Part II: More on Workplace ADR Under the Biden Administration

In “Part I: How Workplace ADR Will Evolve Under the Biden Administration,” CPR intern Antranik Chekemian reviewed on CPR Speaks the first half of comments during an online panel discussion hosted in late February by CPR’s Employment Disputes Committee and its Government & ADR Task Force.  Washington, D.C., arbitrator Mark Kantor focused on prospects for legislative changes for employment and labor ADR issues, and possible regulation, while Mark Gaston Pierce, Visiting Professor and Executive Director of the Georgetown University Law Center Workers’ Rights Institute, covered labor developments in decisions of the National Labor Relations Board, where he served as chairman from 2011 to 2017.  After their presentations, panel moderator Arthur Pearlstein, who is Director of Arbitration for the Federal Mediation & Conciliation Service, turned to panelist Kathryn Siegel, a shareholder in Littler Mendelsohn’s Chicago office, before concluding with a general discussion. Highlights from the second half of the program appear below.

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By Antranik Chekemian

Kathryn Siegel mainly focused on the Equal Employment Opportunity Commission, which, like the National Labor Relations Board, also has five members.

Siegel noted that she did not expect to see drastic EEOC policy changes during the Biden administration. Even though the chair has recently been changed by President Biden, a Republican majority still exists in the commission.

The general counsel at the Feb. 24 seminar date, Sharon Fast Gustafson, was fired by Biden March 5, and replaced by veteran EEOC attorney Gwendolyn Young Reams, who is now Acting General Counsel. Gustafson was a Republican appointee whose term would not have expired until August 2023.

Still, Siegel pointed out, “There is still going to be a Republican [board] majority through at least July of 2022, possibly through the end of 2022 because of the terms of the Republicans,” she said.  Siegel concluded that this will prevent the Biden-appointed chair from advancing Democratic policy initiatives and significant changes through at least the middle of next year.

Regarding the impact of the changes in the EEOC on arbitration/mediation, Siegel noted the “conclusion of the two six-month pilot programs relating to the agency’s conciliation and mediation efforts.”

She provided insights on the program. “The message of the… pilot was to mediate early, mediate often, mediate late, and mediate all the time,” she said. She emphasized that parties could mediate at any stage of any charge, and that it did not have to be at the outset.

She added that the parties in Category B charges—those that require more EEOC investigation to substantiate and pursue–were the ones that were being invited to mediation.  Siegel said, “What we saw during this pilot program was that you could really mediate even the EEOC’s high-priority charges that advanced an issue of law that the EEOC potentially wanted to litigate, that had . . . kind of bad facts in it.”

After the mediation pilot’s conclusion, however, there is not going to be an opportunity to mediate high priority charges. Siegel noted that even though this is a big change, it would not be difficult to adapt to this change as the pilot program was only six months long.

She also discussed the pilot program on conciliation that was launched around the same time as the mediation pilot program. The conciliation program also was officially dropped in January. Siegel, however, noted that a rule was established just before the EEOC’s chair changed. “That final rule as to the new EEOC conciliation and how that will be handled is in place for now,” she said.

Siegel added that the rule will last until the Democrats get the majority back sometime in 2022. She said that the conciliation process rule change provided that the “EEOC must provide factual support for its reasonable cause finding and its damages calculations as part of the conciliation process.”

She then discussed another 2020 change she observed with the EEOC regarding “the number of investigations and how robust those investigations were.” Even for charges that were classed as Category B, she said, requests for position statements were lower than before, and the investigations ended more quickly. She noted that this could have been the result of both the Trump administration and Covid-19, and predicted that investigations will likely ramp up again as things get back to normal post-pandemic.

“Part of that speed in which charges were pushed through and right-to-sues were issued was a result of pressure from the administration to clear a backlog,” she said, adding to “expect that there will be a little bit of the brakes put on, slowing down, to make sure that each charge gets due time in investigation.”

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Moderator Arthur Pearlstein then directed a question to panelist Mark Kantor regarding how administrative actions could potentially affect class action waivers and arbitration. Pearlstein further asked Kantor to clarify the 2019 U.S. Supreme Court Lamps Plus decision.

Kantor noted that Lamps Plus provides that “the presumption is that arbitration is individualized and there is not collective arbitration unless the arbitration clause clearly provides for that.” He also said, however, that “in most circumstances . . . the question of what the arbitration clause says would be delegated to the arbitrator.”

In Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407 (2019), the U.S. Supreme Court provided that because the individualized form of arbitration was envisioned by the Federal Arbitration Act, “Courts may not infer from an ambiguous agreement that parties have consented to arbitration on a classwide basis.” The decision further notes that the class arbitration lacks the benefits of individualized arbitration. “It [class arbitration] sacrifices the principal advantage of arbitration – its informality – and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.”

Kantor said, “A very large number of arbitration clauses in employment agreements, consumer contracts and the like . . . expressly waive the right to bring a class proceeding in arbitration as well as in court.”

He concluded that “a regulatory measure from an independent agency or an executive agency would prohibit that claim . . . in a contract so long as it was aimed at all forums. Not focusing on arbitration has a good chance of passing muster under [Epic Systems v. Lewis] and that might override the literally millions of clauses out there in existing contracts that provide for waivers of class proceedings.”

Pearlstein then noted the “obvious difficulty in getting major legislation passed regarding labor and employment issues” and asked the panelists about the chances of less-dramatic piecemeal legislation passing in Congress. He also asked about the Biden administration’s role with administrative actions and whether it means agencies like the National Labor Relations Board and the EEOC “become more important than they have ever been, or, certainly, in a long time?”

Siegel said that rulemaking has already been used a substitute for doing things at the NLRB, and that this was effective in dictating policy goals. She added that this was an alternative presented at the agency level as a common law substitute. “They did not want to have to wait for the case to come up before them to rule,” she said, and “in lieu of waiting for Congress and having to pass legislation that is not exactly what they would want and as a compromise, that would be an alternative.”

Mark Gaston Pearce said that “rulemaking will show up and go the other direction and use up a lot of agency resources in that regard.” Regarding a piecemeal legislative approach, Pearce noted that it’s “more likely than a wholesale acceptance of a statute like the PRO Act, because there may not be enough Democratic senators — much less Republicans — that are going to buy into the entire measure, but as Mark Kantor suggests, it’s very possible that they can tag on particular key measures of the PRO Act into must-have legislation in order to get some of that across.”

There was a question from the audience asking whether there is proposed federal legislation that would restrict waivers of jury trials, which companies might use as an alternative to class-action waivers.


Mark Kantor responded that he was not aware of any standalone legislation aiming at prohibiting jury-trial waivers. He said, “We do know that several states have enacted legislation, for example, California and Georgia, achieving that result in their own state courts, but at the federal level, again, you’re going to run into the filibuster, so it’s unlikely you would find Republican support in the Senate for legislation like that, and it is equally unlikely that you could obtain 60 votes, a closure vote to override filibuster. It’s not going to be budget reconciliation, which means you’re looking at appending it to a must-pass legislation.”

