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

By Mylene Chan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Claim Forfeited? California Appeals Court Upholds Exclusion of Estate Benefits for Non-Compliance with Court-Ordered Mediation

By Mylene Chan

A recently filed petition for review pending before the California Supreme Court raises a controversial issue regarding the fairness of court actions related to non-compliance with court-ordered mediation.

Breslin v. Breslin, 62 Cal.App.5th 801 (Jan. 26) (available at https://bit.ly/3xI7ige), is a probate case for which a cert petition was filed at California’s top Court on May 6.

The case involves a probate dispute regarding interests in a trust, with potential beneficiaries including 24 charities. The court ordered mediation, but most of the nonprofit groups did not attend. The attending parties reached an agreement.

The opinion notes, “The settlement agreement awarded specific amounts to various parties, including the appearing charities, and attorney fees with the residue to the intestate heirs.” Other non-attending parties were not included.

The probate court approved the settlement and explained that appellants lost their interests in the trust by failing to file responses and objections to the initial trustee’s petition and failing to participate or appear in the court-ordered mediation.

The appellate court upheld the probate court’s decision on the ground that the California Probate Code gives courts discretion to order mediation. “A party receiving notice under the circumstances here, who fails to participate in court-ordered mediation, is bound by the result,” the opinion states.  

The appellants argued that the court’s decision conflicts with existing California laws that are designed to honor a decedent’s testamentary intent, protect beneficiaries, avoid forfeitures, and encourage charitable giving. “Under the label of ‘forfeiture,’ the majority opinion has established what amounts to a terminating sanction for beneficiaries who fail to attend private mediation,” the petition states.

In a reply to the cert petition, Kevin G. Staker and Brandon P. Johnson, of Camarillo, Calif.’s StakerLaw Tax and Estate Planning Law Corp., on behalf of respondent David Breslin, who is the estate’s trustee, argued that the appellants were never vested beneficiaries and lost their alleged rights in the trust because they failed to participate in the court-ordered mediation.

Mark A. Lester, Katherine H. Becker, and Eric A. Hirschberg, attorneys at Jones, Lester, Schuck, Becker & Dehesa in Camarillo, Calif., who filed a brief on behalf of intestate respondents Paul G. Breslin and Kathleen Breslin LaForgia, took a similar position, and also noted that affirming the lower court decisions benefits the trust and estate practice. Respondent counsel Lester indicated in an email with the blog’s author that using mediation early in trust and estate disputes means that the vast balance of the estate gets to the beneficiaries rather than the attorneys. 

The California attorney general submitted a six-page amicus curiae letter in support of the appellants’ request that the state Supreme Court grant review of Breslin. The attorney general argued that the case raises important questions concerning whether a court has discretion to waive a beneficiary’s objections to a petition for approval of a settlement agreement and presents significant policy ramifications.

It is uncertain what trends Breslin would set nationally because Breslin raises several challenging issues, such as forfeiture, due process, cost burdens, and bad faith. For now, it does not appear that New York, for example, would endorse a similarly harsh sanction for non-compliance with court-ordered mediation.

In the past five years, in New York state and federal courts, a court has sanctioned parties for non-compliance only in rare cases. For example, in Workneh v. Super Shuttle Int’l, Inc., 2020 WL 3492000 (S.D.N.Y. June 8, 2020), the court dismissed the case; in Kantor v. Air Atl. Med., P.C., 2020 WL 7130732 (E.D.N.Y. Sept. 23, 2020), the court issued default judgments and recommended monetary sanctions, and in Rice v. NBCUniversal Media, LLC, 2019 WL 3000808, (S.D.N.Y. July 10, 2019), the court imposed a monetary sanction.

These three cases involved egregious behavior–such as repeated violations of court orders in a variety of contexts over the course of two years (responses to discovery requests, refusal to provide authorization, failure to appear as directed), and failure to communicate with the court and opposing counsel for almost a year–warranting serious sanctions. It appears, however, that New York judges might not quickly divest parties of rights for non-appearance as did the California court in Breslin.

If the California Supreme Court accepts Breslin and affirms the lower court rulings, it could signal a shift in the impact and effects of court-ordered mediation. The mediation community, as suggested by the cert petition, is watching closely.  Practitioners will want to monitor the case because of its potential to change the standards applied to parties in court-ordered mediation.

