In his ADR Mosaic column in the Fall 2017 issue of Diversity and the Bar, Theo Cheng and I discuss the stubborn resistance of the ADR world to true diversity and ask you to make concrete suggestions to change the reality now. There are many able and experienced arbitrators and mediators who are not being selected as often as they should be. The world of music changed a similar dynamic by conducting blind auditions. How can we make changes now that will improve ADR today? Please share your thoughts. Visit either Theo or me on LinkedIn
Preparing for mediation is preparing for a negotiation with your mediation partner. You can prepare not only by understanding what you need but by learning as much about your negotiating partners and what they might want or need and who has influence on them. Check this out:
Progress on the N.J. Mediation Front
MAXIMIZING THE BENEFITS TO THE JUDICIARY, LITIGANTS AND ATTORNEYS
By Laura A. Kaster and N. Janine Dickey
New Jersey Law Journal
March 14, 2013
The Civil Presumptive Mediation Program, part of the New Jersey court-annexed Complementary Dispute Resolution program (CDR), has been the subject of re-examination and rule change and hopefully renewal in 2013. It is still under scrutiny by the Supreme Court, but the CDR Committee of the Administrative Office of the Courts (AOC) obtained an extension of the review through mid-2013, and its prospects are looking up. It is a good time to pause, reflect and plan for an even better future for this important program that has served to change the legal culture, expand alternatives for litigants, and reduce costs to both the parties and the courts during these fiscally challenging times.
The New Jersey program — the envy of many other states — grew out of a prestigious Supreme Court task force led by Justice Marie L. Garibaldi, which held public hearings and issued a final report in 1990.
In evaluating the CDR program today, it is important to keep in mind the goals that gave it life. Among the stated goals was the desire that “litigants should have available at all levels of their court system a full set of options for the resolution of disputes ….” To this end, a CDR program would have to “[e]ncourage the confidence and respect of disputants and the general public in the fairness, integrity, and justness” and “be as efficient as possible in terms of the cost and time required of both the system and the disputants.”
CONCERNS: ADDRESSED AND RESOLVED
Starting in 2010, there was a groundswell of concern among court administrators that the program was an inordinate burden on their and the judges’ time because, among other things, it required periodic reporting, set a very early date for the mediation that sometimes was inappropriate, and allowed the mediators to seek unpaid mediation fees by way of an order to show cause. The CDR Committee addressed these issues and very promptly made changes to Rule 1:40, including: eliminating reporting except at the completion of the mediation; extending the time for mediation; permitting mediators to assist the court in case-management; and eliminating the order to show cause. Extensive FAQs were made available on the judicial website. And the NJSBA Dispute Resolution Section developed checklists correlated to the Amended Rule and FAQs for mediators and advocates. These efforts have been very well-received and seem to have met the articulated concerns.
EVALUATING THE PROGRAM
However, the focus on the burden to the court personnel was, at best, only one side of an equation. To measure the real success of the program, even on a purely monetary basis, we would have to weigh and compare the time and money saved by the court system and the parties who were the focus of the Task Force’s goals.
Those who disfavor the program argue that the vast majority of cases do settle before trial — 97 to 98 percent nationwide — concluding that mediation doesn’t add much. But there is a time value of resolving a case much earlier in the process before the court has to rule on multiple motions and before the parties incur significant expenses on the costliest aspect of litigation — discovery.
Unfortunately, cost has limited the ability to undertake a New Jersey study. But California did fund a very careful study of an early mediation pilot program, very similar to New Jersey’s, that assigned a value to the time saved by the court system by resolving cases early. California found that early mediation programs help courts save judicial time and money. In its Evaluation of the Early Mediation Pilot Programs, AOC (California), Feb. 27, 2004, a scientific study assigned a monetary value to both court time expended and court time saved by the programs. It found that, in San Diego, 479 judge days were saved by the program. That was a monetized savings of $1.4 million per year. In Los Angeles (a more limited program), 132 judge days were saved, equating to $400,000. Litigants’ costs were reduced 61-68 percent, and attorney hours saved were 57-62 percent. The savings continued after mediation because there were fewer post-disposition compliance issues. Mediation increased litigant satisfaction and was important to the ultimate settlement in 74 percent of the cases.
