TBA Dispute Resolution Section March 2002 Newsletter

The Newsletter for Conflict Resolution Neutrals and Attorneys
Published by the Dispute Resolution Section of the Tennessee Bar Association

NOTE: Unless otherwise noted, this Newsletter may be freely redistributed. We request an acknowledgement that "This Newsletter [Article] was previously published in the Dispute Resolution Section's [Month and Year of Publication] Newsletter. Reprinted with permission of the Tennessee Bar Association." Contributions of articles, comments, and suggestions are solicited.

In this issue

ART OF ARBITRATION! COMING SOON TO YOUR TOWN

TENNESSEE ALLIANCE FOR LEGAL SERVICES: ITS MEDIATION INITIATIVE

"OUTTEN’S ADMONITIONS Or TOP TEN WAYS FOR EMPLOYERS TO AVOID LAWSUITS"

MAINE SUPREME COURT MANDATES ADR

ARIZONA RULES OF CIVIL PROCEDURE MANDATES CONFERENCE RE: SETTLEMENT AND ADR FORUMS

WASHINGTON STATE LIKELY TO HAVE MANDATORY ARBITRATION IN LARGER COUNTIES

UNAUTHORIZED PRACTICE OF LAW (UPL) By LAWYER-MEDIATORS WITH MULTI-JURISDICTIONAL PRACTICE (MJP)

ASK A JUVENILE COURT REFEREE ABOUT MEDIATION

HOW NOT TO KEEP A CONFIDENTIAL SETTLEMENT AGREEMENT CONFIDENTIAL

EXCLUSION OF PUNITIVE DAMAGES IN ARBITRATION CLAUSE PRECLUDES ARBITRABILITY OF RICO CLAIMS

FOUR CIRCUITS SAY DISMISSALS WITH AND WITHOUT PREJUDICE ARE EQUALLY APPEALABLE AS FINAL ORDERS: THIRD CIRCUIT REMANDS EMPLOYMENT CASE FOR DETERMINATION OF EMPLOYEE’S ABILITY TO PAY

MED-ARB: PRO’S AND CON’S

ART OF ARBITRATION! COMING SOON TO YOUR TOWN

The excellent program, The Art of Arbitration, presented in December 2001 in Nashville (See our December and January newsletters for agenda and report on the program) will be updated and reprised on July 12th in Memphis and July 26th in Knoxville. You don’t want to miss this one. More details later.


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TENNESSEE ALLIANCE FOR LEGAL SERVICES:
ITS MEDIATION INITIATIVE

Robert C. Mussehi, Chair of the ABA' Section of Dispute Resolution, writes in the Fall 2001 issue of Dispute Resolution Magazine:

"The . . .growth in dispute resolution services . . . has been a huge benefit to the poor and to low- and middle-income people. Litigation is very expensive. It is especially stressful for the party with the smaller pocketbook. Parties involved in trials often find it difficult to take off work, and they lose income needed for basic living expenses to support their families. Then there is the strain of waiting for months while worrying about the uncertainty of the result of a trial before a judge or jury. Dispute resolution services help the poor to attain a quick and just result. Litigation is generally a disservice to the poor.

"Our Section is committed to the ideal of providing help that allows the poor and disadvantaged quick and easy access to justice and fairness. Respect for the law begins with a perception that laws are equally applied and that all persons are able to obtain fairness and justice in a system that is open, honest, and fully effective and functional. Respect erodes fast when the justice system financially clubs the poor and disadvantaged.

". . . I have asked our community and peer mediation committee to look into ways we can foster the use of dispute resolution within the legal services community."

I had the pleasure of joining the Board of the Tennessee Alliance for Legal Services (TALS) in March, and, with Debra House, Associate Director of Legal Aid of East Tennessee, serving a co-chair of the organization’s mediation initiative. TALS’ mission is to ensure that every low-income person in Tennessee has timely access to the civil legal justice system. Its mission also is to identify the conditions that adversely affect low-income persons in Tennessee and implement strategies and develop resources to change those conditions.

The goals of the mediation initiative include:
&Mac183; Developing a service that provides functional, timely, and cost-effective ADR for low-income persons;
&Mac183; Establishing referral system to promote mediation as an option, including tracking the use of mediation services;
&Mac183; Creating a campaign to promote mediation as a viable civil legal alternative;
&Mac183; Provide on-going training and technical support for staff and volunteers who work in all levels of a statewide mediation service.

These goals are in the context of a five-year plan to build an ADR system that provides mediation as a positive, viable, and cost-effective alternative for low-income persons needing civil legal justice.