Panelist Kathryn Siegel also noted that states attempt to accomplish certain goals when it’s not possible at the federal level, especially in the context of arbitration limits. “We have seen states,” she said, “such as Illinois, trying to . . . make their own rules as to arbitration and when you can require arbitration of disputes.” She further added even though such laws are going to be preempted by the FAA, many states pass them “hoping that they have crafted it in a way that it avoids the issues that other states have had or that no one will notice.”

An attendee asked the panel whether they “expect a Biden majority to overturn the NLRB’s General Motors decision by re-implementing the specific tests for evaluating discipline for conduct that occurred during protected concerted activity, instead of the Wright Line standard.”

According to the new standard provided by the General Motors decision, the NLRB General Counsel must show that “(1) the employee engaged in Section 7 activity, (2) the employer knew of that activity, and (3) the employer had animus against the Section 7 activity, which must be proven with evidence sufficient to establish a causal relationship between the discipline and the Section 7 activity.”

The General Motors decision provided that the conflict between the anti-discrimination laws and the setting-specific standards explained below required the adoption of the Wright Line standard. The NLRB further cited the EEOC and mentioned that discrimination laws do not forgive abusive conduct when it arises from heated feelings about working conditions or because crude language is common in the workplace. The decision also characterized the setting-specific standards to be “wholly indifferent to employers’ legal obligations to prevent hostile work environments on the basis of protected traits.”

The General Motors case replaced several setting-specific standards:

  • The Atlantic Steel standard on workplace discussions with management: To determine whether abusive conduct by the employee during protected concerted activity was severe enough to lose the National Labor Relations Act’s protection, the Board had  applied a four-factor standard: (1) the place of the discussion; (2) the subject matter of the discussion; (3) the nature of the employee’s outburst; and (4) whether the outburst was, in any way, provoked by an employer’s unfair labor practice. General Motors noted that because the Board had not assigned any specific weight to any of these factors, the Board’s application of these factors resulted in inconsistent outcomes over the years. Furthermore, the second factor – the subject matter of the discussion – favored the protection of the employees as the Atlantic Steel factors only applied when the subject matter was related to Section 7 activity. NLRA Section 7 provides that “employees shall have the right to self-organization, to form, join, or assist labor organizations… and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid protection.” The Board in General Motors also criticized the shortcomings of the Atlantic Steel standard as it was “giving little, if any, consideration to employers’ right to maintain order and respect.”
  • The totality of the circumstances on social media posts and coworker discussions: The General Motors decision also replaced the totality of the circumstances standard that had applied to social-media posts and coworker discussions. “The Board’s flexibility in considering a wider of range of facts in each specific circumstance promises to create the same, if not more, inconsistency and unpredictability,” noted the decision.
  • The Clear Pine Mouldings Test for conduct taking place on the picket line: Cases that applied the 1978 Clear Pine Mouldings test had found that the employees lose NLRA protection only when “it involves an overt or implied threat or where there is reasonable likelihood of an imminent physical confrontation.” General Motors noted that, “As a result, the Board has found appallingly abusive picket-line misconduct to retain protection, including racially and sexually offensive language.”

The NLRB further concluded in General Motors that absent evidence of discrimination against Section 7 activity, there is no merit of “finding violations of federal labor law against employers that act in good faith to maintain civil, inclusive, and healthy workplaces for their employees. These results [from setting-specific standards] simply do not advance the Board’s mission of promoting labor peace or any of the other principles animating the Act.”

After the General Motors decision, the Trump-appointed Chairman, John F. Ring praised the decision. “For too long,” he stated, “the Board has protected employees who engage in obscene, racist, and sexually harassing speech not tolerated in almost any workplace today. Our decision in General Motors ends this unwarranted protection, eliminates the conflict between the NLRA and antidiscrimination laws, and acknowledges that the expectations for employee conduct in the workplace have changed.” President Biden replaced Ring on Jan. 20 with NLRB member Lauren McFerran; Ring’s board term continues through Dec. 16, 2022.

Panelist Mark Gaston Pearce noted that the applicability of the Wright Line standard during protected concerted activity should be fleshed out and that it was an overreach. Even though Pearce said he believed there was a need for a fix with respect to Title 7-type situations, the test could have been within the realm of the existing test–the Clear Pine Mouldings test.

Pearce further acknowledged Clear Pine Mouldings’ shortcomings, noting that under this test, “racial and sexual derogatory remarks were not sufficient to take protection away from the actor, because they were not violence or threats of violence.” He noted that the NLRB had failed to look at the situations from the viewpoint of the recipient of those kinds of remarks, and what kind of reaction that had.

Pearce expressed his concerns regarding the new Wright Line standard that when it comes to obscene or profane remarks made during the heat of the moment or during an exchange between someone engaged in protected concerted activity and management, noting that such circumstances should be treated differently.

He further added that the Wright Line standard does not respond to what happens when management has provoked a response in the course of protected concerted activity. He further explained:

It may well be while that standard exists, these issues are going to have to be fleshed out before an arbitrator who is using the just-cause standard. Because of course if someone was provoked into something in a unionized setting, and it comes out in an arbitration, . . . [the] arbitrator has the ability to weigh those kinds of determinations and [make] an assessment as to whether or not there was just cause for them to act the way it did.

In a non-union setting, that opportunity does not present itself, so there is an inequitable situation there. Furthermore, if employees don’t know what they can say or how they should say, they will censor, self-censor and deny themselves the ability to engage in rights protected under the National Labor Relations Act. The Supreme Court says, and there are several cases that say, that the NLRB and the courts are not in the business of making civility codes.

A seminar attendee asked the panel, “What changes in labor arbitration should we expect with federal agencies like the VA, Capitol Police, Bureau of Prisons, military bases, etc.?”

Moderator Pearlstein first responded that the Capitol Police is not under the Federal Labor Relations Act authority. As to federal agencies in general, he said, “There are dramatic changes on the horizon once the makeup of the NLRB changes . . . and once things rotate into a Democratic majority.”

He said that “the changes under the Trump board at the NLRB were so dramatic, reversing so much precedent, that I think you’re going to start seeing quite a lot of change as that catches up.”

Regarding executive orders, Pearlstein noted that “the president has already reversed all the executive orders basically that applied to the federal workplace.”

There was a question asking whether the EEOC will go back to its prior policy criticizing mandatory arbitration once the Democrats get the majority.

Panelist Kathryn Siegel responded that the “EEOC and most of the federal agencies . . . once they are able to effectuate Democratic policies, they are going to pretend like the last four years were just a nightmare and return as quickly as possible to the policies and the plans that they had prior to the Trump election.”

Therefore, she said, it is likely that there will be a return to what was being advanced by Democrats four years ago.

Panelist Pearce added that NLRB’s “only issue was solely with respect to class-action waivers. The NLRB didn’t challenge mandatory arbitration, because the FAA . . . [and] other Supreme Court cases [concluded] that mandatory arbitration is the rule of the day.”

Pearce said the NLRB’s Epic Systems concern was “the flip handling of what constitutes concerted activity  . . and what kind of impact that will have on future cases.” He added, “Certainly, this Trump board did its best to clamp down on protected concerted activity definitions and issued some cases that really restricted that. I agree in that respect that the Biden board will go in the other direction.”

