ADR

Welcome to the Civil Procedure Podcast. I am your host, Thomas Mayne, and this episode is about ADR. ADR stands for Alternative Dispute Resolution, and the reference to alternative conveys its opposition to formal adjudication, where formal adjudication means litigation in courts. Now, if you want to sound all 21st century, you can say that ADR stands instead for appropriate dispute resolution, where the idea of that naming is to avoid the othering of ADR, and to instead recognize the formal and non-formal methods as equivalent options on a menu, where the idea is that neither the formal nor the non-formal methods is subordinated or is relegated vis-a-vis the others. That modern viewpoint is especially defensible in light of the fact that the so-called alternatives pre-existed their formal counterparts. Yet when I talk about ADR here, I am referring to the non-formal alternatives, and specifically I mean the two primary forms of ADR, which are arbitration and mediation. Stubbornly, I don't even put negotiation into my ADR bucket. For decades, scholars have referred to the three primary forms of ADR, and when you hear that, they usually mean arbitration, mediation, and negotiation. Negotiation, though, simply refers to the process by which disputing parties and their lawyers settle lawsuits. So, negotiation is just the voluntary resolution of a dispute without resort to trial, and without the involvement of some other neutral facilitator. Because I view negotiation as just a constant, unavoidable, integral, important part of formal adjudication, I think it's goofy to treat negotiation as ancillary or as part of some alternative to formal adjudication. So, I don't think of negotiation as part of ADR, and I say that because I see mediation and arbitration as something of an escape, as an alternative to formal adjudication. Mediation and arbitration involve resort to some authority-like figure that is not a judge. These alternatives are disruptive, to use a modern term. They're disruptive in the sense that they displace the status quo of formal adjudication. The displacement might be merely temporary, but the idea is that they change the dynamics. They're introducing a new product, they're disrupting the ordinary networks, and in that sense, arbitration and mediation, but not negotiation, have this shared characteristic that distinguishes it and makes it an alternative to formal adjudication. Now, what I want to do first in this episode is to run through some terms that you absolutely need to know. I've already introduced the idea of a "neutral," which is an important word. A "neutral" is someone who aids parties in resolving a dispute. When someone refers to a "neutral," they are usually referring to either an arbitrator or a mediator. But definitionally, you might imagine that even a judge in formal adjudication is a species of a neutral. So that just means when somebody uses the word "neutral," you want to figure out from the context whether they're using it in contrast to a judge or just referring more generically to the kind of person who assists in the resolution of a dispute. Next, I'm going to describe some idealized forms of arbitration and mediation, but know that there are an endless number of variations of each of these, including combinations of arbitration and mediation. I'm just going to set out some of the archetypes or prototypes here. First, when someone refers to arbitration, they are referring to a process that resembles formal litigation in many respects. In the typical arbitration, lawyers submit briefs. They offer testimony. They cross-examine witnesses. They make motions. They invoke case law. They present arguments pursuant to a set of procedural rules that are not unlike our familiar rules of civil procedure. Arbitrations can take days or weeks or months. They can be expensive, just like trials in formal adjudication. Arbitrators also issue final and binding decisions in matters big and small, in matters of individual rights, and in matters of bet-the-company litigation. And when I run into a former student at a coffee shop and I ask her what she's doing at her civil litigation firm, if she says that she recently had a "trial," it is more likely than not that, in fact, she is referring to an arbitration. Arbitrations are very trial-like, and they are more frequent than actual civil trials. Yet arbitrations are not formally trials, because these are not formal adjudicatory processes. They're occurring in suburban office parks, rather than in courthouses. They are never juries. They are not being presided over by judges, but rather by one or maybe a panel of three arbitrators. Their proceedings are closed to the public, and the resolution of the matter may never be known to the public. The outcomes produce no case precedent. Typically, arbitrations are binding, which is to say that there will be no appeals. Arbitral decisions are almost unreviewable as a practical matter. Empirical evidence suggests that arbitrations are a little bit faster than formal adjudication, but not much cheaper. An unlike formal adjudication, which