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

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Court Declines Question on Email Service, Leaving an International Arbitration Award Confirmation Intact

By Jacqueline Perrotta

Today, the Supreme Court declined to hear Grupo Cementos de Chihuahua S.A.B. de C.V., et al. v. Compañía de Inversiones Mercantiles S.A., No. 20-1033, an international arbitration case regarding a breached stock-purchase agreement. The petitioner had asked the Supreme Court whether service of process by email, in line with Federal Rules of Civil Procedure 4(f)(3), to a foreign entity’s U.S. counsel violates the Hague Service Convention.

This morning’s order list denying cert in Grupo Cementos can be found here.

The Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361, better known as the Hague Service Convention, details what constitutes valid service on parties in another country. The petitioner argued that the dispute falls under the Hague Service Convention and “service,” as instructed by the convention, does not include service by email.

The parties are a Bolivian company, Compañía de Inversions Mercantiles S.A. (“Cimsa”), the respondent in the U.S. Supreme Court case and the original plaintiff, and Mexican companies Grupo Cementos de Chihuahua, S.A.B. de C.V. and GCC Latinoamerica, S.A. de C.V. (collectively “GCC”), which appealed the case to the Court (cert petition available here) and who are the original defendants.

GCC had agreed to give Cimsa a right of first refusal if GCC decided to sell shares it acquired in a third-party cement company. GCC sold shares to a Peruvian company, and Cimsa alleged the sale breached its right of first refusal.

The companies had agreed to arbitrate disagreements arising from the stock deal. In a Bolivian arbitration, Cimsa was awarded several million dollars for the breach of its right of first refusal. GCC challenged this decision; litigation over the arbitration damages award is continuing in Bolivia.

This case came before a Colorado U.S. District Court when Cimsa filed an arbitral award confirmation action through the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which recognizes and enforces foreign arbitral awards.

Cimsa received court permission to serve GCC through its U.S. counsel, which GCC claimed was improper service. The district court found that alternative service through the GGC’s U.S. Counsel was proper under the Hague Service Convention, and confirmed the award.

The Tenth U.S. Circuit Court of Appeals affirmed that service was proper, and also affirmed the district court’s decision to back the Bolivian arbitration tribunal’s decision. Compania De Inversiones v. Grupo Cementos de Chihuahua, No. 19-1151 (10th Cir. 2020) (available at https://bit.ly/3vBlh65).

In holding that the district court correctly confirmed the arbitration tribunal, the Tenth Circuit found that courts construe the New York Convention defenses to enforcing awards “`narrowly’ to ‘encourage recognition and enforcement of commercial arbitration contracts’ citing OJSC Ukrnafta v. Carpatsky Petroleum Corp., 957 F.3d 487, 497 (5th Cir. 2020).

By affirming the district court’s decision, the Tenth Circuit has found that proper service under the Hague Convention includes service by email. By this morning’s Supreme Court action, that case stands, and the arbitration award’s confirmation will not be affected.

At the same time, in its cert petition, GCC had challenged the U.S. award confirmation on the basis that the U.S. courts did not have sufficient contacts for personal jurisdiction, which was also the subject of then-pending U.S. Supreme Court cases, Ford Motor Co. v. Montana Eighth Judicial District Court, No. 19-368 and Ford Motor Co. v. Bandemer, No. 19-369 (S. Ct.).  The Court decided the consolidated cases in Ford Motor Co. v. Montana Eighth Judicial District Court, No. 19-368 (March 25, 2021) (available at https://bit.ly/3wU5sbO).

With today’s cert denial, the Court also declined the petitioners’ suggestion to grant certiorari, vacate the matter, and remand for a decision on personal jurisdiction in accordance with the Ford Motor decision.

GCC’s Supreme Court cert petition can be found at https://bit.ly/2SOkTnl

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The Court today declined to hear a second arbitration case, Amazon.com Inc., et al. v. Bernard Waithaka, No. 20-1077.

Amazon had asked the Court to consider ” Whether the Federal Arbitration Act’s exemption for classes of workers engaged in foreign or interstate commerce, 9 U.S.C. 1, prevents the Act’s application to local transportation workers who, as a class, are not engaged to transport goods or passengers across state or national boundaries.”