Another attendee asked: “Is there any attempt to have Congress address the extent to which the Federal Arbitration Act can be used?”

Said panelist Mark Kantor, “That is exactly what the FAIR Act will aim at. It will pass the House. It will get hearings and committee action in the Senate. but it seems highly unlikely that it will be enacted by the Senate over a filibuster in light of vote counting,” said Kantor (see links above to Kantor’s discussion in Part I, which also includes links to his CPR Speaks articles on the subject).

Moderator Arthur Pearlstein then asked whether there will be an effect on the market for labor and employment arbitration under the Biden administration.

Panelist Siegel replied that the NLRB Trump Board policy was to defer to arbitration as frequently and as early as possible. In 2019, the Board replaced the Babcock standard and returned to the less rigorous standards of Spielberg/Olin [cited and explained in Babcock] to defer to arbitration in cases alleging discharge and discipline in violation of NLRA Sections 8(a)(3) and (1).

Siegel noted that fewer cases were being decided by the Board when there was a parallel proceeding in arbitration. Considering the possibility of a new Board reverting to the Babcock standard which makes arbitration less likely, Siegel concluded that it followed that this could negatively affect the number of cases in the labor and employment arbitration market.

Finally, Mark Kantor mentioned that in its 2019 decision, New Prime Inc. v. Oliveira, “the Supreme Court made clear that the exclusion from enforcement of arbitration agreements under the Federal Arbitration Act for transportation workers did extend to an independent trucker, by application to independent contractors in the transportation field.”

He noted that “the Court was very careful to signal that the interpretation was only to apply to the Federal Arbitration Act and not to any other legislation. There was nothing in that decision signaling that the Court might wish to rethink its interpretation of the exclusion to go beyond transportation workers into other industries.”

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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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CPR Launches New Administered Employment Arbitration Rules and Updates Its Employment-Related Mass Claims Protocol

The International Institute for Conflict Prevention & Resolution (CPR) has launched its first set of Administered Employment Arbitration Rules and updated its Employment-Related Mass Claims Protocol. 

The just-released 2021 Administered Employment Arbitration Rules (Employment Rules) incorporate many innovations from CPR’s 2019 Administered Arbitration Rules, and reflect the collaboration of counsel from the plaintiff’s bar, in-house employment counsel, corporate defense attorneys, and neutrals who contributed to their creation. 

CPR recognizes that employment disputes and employment arbitration programs differ from commercial arbitration in important ways. Among other things, employment arbitration agreements, programs, and procedures must ensure that the interests of individual workers, who as a practical matter often do not negotiate their terms, are adequately protected.

The new CPR Employment Rules give significant attention to due process concerns (described in more detail below), which are vital for individuals subject to mandatory arbitration programs.  These rules are an especially welcome contribution to the field, given the increasing frequency with which employment-related disputes are being arbitrated. (Alexander J.S. Colvin, “The growing use of mandatory arbitration,” Economic Policy Institute (April 6, 2018) (noting that 53.9 percent of nonunion private-sector employers now have mandatory employment arbitration procedures, and that percentage climbs to 65.1 percent among companies with 1,000 or more employees).

The following are some of the distinguishing features of the newly launched CPR Employment Rules:

  • Rule 1.4 (Due Process Protections):  Demonstrating the fundamental importance that CPR places on fairness to all parties, including in particular employees and individuals who may be subject to mandatory arbitration programs, CPR incorporates its Due Process Protections directly in the Rules at their outset. The provision is detailed, providing employers better guidance on when and how CPR will apply the due process requirements.
  • Rules 3.12-3.13 (joinder and consolidation, respectively): CPR has created an innovative procedure that uses an Administrative Arbitrator to address issues of joinder and consolidation when they arise prior to selection of an arbitrator, identifies factors to be considered, and makes clear that neither joinder nor consolidation is permitted if prohibited by the applicable arbitration agreement.
  • Rules 5-6 (selection of arbitrator): CPR’s Employment Rules provide for arbitration by a single arbitrator selected by the parties from a list using striking and ranking as the default procedure (like other employment arbitration providers); however, CPR’s Employment Rules also offer parties a variety of other options for arbitrator selection should they wish to innovate in this area, including allowing parties to propose arbitrators to be included on the slates for nomination or to use CPR’s unique screened selection process for three-arbitrator tribunals.
  • Rule 12.2(c) (hearings): Given the experiences gained during the Covid-19 pandemic, CPR’s Employment Rules make clear that an arbitrator may order remote hearings and provide factors to be considered in making this determination.
  • Rule 14 (emergency measures by emergency arbitrator): Clarifying a matter than can be ambiguous under other providers’ rules, CPR’s Employment Rules provide that their emergency procedures will apply automatically unless parties expressly agree they do not; at the same time, the emergency procedures are not exclusive, and parties still have the choice of going to court for emergency relief.
  • Rules 17 and 18 (administrative and arbitrator fees): CPR’s Employment Rules, consistent with most state law and with the Due Process Protections, provide that employers are generally required to pay arbitration fees but that the arbitrator has authority in appropriate cases to shift fees to the same extent a court would be able to do so. In addition, to address a matter that has become more commonly litigated, CPR’s Employment Rules set out detailed guidance to address cases where a party has refused to pay required fees to provide clarity on preserving the rights of the non-defaulting party.
  • Rule 20 (confidentiality): CPR’s Employment Rules provide that CPR and the arbitrator must maintain confidentiality. But, consistent with developing case law, these rules do not impose confidentiality by rule upon the parties. The arbitrator has the same authority as a court to issue confidentiality orders to protect evidence/discovery.
  • CPR’s Employment Rules are specifically designed to avoid ambiguity and disputes over the interpretation of the rules.

The fee structure for the administration under the Employment Rules can be found HERE.

CPR also is updating the Employment-Related Mass Claims Protocol (ERMCP), which it first launched in November of 2019.  The Protocol provides an innovative mechanism for the more efficient and effective resolution of a mass of employment-related cases.  The ERMCP now incorporates CPR’s newly launched Employment Rules as the default rules that will govern arbitrations under the Protocol.

In addition, and in an effort to provide better clarity around the procedures under the Protocol, and with the guidance from a task force of leading counsel from the plaintiff’s bar, in-house employment counsel, corporate defense attorneys, and neutrals, the updated ERMCP also:

  • clarifies the documents that need to be filed to commence the arbitrations;
  • clarifies certain timelines for triggering events, including payment deadlines;
  • specifies the kinds of grounds for challenging an arbitrator’s independence or impartiality (such as provided in the Employment Rules);
  • defines basic terms to avoid ambiguity, such as “Commencement Date,” the “Employment Mass Claims Panel,” the “CPR Panel of Distinguished Neutrals,” and a “Final Written Reasoned Award;”
  • provides greater details for how the Mediation Process will work;
  • expands the role of the Administrative Arbitrator to assist the parties in expediting the proceedings and reaching a resolution;
  • reinforces the option of the parties to resolve their cases at any point in time even apart from the Mediation Process; and
  • clarifies the authority of the arbitrator to order a remote proceeding so long as taking measures to ensure the remote proceedings remain fair.