is subsidized by taxpayers, with arbitration someone is going to get the bill for the neutrals time and for the administrative processing and whatever resources were furnished by the provider of the arbitration. Arbitration providers include for-profit companies and also not-for-profit organizations. Some providers are international, some are local. Providers might have a specialty subject area, or they might be generalists. That's a quick portrait of arbitration. Now let's talk about mediation. Mediation also makes use of a neutral, and we call that neutral a mediator. A mediator facilitates discussion among disputants in a manner that can produce a negotiated resolution. That is, the desired product of a mediation is a settlement that is agreed to by the parties. If the mediator is unable to lead the parties to some negotiated resolution, then the mediation fails, and the parties will need to resolve their dispute by some other means. Notice the contrast then to arbitration. Arbitrators will render decisions. Mediators are trying to facilitate negotiated resolutions. So when mediation is successful, all of the virtues of a voluntary settlement are realized, avoiding the cost and the time and the risk and the distraction and acrimony and other pathologies of protracted litigation. A voluntary resolution of any dispute is also likely to be more enduring and generative for the parties' relationship than is any outcome produced by the formal adversarial system. So unlike arbitration, where arbitrators essentially mimic judges, mediators must bring special skills to lead parties towards settlements. Indeed, their skill is their only leverage. They can't order or resolve anything. Mediation is rooted in traditions of party self-determination, collaborative participation, and creative problem solving. Two more terms that you want to know here are "facilitative" mediation and "evaluative" mediation. There are many so-called "mediation styles", but these are the two most important. The "facilitative" mediator has a more touchy-feely style, and your visual of the "facilitative" mediator can be the mediator who has all sorts of conversational tricks to keep parties talking productively, to help the parties identify the issues to find common underlying interests. In this sense, "facilitative" mediators tend to care less about the legal endowments of the disputing parties and may not even be lawyers themselves. They're instead facilitating conversation with the goal of resolution. By contrast, the "evaluative" mediator may be a more aggressive participant in the conversation. They're going to draw on their industry knowledge or prior experience, and they will express opinions. That's where the word "evaluative" is coming from. They are willing to offer their evaluation of the party's respective positions. Your visual of the "evaluative" mediator could be someone who will directly, even if also deftly, give one or both of the parties a reality check. Your case isn't as strong as you think it is. A "facilitative" mediator would never say that, but that is the kind of tool that an "evaluative" mediator would deploy. Again, with the goal of leading the parties to a voluntary settlement of their pending dispute. Let's move off of terminology and consider some bigger questions about ADR. For example, one question I'd like you to think about is whether mediation and arbitration are "competitors" or "compliments" to formal adjudication. What is the role of ADR vis-a-vis formal adjudication? Now, as "competitors" of formal adjudication, we might imagine that mediation and arbitration force formal adjudication to do a better job in order to retain its market share in the market for dispute resolution. In this sense, you might think of the "formal" public system as akin to "public schools" amid a regime of "private schools" and other alternatives. How has and how should the public system respond as a competitor? If and when disputants choose arbitration over formal adjudication, and let's say they're choosing it because maybe they love the fact that there are no "appeals" in arbitration. Well, then from the perspective of a competitor system, we might think, well, that's an interesting innovation that perhaps the formal system should consider implementing. Or to the extent that disputants choose arbitration over formal adjudication because, say, it's private and it's shielded from the public view. Again, is that an innovation by a competitor that the formal system should consider? The virtue of this exercise is appreciating that if the innovation is worth considering, then you can think about how one might implement such a reform. And all credit to arbitration and the innovative forces of the dispute resolution market for the innovation. And if the innovation isn't worth considering, because you might think it's antithetical to due process, for example, well, then you should be concerned that such dubious procedures are deployed routinely in arbitral proceedings. Or maybe you're comfortable with them in the context of arbitration, even if not comfortable with