is a default to require specifically a diverse slate. There also was consensus that those clauses rarely generate mark-ups or controversy, and putting them in a template makes it that much more likely they will be added to a draft agreement. CPR provides a model clause that calls for at least one member of a tripartite panel to be diverse. (See link above.)

Other easy, low-cost tips, according to the panel, included praising diverse neutrals, so that their skills are recognized; confronting bias when it arises (e.g., statements like “Are you sure she can handle a $100 million case?”); including diverse neutrals in recommendations to rating services and providers; and, especially with travel restrictions in view of Covid-19 reducing the cost of attendance at virtual hearings, providing exposure by including diverse attorneys in ADR activities so that they are developing the required skills.

Attendee comments presaged the importance of measuring progress, and the panel agreed with the audience comments. Linda Klein proposed setting up a table of neutral qualifications before preparing a candidates’ list to facilitate an impartial selection process.

Brenda Carr presented a spreadsheet for tracking not only the panelists’ individual talents, but also the composition of the slates for those panels, and which candidates were selected.  Carr explained that tracking progress also helps to identify roadblocks—it allows advocates and parties to “have the conversations if you’re presenting a particular arbitrator as a possibility and you notice that the client is constantly turning them down. Maybe you want to follow up and have a conversation about why this person isn’t someone that you are ultimately selecting.” 

Looking at the tracking programs presented by the law firm representatives, Visa in-house counsel Hannah Sholl said that seeing this kind of work, presented in this way, “speaks a lot, and perhaps even more sometimes than … filling in the boxes and the ABA Diversity Commitment  [see https://bit.ly/3sGQ3tc]. You know . . . the firm [that] is tracking this cares about it, . . . is going through a process . . . and they have had a commitment.”

Overall, the panel agreed that the important thing was to start: Whether by signing a diversity commitment or tracking ADR diversity in just one department or working group, that first step is important.

* * *

The author is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

[END]

#CPRAM21: Too Much or Not Enough? The Arbitrator Disclosure Issue, Analyzed

If you missed the 2021 CPR Annual Meeting in January—the first free public meeting held online in the organization’s 40-year history—the videos are being posted on CPR’s YouTube Channel. While additional videos will be posted for CPR members only, the first, linked here on CPR Speaks, is open access and features the keynoters, CNN Anchor and Chief Political Correspondent Dana Bash and General James Mattis, who is former U.S. Defense Secretary. Click the Subscribe button at YouTube for alerts and for more CPR content. For information on full access and joining CPR, please visit CPR’s Membership webpage here.

By Antranik Chekemian

Here are notes on the Jan. 28 closing panel of the second day of CPR’s 2021 Annual Meeting. Moderator Deborah Greenspan, a Washington, D.C. Blank Rome partner focusing on mass torts and complex disputes, served as moderator for the Ethics session.

She introduced the panel, starting with Dana Welch, an arbitrator for nearly 20 years who is based in Berkeley, Calif. Welch focuses on complex commercial and employment matters. She is a fellow of the Chartered Institute of Arbitrators  and the College of Commercial Arbitrators, where she is an executive committee member. Before she became an arbitrator, she was the general counsel of a San Francisco-based investment bank, and a Ropes and Gray partner.

The second panelist was David Pryce, the managing partner of Fenchurch Law Ltd. in London, which is the first U.K. law firm to focus exclusively on representing policyholders in insurance disputes. His practice focuses primarily on construction industry risks. Wherever possible, said Greenspan, Pryce tries to approach disputes in a way that maintains or ideally strengthens the commercial relationships between those involved

The third panelist was Adolfo Jimenez, a partner in the Miami office of Holland and Knight.  He is a litigation attorney focusing on international disputes. He heads the firm’s International Disputes team, and he is chair of the Miami International Arbitration Society.

Greenspan opened by discussing the ethical challenges faced in arbitration, focusing on disclosure, in a session that provided Ethics continuing legal education to qualifying attendees. The panel’s first topic was the issue of repeat players, where an arbitrator is repeatedly selected or appointed by a particular entity or a law firm.

Pryce started off the conversation by presenting a recent U.K. Supreme Court case, Halliburton v. Chubb. He described the case’s background for the online audience.

Halliburton Co. had provided services for Transocean Ltd., the owner of Deepwater Horizon, the Gulf of Mexico oil rig that exploded in 2010.  Halliburton faced various claims along with oil company BP and Transocean. They were all part of the same proceedings. Halliburton settled those claims against it for about $1.1 billion.

