Ch 5 Arbitration Flashcards
What are three ways to resolve disputes rather than litigation?
Negotiation, arbitration, mediation
______ leads to _______ when one party makes a claim that the other denies.
Conflict, Dispute
What is negotiation?
Process used to persuade or coerce someone to do what a person wants them to do
Conflict?
occurs when there are two or more points of view, leads to disputes Not bad or negative
Dispute?
Arises when one part makes a claim that another party denies
Negotiations seek to have a ____________ ______________ outcome.
Mutually, acceptable
Positional Negotiation - Positional Bargaining?
used instinctively by people Ex. Sales price, between the seller and buyer (meet in middle)
Principled, Interest-Based Negotiation
Provides 7 elements that REMOVE certain BARRIERS created by positional negotiation. Referred as interest-based negotiation (ex. Communication, Relationship, Interests, Options, Legitimacy, Alternatives, Commitment)
Alternative Dispute Resolution Systems (ADR)
ADR systems help ENSURE THE PRODUCTIVE RELATIONSHIPS needed for successful business transactions.
Differing methods of resolving disputes exist along a continuum with a negotiated settlement being the least expensive (and probably more effective)
Scale of Dispute Resolution Systems (5)
Trial and Appeal (most expensive in time, cost, and emotions)
> Focus Groups
> Arbitration
> Mediation
> Negotiated Settlement (least expensive in time, cost, and emotions)
Settlements?
Opinions of others are a motivating force in encouraging amicable settlements.
Juries are sympathetic to individuals who have suits against large corporations.
Focus Groups
Focus groups provides attorneys insight into possible JURY REACTION to the evidence and points OUR WEAKNESSES in the case.
-these parties often settle their dispute without having to go through the formal process of either a trial or an arbitration.
Arbitration?
ADR system in which the disputing parties agree to have a THIRD PARTY DECIDE THE MERITS OF THE DISPUTE.
-private, with not public record.
who is the Arbitrator?
Authorized to make decisions that are binding on the parties
-considered an expert in their field.
Benefits of Arbitration
Helps avoid litigation expenses and courtroom formalities,
Ease congested court dockets,
Relatively quick and inexpensive resolution of disputes
What is a submission?
Act of referring a matter to arbitration
What is voluntary arbitration?
Submission to arbitration by the parties
What is mandatory arbitration?
Occurs when a statue or court requires parties to arbitrate
What is an award?
Decision made by the arbitrator
- Not subject to judicial review
- Award is valid as long as it settles the entire controversy and states which party is to pay the other a sum of money
- Final on all issues submitted and enforceable by the courts
Submission - What are the issues?
occurs when the parties enter into an agreement to arbitrate an existing dispute
-May be a question of fact or law.
Submission - Parties can???
Parties can contractually agree to submit to arbitration all issues that arise in the future
Factors that influence the selection Process of Arbitrators - Expertise?
Use of an expert to resolve disputes MAKES ARBITRATION PREFERABLE to litigation
Factors that influence the selection Process of Arbitrators - Number Chosen?
Number of arbitrators is based on the agreement of the parties, but sometimes 3 are chosen.
Factors that influence the selection Process of Arbitrators - Authority over certain matters?
Arbitrators’ authority is a topic of controversy and litigation
expert in their field
Federal Arbitration Act (FAA) encourages
Encourages disputing businesses to utilize arbitration
Federal Arbitration Act (FAA) -how valid is this?
FAA provides that arbitration agreements shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
Federal Arbitration Act (FAA) - Impact on Policy
FAA covers any arbitration clause in a contract that involves interstate commerce
- Courts should enforce arbitration agreements
- Federal policy favors arbitration of commercial disputes
- U.S. Supreme Court strongly supports the use of arbitration
Federal Arbitration Act (FAA) - Impact on State Law
Some state laws specify that designated matters are not to be submitted to arbitration
-Commerce Clause and Supremacy Clause of the U.S. Constitution invalidate state laws that deny arbitration of certain disputes
FAA - Grounds on which arbitration can be vacated
a) Award was procured by corruption, fraud, or other undue means.
b) Arbitrators: Were partial or corrupt.
c) Were guilty of misconduct.
d) Exceeded or imperfectly executed their powers
Statutorily Mandated Arbitration?