that same innovation in the context of formal adjudication. And you have reached that comfort because you say, well, parties have submitted their dispute to arbitration, and therefore they have, in a sense, knowingly and willingly waived those fundamental due process protections. Well, that leads in turn to a question of just how knowingly and willingly persons are submitting their disputes to arbitration. And so let's address that, even if I'm going to address it a little bit indirectly here. If arbitration was an unwelcome competitor, the formal system could extinguish arbitration with a wave of its hand. Arbitration thrives. In fact, it only survives because laws and court decisions prop it up. If arbitration clauses were not enforceable, any party who didn't want to follow through on their contractual promise to arbitrate could instead pursue formal adjudication. Yet it is the formal system that routinely and even aggressively enforces arbitration clauses. Arbitration clauses are enforced today, even when they are in contracts of adhesion, even when it's a consumer contract, even when it's an employment contract. This aggressive enforcement of arbitration clauses is a legal development that started to get momentum in the 1970s, and it has continued without encountering much, arguably, any meaningful pushback. Further, formal courts prop up the arbitration regime at the back end, too, by enforcing arbitral awards that private arbitration associations or corporations would otherwise have absolutely no authority to enforce. Yet courts will virtually rubber stamp arbitral awards, awarding damages, seizing assets, ordering equitable relief to implement an arbitrator's award. And I say rubber stamped, because except in the truly exceptional case, the courts do not review these arbitral awards for mistakes of fact, mistakes of law, bias, or unfairness. Courts are propping up the arbitration industry. Mediation, too, is institutionalized within the courts. Courts enforce mediation agreements and even impose their own mediation requirements, including on parties who don't want to mediate, which of course is somewhat inconsistent with the party self-determination vibe that infuses mediation. Much more problematic, from my perspective, is the adoption of the mediator's mindset by judges. After all, if mediators could resolve cases without trials, well then judges said why not us, and enter the modern regime of judicial case management, which authorized judges to intervene in a manner akin to mediators. Courts adopted mediations message that trials were slow, expensive, and invasive, and unpredictable. And soon it was judges saying that trying a case was a mistake. Trying a case was a failure of judicial case management. When courts abandoned their commitment to trials, judges needed other tools to dispose of cases. Judges could get out of the business of trying cases, but they couldn't get out of the business of disposing of cases. Sure, some cases could be sent to ADR, and they were, with enthusiastic and strict enforcement of arbitration clauses and by requiring parties to mediate. And some cases could also be resolved by insourcing ADR with judicial settlement conferences, for example, or otherwise, judges operating like mediators, but not all cases could be sent to arbitration, or resolved in mediation, or settled in a judicial settlement conference. So how would judges dispose of cases where the parties would not settle if the case couldn't be tried? Answer? Well, one way would be to ratchet up the pleading standard, and by giving the summary judgment standard, fangs. That's a provocative theory that I've tried to prove. You certainly needn't follow me down that path, but I do think it's important for everyone to examine the relationship between the formal and nonformal methods. I want to pose another question for you to think about as you navigate the world of ADR. And that question is, what is ADR's relationship with or its attitude toward the substantive law? We think of substantive law as prescribing the parties' rights and responsibilities, and presumably we wouldn't want parties' rights and responsibilities to play out differently in ADR than in formal adjudication. After all, employment discrimination is employment discrimination, right? Or a violation of an intellectual property right is a violation of an intellectual property right. But it is fair to wonder aloud how the professed virtues of ADR, in fact, respect or observe or account for substantive rights. For example, because one of the virtues of ADR is savings of time and money, well, which parts of formal adjudication then are apparently superfluous? And so long as flexibility with regard to procedural and substantive law is a professed virtue, well, how can ADR both flex the substantive law and also show fidelity to it? This is a tension worth your monitoring. ADR emerged as a product championed by both the political left and the political right. To caricature this a bit, the left saw it as improving access and empowering litigants, the right saw it as outsourcing and caseload