Please also see the FAQs accompanying this revised version.

To make administration of the Protocol more cost-effective, the fee structure for the Protocol has also been modified based on efficiencies that can be achieved.  CPR still requests that any party contemplating inclusion of the Protocol in its dispute resolution program discuss the Initiation Fee with CPR both to scope out the size of any matter and to ensure there is compliance with CPR’s Due Process Protections and other guidance.

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Conflict, Constructively: Damali Peterman on Managing Conflict

By Amy Foust

Commitment, communication, conflict resolution, and comradery: New York attorney Damali Peterman, founder and CEO of Breakthrough ADR, presented a Thursday, March 25, CPR-hosted discussion, “The 4 Cs to Managing Conflict in the Workplace Remotely.” 

Those “4 Cs,” she explained, establish or maintain comradery in a remote relationship. She discussed virtual coffee meetings, using the phone instead of Zoom, turning on cameras during Zoom calls to increase interactive communication, and introducing short icebreakers before getting to the substance of a meeting.  Damali modeled using “reactions” and the Zoom chat function to solicit audience involvement throughout her presentation.

Among other frameworks for understanding and preventing conflict, Damali reviewed the Thomas-Kilmann Conflict Mode Instrument’s communication styles and how they might appear in common workplace situations.  Understanding those styles, Damali said, can help in understanding behavior even if we do not know people well, as can happen in remote work relationships.  That understanding can also help us be aware of our own responses to conflict, avoiding defensiveness and adapting our response to the situation constructively.

Imagining conflict as an iceberg, Damali said that “only 10% of the iceberg is showing above the waterline.  We want to jump under that water line, and we want to see . . . more of the conflict, understand what happened and gather information.”

To gather information, she encouraged the use of the word “and.”  Rather than acknowledging other perspectives with “yes, but,” which tends to negate what came before, Damali encouraged the use of “yes, and,” which recognizes that there could be many valid perspectives.

In addition to Damali Peterman’s resources on the Breakthrough ADR website, a program of related interest will be “Yes, You Can!  Pathways to a Career in Conflict Prevention & Resolution,” a May 6 event presented by CPR’s Young Leaders in Alternative Dispute Resolution (Y-ADR) and the Metropolitan Black Bar Association’s Dispute Resolution Section.

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Author Amy Foust 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.

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Mediation Confidentiality: Misconceptions, Pitfalls and Best Practices

By Temitope Akande

CPR’s Mediation Committee presented Los Angeles mediator Jeff Kichaven on the limits of mediation confidentiality at a March 16 online program that provided attendees with cutting-edge and occasionally controversial practice guidance on confidentiality, and avoiding neutrals’ liability disclaimers, as well as ethics continuing legal education credits.

Kichaven began his presentation with a statement he attributed to the late U.S. Supreme Court Justice Antonin Scalia in 2003:

The principle of separation of powers is central to the American system of government. The framers of the American Constitution believe that that principle, as popularized by Montesquieu, was the single most important guarantee of freedom. No political truth, wrote James Madison in the Federalist Papers, is certainly of greater intrinsic value or is stamped with the authority of more enlightened patrons of liberty.

Kichaven continued, “For the separation of powers regime to work, we must have a robust and functioning judiciary, as well as executive and legislative branches to our government, and for that to happen it’s necessary for people to have confidence in the judiciary.”

That’s why we have the “basic rule of evidence everywhere–all relevant evidence is admissible,” Kichaven explained. If parties and advocates want courts to get things right, he said, the courts need to have the relevant evidence before them, and anytime court does not get a case right, it is eroding a key element of the law.

While evidence law recognizes certain privileges, which frustrate courts’ abilities to get relevant evidence, “those privileges serve important societal purposes,” he said, which is critical, for example, for the functioning of lawyers, doctors and clergy in their critical professions.

Kichaven explained that Wigmore’s attorney-client privilege—the prevailing standard in law and practice protecting communications—”construe[s] privileges narrowly, no more broadly than necessary to effectuate their purposes, because every time privileges are asserted, a court is deprived of relevant evidence, [and] it becomes less likely that a court will get a decision right.” So, a key element of the rule of law is eroded every time a court is unable to adjudicate a claim properly.

This led to the discussion of what Kichaven called “the mantra that confidentiality is necessary for effective mediation.” Kichaven emphasized the word “mantra” because he opined that there is no evidence to support the assertion the confidentiality is necessary for effective mediation.

He defined confidentiality for the purposes of the session in three ways–

  • Evidentiary confidentiality: “Can courts compel disclosure of what is said or done in mediation as part of discovery or trials?”;
  • Caucus confidentiality: “People say things to mediators in caucuses and mediators agree not to disclose those things to the opposing parties,” and
  • Societal confidentiality: “Are we allowed to talk to reporters, bartenders neighbors and various others about what people say or did in mediation?“

On caucus confidentiality, he said that it assumes people disclose secrets, and mediators keep them confidential. The two parts of the assumption are problematic in commercial cases, he said, because it is rare that parties volunteer weaknesses in their case of which the other side is not aware because “there is always a greater than zero percent chance that the mediator will leak” those secrets.

Kichaven said, “The best way to keep it a secret is not to tell the mediator in the first place.  . . . And also, let’s face it, mediators often leak. We can’t help it.” He discussed subconscious actions and words that result in mediator leaks.

Societal confidentiality is a problem in product liability and sexual harassment cases, among others, said Kichaven, because it is generally a subject to be covered by statutes. Still, legislatures haven’t imposed societal confidentiality as a condition of participating in settlement talks or mediation, he explained, but some mediators put it into their confidentiality agreements.

“In essence,” he said, “the mediators are conditioning their willingness to serve on people forfeiting rights that legislators wanted them to have, or at least allowed them to have. [T]hey are having people waive those rights, a condition of serving as mediator.”

Kichaven discussed at length evidentiary confidentiality, which was his key focus in the CPR seminar.  He stated that there is no evidence to prove that evidentiary confidentiality is necessary for effective mediation. In support of this assertion, he discussed the California Legislature’s request to the state’s Law Revision Commission to evaluate a possible exception to California’s mediation confidentiality law for legal malpractice that is alleged to have occurred at a mediation.

The exception—which is in the Uniform Mediation Act but which California has not adopted–would have allowed the introduction of mediation evidence from the session to back a legal malpractice claim. The mediation establishment, according to Kichaven, failed to produce any evidence to prove that evidentiary confidentiality actually is necessary to conduct effective mediation. If the evidence existed, he said, nobody was in a better position to deliver it.

He further stated that U.S. jurisdictions largely reject the need for evidentiary confidentiality in mediation, and compared the adoptions of the Uniform Mediation Act. The act is “kind of a failure,” he said, noting its adoption in only 11 states and the District of Columbia.

Neither has the act fostered “mediation tourism,” he said. If statutory confidentiality were necessary for effective mediation, there would be more mediation in states that have the statutory confidentiality, Kichaven maintained, adding, therefore, “this concern about confidentiality is just overblown.”