The Department of Justice has also studied the administrative cost to it versus the administrative savings of mediation and found that the savings far outweigh the costs. It found year over year increases in the savings, and also found that the vast majority of cases benefit even when mediation does not result in immediate settlement. www.justice.gov/olp/adr/doj-
These studies confirm the benefits envisioned by the New Jersey Task Force. So how can we help CDR flourish in New Jersey?
EXPANDED RULE CHANGE BENEFITS
Rule 1:40 originally contemplated that all mediations would be conducted within 90 days from the filing of defendant’s answer. Some attorneys objected to being “pushed” into early mediation. The September 2011 rule changes cured this problem, giving mediators greater leeway to schedule the mediation at any point prior to the discovery end date. This scheduling flexibility should permit mediators to tailor mediation schedules.
Permitting later mediation when appropriate also provides greater opportunity for mediators to assist with case management. With judges overburdened, litigants and attorneys can benefit from the assistance of a mediator acting as neutral discovery facilitator, identifying critical discovery to exchange prior to mediation, timing the exchange of documents and expert reports, sequencing depositions, etc. Case-management training is now part of the continuing training requirements under the Sept. 2011 Rule 1:40 amendments.
Trusting the competence of a mediator is an important factor that enables the parties and counsel to use the full range of a mediator’s skills and services. The amended Rule 1:40-6(b) encourages attorneys to “party-select” a roster mediator of within 14 days after entry of the Mediation Referral Order without foregoing entitlement to two free hours of mediation services. The “court designated” mediator becomes the mediator of record only if no “party selected” mediator is named. Given the overburdened judicial calendar and vacancies that significantly delay both disposition of discovery motions and trial dates, mediation may shave months or even years off the time to obtain a final disposition from the court.
EARNING RESPECT: MEDIATOR QUALITY AND PROFESSIONALISM
The legal community’s reaction to the court-sponsored mediation program currently varies from passionate support to push-back at required participation. Why the discrepancy and how can it be addressed?
The key to encouraging confidence and respect in the “fairness, integrity and justness” of the program lies in assuring that roster mediators are committed to treating mediation as a profession. Better experiences and greater respect by disputants, attorneys and the judiciary will, in turn, foster cooperation for creative and expanded uses and benefits of mediation.
New Jersey’s court-mandated mediation program serves as a gateway and an education in mediation for all the parties and counsel that participate. The initial experience with the mediation program — positive or negative — is likely to significantly impact the participants’ respect for the mediation process, and will influence their future voluntary participation in mediation outside the court-ordered program.
So how can we move closer to this goal? The ABA’s Model Standards of Conduct for Mediators, Standard IV, Competence states:
A mediator shall mediate only when the mediator has the necessary competence to satisfy the reasonable expectations of the parties …. A mediator should attend educational programs and related activities to maintain and enhance the mediator’s knowledge and skills related to mediation.
The programs that are most successful in other states impose greater training demands and require practice as a mediator, shadowing other mediators, mediating smaller cases and ongoing work as a mediator. Studies have also shown a direct correlation between a mediator’s actual case experience and higher settlement rates.
The roster mediators often introduce parties and sometimes attorneys to the mediation process. They should be committed and able mediators. Therefore, continued roster membership should require ongoing learning and ongoing practice. But New Jersey’s large pool of 620 roster mediators means each roster mediator may be assigned only one or two cases annually and is unlikely to gain significant actual mediation experience solely from the court program. A commitment to do one or two mediations a year is not sufficient to achieve mastery.
To create and sustain the quality needed to lift the system and allow it to enhance the promise of mediation acceptance, every roster mediator needs to undertake that role as a committed professional. Continual training and practice are critical. Advanced skill training, apprenticeship programs and opportunities to conduct mediations are widely available. Both the Dispute Resolution Section of the NJSBA and the New Jersey Association for Professional Mediators provide collegiality and a wide variety of opportunities to improve and enhance mediation skills.
Perhaps it would change the performance of roster mediators and the perception of lawyers, litigants and judges, if each roster mediator pledged as follows:
Recognizing the duty under the Model Standards of Conduct for Mediators that: “A mediator shall mediate only when the mediator has the necessary competence to satisfy the reasonable expectations of the parties,” I pledge to undertake the ongoing training and practice necessary to assure a professional level of commitment and accomplishment as a mediator.?
“Social Network” has come to life with lessons on how to prepare for mediation.
