Chapter 4
MANAGING DISPUTES: ALTERNATIVE DISPUTE RESOLUTION
AND LITIGATION STRATEGIES
CHAPTER OUTLINE
I. What is Alternative Dispute Resolution?
II. Types of Alternative Dispute Resolution
A. Arbitration - Oldest Form of ADR
1. Parties submit grievances and evidence to a third-party expert in an informal setting
2. American Arbitration Association provides many arbitrators
3. Binding arbitration – can’t get court to reverse it
4. Advantages
a. Less formality
b. Moves faster than a trial
c. Handled privately
d. Expert handles the cases
5. Disadvantages
a. Arbitrator may not have legal training and may not understand the significance of legal points
b. Rules of evidence don't apply
6. Federal Arbitration Act
a. Passed to curb judicial declarations of arbitration clauses invalid
b. Designed to encourage arbitration except when it is specifically prohibited
c. Courts rarely interfere with contract arbitration clauses
7. Process
a. Parties agree to submit to arbitration
(1) may be part of their contract
(2) can agree after the fact
b. American Arbitration Association (AAA) can handle the proceedings for a fee
c. Demand for arbitration is filed
d. Arbitrator is selected
(1) proposed list sent to parties
(2) they can object within time limits
e. Hearing preparation - parties gather evidence
f. Case is presented in hearing
g. Arbitrator has thirty days from close of hearing to make a decision
h. Award is made
i. Binding arbitration: award is final
B. Mediation
1. Parties use a go‑between to negotiate and communicate
2. Used in international transactions
3. Mediator can offer suggestions for resolution
4. Not binding
C. Medarb
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1. Arbitrator tries mediation first
2. If no success, goes to arbitration
D. Minitrial
1. Small‑scale trial where parties present case to a judge with experience in the field or to a neutral advisor
2. Advisor or judge makes decision
3. Can motivate parties to resolve differences even if the results are not binding
E. Rent‑a‑Judge
1. Trial held in commercial as opposed to a public court
2. Pay fees for courtroom and judge
3. Example: “The People's Court” TV show; Judge Judy
F. Summary Jury Trials
1. Summary presentation of case to judge and jury
2. Gives parties an idea about jury's perceptions
3. Used after discovery is complete
G. Early Neutral Evaluation
1. Consultant or volunteer gives parties an assessment of the position
2. Generally used prior to discovery
3. Saves expenses if parties settle following the evaluation
H. Peer Review
1. Employment dispute method
2. Company-chosen, employee-chosen and neutral members review employer's actions
3. High success rate
I. Impact of ADR
1. Some states have mandatory ADR for cases below a certain dollar amount ($25,000 - $50,000)
2. Trends on ADR vary – some lawyers question its benefits because of increasing costs of discovery and hearings
III. Resolution of International Disputes
A. International Chamber of Commerce (ICC) Has Used Arbitration Since 1922
B. Center for Settlement of Investment Disputes (ICSID) is an International Arbitral Organization for Investors; Investment Contracts Can Provide for Arbitration by ICSID
