Law of Alternative Dispute Resolution Professor Phyllis Bernard Fall 2009 Introduction - The Vanishing Trial - The Vanishing

Trial has gone from a concept to a reality in most areas of practice speaking both in terms of subject matter and in terms of jurisdiction. - Most cases actually do settle rather than being decided by a judge or jury. The usual estimates range from 90-98%. - Although wed like to think of negotiation, mediation and arbitration as kinder, gentler ways of resolving a case its not necessarily so. - Law of ADR? - ADR is supposed to occur in the interstices of the law. Its supposed to be an alternative to the standard court room legalisms and technicalities, right? Yes, but thats not reality. - Reality is that negotiation, mediation and arbitration still require optimally the involvement of lawyers. - However, most lawyers dont have a clue how to represent their client in these settings that take place outside the purview of the judge. - With no judge to serve as referee, with no Rules of Civil Procedure or Rules of Evidence to control; with an imbalance of power between the parties; with a principle of law at stake ADR can become a very poor substitute for the courts. - There is a role for litigation, and usually ADR occurs in concert with, or within the context of, ongoing litigation. This assumes, however, that litigation is even an option. Most commercial and financial matters include mandatory, binding arbitration which virtually assures no court hearing. - The last resort for the attorney who represents a client in an alternative setting is oftentimes not statutory law as we commonly think of it, but ethics rules. - The ABA Model Rules of Professional Conduct may become the best guide an attorney has to structure client interviews, counseling, preparation for negotiations, the conduct of negotiations, interactions in mediations. - Ethics issues may be the only way to bar enforcement of an arbitration award. - Main paths to ADR - Agree to use ADR in event of future conflict - When conflict arises, decide to use ADR - When conflict arises, required by court to try ADR

[1]

NEGOTIATION The Settlement Debate and Institutionalization of ADR - Owen Fiss, Against Settlement - The very fact that the neighbors have turned to someone else to resolve their dispute signifies a breakdown in their social relations; the advocates of ADR acknowledge this, but nonetheless hope that the neighbors will be able to reach a settlement before the stranger renders judgment. - Settlement is the civil analogue of plea bargaining: - consent is often coerced; - the bargain may be struck by someone without authority; - the absence of a trial and judgment renders subsequent judicial involvement troublesome; and - although dockets are trimmed, justice may not be done - Settlement Advantages: - Some cases arent worth the expense or delay - Society doesnt always need to contribute to dispute resolution (not meaningful precedent) - Judicial Efficiency (loosening dockets) Negotiation Process and Strategy - Negotiation is the decision making process by which two or more parties agree how to allocate scarce resources - How is negotiation different than debate? - Debating involves convincing another party of the validity of your position or interests by giving away information - Negotiation requires listening carefully; taking information from the other party, determining their interests and how to satisfy their needs of another party while getting what you want - Planning for Negotiations: - Establish a BATNA (Best Alternative to a Negotiated Agreement) - Do everything you can to improve your BATNA before you negotiate - Opposing partys perceptions of your BATNA are critical - Establish your Reservation Point - The point at which you are indifferent to whether you achieve a negotiated agreement - Reservation price is your BATNA +/- the things that make you want to do the deal (opportunity costs, switching costs, ego, miscellaneous preferences) - Establish your Target (What you aspire to get out of the negotiation; the ideal world) - Your opening offer is likely to exceed this target so you can compromise down - However, you want to seem reasonable and dont want to seem ridiculous - So, the big question is how to figure out your opening offer; how high is too high? (Articulate an objective sounding rationale to support-not too self serving) - Allow yourself room to make concessions; develop a rationale around each of your concessions (Make bilateral not unilateral concessions: Dont reward obstinate opponents!) - Negotiations Strategy: - Generally - Focus mentally on the target value or the BATNA? If you focus on your target you get a better outcome, but you may experience less satisfaction; if you focus on the BATNA, the outcome is less successful, but satisfaction level is higher (Dont be so hard on yourself about this) - Listen to the other clients interests - Good presentation of the law without emotional outbursts - Come with written proposals to anchor the session - Prepare counterproposals - Delay emotional issues [2]

- Give clients control; dont rush the consideration of the proposals Even good negotiators dont always reach a resolution: Sometimes there is no option to reach an agreement that is within a positive bargaining zone for each party (better than both RPs) - Getting to Yes: The Fisher and Ury Strategy - Negotiation is best approached as a joint problem solving task by: - Separating people from the problems - Focus on interests, not positions, ask WHY people are seek the solution they advocate - Generate multiple possibilities (through brainstorming) - Base results on objective standards Negotiation Typologies: - Positional v. interest-based - Adversarial v. problem-solving - Distributive v. integrative -

