Chapter 15:Alternative Dispute Resolution

CHAPTER 15:ALTERNATIVE DISPUTE RESOLUTION

TRANSPARENCY MASTERS

Alternative Dispute Resolution (ADR)

Binding and Nonbinding ADR

Negotiation

Arbitration

Mediation

Other Methods of ADR

PURPOSE AND SUBSTANTIVE CONTENT

This chapter explains the various methods of alternative dispute resolution, including negotiation, mediation, and arbitration.

CHAPTER OUTLINE

Technology Corner

Case File

15-1Introduction

15-2Binding ADR v. Nonbinding ADR

15-3Negotiation

15-4Arbitration

15-5Mediation

15-6Mini-trials

15-7Court-Related ADR

15-8Private Judges

15-9SpecialMasters and Discovery Referees

15-10ADR and Criminal Law

15-11Arbitrators, Mediators, and Other Neutrals

Featured Website

Chapter Summary

Terms to Remember

Questions for Review

Questions for Analysis

Assignments and Projects

SKILL BUILDING

The examples, assignments, case questions, and projects provide the opportunity for students to build the following skills:

Document Analysis

Investigative

Writing

CASE SUMMARIES, CASE QUESTIONS, AND SUGGESTED ANSWERS

Madden v. Kaiser Foundation Hospitals,17 Cal. 3d 699, 131 Cal. Rptr. 882, 552 P.2d 1178 (1976) (Pg. 350)

Defendants appeal from an order denying enforcement of an arbitration provision in a medical services contract entered into between the Board of Administration of the State Employees Retirement System (hereafter board) and defendant, Kaiser Foundation Health Plan. Plaintiff, a state employee who enrolled under the Kaiser plan, contends that she is not bound by the provision for arbitration. The instant appeal presents the issue whether an agent or representative, contracting for medical services on behalf of a group of employees, has implied authority to agree to arbitration of malpractice claims of enrolled employees arising under the contract. The Court found that she was bound by the agreement because the board was her agent. Furthermore, this is not to be treated as a contract of adhesion.

If arbitration is so beneficial, why did plaintiff oppose it in this case?

Suggested Answer:

Call for students’ opinions.

Because this case was decided by the California Supreme Court, is arbitration really an alternative to the court process? Explain.

Suggested Answer:

This case decided only whether arbitration could be forced. It did not resolve the merits of the underlying dispute. However, even with arbitration, the courts sometimes do get involved.

According to the California Supreme Court, what are the advantages of arbitration?

Suggested Answer:

The speed and economy of arbitration, in contrast to the expense and delay of the jury trial, could prove helpful to all parties; the simplified procedures and relaxed rules of evidence in arbitration may aid an injured plaintiff in presenting his case. Plaintiffs with less serious injuries, who cannot afford the high litigation expenses of court or jury trial, disproportionate to the amount of their claim, will benefit especially from the simplicity and economy of arbitration. This procedure facilitates the adjudication of minor malpractice claims that cannot economically be resolved in a judicial forum.

The California Supreme Court ordered the parties to submit to arbitration in this case. Was it to be binding arbitration or non-binding? Did the plaintiff in this case agree to be bound by an arbitration award?

Suggested Answer:

This is binding arbitration. Although the plaintiff did not personally agree to be bound by an arbitration award, her agent had the right to bind her.

Lawrence v. Walzer, 207 Cal. App.3d 1501, 256 Cal. Rptr. 6 (1989) (Pg. 355)

The law firm of Walzer and Gabrielson and four attorneys associated with that firm are defendants in an action for legal malpractice brought by Margaret Drain Lawrence, a former client, and appeal from the denial of their petition to compel arbitration. Defendants contend the retainer agreement signed by plaintiff compels arbitration of this action for legal malpractice. A retainer agreement, consisting of a three-page letter from defendants to plaintiff, states: “This letter sets forth the agreement concerning our representation of you.” Thirteen numbered paragraphs follow. The first nine paragraphs concern the computation and payment of attorney's fees and costs. In paragraph 10, defendants promise to keep plaintiff informed of the progress of her case. Paragraph 11 then states: “In the event of a dispute between us regarding fees, costs or any other aspect of our attorney-client relationship, the dispute shall be resolved by binding arbitration. The prevailing party in any arbitration or litigation between us shall be entitled to reasonable attorney's fees and costs.” The final two paragraphs contain a promise by defendants to conform “to the highest legal and ethical standards,” and instructions to plaintiff to sign and return a copy of the letter. The court held that the agreement to arbitrate applied only to the issue of attorney fees not whether malpractice occurred.

Compare the attitude of this court toward arbitration to the attitude of the Madden (Pg. 366) court.

Suggested Answer:

This court sees an agreement to arbitrate as an agreement in which one gives up substantial rights, especially the right to a jury trial. The court says that the law ought not to do this where a client has not been made aware of the existence of an arbitration provision or its implications.

How do the facts of this case differ from the facts of the Madden case?

Suggested Answer:

Students may see different factual similarities and differences. In both cases plaintiffs were parties to agreements containing arbitration clauses. Although not stated in the case, the fact that the defendants were lawyers probably had an impact on the decision.

In the matter of the Arbitration between Freddie Prinze, Also Known as Freddie Pruetzel, Appellant, and David Jonas, Respondent, 38 N.Y.2d 570, 345 N.E.2d 295, 381 N.Y.S.2d 824 (Pg. 356)

On January 16, 1974, petitioner and respondent signed a contract whereby the petitioner agreed to employ the respondent as his agent for a period of three years. The contract is a standard form used and approved by the conference of personal managers in the entertainment industry. It contains an arbitration clause that provides: “In the event of any dispute under or relating to the terms of this agreement, or the breach, validity or legality thereof, it is agreed that the same shall be submitted to arbitration.” In addition to the standard features the contract contains a rider giving the respondent the option to extend the agreement for four more years.

When the petitioner signed these agreements he was 19 years old and thus, according to the law in effect at that time, he was legally an infant. The court held that arbitration was the proper way to handle the dispute.

Did the court rule that the entire contract was valid? Could one provision in the contract be valid and enforceable while the rest of the contract is not valid?

Suggested Answer:

The court held only that the arbitration clause was reasonable and enforceable. It left it to the arbitrator to decide the remaining issues.

What is the New York court’s general attitude toward arbitration?

Suggested Answer:

The court favors arbitration. “In the absence of a compelling public policy, arbitration is a preferred means for the settlement of disputes.”

Neaman v. Kaiser Foundation Hospital, 9 Cal. App.4th 1170, 11 Cal. Rptr 2d 879 (1992)

(Pg. 362)

After an arbitration hearing, the petitioners learned that one of three arbitrators had a prior business relationship with defendant. They moved to set aside the award. The court granted the motion.

Was the court concerned with the fairness of the arbitrator's award in this case?

Suggested Answer:

Although fairness might be an underlying concern, the court says nothing about it. The court is concerned with the fairness of the proceeding rather than the award.

Why did the court set aside the arbitration award?