C. Parties Free to Choose Which Courts Will Hear Their Disputes
1. Party autonomy
2. U.S. courts are a popular choice
D. International Courts (like ICJ) Have No Enforcement Powers
1. Act as mediators
2. Provide perspective on dispute
IV. Litigation vs. ADR: The Issues and Costs
Managing Disputes: Alternative Dispute Resolution and Litigation Strategies 35
A. Speed and Cost
1. Arbitration mandatory (non-binding) in 35 states for disputes of lesser dollar amounts ($50,000 is typical)
2. Hearing is faster/frees up courts for larger disputes
B. Protection of Privacy
1. Court records are public documents
2. Firm’s financials, strategies, concerns, and weaknesses are on display for the public
C. Creative Remedies
1. Creative resolutions not generally available through courts
2. More room for give and take of issues and discussion
D. Judge and Jury Unknowns
1. Trier of fact presents a variable in outcomes
2. Problems of hindsight determination
E. Absence of Technicalities
1. Evidentiary exclusions limited
2. More of a search for the truth
V. When You Are In Litigation...
A. How Does a Lawsuit Start?
1. People begin civil lawsuits - system does not do it for them
a. Based on a claim of right
b. Lawsuits are efforts of individuals to enforce their rights
2. The Complaint (Petition)
a. Must be filed within statutory time limits, statutes of limitations
b. Vary from state to state
c. Vary for the type of right
Example: Generally two years for personal injury claims, generally four years for contract suits
d. Complaint is general statement of claim
(1) must describe actions that led to claim of violation
(a) could be claim for money damages
(b) could be claim for equitable remedies
Example: Specific performance, injunctions
(2) must establish jurisdiction and venue of court in which it is filed
Example: For federal district court, must show diversity or that a federal question is invoked
(3) class actions are often filed against businesses
(a) plaintiffs pool together for costs
(b) defendant need only try case once
(c) possible abuses of class actions
3. The Summons
a. Complaint or petition and summons is served on defendant
b. Summons explains to defendant his/her rights
(1) where to defend
(2) how long to defend
(3) the effect of not defending the suit
c. Delivered by an officer of the court (sheriff or magistrate) or by licensed private process servers
d. In exceptional circumstances, service is accomplished by publication
e. Rules on how service is accomplished vary
Managing Disputes: Alternative Dispute Resolution and Litigation Strategies 35
(1) statutory agents can accept service for corporations
(2) leaving with another adult at residence is acceptable
4. The Answer
a. Second portion of the documents in a case are known as pleadings
b. Pleadings include:
(1) complaint (petition)
(2) answer
(3) counterclaims
(4) crossclaims
c. Failure to file an answer within the statutory time period is a default
(1) time limits for filing answers are typically twenty to thirty days
(2) like a forfeit in sports - plaintiff wins because the defendant fails to show up
d. Answer content
(1) defendant can admit allegations in complaint are true
Examples: Can admit court has jurisdiction, can admit incorporation in that state
(2) defendant can deny allegations in complaint
Example: Defendant denies that he negligently struck plaintiff
(3) defendant can counterclaim - effect is the defendant is also suing plaintiff for damages
Example: Defendant denies contract breach and counterclaims for defamation because of plaintiff’s statements about the breach in the business community
B. Seeking Timely Resolution of the Case
1. Motions for formal requests for a court to take action
2. Motion for judgment on the pleadings
a. Even if everything the plaintiff said in the complaint were true, there is no cause for action
Examples: A suit for defamation where no one heard or saw the remarks (no publication) doesn’t give the plaintiff any remedy even though the statements were defamatory, calling a partner dishonest in a closed room where only that partner is present
b. If court grants motion, the case is over at the trial court level (appeal is possible)
3. Motion to dismiss
a. Can be filed any time throughout the case
b. Can be based on lack of jurisdiction or expiration of the statute of limitations
4. Motion for summary judgment
a. Appropriate in cases where there are no factual issues
Examples: In contract cases, the case often revolves around the interpretation of a statute and not the factual issues in the case
b. Used to resolve questions of law when the parties agree on the facts
c. Tort and personal injury cases are inappropriate for summary judgment because of issues of fact
C. How a Lawsuit Progresses: Discovery
1. Process of gathering evidence for trial - new federal rules and those of most states now mandate timely disclosure of all relevant evidence
2. Forms of discovery to supplement evidence released
a. Requests for admissions - request from one party to another for the admission of facts so that proof requested at trial is limited
Example: Admitting a contract; the contract is signed. The penalty of attorneys’ fees is assessed to parties who fail to admit subsequently established facts.
b. Depositions - statements of parties or witnesses taken under oath in an informal setting
(1) preserves immediate recollection of witnesses
(2) helps predict testimony to be given at trial
c. Limitations on discovery
(1) evidence must be relevant
(2) cannot discover work product - the thoughts, strategies, and theories of the attorneys in the case
(3) applies only to attorneys' work product and not accountants
d. Requests for production - requests to parties to produce documents relevant to the case
Examples: Income tax returns (to show lost earnings), memos (internal) on contracts
D. Resolution of a Lawsuit: The Trial
1. Can be a trial to the court or a jury trial
2. Jury trial
a. Required in cases where damages over $20 are claimed
b. Absolute right to jury trial is only in criminal cases
c. Jurors selected from voting or drivers' license lists
d. Process of voir dire used to narrow jurors for panel
(1) ask questions about their knowledge of the case, level of education, background, etc.