Amazon had cited conflicting lower court authority on whether drivers who signed up for an Amazon distribution program and who stayed within state lines could avoid arbitration provisions under the FAA exemption in their disputes with online retailing giant.

Both the federal district court and appeals court declined to compel arbitration. Those decisions stand, with other cases still pending. Earlier this year, in a similar case Amazon linked to today’s decision, the Court declined cert in Amazon.com Inc. v. Rittmann, No. 20-622 (Feb. 22).

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

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Y-ADR Interview Series #4: Mathias Goh

CPR’s new Y-ADR Interview Series returns with another discussion on in-house work, law practice development, and careers in dispute prevention and resolution.

This week, Y-ADR Steering Committee member Elizabeth Chan, an associate in the London office of Three Crowns, discusses career advice and conflict resolution with Mathias Goh, the Regional Legal Counsel with Carlsberg Asia in Hong Kong.

Goh discusses his career path and conflict resolution experience.  He covers factors to consider when negotiating dispute resolution clauses, with a spotlight on Hong Kong-seated arbitration provisions; the difficulties of multi-tiered dispute clauses; what he looks for when selecting external counsel for a matter and when designating an arbitrator; his experience with virtual hearings; advice for young lawyers–spoiler alert: learn financial concepts–and the importance of reputation and brand as a young lawyer.

Lizzie Chan’s interview is her fourth in the CPR Y-ADR Interview series.  The previous interview, with Timothy Shore on working as an ombudsman, can be viewed on CPR Speaks here. The second interview in the series, with CPR Y-ADR co-chair Jason Klingensmith, Assistant General Counsel, at General Motors Co. in Detroit, is available on CPR Speaks here.  The kickoff interview in the series, with Jason’s GM colleague Brittany Mouzourakis, is available on CPR Speaks here.

Watch above, and share the interview on YouTube here.

CPR’s Young Leaders in Alternative Dispute Resolution educates the next generation of leaders on the full spectrum of dispute prevention and resolution mechanisms, and offers unique networking and professional development benefits to participants. Through periodic seminars and other initiatives, participants are introduced to CPR and gain an insider’s view into how CPR’s community of corporate counsel, law firm counsel, and other experts in the field are using dispute prevention and resolution techniques to manage conflict.

Y-ADR is open to the conflict prevention and resolution community–attorneys, professionals, academics and students–45 years old and younger, or those with less than eight years of professional experience in international or domestic ADR practice or other areas of conflict prevention and resolution.

The Y-ADR Steering Committee is the leadership group for Y-ADR. Jason Klingensmith’s co-chair is Ulyana Bardyn, counsel in the New York office of Eversheds Sutherland.

Follow CPR’s social media at the links at the bottom of this page for developments, and connect with Y-ADR’s LinkedIn page here.

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Beyond the Pandemic: A U.K. Research Center Issues Disputes Guidelines

By Jacqueline Perrotta

In response to the Covid-19 pandemic, the British Institute of International & Comparative Law (“BIILC”) developed the “Breathing Space” series to discuss the impact of the pandemic on the legal and business world, and reflect on preserving commercial relationships further promoting economic sustainability.

The BIILC is a center for research projects, seminars, and publications to advance and develop the understanding of international and comparative law in the U.K. and globally. As part of the Breathing Space series, the first and second “concept notes” focused on the legal and business communities’ reliance on private law and how disputes arise during the pandemic, particularly the burden on the courts, and how dispute resolution can be used to foster rather than impede economic recovery. 

Last September’s third concept note in the series outlined the best practices for dispute resolution, continuing the discussion of how business uncertainty and the effects of the pandemic inhibit economic growth.

Using the guidelines as a different perspective from which to view legal and business disputes in light of the pandemic, BIILC is encouraging efficient dispute resolution, keeping existing relationships intact and strengthening new commercial partnerships.

The guidelines outline three main concepts: (A) interactions between contractual parties; (B) dispute resolution considerations, and (C) ADR and legal proceedings, focused on efficient proceedings and resolution using ADR techniques or other available procedures.

Subpart A, interactions between contractual parties, highlights the conduct of contractual parties and the goal of supporting the relationships by discussing and balancing each parties’ perspective. Subpart B, dispute resolution considerations, focuses on the behaviors geared toward resolving disputes and preventing further aggravation by appointing appropriate parties and addressing each sides’ limitations. Finally, Subpart C tackles dispute resolution through official procedures and efficient resolution, using ADR techniques such as mediation or arbitration.