relief from overburdened courts. ADR exploded in the 1970s and 1980s. It transformed from a niche product into something that commands attention in all sectors of the economy and in every segment of society. Courts have been ADR-ized. As I've explained, ADR has had a reforming influence on formal adjudication. There is also evidence of a reverse effect. ADR has been formalized in the image of courts. This litigation of ADR is demonstrated by reforms that have responded to the kinds of concerns that I've expressed here. After all, if we are allowing so many cases to be resolved in ADR, shouldn't we have stronger guardrails to ensure that what happens in ADR is dispute resolution of which we can be proud and confident? Sure, and then enter formalized procedural rules and processes such that arbitration has a motion practice and a rhythm that basically mimics courts. One of the strangest and most telling indicators of that phenomenon is revealed by the fact that the most popular arbitrators are former judges. To return to the analogy of the public and private schools, arbitration's hiring of judges is similar to a situation where we had a bunch of private schools, where the most in-demand instructors were former public school teachers, and where the curriculum in the private school was to replicate the curriculum of the public schools. What's going on with this so-called alternative? And enter procedural rules and processes that regulate the credentials and the practices of mediators and arbitrators. That's comfort to the ears of persons who are concerned that what's happening in ADR processes should be regulated and rootinized, and that the interests of parties, especially weaker parties, need to be protected in those alternative forums. But that line of thinking will deny us of the value of experimental alternatives to formal adjudication. Isn't there some value to escaping the formal system to something that doesn't merely replicate the formal system? Net-net, the formal system and its alternatives are interacting in interesting and meaningful ways, and your practice is undoubtedly going to require you to navigate both of those worlds. Let's terminate the lofty discussion and end this episode with the definition of one more term that you're likely to hear soon. The term is "batna," which is an acronym for the best alternative to a negotiated agreement. Batna. In a negotiation or a mediation setting, you will find yourself evaluating a settlement offer. So let's imagine that you're a plaintiff and I, as a defendant, make an offer to you that I will settle this case for $500,000. Well, you need to accept or to decline that offer. Obviously, when you're making that decision, you'll be thinking about the relative advantages and disadvantages of taking the sure thing, taking the $500,000 as opposed to declining it and hoping for more. You would use the term or you could use the term "batna" to describe your best alternative to the $500,000 sure thing. You might, for example, think that the best outcome at trial would be a verdict for, let's say, $2 million. That might be your highest estimate of what you might recover at trial, $2 million. Now, what a mediator would point out or what a thoughtful negotiator would appreciate is that the $2 million outcome would require an additional investment of time and money compared to the sure thing, compared to the $500,000 offer that is on the table right now. Moreover, there is also uncertainty as to whether the defendant could, in fact, even satisfy a $2 million judgment. If I don't have those resources, you're not going to collect $2 million from me even if you win. Your "batna" is one of many terms that folks use to describe the real best alternative to the sure thing. So rather than seeing the alternative as $2 million versus $500,000, you would say, "Well, even the best alternative is $2 million minus the additional investment minus the risk." Oh, it tends to put the negotiated outcome in a better comparative light. And of course, "batna" is policing only the best outcomes, the best alternative to a negotiated agreement. It is discounting what is perceived as the best outcome. As you might imagine, there are also terms for exploring the worst alternative to a negotiated agreement. If you decline my offer of $500,000, you might lose at trial. You might recover nothing. And of course, the worst alternative to a negotiated agreement is, you guessed it, your "batna" or "batna" worst alternative to a negotiated agreement. That's not only the losing at trial, but also the incurring the additional investment of time and money required to litigate the case from the time of my offer through that trial. These are just two terms. There are plenty more where those came from. And in ADR courses, one can learn these terms, these concepts, and also strategies in these alternative forums. That concludes this episode of the Civil Procedure Podcast. I wanted this to be an introduction to some terms and issues around the topic of alternative dispute resolution, and I hope that you found some of it useful. Have a good day.