As you can appreciate, this effort will include a number of cooperating organizations: Legal Services, Administrative Office of the Courts, community mediation centers, our TBA ADR Section, and ADR committees of local bar associations, along with many other organizations. You can be of great help in developing this program by sharing your thoughts with me. For example, how much is your local or regional Legal Aid organization presently using or seeking to use ADR? What are some of the roadblocks? If you are a mediator, for example, what do you need to accept a pro bono mediation case? What ideas do you have for promoting ADR throughout the state? Is legislation required? [See the stories below about the courts and states that are moving to mandatory ADR,] Please let me hear from you in person, by mail or e-mail. Ken Jackson, Neal & Harwell PLC, 150 Fourth Avenue, North, Suite 2000, Nashville, TN 37219, Tel. 615-244-1713, kjackson@nealharwell.com.


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"OUTTEN’S ADMONITIONS OR TOP TEN WAYS FOR EMPLOYERS TO AVOID LAWSUITS"

Wayne N. Outten is the Managing Partner of Outten & Golden LLP in New York City, a firm that represents employees. He wrote this two-page article that says more than certain volumes I have read, giving items #10 to #1 as David Letterman does. See Wayne N. Outten, "Outten’s Admonitions Or Top Ten Ways For Employers To Avoid Lawsuits," 18 No. 1 Corp. Counsel Qtrly. 86-87 (January 2002). He gave me permission to pass on #2:

"2. Consider alternative dispute resolution (ADR) Techniques. When the foregoing approaches fail to avert or resolve a particular dispute, consider using such dispute resolution procedures as peer review, early neutral evaluation, mediation, and nonbonding arbitration. (Use of ADR procedures should always be truly voluntary – not crammed down on employees as a condition of initial or continued employment.)"

Number 1 has to do with engaging in mutual problem solving discussions with plaintiff’s attorneys to create the possibility of averting litigation. Indeed, all of his points are aimed at that objective.


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MAINE SUPREME COURT MANDATES ADR

Maine Supreme Court Rule 16B, effective January 1, 2002, provides that all parties to any civil action filed in Maine’s Superior Courts shall, within 60 days of the Rule 16(a) scheduling order, schedule an ADR conference to be held and completed within 120 days of the scheduling order. There are certain exemptions, e.g., where they have already engaged in formal ADR, nonpayment of notes in mortgage foreclosures and other secured transactions, and court exemptions on motion for good cause shown. But the thrust is mandatory ADR.

16B(e) provides in part: "If at the conclusion of that (ADR) process and, after a serious effort by the parties, agreement is not reached on all issues, the the neutral may proceed to a case management discussion with the parties to try to reach agreement on the following: (i) identification, clarification and limitation of remaining issues; (ii) stipulations; and (iii) discovery-related issues."

16B(f) identifies who must attend the ADR conference: individual parties, management employee or officer of a corporation with authority to settle (if corporate interests are not entirely represented by an insurance company); representative of a government entity (same exception); adjuster for the `1company with settlement authority; and counsel for all parties. Nonparties whose participation is essential to settlement discussions may be invited to be present. Sanctions may be imposed on any party or representative who fails to attend. Attendance must be in person unless the neutral allows presence by telephone.

For more information, including a statement of non-concurrence by Justice Clifford, check out www.cleaves.org/supreme.htm.

ARIZONA RULES OF CIVIL PROCEDURE MANDATES CONFERENCE RE: SETTLEMENT AND ADR FORUMS

Rule 16 (g) Alternative Dispute Resolution of the Arizona Rules of Civil Procedure has been revised to provide that the parties have a duty to consider ADR, to confer and report. This consultation, in person or by telephone, shall address:

(1) the possibilities of a prompt settlement or resolution of the case; and

(2) whether they might benefit from some ADR process, the most appropriate type of process, the selection of the ADR provider, and the schedule for the ADR proceedings;

The Rule provides that the attorneys of record and all unrepresented parties are jointly responsible for attempting in good faith to settle the case or agree on an ADR process and for reporting the outcome of their conference to the court. Within 30 days of this conference or consultation, the parties provide a written report to the court of the following:

(1) if the parties have agreed to an ADR process, the type, name and address of the ADR provider, and the date by which the proceedings will be completed. [It seems to me obvious that this date will need some "fudge" factor.]

(2) if they have not agreed to an ADR process, the position of each party as to the type of ADR process that is appropriate or why ADR is not appropriate; and

(3) whether either party asks the court to have a conference to consider ADR.
The Court may direct the parties to consult with a court-appointed ADR specialist if they have not agreed to a specific ADR process.