Negotiation Legal and Ethical Rules - Overview - Issue of whether to do what is in the best interests of the client, or to focus on relationship with other attorneys - Conflicts between what is the right thing v. what your client thinks is the right thing - Explain to the client about how the law works - What is legal? - What is ethical? - If I do this, it wont help you - Statutory law--places requirements on what you can and cannot fail to disclose during settlement negotiations - MPRC and Negotiations - The legal professions rules governing the ethical conduct of lawyers are generally enforced through the legal profession itself: viz., through bar disciplinary action, as shown in cases 1-3: 1. An alleged violation of the Rules of Professional Conduct results in review by the disciplinary committee of the state bar; however a violation does not automatically give rise to a private cause of action. [In re Grievance Proceeding (D.Conn. 2002)] 2. Attorneys fees can play a role in the success, failure, timing of and client satisfaction with settlement negotiations. Who is best situated to decide whats best for the client; and at what point must a client have to deal with the consequences of their decisions without being allowed to seek additional redress from the bar or courts? [In the Matter of Fee and Montijo (Ariz. 1995)] 3. In class action litigation attorneys play a pivotal role, especially since most cases are quite costly to pursue and are resolved through settlement negotiations in which the named parties play little or no role. Ask yourself: who was the client here? [In re Hager (D.C. App. 2002)] - However, private parties may seek to hold attorneys accountable for alleged violations of ethics rules, particularly where the attorneys alleged misconduct has harmed their case. Since ethics rules do not automatically give rise to a private cause of action, litigants must identify indirect ways to apply the ethics rules, as shown in cases 4-8: 4. The burden is on the attorney to assure full disclosure, especially of conflicts not apparent at the time the representation begins, but are reasonably foreseeable as the case unfolds. Failure to disclose fully could give rise to a later claim had been procured by fraud, misrepresentation or overreaching. California case law uses the code of professional responsibility as a measure of prudent practice. Again, the rules apply not directly, but indirectly through bootstrapping. [Egedi v. Egedi (Ct. App. Calif. 2001)] 5. The classic professional ethics conflict for attorneys occurs when a corporate client implodes splitting over internal conflicts. Can the lawyer or law firm that represented everyone now [3]

represent anyone? In this federal district court the rules of professional conduct were applied as part of the courts inherent power to supervise the conduct of attorneys practicing before it. [Imbesi, et al. v. Imbesi, et al. (E.D. Pa. 2001)] 6. Often the rules of professional conduct are used in courts to articulate the standard of care owed by a reasonably prudent attorney in similar circumstances. Legal experts testify about how the rules of professional conduct apply, forming key evidence in a legal malpractice claim. However, violation of the rules of professional conduct does not alone constitute per se grounds for a legal malpractice action. [Alper v. Altheimer & Gray (N.E. Ill. 2002)] 7. The rules of professional conduct are considered persuasive authority although not binding. This case questions whether an attorney in private practice who had earlier presided over settlement negotiations as a magistrate judge had gained confidential information that should bar him and his law firm from participating in a case related to that prior matter. [In re Hoglund v. Forsyth (9th Cir. 2000)] 8. In a specialized area of practice, such as health law, and in a market-regulatory environment that encourages and rewards cooperation, law firms can find themselves in a bind if the cooperative business deal craters. The contemporaneous records of communications became critical evidence on which the case turned. To understand the relationship and whether it was sufficiently related to merit disqualification of the law firm turned on documentation of who did what, when did they do it, and to whom was it communicated? In Alper the same court said that violation of the rules of professional conduct does not give rise to a private cause of action. But here, the rules play a more direct role in the litigation. What is it? How do the rules play a different role here than in Alper? Focus on what the plaintiff gains by disqualifying the law firm beyond eliminating an able adversary. Examine the precise cause of action claimed and the elements necessary to prove that claim. [Shermanchoice, Inc., et al v. Wellmark Community Insurance (N.D. Ill. 1999)] - Sometimes the attorney conduct appears not only unethical but illegal. While lying by lawyers is considered a staple for bad jokes about the profession; it is not a laughing matter to clients and to the courts. However, the ethics rules often provide only the dimmest illumination as we try to discern the line between puffery or hard ball in negotiations compared to lying or coercion, as shown in case 9: 9. One doesnt usually find a reported decision that gives specific language, on the record, by which an attorney is alleged to have violated MRPC 4.1 - Truthfulness in Statements to Others; and MPRC 3.3 - Candor Towards the Tribunal. But, here it is. It also includes a great exposition of case law on the issue of truthfulness in settlement negotiations. How do we define settlement bluster compared to lies? Note the various tools the court arrays for dealing with Sweetlands deceit; and the choice ultimately made to refer the matter to the disciplinary committee of the bar. [Ausherman, et al. v. Bank of America Corp., et al. (D. Md. 2002)] Fraud and Misrepresentation in Negotiation - In this set of cases we move beyond analyzing attorney conduct in settlement negotiations from the perspective primarily of ethics. Instead of focusing on how the rules of professional conduct can be used to set boundary lines for whats acceptable or unacceptable behavior in negotiations, well use the common law. The law of contracts, agency, tort, etc. will figure prominently. Almost every case also includes some elements of a claim of legal malpractice, although this will not be the major focus. Rather than seeking to challenge an attorneys standing to participate in a case, or in the proceeds or fees from a case, these cases seek to undo the settlement agreement itself. - This case set has five cases: 1. The Home Insurance Co. case sets forth some fairly clear guidance to understand when a something that is said or omitted constitutes a misrepresentation. It also tells us much about the courts perspective on mental state. How much intentionality is necessary to constitute fraudulent misrepresentation? [Home Insurance Co. v. Dunn, et al. (7th Cir. 1992)] 2. If parties and their attorneys believe at one point that they have a settlement, and later find themselves disputing the terms, at what point does the settlement break down entirely? Where [4]