The storyline for this blockbuster movie, in case you missed it is that on “a fall night in 2003, Harvard undergrad and computer programming genius Mark Zuckerberg sits down at his computer and heatedly begins working on a new idea. In a fury of blogging and programming, what begins in his dorm room soon becomes a global social network and a revolution in communication. A mere six years and 500 million friends later, Mark Zuckerberg is the youngest billionaire in history… but for this entrepreneur, success leads to both personal and legal complications.” http://www.imdb.com/title/tt1285016/.
Those legal complications resulted in a recent Ninth Circuit decision that is of value even beyond the curiosity factor. The Facebook, Inc.; Mark ü Zuckerberg v. ConnectU, Inc., Slip Op. No. 09-15021 (9th Cir. April 11, 2011). The law suit was initiated by the twin brothers Winkelvoss, who claimed that Zuckerberg stole the idea for Facebook from them. Zuckerberg countersued and the district court in California ordered the parties to mediate. Facebook, the competing website ConnectU, and the Winklevoss twins were all party to the mediation. Before the mediation began, the participants entered into a confidentiality agreement that provided that all statements made during mediation were privileged, non-discoverable and inadmissible “in any arbitral, judicial, or other proceeding.” A full day of negotiations resulted in a signed, handwritten, one-and-a-third page “Term Sheet & Settlement Agreement.” In return for cash and a Facebook shares, the Winklevosses gave up ConnectU. The parties stipulated that the Settlement Agreement was “confidential,” “binding” and “may be submitted into evidence to enforce [it].” Slip Op. at 4902.
But, before the ink was dry, the parties were at arms. Facebook sought to enforce the settlement term sheet. The Winklevosses claimed material terms were omitted from the term sheet and that they had been defrauded (in violation of Section 10(b)-5) in the mediation, in particular focusing on a difference in their understanding of the value of the shares of Facebook that they had agreed to accept. The Court found the terms sufficiently definite, including the delegation of the drafting of the deal papers to Facebook. It further held that the dispute over the valuation of the shares was not particularly persuasive given the extensive prior discovery in the litigation and the presence of six lawyers and Winkelvoss pere who was a former accounting professor at the Wharton school. The release language agreed to in the term sheet was to be the broadest possible and to terminate all claims between the parties. The Court read this to include any claims, including unknown claims, arising out of the mediation itself: “An agreement meant to end a dispute between sophisticated parties cannot reasonably be interpreted as leaving open the door to litigation about the settlement negotiation process.” Id. at 4908.
Moreover, properly excluded proffered testimony about representations made during the mediation in light of the confidentiality agreement between the parties. Finally,the Court noted that the current valuation of Facebook appears to be three times what the Winklevosses were claiming they were entitled to, demonstrating that their advisors had made a perfectly good deal for them and all good fights must come to an end. Id. at 4912. The current value of the settlement appears to be $160 million, and was a mere $65 million at the time of the settlement. http://latimesblogs.latimes.com/technology/2011/04/winklevoss-twins-file-a-petition-for-another-hearing-in-their-fight-with-facebook.html. The twins have already petitioned for rehearing en banc. Id.
Most of us wish we could have the Winklevoss problem. But we may look beyond the story to the questions it raises. How could parties, and more importantly the advocates, come to such a significant mediation without having actually drafted key language? Without having key terms at hand? Why was a handwritten document required? The answer may be that despite the fact that that over 98% of cases settle, lawyers still prepare for settlement discussions and mediation far less carefully and assiduously than they do for trial. We have a system of checklists and protocols for trial preparation and no comparable system of preparation for settlement and mediation. Dealmakers do usually have a list of key terms but often resort to references to the “usual language” which does not really exist in most cases and leads to confusion or recrimination. Do yourselves and your clients a favor and suggest to the mediator that release language and key non-monetary terms be exchanged even in advance of the mediation, or certainly that the parties bring draft clauses to discuss at the mediation itself. If you have “standard” release language and a preferred confidentiality clause, bring them along. In fact, create a checklist of items and provisions that will have to be covered and your preferred terms for each of them. These terms may be agreeable to your opposing counsel and may even form the basis for small agreements that can lead to better resolutions. In any case, don’t let key assumptions go unstated and undocumented. Let the movies speak to you
The Restoring American Financial Stability Act of 2010 (the “Dodd-Frank Wall Street Reform and Consumer Protection Act”) was recently signed into law. The Act has a number of provisions that can potentially impact consumer arbitration. The Supreme Court continues to deal with a number of critical arbitration issues but with respect to consumer arbitration, it seems to be on a collision course with Congress. The new Act gives the SEC the power to ban or limit mandatory arbitration in certain agreements. Here are some provisions related to arbitration:
SEC. 748. COMMODITY WHISTLEBLOWER INCENTIVES AND PROTECTION. The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding at the end the following:
‘‘(n) NONENFORCEABILITY OF CERTAIN PROVISIONS WAIVING RIGHTS AND REMEDIES OR REQUIRING ARBITRATION OF DISPUTES.—
‘‘(1) WAIVER OF RIGHTS AND REMEDIES.—The rights and remedies provided for in this section may not be waived by any agreement, policy form, or condition of employment including by a predispute arbitration agreement.