Meant to supplement a business’s existing practices rather the supplant them altogether, the guidelines are a reminder that maintaining meaningful commercial relationships is essential to the success of the overall economy.  

Helen Dodds, co-drafter of the BIILC guidelines, says the aim is to provide a “menu to help make sensible choices,” and should be referred to generally when tackling disputes and coming to resolutions between parties.

By tailoring the guidelines and revising them slightly to make them more applicable globally, BIILC has provided a simple but effective reference tool. While the focus is on commercial contracts, the guidelines can also apply more broadly to commercial torts matters.

Many U.K. firms and organizations have commented on these guidelines and their potential across legal and business communities, Dodds says, noting the importance behind implementing these best practices and making the guidelines as universal as possible.

The guidelines can be applicable in any culture, jurisdiction, or legal system, says Dodds, who is a member of the Commercial Dispute Resolution Taskforce of LawtechUK, which works on digital initiatives to benefit the U.K. legal services sector. She also is former Global Head of Legal, Dispute Resolution, at Standard Chartered Bank.

The catalyst for the guidelines was the pandemic, but looking forward, the goal is to have the guidelines used broadly and globally, collating the ideas and practices in a succinct and cohesive document.  Dodds says that the guidelines assist in promoting good choices so that business and legal communities can contribute to economic recovery by promoting less confrontational dispute resolution, ultimately preserving commercial relationships and decreasing the costs of disputes.

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

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EEOC (and Congress) Rolls Back ADR Policy

By Cai Phillips-Jones

A new U.S. Equal Employment Opportunity Commission rule affecting the agency’s conciliation process became effective Feb. 16, but was repealed via a Senate resolution last month. The May 19 Senate move signals “disapproval”; In order for the rule to be fully overturned, the House will have to vote on the joint resolution, and it must be signed into law by President Biden.

Passage is likely in House, where it awaits consideration. The conciliation process rule, devised under the Trump Administration, drew fire from Democrats because it required more information in early stages of discrimination complaints to be provided to employers, and critics said that could spark retaliations.  Republican supporters said the process supported settlements. See, e.g., Daniel Wiessner, “Senate votes to repeal EEOC settlement rule that ID’ed bias victims,” Reuters (May 19) (available at https://reut.rs/3wcIYCG).

Conciliation is a mediation-like process that aims to increase the speed at which EEOC complainants get relief. Conciliation is conducted by an EEOC investigator rather than a third-party mediator, and takes place after the agency has found evidence of discrimination.

The new rule required the EEOC to share the factual and legal basis of any findings of discrimination with employers about findings of discrimination during the conciliation process. The rule aims to increase the transparency of the conciliation process by providing the employer with more information about their potential liability.

The rule has been viewed as a rollback of the Supreme Court decision in Mach Mining v. EEOC, 575 U.S. 480 (2015) (available at https://bit.ly/2TmuMZg), which limited the amount of information employers received about EEOC discrimination findings.

The Senate vote to overturn the new conciliation rule is the latest example of EEOC rules changing since the Biden administration took office. In addition to this rule change, a conciliation pilot program was ended earlier than expected, in January. The pilot program made a small change to the existing EEOC program by mandating that settlement offers be shared with “appropriate levels of [EEOC] management” before being shared with the respondent.

In January, the EEOC also ended a mediation pilot program, which expanded the use of mediation to additional case types and during more phases of the EEOC administrative process. The mediation pilot program was announced on July 7, 2020, and was originally scheduled to run for six months, ending in January 2021. On Jan. 6, the pilot was extended until September, 2021. But the EEOC reversed course weeks later, and under new Biden Administration EEOC leadership, ended the program on Jan. 27.

In addition to expanding the availability of mediation, the pilot program also increased the use of video-conferencing mediation and electronic feedback from mediation participants. The video conferencing and electronic communication elements will be carried forward from the pilot program, as will the ability for parties to request a mediation at any point during the EEOC process.

It appears that the only major part of the pilot not being continued is the expansion of mediation to additional case types. EEOC cases are individually evaluated for referral to mediation. Some case types, however, including class and systemic charges, have historically been exempted from mediation referrals. During the pilot, these exemptions were suspended. The end of the pilot likely signifies a return to exempt status for these cases.

