TBA Law Blog


Posted by: Christy Gibson on Jul 5, 2012

Mark C. Travis, Travis ADR Services, LLC*

In 1997, the Industrial and Labor Relations School of Cornell University conducted a comprehensive study of the use of alternative dispute resolution in the Fortune 1000. The results of that study were later published in a book, Emerging Systems for Managing Conflict: Lessons from American Corporations for Managers and Dispute Resolution Professionals.  After the passage of more than 10 years, coupled with the environmental factors of increased litigation, budget crises in the courts, and decisional trends in the courts, a new survey of the Fortune 1000 was conducted in 2010 and 2011. In addition to the Scheinman Institute on Conflict Resolution at Cornell, the survey was co- sponsored by the International Institute for Conflict Prevention and Resolution and the Straus Institute for Dispute Resolution at the Pepperdine Law School.

The objectives of this study were to obtain information regarding mediation, arbitration, and other ADR techniques used by major U.S. corporations; to identify trends comparing results with the results obtained in the 1997 study; to discover emerging policies and practices in the use of ADR by major corporations; and to understand the factors that explain the trends and patterns in the use of ADR.  While the results have not been officially published, the results were presented in a session at the conference of the Dispute Resolution Section of the ABA in April in Washington. The following is a brief summary of that presentation.

Experience with Types of ADR

This component of the study measured the proportion of corporations that used the particular form of ADR at least once in the previous three years.

 

Process

1997

2011

Mediation

85%

90%

Fact-Finding

20%

28%

Arbitration

80%

83%

Peer Review

10%

13%

In-House Grievance

37%

36%

Ombudsman

10%

16%

This component of the study shows that usage of all forms of ADR Process has remained strong. Perhaps the most notable point from this part of the study shows a fairly strong increase in the use of internal dispute resolution mechanisms such as peer review and ombudsmen.

Principal Reasons Companies Use ADR – 2011

Saves Time

71%

Saves Money

69%

Preserves relationship

44%

More satisfactory settlements

26%

More satisfactory Process

38%

Court-Mandated

55%

Party control over outcome

52%

Change in Use of Mediation by Type of Dispute

This part of the survey looked at the proportion of corporations that used mediation at least once in each of the following type of dispute in the previous three years:

Dispute

1997

2011

Consumer

24%

26%

Employment

79%

81%

Commercial

78%

80%

Environmental

31%

28%

Intellectual Property

29%

41%

Personal Injury

57%

58%

Product Liability

39%

38%

Construction

39%

26%

Change in Use of Arbitration by Type of Dispute

This segment of the study measured the proportion of corporations that used arbitration in the particular type of dispute at least once in the previous three years.

Dispute

1997

2011

Consumer

17%

12%

Employment

62%

36%

Commercial

85%

60%

Environmental

20%

9%

Intellectual Property

21%

14%

Personal Injury

32%

22%

Product Liability

23%

10%

Construction

40%

14%

This component of the study is noteworthy in two particular aspects. It is obvious that the use of arbitration in both commercial and employment cases has reduced significantly.  Perhaps the reason (or reasons) can be discerned in the analysis below. Beyond that summary, respondent interviews revealed other explanations for the decline in the use of arbitration, such as the opinion that arbitration has increasingly become similar to litigation, and that external law has made arbitration more complex, costly, and time-consuming.

Principal Reasons Companies Did Not Use Arbitration by Type of Dispute

Reasons

Consumer

Commercial

Employment

Difficult to Appeal

41%

52%

41%

No legal rules

33%

44%

36%

Unwilling Opponent

53%

45%

43%

Compromise Outcomes

42%

47%

43%

Lack of confidence in neutral

29%

34%

24%

Lack of qualified neutrals

16%

11%

8%

Too costly

28%

23%

18%

The initial findings of the study concluded that about 50% of the respondents have adopted ADR as their principal approach to resolving consumer, commercial, and employment disputes. Additionally, while the use of mediation has remained essentially constant over the last 15 years, there is a trend toward the embrace of a wider array of ADR techniques and many corporations seek to resolve disputes at the earliest possible stage such as through fact-finding, ombudsmen, and peer review.

On the other hand, the survey found that a significant proportion of major corporations – possibly 40% - continue to rely on traditional methods of resolving disputes. The survey also notes a substantial and possibly growing divide between companies that rely heavily on ADR and companies that do not.

*Mark C. Travis, J.D., LL.M., is an independent mediator and arbitrator and also serves as the Director of the Tennessee Center for Workforce Relations. A past chair of the Dispute Resolution Section of the Tennessee Bar, he serves on the panels of the American Arbitration Association, the Federal Mediation and Conciliation Service, the National Mediation Board, and the Financial Industry Regulatory Authority. He can be reached at mtravis@travisadr.com.