Halliburton made a claim under the general liability policy it had with insurer Chubb. Chubb refused to pay the claim on the basis that Halliburton had entered into settlements that were unreasonable. A dispute ensued and the general liability policy provided for an ad hoc London arbitration with three arbitrators, one arbitrator to be chosen by each of the parties and a third arbitrator chosen by the party-appointed arbitrators.

If the arbitrators couldn’t agree, the third arbitrator was to be appointed by the High Court in London. In front of the High Court, each of the parties put forward several candidates. After a contested hearing, the High Court chose Chubb nominee Kenneth Rokison QC, an arbitrator in Reigate, U.K. Rokison was “a regular arbitrator in uniform arbitrations,” explained Pryce, “and Halliburton’s perception . . . was that he was someone that is generally appointed by insurers rather than policyholders.”

Prior to him being appointed, Rokison disclosed relevant points to the proceedings. Rokison said that he previously acted as an arbitrator in several other arbitrations including Chubb. He acted as a party-appointed arbitrator by Chubb and he was currently acting as an arbitrator in relation to references that included Chubb.

The High Court didn’t regard any of those appointments as being an impediment to his appointment in the Halliburton-Chubb dispute and they didn’t call into question Rokison’s impartiality.

Three months after his first appointment in 2015, Rokison accepted a further appointment by Chubb to act as an arbitrator in relation to a claim against it by Transocean, which as the overall owner of Deepwater Horizon was also facing similar claims to the ones that Halliburton had been facing. The dispute between Chubb and Transocean also related to the reasonableness of settlements which Chubb refused to pay on a similar basis for the reasons it refused to pay Halliburton.

Rokison disclosed his involvement in the Halliburton arbitration to Transocean, but he did not disclose to Halliburton that he accepted the Transocean appointment.

The following year, Rokison accepted another appointment in relation to an arbitration between Transocean and different insurers, and that was not disclosed either.


After finding out about the second and third appointments, Halliburton wrote to Rokison and raised concerns about these appointments.

Rokison responded that it had not even occurred to him that he was under any obligation to disclose the second and third appointments to Halliburton. Halliburton called for him to resign, raising concerns about his impartiality with regard to Chubb.

It’s apparent that Halliburton was just as concerned, explained David Pryce, and perhaps even more concerned, about a second issue–that Chubb would potentially gain a tactical advantage as a result of being able to find out what Rokison’s views were on certain issues, because they would be making submissions in the second arbitration which will be relevant to the decision that Rokison was facing in deciding the Halliburton arbitration.

A High Court claim was issued by Halliburton seeking Rokison’s removal under U.K. Arbitration Act Section 24, dealing with situations where circumstances exist for a justifiable doubt about the arbitrator’s impartiality.

The High Court and the Court of Appeal both dismissed Halliburton’s application, so it went to the Supreme Court.

The Supreme Court made the following key observations in reaching the decision:

  • First, the obligation of an arbitrator to act fairly and impartially is a core principle of arbitration, and under English law, the duty of impartiality applies just as much to party-appointed arbitrators, sole arbitrators, and presiding arbitrators. Presiding arbitrators like Rokison in Halliburton v. Chubb aren’t required to be any more impartial than party-appointed arbitrators–“Everyone is required to be impartial,” explained Pryce.
  • Second, the Supreme Court confirmed that the test under English law to establish whether an arbitrator had a real possibility of biases is an objective test. “When the fair-minded informed observer is looking at that, they should take into account various considerations including the factual matrix of the case , . . the role of the arbitrator in the case, and expectations regarding what an objective observer may take into account,” said Pryce. In that regard, market practices are relevant, but in some areas, overlapping appointments may be more likely to give rise to an appearance of bias than others.
  • Finally, in relation to the arbitrator’s duty of disclosure, the Supreme Court held the disclosures are not a question of best practices and that disclosures can only be made if the parties that confidentiality obligations are owed give their consent.

The key takeaway from this case is that “disclosure is not an option,” said Pryce, because disclosure doesn’t trump confidentiality.

“The unfair advantage is not the same thing as a lack of impartiality,” Pryce said, adding, “There is just no remedy for unfair advantage.” Even though repeat business might suggest bias in some cases, it is going to depend on market practice.

He further added that in some areas like treaty reinsurance, overlapping appointments are commonplace and parties are not concerned as there are repeat users “all the time.”

Pryce added that it is much more challenging when where there is a one-off user in a dispute with a repeated user. “From the perspective of someone who was a policyholder such as Halliburton,” said Pryce, “a one-time user in this situation, against an insurer who’s going to be a repeat user, the Supreme Court decision for me feels a little bit tougher.”