In the Jan. 27 press release terminating the previously extended pilot but noting the popularity and success of EEOC mediation, the new EEOC Chair, Charlotte A. Burrows, endorsed the continuing use of mediation and conciliation when appropriate. “I strongly support the prompt and voluntary resolution of discrimination charges whenever doing so is consistent with our mission,” she noted in a statement in the release, adding, “The Commission will continue to strengthen its conciliation and mediation programs in accordance with the overarching goal of preventing and remedying discrimination in the workplace.”

Burrows was critical of the pilot program’s implementation by predecessor chair Janet Dhillon. As an EEOC Commissioner last July, Burrows, noting that the program hurt the agency’s traditional enforcement role, said that Chair Dhillon “lacks authority to institute this sweeping change unilaterally, because it contradicts policy formally approved by a Commission vote.” See Paige Smith, “EEOC Alters Mediation Process Under New Temporary Program,” Bloomberg Law (July 7, 2020) (available here).

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The author, a J.D. student who will enter his third year this fall at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.

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Dispute Resolution Mechanisms Report on the China Belt and Road Construction Projects

By Mylene Chan

The Beijing Arbitration Commission/Beijing International Arbitration Center, the  China International Contractors Association, and Tianjin University Department of  Engineering Management jointly released a report on the use and nature of dispute resolution mechanisms in Belt and Road Construction Projects (BRI Report). 

The report provides interesting insights into the ADR preferences of the many players involved in the project, including on the types of disputes, arbitrator selection, the availability of mediation, and more.

China initiated the Belt and Road Initiative (BRI) in 2013 to connect Asia with Africa and Europe through land and maritime networks. The BRI has spawned massive infrastructure investments.  For more on the Belt and Road Initiative, see a researcher’s website here, and see Andrew Chatzky and James McBride, “Backgrounder: China’s Massive Belt and Road Initiative,” Council on Foreign Relations (Jan. 28, 2020) (available at https://on.cfr.org/3vfXhoX).

The April 2021 BRI Report (available in Chinese at https://bit.ly/3pHEDFj) examined the experiences of Chinese general contractors regarding the use of arbitration to resolve BRI disputes. From March 2020 to May 2020, the BRI Report interviewed more than 1,000 experts from 13 industries participating in BRI projects around the world, including trading companies, electrical contractors, financial institutions, investment companies, and general contractors. Respondents’ roles included insurers, suppliers, financiers, subcontractors, owners, and general contractors.

The interviews revealed a number of interesting data points. Disputes were mostly between general contractors and project owners. Disputes also arose between general contractors and subcontractors, among parties within joint ventures, and between general contractors and suppliers. The issues in dispute primarily involved project delay, change of construction, unforeseeable risks, payment issues, and suspension and termination of projects.

The main form of dispute resolution elected by BRI Chinese companies, according to the report, was negotiations/top-management discussions. The next four forms of dispute resolution in descending importance were commercial arbitrations, commercial mediations, dispute hearings, and litigation in local courts.

The top reasons given for choosing arbitrations, according to the BRI Report, were, in descending importance, independence and impartiality, enforceability of judgments, confidentiality, professionalism, and fairness. Top concerns when choosing arbitration included a lengthy process/high cost, an inability to reverse the judgement, a lack of understanding of arbitration institutions and arbitrators, the limitation of arbitration clauses in contracts, and low efficiency. 

The interviewees indicated that the main reason for choosing a particular arbitration center was its reputation. Interviewees also considered independence and fairness, efficiency, location, and strength of specialties. The parties’ nationality and the contract’s governing law played a role as well.

The speed of arbitration was also cited as an important consideration. While the arbitrations generally lasted between one to three years, most interviewees deemed an arbitration duration of less than one year as efficient. The greater speed of arbitration in China was a factor in preferring Chinese arbitration centers.

The main consideration in selecting arbitrators was arbitration experience in the relevant industry. The next four top selection considerations in descending importance were legal and specialized knowledge, industry experience, familiarity of law, independence and impartiality.