(2) can be challenged for cause - incapable of making an impartial decision when they know parties, when they were involved with the case
(3) peremptory challenge - limited number of challenges used by attorneys to remove potential jurors with whom they are uncomfortable
e. Jury selection is an art - lawyers attend seminars to learn tools for selection; consulting firms are available to help with background data and demographics on past juries and attorney success rates
3. Trial language
a. Opening statement - gives summary of the case and witnesses and how they fit together to prove necessary elements
b. Plaintiff's case
(1) presents witnesses - direct examination
(2) defendant can cross-examine plaintiff's witnesses
c. Post-plaintiff's case motion - motion for a directed verdict
(1) plaintiff must prove all elements - called a prima facie case
(2) failure to prove all elements entitles defendant to a directed verdict
(3) made with jury excused
d. Defendant's case
(1) presents witnesses - direct examination
(2) plaintiff can cross-examine defendant's witnesses
e. Types of evidence
(1) witnesses' testimony
(2) documents
(3) photographs
(4) tangible items
(5) hearsay - can be admissible to establish facts other than the issue in the case
(6) expert testimony – expert must be qualified
f. Closing arguments - each side summarizes cases presented
g. Jury instructions
(1) judge explains law to jurors
(2) law is written in form for jurors to apply
(3) lawyers have input on instructions
h. Jury deliberations
(1) some states do not require unanimous verdicts in civil cases - a majority
(2) if jury cannot reach a verdict, hung jury results and there must be a new trial
i. Jury verdict
(1) decisions of jury
(2) one side can request to have jury polled - occasionally any pressure exerted will come out then
j. Post-trial motions
(1) motion for a judgment NOV (non obstante veredicto) - motion for a judgment notwithstanding the verdict; effect is a trial court judge reversing the jury verdict - rarely done
(2) motion for a new trial - judge orders case retried
VI. Issues in International Litigation
A. Which Laws Apply?
If country of accident has adequate remedies, foreign citizens may not come to U.S. in order to enjoy benefit of our traditionally liberal recovery rules and higher verdicts.
B. Differences in U.S. vs. Other Countries
1. Tort liability
2. Amounts of damages
KEY TERMS
Managing Disputes: Alternative Dispute Resolution and Litigation Strategies 35
Alternative Dispute
Resolution (ADR)
American Arbitration
Association (AAA)
Answer
Arbitration
Binding Arbitration
Burden of Proof
Class Action Suits
Closing Arguments
Complaint
Counterclaim
Cross-Examination
Default
Depositions
Derivative Suit
Directed Verdict
Direct Examination
Discovery
Early Neutral Evaluation
Equitable Remedy
Federal Arbitration Act
(FAA)
Hearsay
Hung Jury
Injunctions
International Chamber of Commerce (ICC)
Judgment NOV
Jury Deliberations
Jury Instructions
Legal Remedy
Medarb
Mediation
Minitrial
Motion
Motion for Judgment on the Pleadings
Motion for Summary Judgment
Motion to Dismiss
Nonbinding Arbitration
Opening Statement
Peer Review
Peremptory Challenge
Petition
Pleadings
Prima Facie Case
Process Servers
Redirect Examination
Rent-a-Judge
Request for Admissions
Request for Production
Specific Performance
Statute of Limitations
Summary Jury Trials
Summons
Trial
Verdict
Voir Dire
Work Product
Managing Disputes: Alternative Dispute Resolution and Litigation Strategies 35
MATCHING
a. Peer Review g. Summons
b. Hearsay h. Voir dire
c. Burden of Proof i. Rent-a-Judge
d. Medarb j. Alternative Dispute Resolution
e. Depositions k. Statute of Limitations
f. Peremptory Challenge l. American Arbitration Association
Managing Disputes: Alternative Dispute Resolution and Litigation Strategies 35
______ 1. Evidence offered in court by a witness who does not have personal knowledge of the information being given but who has heard it from someone else.
______ 2. A process by which the attorneys in a case speak with and question prospective jurors to determine whether they are qualified to serve on the jury.
______ 3. Form of alternative dispute resolution in which the arbitrator attempts to negotiate between two parties and, if not successful, proceeds to take them to arbitration.
______ 4. Private court system.
______ 5. Parties’ responsibility to prove the facts.
______ 6. A legal document which tells the defendant that a suit has been filed against him or her and explains his or her rights under the law.
______ 7. Method of resolving differences outside the courtroom.
______ 8. The eliciting of oral testimony from the parties' witnesses in a lawsuit, under oath and before trial.
______ 9. The dismissal or removal of a prospective juror from a case by an attorney which requires that no reason whatsoever be given for the removal.
______ 10. Review by co-workers of an action taken against an employee by an employer.
______ 11. The largest ADR provider in the U.S.
______ 12. Time limit on filing a complaint.
FILL-IN-THE-BLANKS
1. A form of alternative dispute resolution in which both parties meet with a neutral third party who listens to both sides and tries to get the parties to agree to a solution is called ____________.
2. In order to give the defendant notice that a lawsuit has been filed against him or her, a ____________ must be delivered to the defendant by a ____________. The defendant then typically has twenty days (thirty days for out-of-state defendants) to file an ____________; a defendant's failure to respond in this manner to the filing of a lawsuit against him or her may result in the court's order of a ____________, meaning that the plaintiff wins the case. In some cases, the defendant will also file a ____________, alleging a violation of the defendant's rights and requesting damages from the plaintiff.