Panelist Dana Welch said, “I’m not sure a U.S court would have reached the same decision.  . . . We take it for granted in the United States that you have to disclose every business relationship that comes to mind.”

She then shared that California’s Judicial Council has enacted a rule that requires that the arbitrators not only have to disclose looking backward, but they have a duty to disclose looking forward. Arbitrators are required to disclose at the time of appointment whether they are willing to take future business from either a party who is appearing in that case or a law firm that is appearing in that case.

If the arbitrator discloses that they can take future business, they can be disqualified at that point if someone objects. Once the arbitrator accepts the possibility of future business, and then proceeds in the future to take that business, they must provide notice to the previous parties and the law firm that they have done so. At that point, the parties have no right to disqualify the arbitrator.

Panelist Adolfo Jimenez also shared that from an ethical perspective, repeat business in arbitration presents two problems that also were identified in the Halliburton case.

“You can have a situation where you’re going to have one party that’s better informed and an arbitrator that’s hearing evidence that is related to two separate cases,” said Jimenez, “but they are related cases that may influence their view while a set of attorneys who aren’t parties to that other proceeding is ignorant of all . . . that evidence, all that information.”

Second, Jimenez noted, is the risk of inappropriate communications. “Simply because you can does not mean that you should,” said Jimenez, noting that there can be as a result of such contacts an erosion of trust in the process, with one of the parties believing that they’re being affected.

Dana Welch also emphasized that the arbitrators should be careful in order to preserve the integrity of the process in the face of repeat business. She said:

There is a financial incentive if you get repeat business.  And for each one of us who serves as a neutral, every time we get repeat business, we really need to think long and hard about whether we can truly serve as a neutral in a proceeding with a law firm that appoints us a lot or a party that appoints us a lot.  . . . What Adolfo said is right: There’s a difference between ‘can’ and ‘should,’ and it’s an extremely important difference in order to preserve the integrity of the process.

After a participant asked about the future of London-based insurance arbitration in light of the Halliburton decision, David Pryce responded that a single decision shouldn’t call into question the city’s role in insurance arbitration.  He said that when there is a situation with a “one-off” buyer of arbitration services and a repeat user of arbitration services, the court should be extra careful not to go for the appointment of someone who is used frequently by repeat buyers.

“It was an unfortunate choice by the High Court,” said Pryce, adding that if that sort of choice is repeated again and again, “it looks like the deck is being stacked against policyholders,” and that would be a problem for insurance arbitration in London. But he added that as a policyholders’ representative, he did not think the deck is usually stacked against his clients.

[For even more on Halliburton, see the latest issue of Alternatives to the High Cost of Litigation: Adam Samuel, “Multiple Appointments, Multiple Biases: The U.K. Supreme Court Does Arbitrator Disclosure,” 39 Alternatives 19 (February 2021) (available directly at https://doi.org/10.1002/alt.21880).

* * *

Moderator Deborah Greenspan then invited panelists to discuss the expectations parties have about the status of a party-appointed arbitrator.

Panelist Adolfo Jimenez started off the conversation by saying that the duty of impartiality permeates throughout the entire U.K. and U.S. legal systems, and that most arbitral institutions require that arbitrators be neutral.

Jimenez also noted, however, that there sometimes are justifications for repeat businesses–for example, specialized arbitration proceedings such as those at the London Maritime Society of Arbitrators, where parties prefer arbitrators that are particularly qualified. When there is a limited number of qualified individuals, repeat business is an option, said Jimenez.

A second justification is to allow for party autonomy.

He further noted that the Code of Ethics for Arbitrators in Commercial Disputes adopted by CPR Dispute Resolution has the assumption that the arbitrators will be neutral. Even in jurisdictions which allow for repeat business, he noted, neutrality is still expected and required.

Panelist Dana Welch also noted an important reality in arbitration. She said, “When a party chooses an arbitrator, even if it’s a sole arbitrator and not a party-appointed arbitrator, all parties hope that the arbitrator is going to rule on their behalf. Therefore, they are looking for somebody who is going to see things from their point of view.”

She further noted that CPR Dispute Resolution rules provide a process for challenging a party-appointed arbitrator if either side believes that a party appointed arbitrator is not neutral. Reading from CPR Administered Arbitration Rule 7.5, she said: “Any arbitrator may be challenged if circumstances exist or arise that give rise to justifiable doubt regarding that arbitrator’s independence or impartiality.  . . .” She praised the rule and its challenge process for when neutrality isn’t observed.