In In re MSTG Inc., 675 F.3d 1337 (Fed. Cir. 2012) (available at https://bit.ly/3tX8rP8), the appellate court was asked to adopt a settlement communication privilege as a matter of federal common law, which Kichaven said would far exceed the protections of Federal Rule of Evidence 408, Compromise Offers and Negotiations.  The circuit court, he reported, held that “while there is clearly an important public interest in favoring the compromise and settlement of disputes, disputes are routinely settled without the benefit of a settlement privilege. It is this thus clear that an across-the-board recognition of a broad settlement negotiation privilege is not necessary to achieve settlement.”

Kichaven repeated that parties do not conduct mediation “tourism” to take advantage of statutory confidentiality like litigators may do when the laws would be to their advantage. That is, litigators do not react to the statutory confidentiality, privilege, or rules in mediation like they might in other areas, like patents.

Kichaven discussed two cases, People v. PriceWaterhouseCoopers, 150 A.D.3d 578 (2017), and GE Company v. APR Energy (see discussion below). He noted that the first case is a complex financial matter, important to the mediation confidentiality issue, because the process and analysis has gotten much more complicated with many mediations conducted with interstate parties–with parties and advocates often living and practicing law in different states.

He focused on the PriceWaterhouseCoopers case in part because of its New York origin, noting that New York is important to commercial litigation and mediation, making it a likely site of problems.  And “New York law is kind of a mess, and it’s not a mess that favors mediation confidentiality,” he said.

In the case, the New York court applied the forum law—which does not include a statutory accountant-client privilege, in contrast to the law where the contract took place, Texas.

This led Kichaven to discuss of the 1934 and 1971 Restatement of Conflict of Laws. The 1934 restatement provides for the territoriality test–courts are to apply the law of the forum where discovery was sought in cases where there are conflicts regarding evidentiary privileges and confidentiality, regardless of where the communications took place.

But the American Law Institute’s second restatement in 1971 replaced the territoriality tests with the “significant relationship test,” where courts are supposed to apply the state privilege law with the most significant relationship to the communications at issue. Generally, said Kichaven, that’s thought to be the state where the communications took place.

Therefore, courts have a motivation to do justice in the case before them, and want to get relevant evidence to do their jobs, Kichaven explained.  That means, he said, they are inclined to pick the law of whatever state gives them the greatest ability to obtain evidence while conducting the mediation, which puts the mediation communications at risk.

The important point from General Electric Co. v. APR Energy PLC, 19-CV-3472 (VM) (KNF) (S.D.N.Y. Dec. 14, 2020) (available at https://bit.ly/2PdF9Nc), is territoriality. New York courts will not automatically apply the privilege or confidentiality law of the place where the mediation took place. That is, a written confidentiality agreement in a prior mediation may not protect a party even if the prior mediation took place in a state with stronger statutory protection for mediation confidentiality.

The result is that a New York court may compel production of materials from a prior mediation upon request in a New York matter, Kichaven said, potentially even using a general evidentiary relevance standard under FRE 26, rather than a heightened mediation “standard of need.” That could occur in New York, he said, even if the state the mediation occurred in had a higher standard of protection and even if there was a confidentiality agreement between the mediation parties.

Kichaven warned that when there is a breach of confidentiality, a mediator could be sued for ordinary negligence, negligent misrepresentation, or perhaps more severe claims on basis that the neutral induced or allowed clients to be more candid than they otherwise would have been.  So, since confidentiality may not protect mediators, it is problematic in terms of whether mediators should promise mediation confidentiality at all because they are not promises mediators have the power to keep, he said.

As an ethical issue, mediators and lawyers are not supposed to make guarantees to clients on the outcome of judicial proceedings. “But,” explained Kichaven, “when you make that airtight [mediation] confidentiality promise, is that not just precisely what you have done? . . . By so doing you’ve misled your clients as well and that’s a potential ethical issue, too.”

Advocates need to inform their party-clients on the potential persistent use of the territoriality test, said Kichaven, and decide on how candid they should be during the mediation. For these reasons, Kichaven disclosed that he does not use written mediation confidentiality agreements in order to avoid the appearance of making promises to mediation parties, or practicing law via the production of a contract that applies to the rights of both sides. “It’s up to the parties to have the kind of confidentiality agreements that suit them best,” said Kichaven.

Finally, Kichaven advised that the best practice is for mediators to ensure that they do not get sued based on a prospective waiver of liability.  He said to avoid the use of such clauses in confidentiality agreements—that is, the waivers are another reason not to provide a confidentiality agreement.

He noted that the typical clause says, “The mediator shall have no liability for any act or omission in connection with this mediation.”  Said Kichaven, “It’s a cowardly act,” something mediators would do to avoid the consequences of their conduct.  

He stated that the liability waiver is really saying that, as a mediator, “We are announcing to the world that we are lowering our ethical standards.  . . . We should be sending the message that we stand behind the quality of our work and that we want you to be compensated and treated fairly in the unlikely event something goes wrong.”

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CPR members can access the full video here after logging in.

* * *

Akande, who received a Master of Laws in Alternative Dispute Resolution last May at the University of Southern California Gould School of Law in Los Angeles, is volunteering with the CPR Institute through Spring 2021.

YouTube Analysis: What Happens Next with the 3/22 Servotronics Cert Grant on Foreign Arbitration Evidence

John Pinney, counsel to Graydon in Cincinnati, joins Russ Bleemer, editor of Alternatives to the High Cost of Litigation, to set the stage on why the U.S. Supreme Court agreed Monday, March 22, to hear Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794, and what may happen if the arbitration proceeds in advance of the expected late 2021 Court arguments.

This morning, CPR Speaks examined the cert grant and provided links covering some of the policy considerations that John discusses in this video.  See Amy Foust, The Next Arbitration Matter:  Supreme Court Agrees to Decide Extent of Foreign Tribunal Evidence Powers, CPR Speaks (March 22).

Disclosure: As discussed in the CPR YouTube video, the International Institute for Conflict Prevention and Resolution—CPR, which publishes this blog, submitted an amicus brief asking the Supreme Court to resolve the split in federal circuit court opinions on the topic without taking a position on the merits. See “CPR Files Amicus Brief Asking U.S. Supreme Court to Tackle Foreign Discovery for Arbitration,” CPR Speaks (Jan. 6, 2021) (available at http://bit.ly/2PJvzBO). (CPR has created a web page for the brief at http://bit.ly/3nklaYp).

Our guest John Pinney wrote the amicus brief on CPR’s behalf.   

[END]

The Next Arbitration Matter: Supreme Court Agrees to Decide Extent of Foreign Tribunal Evidence Powers

By Amy Foust

The U.S. Supreme Court today granted review in Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794, and will be the next arbitration case on the Court’s docket.  It will likely be heard in the term beginning in October.

The case highlights law that had long appeared settled on whether foreign tribunals seeking discovery in the United States includes private arbitration panels.

In the past two years, cases on the statute in question–28 U.S.C. § 1782, “Assistance to foreign and international tribunals and to litigants before such tribunals”–have packed federal courts. See Joseph Famulari, “Section 1782 Circuit Split Update: 7th Circuit says Law Doesn’t Include Arbitration, as 9th Circuit Hears Arguments,” CPR Speaks (Oct. 22, 2020) (available at http://bit.ly/38kxyCV), an John B. Pinney, “Update: The Section 1782 Conflict Intensifies as the International Arbitration Issue Goes to the Supreme Court,” 38 Alternatives 125 (September 2020) (available at https://bit.ly/3tbgFCX).