Interviewees cited the application of non-Chinese law, the use of non-Chinese languages in arbitration processes, unfamiliarity with the arbitration process, the high cost of arbitration, and uncertain arbitration results as major frustrations during the arbitration process. Factors affecting the cost and efficiency of arbitration included the professionalism of arbitrators, complexity of evidence, management of arbitration centers, difficulty of disputes, and professionalism of lawyers.

The top three services sought by BRI Chinese companies in the survey results, in descending importance, were a speedy arbitration process, independent mediation services outside of the arbitration process, and mediation within arbitration centers. The top three dispute resolution skills and knowledge in which BRI Chinese companies hoped to see improvements were international arbitration practice, contract negotiations, and knowledge of U.S. and British contract law.

Because Chinese culture favors dispute resolution outside of courts, the BRI, populated by Chinese companies, has a great need for alternative dispute resolution. To minimize value-deflating conflicts, the BRI Chinese companies should consider incorporating dispute prevention at the outset of contract formation—the January 2021 CPR Dispute Prevention Provisions are a good example. The provisions supplement traditional dispute resolution clauses, rather than replace them, by calling for, for example, parties’ commitment to the principle of early identification and discussion of disagreements, and flexible options to use the services of a third-party as facilitator or neutral as disagreements arise in contract performance.

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

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Y-ADR Interview Series: From In-House Counsel to Ombuds

CPR’s new Y-ADR Interview Series returns this week with another discussion on in-house work, law practice development, and careers in dispute prevention and resolution.

This week, Y-ADR Steering Committee member Elizabeth Chan, an associate in the London office of Three Crowns, discusses career advice and conflict resolution with Timothy Shore, former ombudsman at Pfizer Inc. in New York.

Shore discusses his work in more than 30 years at Pfizer in the legal, business, and human resources functions.  He served as the pharmaceutical giant’s first Chief Ombudsman, and talks about his design work involving the function to address employment issues, including using alternative dispute resolution.

He discusses his views on the value of a role for restorative justice in dispute resolution in corporate contexts, and provides advice for young practitioners looking to go in-house.

Lizzie Chan’s interview is her third in the series.  The previous interview, with CPR Y-ADR co-chair Jason Klingensmith, Assistant General Counsel, at General Motors Co. in Detroit, is available on CPR Speaks here.  The kickoff interview in the series, with Jason’s GM colleague Brittany Mouzourakis, is available on CPR Speaks here.

Watch above, and share the interview on YouTube here.

CPR’s Young Leaders in Alternative Dispute Resolution educates the next generation of leaders on the full spectrum of dispute prevention and resolution mechanisms, and offers unique networking and professional development benefits to participants. Through periodic seminars and other initiatives, participants are introduced to CPR and gain an insider’s view into how CPR’s community of corporate counsel, law firm counsel, and other experts in the field are using dispute prevention and resolution techniques to manage conflict.

Y-ADR is open to the conflict prevention and resolution community–attorneys, professionals, academics and students–45 years old and younger, or those with less than eight years of professional experience in international or domestic ADR practice or other areas of conflict prevention and resolution.

The Y-ADR Steering Committee is the leadership group for Y-ADR. Jason Klingensmith’s co-chair is Ulyana Bardyn, counsel in the New York office of Eversheds Sutherland. The Committee has extended its deadline for seeking applications for new members until June 15–for information, go here.

Follow CPR’s social media at the links at the bottom of this page for developments, and connect with Y-ADR’s LinkedIn page here.

If you would like to hear more about ombuds with Timothy Shore, join CPR for the June 16 CPR Employment Dispute Committee, where Tim will be joined by Joan Waters, University Ombuds Officer in the Ombuds Office at Columbia University, and Natalie Chan of Sidley Austin LLP. The panel will discuss ombuds programs, including how they are set up and the various services and powers they have to prevent disputes in corporations and universities. Information on the panel program Timothy will join, and registration, is available on CPR’s website here.

In addition, for more information on other dispute prevention techniques and practices, visit CPR’s website, which features the recently launched Dispute Prevention Pledge for Businesses, a new policy statement in which organizations pledge to incorporate dispute prevention mechanisms into their arrangements, here.

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Decline of Dialogue? Galton, Love & Weiss on Joint Sessions, Caucuses, and the State of Mediation

If the point of mediation is to get parties together to discuss and thereby resolve their problems, why is the distinct trend to keep the parties apart?