Greenspan then asked the panelists about the ideal steps parties should take when selecting arbitrators.

Welch said she is a strong advocate of both parties interviewing the arbitrators to understand their management style or their approach to the issues.

Jimenez added that one should be allowed to communicate with an arbitrator to make sure that the arbitrator is comfortable with the cases’ technical issues but should not get into discussing the substance or facts of the case, noting that a red line exists in between.

* * *

Moderator Greenspan then asked the panelists on how to deal with the reality that people from different backgrounds and different jurisdictions have different expectations when it comes to ethical challenges.

Jimenez agreed that different jurisdictions have different norms. He suggested that practitioners can look to journal articles and general expectations of limits that are employed for international disputes. He pointed out that “what may be improper or incorrect in one place is going to be perfectly acceptable [elsewhere]–that’s a real challenge when you’re dealing with a cross-border dispute.”

Greenspan then discussed how parties can enhance trust when implicit or explicit biases exist. When arbitrators are appointed by a party, Welch responded, “it would be the height of denial, to say that there isn’t some impetus that you feel or allegiance that you feel to that party. You really have to struggle against that and understand that you’re a neutral in all senses.”

Welch added that arbitrators need to be conscious of the kind of bias that arises when a party picks them just like they need to be conscious of the kind of bias that can arise when they have repeat businesses.

* * *

The next topic of the panel was about disclosures.

Welch first expressed that the level of disclosure is an interesting question in this age “where everything is known about everybody,” and so much information is out already on social networks. The question, she asked, is “How much is there an obligation for us to disclose versus a party to investigate?”

She then presented two cases.

In the first case, an arbitrator ruled against a claimant, and the respondent was a law firm. Afterward, the claimant did an Internet search and revealed a 10-year-old resume of the arbitrator with a recommendation from a partner from the respondent’s firm.  An appellate court decided this was enough to vacate the award.

Welch concluded, “What it shows is that the courts will look at the arbitrator for disclosure rather than . . . say to the parties to investigate that.”

The second case she presented was decided just a month ago, she said. An arbitrator rendered an award against the claimant. The claimant then found on the Internet that the arbitrator was a founding member of GLAAD, an organization supporting gay rights. The claimant then argued that because he was active in the Catholic Church, and because the arbitrator is active in social justice causes like gay and lesbian rights, the arbitrator had an inherent bias against the claimant.

The Court of Appeals rejected this claim, Welch reported, as it could not find any relationship between the claimant’s allegation and facts of the case.  She noted that “even California” has limits on challenging impartiality. Welch concluded:

What you need to draw from these cases is that the main obligation of disclosure is on the arbitrator, not on the parties. You need to disclose everything that comes to mind. If it comes to mind, you should be disclosing it, but you don’t need to disclose who you voted for president, or what you are active in unless there is a specific issue in that case before you.

Fenchurch’s David Pryce said that “there is a dividing line between . . . bias, something that gives the appearance of bias and what is simply just having better knowledge.” Having better knowledge on its own, he said, doesn’t give rise to either risk of or appearance of bias.

He further reflected on Halliburton v. Chubb. The disclosures, which relate to the same party in another “really high-stakes arbitration . . . about sums over a billion dollars” and issues that are almost exactly the same in both arbitrations, “aren’t insignificant things.”

But, said Pryce, “if we get to a situation where arbitrators feel they need to disclose lots of insignificant things, then I think everyone’s time is just going to be wasted unnecessarily.”

* * *

Greenspan presented the ethics panel’s final topic: “If you’re a mediator in a case and then you are later asked [in a case that doesn’t settle] to be an arbitrator, or if you are an arbitrator and then you’re asked to mediate the case,” how should such a situation be approached?

David Pryce said the moves are uncommon in the United Kingdom.  He added that huge challenges for the med-arb, mixed-mode ADR setup exist, because in mediation, parties are hoping to take advantage of the ability to share things with a mediator that they wouldn’t share with their opponent–and certainly not with the person that needs to make a decision about their case where the neutral is acting as an arbitrator.

The next question was about a situation where somebody had assisted an entity with developing its internal resolution guidelines or contractual terms to use to resolve disputes, and then also became the arbitrator or the mediator in a dispute which is affected by those guidelines.  The question was whether this would constitute a problem.

Dana Welch noted that such a situation raises fewer ethical issues as the person only designed the process, as opposed to being involved in a dispute, and that the person does not know confidential information about the dispute—he or she just comes in understanding the process. Welch says that courts have backed such arbitrators but the focus must be on extensive consents after disclosure.

* * *

The author, a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern.

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