States statutes require mandatory arbitration for certain types of disputes.
- Types of cases: for money of a small amount
- specific subject matter i.e. divorce.
- when party demands a jury trial.
De novo judicial review:
Court tries the issues anew as if no arbitration occurred
Mandatory Arbitration Procedures:
Procedures: -Mandatory arbitration does not provide speedy justice.
- Discovery procedures are used prior to the hearing on arbitration.
- Arbitrators have the power to:
- ->Determine the admissibility of evidence.
- ->Decide the law and facts of the case
Forms of Voluntarily Arbitration Agreements (2)
Predispute arbitration clause or Post dispute arbitration agreement.
-Efficient and affordable alternative to litigation must be achieved to encourage business people to use voluntary arbitration.
Predispute arbitration clause:
Contracting parties understand that disputes are better resolved through arbitration
Post dispute arbitration agreement:
Occurs when parties in dispute decide that arbitration is better than litigation
Judicial Review of Voluntary/Contract-based Arbitration Awards:
Judicial review of an award is restricted and final
- Error of law renders the award void if it requires the parties to violate the law.
- Courts do not interfere with an award.
- Review can correct fraudulent actions by an arbitrator.
- Award against public policy is rescinded
Mediation
Mediator attempt to assist disputing parties in resolving their differences
Review of statutorily mandated arbitration
Higher level of judicial review of the award is required. -Belief that mandatory arbitration statutes are against public policy and unconstitutional
- can seek de novo judicial review (of the interpretation and application of law by arbitrators.)
Can a party in mandated arbitration reject an award and seek a trial?
Yes, the award is intermediate step.
How is mandatory arbitration unconstitutional?
- deprive property and liberty without due process
- violates 7th amendment rights to jury trial
- violates states constitution of separation of powers
Mediator is
a third person -Cannot impose a binding solution on parties -Utilize the principles of interest-based negotiations
-Cannot testify/will not testify
Reasons for Increase in Mediation
1 Parties retain control over when to settle and continue disputing.
2 Cost savings
3 Reduction of the legal system governing the process
Mediation Procedures
1 Mediator explains the procedures to which the parties should agree.
2 all Parties make statements about the dispute.
3 dialogue of exchange phase.
4 how to work together, evaluate solutions
Caucus?
Occurs when the mediator meets privately with one party and their attorney, without other party
Advantages to mediation
-Disputing parties retain full control over the resolution of controversy -no informal presentation of evidence.
Disadvantages to mediation
-No enforcement mechanism to ensure the parties will mediate in good faith. -Selection of the neutral mediator. -Training and licensing requirements for a mediator are non-existent
True/False “If the parties to a mediation sign an agreement at the end, that agreement is usually binding (can be enforced in court)
True
Mediations - Lack of Judicial Involvement
No need for judicial review of the mediation process. If mediation is successful, it is the parties’ agreement that resolves the dispute. If the parties are not pleased with the mediation, they are free to end their voluntary involvement. Mediators have the disputing parties sign a consent to mediate that states the mediator cannot be subpoenaed or otherwise be made to testify in any judicial hearing.
Magnuson-Moss Warranty Act
Magnuson-Moss Warranty Act provides that if a business adopts an informal dispute resolution system to handle complaints about its product warranties, then a customer cannot sue the manufacturer or seller for breach of warranty without first going through the informal procedures. It allows a manufacturer to require mediation before the complaining consumer can litigate.
Litigation characteristics
High expense, final decision, a lot of time
Arbitration characteristics
Final decision rendered by 3rd party, voluntary or mandatory, Federally preferred
Mediation characteristics
not reviewable by the court, parties have control, lack of expertise
what are the most popular ADR systems?
Arbitration and mediation