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WASHINGTON STATE LIKELY TO HAVE MANDATORY ARBITRATION IN LARGER COUNTIES

Under legislation passed by the Washington legislature, mandatory arbitration of civil actions would be required for counties with more than 150,000 population, and optional for counties with smaller populations. The bill, H. B. 2754, was sent to the Governor on March 11, 2002 for his signature. See: http://www.leg.wa.gov/wsladm/billinfo/dspBillSummary.cfm?billnumber=2754. The Governor’s site reports on his actions on legislation. See: www.governor.wa.gov.


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UNAUTHORIZED PRACTICE OF LAW (UPL) By LAWYER-MEDIATORS WITH MULTI-JURISDICTIONAL PRACTICE (MJP)

Lawyers are potentially affected by the unauthorized practice of law issues when they provide services as a neutral in a jurisdiction in which they are not admitted to the practice of law. The ABA’s Commission on Multijurisdictional Practice has adopted a proposed Model Rule 5.5 (c) (4) that would create a "safe harbor" for representation of a client for work on a temporary basis in a jurisdiction in which the lawyer is not licensed in connection with ADR proceedings. The Commission’s Report states that the proposed safe harbor would not address the work of arbitrators, mediators and others serving in an ADR context in a non-representational role.

The Report goes on to say: "It is questionable whether work as an adjudicator or ‘neutral’ in an ADR proceeding comprises the practice of law for purposes of UPL restrictions. Assuming it does, this work would generally be covered by the proposed ‘safe harbor’, discussed above, applicable to professional services that non-lawyers are legally permitted to render, since it is generally understood that non-lawyers may serve as arbitrators and mediators and in similar roles in the ADR context."

The Committee will be reporting to the House of Delegates by the end of May. For a copy of the interim report, go to www.abanet.org/cpr/mjp-home.html. The Committee is soliciting comments no later than March 15th.

For an older, very interesting article on the subject, see John Cooley’s "Shifting Paradigms: The Unauthorized Practice of Law Or The Authorized Practice of ADR," originally published by the Dispute Resolution Journal in the August-October 2000 issue, at www.mediate.com.


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ASK A JUVENILE COURT REFEREE ABOUT MEDIATION

I was privileged recently to attend a meeting with Juvenile Court referees and to hear their support and encouragement of mediation by CASA staff and pro bono mediators.

To illustrate, Referee Michael O’Neil’s opening statement in an appearance docket includes the following excerpt:

"Everyone needs to understand that an agreement between the parties is generally a lot better than a trial in front of the Court. When you give a little and get a little in an agreement, you each have some say in the outcome of the case. When you have a trial, you don’t have any say in the outcome – I have all the say in the outcome. Many times when there is a trial both parties leave the Courtroom very unhappy because of the orders that I make them live under. The way to get around that is to cooperate with the Court and the services we provide to help you reach an agreement. One of the services that may be ordered in your case is mediation. Mediation is a process where a trained mediator sits down with the parties and tries to work out an agreement that satisfies everyone’s needs and concerns."

If you want to expand your mediation experience and help some folks who need to work out doable agreements, contact your local CASA office or Juvenile Court judges and referees. If they are like ours in Davidson County, they will be thankful for the help.


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HOW NOT TO KEEP A CONFIDENTIAL SETTLEMENT AGREEMENT CONFIDENTIAL

In the case of Goble Jessup vs. Robert Luther, No. 01-1523, the U. S. Court of Appeals for the Seventh Circuit decided on January 17, 2002 that the lower court erred in not unsealing a settlement agreement as requested by a newspaper. The general rule is that the record of a judicial proceeding is public. The general rule is that settlement agreements are private. However, the parties, Judge Posner says, "will file a stipulation of dismissal pursuant to which the suit will be dismissed without further ado or court action . . . and the settlement agreement . . . will then have the identical status as any other private contract." Settlement agreements that contain equitable terms such as an injunction "will usually be embodied in a consent decree so that the judge will have continuing jurisdiction over their terms. But consent decrees are judicial orders and therefore are public except insofar as particular provisions may be concealed in order to protect trace secrets or other compelling interests in secrecy."

In this case, a settlement of a suit on an employment contract, the settlement agreement was approved by the judge, deposited in the files of the court, and sealed. And the suit was dismissed with prejudice. The Court of Appeals found that the judge’s participation in the settlement was a public act, and the fact that the settlement agreement was in the court’s file made it accessible to the newspaper. Tacit, I suppose, was the absence of a showing that there was no overriding reason for maintaining the confidentiality of the agreement despite the public policy of openness.

A copy of the case is available on the 7th Circuit’s website. http://www.ca7.uscourts.gov/op3.fwx.