‘‘(2) PREDISPUTE ARBITRATION AGREEMENTS.—No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.’’.
SEC. 919B. STUDY ON IMPROVED INVESTOR ACCESS TO INFORMATION ON INVESTMENT ADVISERS AND BROKER-DEALERS.
(1) IN GENERAL.—Not later than 6 months after the date of enactment of this Act, the Commission shall complete a study, including recommendations, of ways to improve the access of investors to registration information (including disciplinary actions, regulatory, judicial, and arbitration proceedings, and other information) about registered and previously registered investment advisers, associated persons of investment advisers, brokers and dealers and their associated persons on the existing Central Registration Depository and Investment Adviser Registration Depository systems, as well as identify additional information that should be made publicly available.
SEC. 921. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.
(a) AMENDMENT TO SECURITIES EXCHANGE ACT OF 1934.—Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o), as amended by this title, is further amended by adding at the end the following new subsection:
‘‘(o) AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.—
The Commission, by rule, may prohibit, or impose conditions or limitations on the use of, agreements that require customers or clients of any broker, dealer, or municipal securities dealer to arbitrate any future dispute between them arising under the Federal securities laws, the rules and regulations thereunder, or the rules of a self-regulatory organization if it finds that such prohibition, imposition of conditions, or limitations are in the public interest and for the protection of investors.’’.
(b) AMENDMENT TO INVESTMENT ADVISERS ACT OF 1940.—Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–5) is amended by adding at the end the following new subsection:
‘‘(f) AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.—
The Commission, by rule, may prohibit, or impose conditions or limitations on the use of, agreements that require customers or clients of any investment adviser to arbitrate any future dispute between them arising under the Federal securities laws, the rules and regulations thereunder, or the rules of a self-regulatory organization if it finds that such prohibition, imposition of conditions, or limitations are in the public interest and for the protection of investors.’’.
SEC. 922. WHISTLEBLOWER PROTECTION.
(a) IN GENERAL.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 21E the following:
‘‘(e) NONENFORCEABILITY OF CERTAIN PROVISIONS WAIVING RIGHTS AND REMEDIES OR REQUIRING ARBITRATION OF DISPUTES.—
‘‘(1) WAIVER OF RIGHTS AND REMEDIES.—The rights and remedies provided for in this section may not be waived by any agreement, policy form, or condition of employment, including by a predispute arbitration agreement.
‘‘(2) PREDISPUTE ARBITRATION AGREEMENTS.—No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.’’.
SEC. 1028. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.
(a) STUDY AND REPORT.—The Bureau shall conduct a study of, and shall provide a report to Congress concerning, the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services.
(b) FURTHER AUTHORITY.—The Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers. The findings in such rule shall be consistent with the study conducted under subsection (a).
(c) LIMITATION.—The authority described in subsection (b) may not be construed to prohibit or restrict a consumer from entering into a voluntary arbitration agreement with a covered person after a dispute has arisen.
(d) EFFECTIVE DATE.—Notwithstanding any other provision of law, any regulation prescribed by the Bureau under subsection (b) shall apply, consistent with the terms of the regulation, to any agreement between a consumer and a covered person entered into after the end of the 180-day period beginning on the effective date of the regulation, as established by the Bureau.
SEC. 1414. ADDITIONAL STANDARDS AND REQUIREMENTS.
(a) IN GENERAL.—Section 129C of the Truth in Lending Act is amended by inserting after subsection (b) (as added by this title) the following new subsections:
‘‘(1) IN GENERAL.—No residential mortgage loan and no extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer may include terms which require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction.