Design your dispute
resolution process
By Richard Chernick and Barbara
Reeves Neal
Thirty-seven years ago Frank Sander unveiled the concept of a
"multi-door courthouse" in which disputes arriving in court would be
allocated to various dispute resolution mechanisms, such as court adjudication,
arbitration, mediation, negotiation and other processes on the basis of
criteria such as the nature of the dispute, the relationship between disputing
parties, the amount in dispute and concerns regarding the speed and cost of
dispute resolution. (Frank E.A. Sander, Varieties of Dispute Processing, The
Pound Conference, 70 F.R.D. 111. 1976).
Courts have not gotten there yet, but dispute-resolution
professionals can assist lawyers in designing dispute resolution processes to
help lawyers resolve conflicts. Rather than leaving your client in the default
position of facing court litigation, proactive dispute-resolution professionals
(arbitrators, mediators, special masters and lawyers) can design dispute
resolution processes that are tailored to the needs of the clients and their
specific transactions. Planning ahead is the key.
This article explores techniques for achieving appropriate
process agreements, for developing integrated conflict management systems and
for effectively managing the resolution of disputes.
Predispute agreements
The key to drafting an effective
dispute resolution clause in connection with a transaction, at the time
of contracting and prior to the emergence of contract-related claims or
controversies, is to design a process that is flexible enough to suit the
dispute once it arises. Contractual conflict resolution provisions must provide
an appropriate framework for whatever dispute might later arise. A “step” procedure
that incorporates negotiations between the parties, followed by mediation and,
if that does not resolve the dispute, by non-binding evaluation or binding arbitration,
is one alternative that allows the parties to progress toward resolution while
maintaining control of the resolution process.
In drafting the dispute resolution
clause, factors to consider are the nature of the process, i.e. mediation,
mediation plus arbitration, arbitration or general court reference. If the
process will produce a binding decision, specify the governing law, the venue
(including which arbitral rules and who will administer the arbitration), qualifications
and selection of the neutral, special discovery provisions or limitations, time
deadlines, the arbitrator’s remedial powers and whether you want to provide for
an appellate process.
In longer term relationships, such as
construction projects, joint ventures, employment arrangements and long-term
supply contracts, providing for “real-time” dispute resolution through a
project neutral or ombudsman may be the key to preserving relationships and
facilitating performance by providing for prompt response to and resolution of
conflicts. One example is the appointment of a “dispute resolution adviser” who
is involved from the commencement of the contractual relationship and
extends throughout the life of the relationship to address conflicts as they
arise, develops conflict resolution schemes and partners with the parties in
the resolution of conflict.
Finding a path to resolution of existing
disputes
If a dispute arises and there is no
pre-existing dispute resolution mechanism in place, parties may agree to submit
their dispute to a resolution process. If they are unable to agree on a
process, creative lawyers can move the dispute toward resolution by bringing in
a mediator who is skilled in process design.
The mediator, who is a process
expert, ought to be able to work with the parties, diagnose the dispute, and
make suggestions about appropriate process choices. Is this case best handled
by facilitating discussions between the parties and letting the parties be
heard? Are there legal issues that could be carved out for an evaluation or opinion
by a legal expert in the field (perhaps the mediator himself or herself)? Are
there issues where an independent accountant or appraiser could break a
deadlock? If there are multiple parties and/or multiple claims, can the
mediator attempt to achieve settlement of part of the case? This dispute design
process may itself reveal or lead to a resolution of the dispute.
It is crucial that the mediator
understands how each process works, and how to make it enforceable. A
“creative” dispute resolution agreement can flounder because of process errors
or misidentification of the agreed process. A recent example of a misunderstood
process arose in Bowers v. Raymond J. Lucia Companies, Inc, 206 Cal. App. 4th 724 (2012). The parties agreed to “binding mediation,”
then disagreed as to what that meant after the mediator handed down a “binding
mediator judgment.” The Court of Appeal held that the agreement was
sufficiently certain to be specifically enforceable, but the parties went
through a lot of disagreement and litigation on the road to resolution.
Parties in dispute should be aware
that there are always alternatives to court litigation. Their counsel should be
proactive in creating an atmosphere for creative resolution of disputes.
—Richard Chernick and Barbara Reeves Neal are arbitrators and
mediators with JAMS. Chernick is the managing director of JAMS Arbitration
Practice.