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EXCLUSION OF PUNITIVE DAMAGES IN ARBITRATION CLAUSE PRECLUDES ARBITRABILITY OF RICO CLAIMS

The llth Circuit U. S. Court of Appeals in In re Humana Inc. Managed Care Litigation, No. 01-10247 decided March 14, 2002 affirmed the decision of the underlying case at 132 F. Supp. 2d 989 (S. D. Fla. 2000) that Humana could not compel arbitration of RICO claims under an arbitration clause that excluded the arbitrator’s authority to award punitive damages. Text of case: http://laws.findlaw.com/11th/0110247.html.


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FOUR CIRCUITS SAY DISMISSALS WITH AND WITHOUT PREJUDICE ARE EQUALLY APPEALABLE AS FINAL ORDERS

THIRD CIRCUIT REMANDS ON ISSUE OF ARBITRABILITY WHERE EMPLOYEE ALLEGING INABILITY TO PAY MUST PAY AAA FILING FEES AND HALF OF COST OF ARBITRATOR.

In the latest of several circuit court cases following Green Tree Financial Corp.-Alabama v. Randolph, 531 U. S. 79 (2000), the Third Circuit held in Blair v. Scott Specialty Gases, No. 01-1096 (March 13, 2002) that the district court’s dismissal without prejudice of sexual harassment and discrimination claims and ordering the parties to arbitration pursuant to their arbitration agreement was a final decision and thus appealable. Blair’s underlying argument is that the arbitration agreement is invalid and unenforceable, and in violation of public policy. Green Tree, you will recall, held that the District Court’s order directing the parties to arbitrate and dismissing the plaintiff’s claims with prejudice "plainly disposed of the entire case on the merits and left no part of it pending before the court." The ability of a party to bring a later action to confirm or vacate an award does not, the Supreme Court said, "vitiate the finality of the District Court’s resolution of the claims in the instant proceeding."

The opinion of the Third Circuit follows three other circuits in deciding that in arbitration cases such as this there is no difference between dismissals with and without prejudice since there is nothing left for the plaintiff to do but proceed with arbitration and nothing for the court to do other than execute, modify or vacate the ultimate arbitration award. See Interactive Flight Technologies, Inc. v. Swissair Swiss Air Transport Co., 249 F. 3d 1177 (9th Cir. 2001); Salim Oleochemicals v. M/V Shropshire, No. 01-7624 (2d Cir., Jan. 18, 2002); and Employers Insurance of Wassau v. Bright Metal Specialities, Inc., 251 F. 3d 1316 (11th Cir., 2001).

Since the decision below was final and appealable, the Third Circuit went on to decide that the case should be remanded for inquiry into the costs of arbitration to the employee and her ability or inability to pay for it.

For full text of the Blair case, visit www.adrworld.com.


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MED-ARB: PRO’S AND CON’S

As I understand it, the basic idea of med-arb is for the parties to agree that a neutral will attempt to facilitate a settlement by the parties through mediation, and, if that fails, to serve as the arbitrator, hear evidence, and render a binding decision on the merits. In some versions, the substantive aspects of the mediation are conducted solely in private sessions with each party. That form is criticized on the same basis that a judge would be criticized for having ex parte communications in a case that the judge would try. Another version is where the mediation is conducted solely in joint sessions.

John Cooley in The Mediator’s Handbook (NITA, 2000) at pp. 19-20 promotes "binding mediation" as an alternative to med-arb, at least for insurers and commercial cases. He asks: ". . . if the parties and their counsel spend two hours in a mediation with an experienced mediator or a retired judge, why should the parties not have that neutral determine what the fair settlement value (FSV) of the case is and preagree to be bound by that determination?" In this case, unlike in med-arb, he argues, the fair settlement value may have little relation to the ultimate merits of the case. The neutral in the med-arb context makes a decision on the merits that may not include the variables that go into calculating fair settlement value. See pp. 229-232 for his formula for FSV calculations. Because "binding mediation" ends up with a "best guess" and is susceptible to abuse in private sessions, Cooley suggests that the parties agree on a high-low bracket of which the neutral is unaware.

I would like to hear from you about your experience with, and thoughts about any of the hybrid mediation-arbitration processes. I’m particularly interested in your thoughts on their use in family and juvenile cases, because I’m toying with an hypothesis that some of these forms might be useful in certain of these cases. Of course, it could be argued that the neutral could simply take a sharp turn and become super-evaluative as a mediator. What do you think?


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If you have questions or need information about TBA's Dispute Resolution Section, you may contact: Lynn C. Pointer, Sections/Committees Coordinator, Tennessee Bar Association, 221 Fourth Avenue North. Suite 400, Nashville, TN 37219. Email: lpointer@tnbar.org
Phone: (615) 383-7421 and Fax: (615) 297-8058.