The cover story in the new June issue of Alternatives to the High Cost of Litigation presents a survey that shows how caucuses predominate and joint sessions are declining in mediation practice. 

The authors–veteran leaders in the profession—are Eric Galton of Lakeside Mediation Center in Austin, Texas; Lela P. Love, a law professor and director of the Kukin Program for Conflict Resolution at New York’s Benjamin N. Cardozo School of Law, and Jerry Weiss, founder of MediationInc, based in Shaker Heights, Ohio.

The authors join us in the YouTube video above to discuss their research.  Please like and share it at the YouTube link or below on Twitter, Facebook, and LinkedIn.

In their Alternatives article, “The Decline of Dialogue: The Rise of Caucus-Only Mediation And the Disappearance of the Joint Session,” 39 Alternatives 89 (June 2021), the authors chart the regional differences in the use of joint sessions and so-called phenomenon of “mediation without dialogue,” and use an example of how joint sessions can be deployed to reduce the conflict that caused the dispute.

Alternatives is available here to CPR members who are logged into the CPR website.  Subscription information is available at altnewsletter.com.

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Roundup: Four New Arbitration Petitions Under Consideration at the U.S. Supreme Court

By Mylene Chan

Four recent petitions for writs of certiorari pending before the U.S. Supreme Court raise a number of interesting arbitration issues. While the Court may decline to hear these cases, they are worth following because they could help to define the scope of arbitration in both consumer and commercial contexts.

The cases are being briefed and will be scheduled for conferences.  If accepted, they likely would be argued in the 2021-2022 Court term beginning Oct. 4.

The Court already has two cases that will be argued in the new fall term, and which are awaiting hearing dates:

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Here are the cases the Court will soon be considering:

Shivkov v. Artex Risk Solutions Inc., No. 20-1313

Shivkov centers on the availability of class arbitrations. In the case, the plaintiffs contracted with Artex and TSA Holdings LLC to set up and manage business entities—captive insurance vehicles the small business owner-plaintiffs entered into with the defendants–that the U.S. Internal Revenue Service later determined were illegal tax shelters.  The plaintiffs alleged the captive insurance schemes were “mass-marketed fraud” that caused the plaintiffs to be liable for back taxes, penalties, interest and “significant fees.”

The plaintiffs filed a class action against the defendants, alleging a variety of Arizona state and federal claims for breach of fiduciary duty, negligence, conspiracy and related claims.  Relying on an arbitration clause in the agreements, the defendants moved to compel arbitration.

The Ninth U.S. Court of Appeals ordered individual arbitrations of the plaintiffs’ claims. The appeals court first rejected the plaintiffs’ arguments that the defendants had a fiduciary duty to explain the arbitration clause to the plaintiffs, that the arbitration clause did not survive termination of the contracts, and that the arbitration clause did not cover all of the plaintiffs’ claims.

The appeals court also found that class arbitration was unavailable.  In so ruling, the appellate panel held that the availability of class arbitration is a gateway issue for courts–not arbitrators–to decide that the arbitration agreements did not provide for class arbitration. The Ninth Circuit also rejected the plaintiffs’ argument that the inclusion of the American Arbitration Association as the default arbitration method in the agreements was the equivalent of incorporating AAA rules about class arbitrability by reference into the agreements.

On March 17, the plaintiffs filed a petition for a writ of certiorari and presented two questions: (1) Whether an agreement that specifies arbitration before the AAA as the default dispute resolution method also must specifically mention the AAA rules to avoid being considered ambiguous about whether the parties intended to apply the AAA rules; and (2) Whether the availability of class arbitration is a matter for an arbitrator to decide, or for a court to decide.

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Eni USA Gas Marketing LLC v. Gulf LNG Energy LLC, No. 20-1462

The next case involves an attempt to use arbitration proceedings as a means of collateral attack on a previous arbitration award. In the case, Gulf entered into a Terminal Use Agreement (TUA) with Eni whereby Gulf would construct a natural gas terminal and Eni would use the terminal to deliver natural gas. The TUA contained a broad arbitration clause.

Eni initiated arbitration, alleging breach of contract, and arguing that the TUA was void because of unforeseen changes in the market. The arbitration tribunal found that the TUA had terminated and ordered Eni to pay Gulf for the value of Gulf’s partial performance under the TUA.

Eni then filed a second arbitration alleging a breach of contract claim left undecided from the first arbitration and misrepresentation. Gulf moved to enjoin Eni from pursuing the second arbitration. Eni argued that an arbitrator–rather than a court–should decide whether the first arbitration award precludes the second arbitration.

The Delaware Supreme Court enjoined Eni from pursuing the second arbitration. The Court reasoned that when a party files a second proceeding attacking a prior arbitration award, it circumvents the contractual  Federal Arbitration Act review procedure. The Court held that courts may intervene in a party’s attempt to seek arbitration when the objective is to rectify a prior unfavorable arbitration award by arbitrating claims in new separate arbitration proceedings. 

On April 15, Eni filed a petition for a writ of certiorari in the U.S. Supreme Court presenting the issue of whether the FAA permits a court to refuse to enforce an arbitration agreement delegating all questions, including a question of arbitrability, to an arbitrator where a party contends that the claim sought to be arbitrated represents a “collateral attack” on a prior arbitration award.

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HRB Tax Group v. Snarr, No. 20-1570

This case looks at the scope of the Federal Arbitration Act preemption of state law in cases where plaintiffs seek a remedy of a public injunction. In HRB Tax Group v. Snarr, the plaintiffs sought to stop their tax service provider from continuing business practices they alleged are fraudulent.

HRB and the plaintiffs entered into agreements in which HRB offered the plaintiffs services in filing tax returns. The service agreements required all disputes arising from these agreements to be resolved through individual arbitration.

The plaintiffs, customers of H&R Block’s accounting services, alleged that the marketing of HRB’s tax filing services violated California’s Consumers Legal Remedies Act, False Advertising Law, Cal. Bus. & Prof. Code, and Unfair Competition Law. They filed a class action suit against HRB and sought a public injunction enjoining HRB’s alleged misleading web services and advertising.

HRB moved to compel arbitration, arguing that the Federal Arbitration Act, which provides that arbitration agreements are presumptively valid, preempts McGill v. Citibank, N.A. 393 P.3d 85 (2017) (which held that a contract is unenforceable when it entirely waives the right to seek public injunctive relief under consumer protection statutes). 

The Ninth Circuit denied HRB’s motion to compel arbitration. The court reasoned that HRB’s argument had been foreclosed by Blair v. Rent-A-Center Inc., 928 F.3d 819 (2019) (holding that the FAA does not preempt McGill.)

HRB’s May 10 U.S. Supreme Court cert petition asks whether California’s public policy rule declining to enforce agreements for individualized arbitration whenever a plaintiff seeks a public injunction is preempted by the Federal Arbitration Act.

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Viking River Cruises v. Moriana, No. 20-1573

The fourth case raises questions about the applicability of agreements for bilateral arbitration to claims brought under California’s Private Attorneys General Act of 2004 (PAGA). In Viking River Cruises, aggrieved employees sought relief from an international cruise line.

Original plaintiff Angie Moriana agreed upon joining Viking as a sales representative to an arbitration agreement providing that any employment-related disputes would be arbitrated. The agreement also required Moriana to waive all rights to bring a class, collective, representative, or private attorney general action in the employment contract.

Moriana filed suit against Viking on behalf of the state and all other similarly situated employees alleging various California Labor Code violations under PAGA.

Viking moved to compel individualized arbitration of Moriana’s PAGA claims, arguing that Epic Systems Corp. v. Lewis 138 S.Ct. 1612 (2018), validates private predispute waivers of such claims. Viking claimed that Epic Systems overruled Iskanian v. CLS Transportation Los Angeles, LLC  59 Cal. 4th 348 (2014), a California Supreme Court decision holding that arbitration agreements that waived the right to bring PAGA actions are unenforceable.

The California Court of Appeal denied Viking’s motion to compel arbitration, reasoning that the real party in a PAGA claim is the state and Moriana was not acting as an agent of the state when she bound herself to arbitrate. The court  explained that Iskanian remains good law because Epic Systems differs fundamentally from a PAGA claim. Epic Systems addressed the enforceability of an individualized arbitration requirement against challenges that such enforcement violated the National Labor Relations Act.

Viking filed a petition for writ of certiorari on May 10. The issue the Court will decide to consider is whether the Federal Arbitration Act requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.

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