Petitioner Servotronics presented the question formally as:

Whether the discretion granted to district courts in 28 U.S.C. § 1782(a) to render assistance in gathering evidence for use in “a foreign or international tribunal” encompasses private commercial arbitral tribunals, as the U.S. Courts of Appeals for the Fourth and Sixth Circuits have held, or excludes such tribunals without expressing an exclusionary intent, as the U.S. Courts of Appeals for the 2nd, 5th and, in the case below, the 7th Circuit, have held.

The question doesn’t reveal the unusual posture of the case, because it literally created its own circuit court split. There are two decisions:  The Seventh U.S. Circuit Court of Appeals decision on appeal that was granted today had prohibited Servotronics’ requested discovery for the foreign arbitration tribunal also had been decided in Servotronics’ favor against the same adversaries, Rolls Royce and Boeing, when the case was heard in the Fourth Circuit.

The International Institute for Conflict Prevention and Resolution—CPR, which publishes this blog–submitted an amicus brief asking the Supreme Court to resolve the split in opinions without taking a position on the merits. See “CPR Files Amicus Brief Asking U.S. Supreme Court to Tackle Foreign Discovery for Arbitration,” CPR Speaks (Jan. 6, 2021) (available at http://bit.ly/2PJvzBO) (CPR has created a web page for the brief at http://bit.ly/3nklaYp).  

The evolution of the circuit split is described in John B. Pinney, “Will the Supreme Court Take Up Allowing Discovery Under Section 1782 for Private International Arbitrations?” 38 Alternatives  103 (July/August 2020) (https://onlinelibrary.wiley.com/doi/abs/10.1002/alt.21848) (Pinney prepared on behalf of CPR the Supreme Court amicus brief in Servotronics).  

Justice Samuel A. Alito Jr. didn’t participate in the consideration of or the decision to accept the petition, according to this morning’s order list, indicating that the case could be decided by eight judges later this year.

In the case the nation’s top Court agree to hear today began in January 2016, during testing at a Boeing facility, when an engine manufactured and installed on an aircraft by Rolls Royce caught fire. Boeing sought reimbursement from Rolls Royce for damage to the aircraft.  Boeing and Rolls Royce settled the matter between them.

Rolls Royce then sought reimbursement from Servotronics, which manufactured a fuel valve for the engine.  When negotiations over the reimbursement failed, Rolls Royce demanded arbitration under the rules of the Chartered Institute of Arbitrators in the United Kingdom, as permitted by an agreement between Rolls Royce and Servotronics.

During the arbitration, Rolls Royce and Boeing declined an invitation to produce evidence that Servotronics insists is critical to its defense, including information about what Rolls Royce and Boeing did after observing certain test results.  Servotronics contended those test results presaged the fire and showed a missed opportunity to intervene before the fire.

Rolls Royce countered that the discovery requested by Servotronics was reviewed and denied by the arbitral panel, in part because the request was overly broad.  Servotronics applied for leave under 28 U.S.C. §1782 to subpoena records from Boeing’s Illinois headquarters and, in a separate application, to take the depositions of three South Carolina-based Boeing employees,  where the test flight went awry.

The South Carolina application was denied, but the denial was overturned by the Fourth Circuit. Servotronics Inc. v. Boeing Co., 954 F.3d 209, 216 (4th Cir. March 30, 2020) (available at https://bit.ly/3h7s0P8). The Fourth Circuit rejected the notion that §1782 is limited to public or state-sponsored tribunals. 

Further, the court reasoned, arbitration in the United Kingdom is government-sanctioned and regulated, at least by the U.K. Arbitration Act of 1996.  Therefore, a U.K. arbitrator is acting under the authority of the state and would meet Boeing’s proposed restrictions on the scope of §1782.

The appeals court dismissed Boeing and Rolls Royce’s predictions of expanded discovery and increased international arbitration costs if a tribunal is broadly defined in §1782, reasoning that courts have discretion to consider applications for documents or testimony in view of the Congressional purpose of extending aid to a foreign tribunal.

But the case also was being litigated in the Midwest. An Illinois application was initially granted ex parte but was quashed upon intervention by Rolls Royce and Boeing. The denial of discovery in Illinois was upheld by the Seventh Circuit—the case before the Court in Friday’s conference and accepted for argument today. Servotronics Inc. v. Rolls Royce PLC, 975 F.3d 689 (7th Cir. Sept. 22, 2020) (available at https://bit.ly/3ccK7RU).

The Seventh Circuit had followed the Second and Fifth Circuits in finding that a “foreign or international tribunal,” as used in 28 U.S.C. §1782, refers to a state-sponsored tribunal, and private arbitration is not state-sponsored. 

The Seventh Circuit opinion noted that a limited definition of “foreign or international tribunal” also avoids an apparent conflict with the Federal Arbitration Act, which permits a district court to order discovery only on request of the arbitrator.  The panel observed that including private international arbitral tribunals in the scope of §1782 would result in a prohibition on a party to a domestic arbitration seeking court assistance with discovery under the FAA, while permitting a party to an international arbitration to obtain the same assistance (under §1782).

The case therefore presented the circuit split in stark relief—with discovery granted in the Fourth Circuit, and denied in the Seventh, in the same matter between the same parties before the same foreign arbitral tribunal. 

Rolls Royce argued that certiorari should be denied to allow the Circuit Courts continue to consider the issue and because this case would likely be moot before the Supreme Court could complete its review, with the final arbitral hearing scheduled for May.

Today’s order provides further review and clarification by the Supreme Court in an area that had been considered settled law until the flurry of cases hit the circuit courts in recent years.  CPR Speaks will provide more analysis later today  on the background and the future of Servotronics.

* * *

Author Amy Foust 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.

[END]

#CPRAM21 Video Now On YouTube

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 YouTube.

Click here for CPR’s YouTube channel.

The first video released features keynoters from #CPRAM21’s first two days:

  • CPR President and CEO Allen Waxman
  • CNN Anchor and Chief Political Correspondent Dana Bash
  • General James Mattis, Senior Counselor, The Cohen Group, former Secretary of Defense (2017-2018) and Commander, U.S. Central Command (2010-2013)

Highlights from Dana Bash’s presentation are on CPR Speaks here. Highlights from James Mattis’s talk are on CPR Speaks here.

Here is a direct link to the new YouTube video. Click the subscribe button for more CPR YouTube content.

Additional videos will be posted from #CPRAM21 for CPR members only. For information on access and joining CPR, please visit CPR’s Membership webpage here.

[END]

The Zoom in Arbitration: #CPRAM21 Practitioners Focus on Virtual ADR

By Claudia Diaz

Below are notes from the 2021 CPR Annual Meeting third-day panel, “Hot Topics In ADR And Year-End Wrap Up,” an hour-long Jan. 29 afternoon event.

  • Moderator Ana Reyes, a partner in Washington, D.C.’s Williams & Connolly, provided questions to three panels members, opening by noting that the effect of the pandemic on litigation and dispute resolution–including the adjustments the legal profession has taken, and which practices will be continuing–was the key hot topic that came up for the panel in preparing for the CPR Annual Meeting session.
  • Reyes’ first question for the panel was to comment on trends.  She said, “I have read that in this world of COVID that there are two recent trends in dispute resolution: more not less dispute resolution, and sooner not later.”  
  • Panelist Thomas J. Roberts, Chief Counsel, Litigation, Boeing Defense, Space & Security, in Arlington, Va., noted that he has seen a marginal increase toward more alternative dispute resolution. Initially there was hesitation to do mediation in a virtual setting, but he reported that his department has learned that virtual mediation works well. An in-house counsel, he said, should always think about resolution through mediation whenever a dispute arises. It is the best way to have a settlement conversation, he said, and the dispute will benefit from the guidance of a third-party neutral.
    • There are right and wrong reasons to mediate. Covid-19 has delayed dispute resolution, more so for courts than for arbitration. And he said you don’t want to mediate for the wrong reasons, focusing on entering and using the process solely because of the delays.
    • Still, with the delays, the windows for engaging in mediation are a little bit wider, which is lessening the hesitancy to mediate, giving people more time to consider it.
  • Question for Panelist Yvette Ostolaza, a Sidley Austin partner in the Dallas and Houston offices: Has the pandemic changed your clients’ desire to avoid a virtual hearing that they might not be able to delay? Are they trying to mediate where they would not before?
    • Ostolaza:
      • Virtual hearings are effective. Some clients said to wait, but the parties tried it “because there were bankruptcy issues.” After a securities class-action case mediation with 10 people, she said, “I found it way more effective to be by virtual and by a video than if I had been at an office.” So, efficiency was much better virtually than in person.
      • In virtual arbitration, there were differences in terms of the strengths of the party presentations, and more training is encouraged for participants.
      • There is something about video that makes it so obvious about who is not engaged. Participants need to behave as if they were in the courtroom. “We had one arbitrator that was clearly not paying attention and the client was pretty disappointed.”
      • “We need to remember this is a professional environment, . . . and not be too casual.”
      •  “I think there is a lot of cost-saving in the virtual world.”
  • Question on arbitrators pushing hearing forward virtually, even if that might not be best for the client.
    • Panelist J. Michael McNutt, senior litigation advisor and of counsel at the Paris law firm of Lazareff Le Bars:
      • ADR for his clients, who invest in multi-jurisdiction projects, virtual hearings adds a lot more complexity, said McNutt.
      • He said he has been working under new International Chamber of Commerce Court of Arbitration pandemic policies, which in certain circumstances pushes virtual hearings when the matter is not ready or too complex. For example, in one matter, among other logistical cross-border concerns, the parties needed translations for four languages. With due process considerations, the parties he is representing will proceed, but they will reserve their rights, noting also that there is a counterclaim.  “With international arbitration, it is a lot more complex.”
      • Moderator Reyes asked about cross-examination over video as opposed to in-person. McNutt replied, “It is very very difficult to have an effective cross examination because you can’t assume the other side is going to be honest or act properly.  You have to put another body in the room.” He says he is concerned about protecting the integrity of the proceeding.
  • Question: Are hearings different than mediations virtually?
    • Ostolaza:
      • “I wholeheartedly agree . . . that when it comes to depositions and . . . a hearing with live witnesses that you are cross examining it is very difficult.”
      • At a minimum, the attorney has a right to be with the client in person, and the other side should be socially distanced.    
      • Mediators can juggle multiple rooms better virtually than in person, knocking on doors and waiting.
  • Question to Tom Roberts of Boeing: What is one thing missing from the virtual mediation as opposed to the in-person mediation? Moderator Ana Reyes proposes that the key missing element is the mediator’s power to communicate with the individuals.  
    • Roberts:
      • “The best value that the mediator can bring” is to “credibly deliver the substance of . . . his or her view of the merits of the legal claims.”  He added, “that communicates pretty well virtually.”
      • On the downside, “there is a bit of easy-come, easy-go with virtual mediations.” No travel needed, just click in and click out, he said, concluding that it is easier now for parties to stop mediating.
      • A mediator that is committed to the process will have the people skills to stop today, but will catch up with the parties after—a mediator who wants to see it through.
    • Ostolaza:
      • She said her matters are starting earlier, with three or four calls before the actual mediation day, to go through the parameters and make the client feel comfortable so that the mediation will work.
      • For arbitration hearings, she advises practicing on exhibits and the process with the tribunal administrator
  • Question: Mediations don’t generally occur in international arbitrations—for example, the ICC does not require pre-mediations–perhaps because of a lack of availability of mediators that can work on the cross-cultural issues at play. Discuss these cultural factors.
    • J. Michael McNutt:
      • The reason the firm has offices in Dubai is for Chinese investors investing in Africa, who use arbitration in Abu Dhabi, in the United Arab Emirates, for those disputes.
      • The mentality and the civil law upon entering the contract is a fundamental issue when you have to interpret the contract in these international cases. In mediation it is difficult to find someone that “both parties would agree could accurately boil down” the essence of the dispute. He says that he cannot find qualified mediators– “Mediation is tough.”
      • For international mediation to become more relevant, it needs the ability to address these broad issues.
  • Question to Tom Roberts: Boeing is an international entity–Is that something Boeing has had to face, cross-cultural issues?
    • Roberts:
      • He agrees with McNutt, saying, “If you can find the right person then there is real value [to mediation].”
      • “The cultural differences, expectations, [and] legal understandings are very different in different parts of the world, so [finding the right person is] a big challenge.”
  • Question: Is there some loss in connecting in mediations virtually?
    • Ostolaza:
      • “There are differences in America” in negotiate style depending on the part of the country. “The art of being a great lawyer is understanding and embracing those differences and being good at it and being able to be a chameleon.”
      • She said she and her clients had discussions after virtual mediations by staying on the video for purposes of recapping client communications.
      • There can be a lack of buy-in without the travel and the commitment of an in-person mediation. But the counter is that it was “a little bit” friendlier not being in the same room with participants “hating” each other.  It counterbalanced.
  • Question: Often at the end of a mediation, noted Mediator Reyes, the mediator will ask parties to sign on to the terms of the mediation so the settlement will not unravel.  How have you addressed the technical request to sign on to the terms?
    • Ostolaza:
      • She had a term sheet at the outset for one pandemic mediation—she says she brings one to every mediation—and the parties were able to sign it two days after the conclusion of the session.
      • In another recent case, the mediation term sheet was signed with DocuSign—virtually–and no one left until it was done. That, she said, was the agreement about the deal going into the session, and it worked.
  • Question: Do you have a feeling that a couple years from now we will see a developing body of law about awards being enforced that were made in a virtual hearing?
    • McNutt:
      • If necessary, he says his firm will resist enforcement if it serves their clients.
      • He says he is a proponent of civil law issues, but in cross-border disputes, it is about the will of the parties and not the type of analysis of a common-law setting.
      • In a virtual hearing, he said, you do not know if the other lawyer is sitting across the table handing the answer to the witnesses. We have that problem even in in person hearings, said McNutt.
      • He said he looks forward to challenging the validity of awards where due process rights were abused, for example, in France, where process is fundamental to enforcement. Such challenges are “not good for arbitration,” he conceded, because finality of the award is the core reason clients turn to arbitration.
      • Tribunals need to render awards that can be enforced.
      • “The tribunal works for the parties, . . . and people need to hold tribunals accountable,” he said, for producing awards that can be enforced.
  • Question: A new issue developing, med-arb, in which you have a session with a single mediator and if a claim does not settle, then the mediator becomes the sole arbitrator, converting the matter to an arbitration from mediation. Comments?
    • Yvette Ostolaza:
      • She said she was not in a med-arb matter, but a client as part of the mediation agreed that if there is a dispute the neutral would arbitrate the mediation issues covered. She said she thought it would not work, because the mediator would think the entire time to protect himself. “I am not a fan,” she said, “Heck, I am not a fan of doing the federal magistrates’ [mediation] when they are mandatory and then going to the federal judge,” noting that she is skeptical that they will refrain from talking as the magistrate sheds the settlement role and the judge moves in to adjudicate.
    • Tom Roberts:
      • “I am generally down on the idea, but it also sort of depends on what the alternative is.” He agreed with Ostolaza’s concerns. It is impossible to not have the arbitrator contaminated by what they learned in the mediation process, said, adding he might be open to med-arb in a smaller case “where you really just want to get an answer.”
  • Moderator Reyes noted a 2021 CPR Annual Meeting chat comment advising that mediation is an old process with deep tribal roots that is common in most indigenous populations.
    • J. Michael McNutt:
      • “Mediation works when the community has already established who the mediator should be. That’s fundamentally different than a judge, of course.”
      • The skillset for arbitration: “We are hired to protect our clients and defend and win in the client’s interest. Prior to commencing arbitration there is a conversation of what is the client’s interests so that we know what they are and what to fight for.”
      • To mediate in arbitration is different, concluded McNutt, adding that the skillset is different.

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The author, a third-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern. Videos from #CPRAM21 will be posted soon at www.cpradr.org.

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House Reintroduces a Proposal to Restrict Arbitration at a ‘Justice Restored’ Hearing

By Mark Kantor

On Thursday, Feb. 11, the U.S. House of Representatives Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law held a hearing, “Justice Restored: Ending Forced Arbitration and Protecting Fundamental Rights.” 

This hearing was held in connection with the same-day reintroduction of the “Forced Arbitration Injustice Repeal Act” or the “FAIR Act” (See press release here).  That proposed act, co-sponsored by 155 House Members, would ban mandatory pre-dispute arbitration agreements in cases of employment, consumer, antitrust and civil rights disputes. 

In the previous Congress, the FAIR Act passed the House by a 225-to-186 vote, with virtually all Democrats and a number of Republicans in support.  The U.S. Senate, however, then controlled by the Republicans, did not take up the legislation.  The FAIR Act thus died at the end of term in that Congress, to be revived as a proposal in the current Congress that convened last month.

The hearing was chaired by Rep. Hank Johnson, D., Ga., a leading FAIR Act sponsor.  Johnson strongly supported prohibiting such pre-dispute arbitration agreements.  In addition to employment, consumer, antitrust and civil rights disputes, Johnson also criticized the impact of mandatory arbitration on small business disputes with large businesses.

After Johnson’s opening statement, Ranking Minority Member Rep. Ken Buck, R., Colo., made his own opening remarks.  Buck opposed the FAIR Act’s general ban on pre-dispute arbitration clauses, arguing that arbitration is a fair system. 

It is very interesting to note that he did, however, offer support for reviewing coverage of sexual predation claims in arbitration and “doing away with the secrecy provisions in contracts” when workplace predatory conduct exists–“those are two issues I want to make sure we distinguish in the employment context.  . . .” 

Buck stated his particular interest in hearing the testimony from Gretchen Carlson, the former Fox News anchor who made public her story of sexual harassment and filed suit against her boss at Fox News.  Other Republican members raised the prospect of excluding “sex and race discrimination” from mandatory arbitration and for overriding class action waivers for a “pattern of behavior” by a “bad actor” rather than individual claims. 

That focus on employment discrimination/harassment claims and overriding related confidentiality provisions may signal a possible path for narrower bipartisan legislation.  A narrower approach may arise if, as many anticipate, the broader approach of the FAIR Act fails again in the Senate for lack of the 60 cloture votes necessary to overcome a filibuster or a Senate decision to eliminate the filibuster.  

Four witnesses testified at the hearing:

  • Gretchen Carlson, Journalist, Author, and Advocate
  • Myriam Gilles, Paul R. Verkuil Chair in Public Law, Benjamin N. Cardozo School of Law
  • G. Roger King, Senior Labor and Employment Counsel, The HR Policy Association
  • Jacob Weiss, Founder and President, OJ Commerce

Carlson spoke about the adverse impact of “forced arbitration” on her sexual harassment claims, as well as the barrier federal arbitration law poses to implementation of local State laws seeking to move similar claims out of arbitration.

Gilles spoke more broadly in opposition to mandatory arbitration in employment, consumer, antitrust, civil rights and small business/big business disputes, areas of her scholarship for many years. 

Weiss spoke in criticism of Amazon’s arbitration policy in contracts with its small business counterparties.  Notably, Weiss was discussing a category of B-to-B commercial claims where there is an imbalance of bargaining power, not claims involving individuals.

King testified in support of positive aspects of arbitration, the inclusion of due process rights for claimants based on procedures adopted by U.S. arbitral institutions, and reform of class action procedures.  Like Rep. Buck, he contended that concerns about confidentiality and nondisclosure agreements can be addressed separately from arbitration.

Readers should note that other legislation has also been introduced in the new Congress focusing among other matters on banning pre-dispute mandatory arbitration clauses in employment arrangements.  The most notable legislation in that respect is the proposed Protecting the Right to Organize Act.  Among as many as 50 pro-employee proposals in the PRO Act, it would prohibit employers from using mandatory arbitration agreements with employees.

Senate control has shifted to the Democrats in this Congress, even though by the narrowest of margins.  We can therefore anticipate hearings and committee activity in both the House and the Senate for these legislative proposals.  In each case, though, the fundamental political calculus in the U.S. Congress will be driven by the role of the Senate’s filibuster.

A video of the hearing, statements from House Members, witness written testimony and statements from interested parties can be found here.

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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 has contributed frequently to CPR Speaks, and this post originally was circulated to a private list serv and adapted with the author’s permission.

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For more from author Mark Kantor, join CPR’s Employment Disputes Committee and Government & ADR Task Force for a free public online panel discussion on Feb. 24 on labor and employment ADR under the Biden Administration. Kantor and other experts will discuss how the current composition of the Supreme Court, the new Democratic majority in Congress, and the new leadership of the NRLB and EEOC will affect arbitration and mediation of U.S. labor and employment disputes.  For a list of Kantor’s co-panelists and registration information, please visit the CPR website at https://bit.ly/3nV4fgf.

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