does fault lie? Is it necessary to find fault? These questions matter because if one party seeks to enforce the agreement, or seeks to avoid enforcement of the agreement, the attorney must be able to frame their case in terms that meet the principles of contract law that favors their outcome. Creating the kind of written record referenced throughout the case as various exhibits is one of the chief tasks of an attorney. This is why legal representation can be expensive, irrespective of whether the case is pure litigation or is transactional. Why? Because if it becomes necessary to prove a point in court, whats written has much more persuasive value than whats merely oral. [Christianson v. Henderson (S.D. Iowa, 2000)] - Its probably not too unfair to surmise that when you find a case concerning a settlement agreement where ethics rules play a prominent role, other attempts at undoing the settlement agreement have either failed, or are being pursued in other, collateral litigation. One analogy could be: a challenge based on violations of the rules of professional conduct B whether directly applicable or indirectly applicable through bootstrapping B is like aiming at the yellow circle on a target. Challenging a settlement agreement on the grounds that it violated statutory or common law is like aiming at the bulls-eye in the very center of the target. - We shall soon move to the heart of the general issue: whether statements made or omitted in settlement negotiations were so material as to be fraudulent, thereby nullifying any purported agreement. However, lets revisit the disgruntled client who alleges that their attorney engaged in misconduct during the settlement negotiations, to their disadvantage. Again, this Case Supplement No. 2 pursues this claim not within the framework of the lawyers code of conduct. Instead, the disgruntled client in the following case has removed his claim as far as possible from the purview of the lawyers. The disgruntled client has framed his case within the context of statutory and common law regarding the attorneys authority to speak on his behalf. Namely, did the client give knowing and informed consent to the settlement terms? Or, did the clients attorney agree to the negotiated settlement without having legal authority to do so? - Understand the difference in outcome. This is a far more potent attack upon the settlement agreement than merely challenging the ethics of the attorneys conduct. If such an ethics challenge is successful, the attorney would be required to make some suitable recompense such as fee disgorgement or to face suspension of his license to practice law. These outcomes may indeed be onerous from the attorneys perspective; but they do not contribute much toward making the client whole. By contrast, arguing the case on the basis of standard contract and agency law attacks the core issue of whether an agreement, a contract, exists at all. The client benefits directly by having an unsatisfactory agreement voided, clearing the way for another settlement on more favorable terms, or for new litigation. 3. Note, the court in Kulesa clearly had some doubts concerning the bona fides of the belated claim of incompetence and lack of authority. From one perspective it could appear that the disgruntled client and his attorney were colluding to raise issues designed to void a valid albeit perhaps less than ideal settlement agreement. (Although, given the apparent fact that the attorney would not be paid unless and until the lump sum settlement payment was made pursuant to the agreement, the attorney probably had little self-interest in collusion.) On the other hand, particularly since Kulesas attorney asks the court to consider appointing a guardian ad litem for his client, there could be some genuine issues of mental competence involved, although they were difficult to prove. [Kulesa v. Middaugh (N.D.New York 1999)] 4. When do statements made in negotiations stretch beyond the generally accepted conventions of negotiation and become fraudulent misrepresentations? Is there a difference between fraudulent misrepresentations and breach of contract? Does it really matter in terms of the outcome for your client? Consider what it may take to prove the elements of the cause of action; consider also the likely affect on remedies. The accepted conventions of negotiation vary according to circumstances; custom of the industry; regional differences. The next case takes place in the Deep South where the culture has traditionally valued family, friends, civility, and honor. As the saying goes: A mans [5]

word should be his bond. How strongly does this notion of due reliance and care apply to car salesmen? Negotiations for the purchase of a car everywhere in the U.S. are notoriously lacking in honor. What about negotiations for the purchase of a car dealership? What should be the reasonable expectations of the parties? How outrageous does conduct have to be before it is legally culpable? [King v. Richmond Motor Co., Inc. (Va. Cir. 2001)] 5. [CGR Investments v. Hackney Petroleum, Inc. (Tenn. App. 1997)] Confidentiality and Privilege in Negotiation - The touchstone of negotiated settlements is that ostensibly these discussions are conducted in private; what is said in settlement negotiations will stay private. Under the terms of art of the law, settlement negotiations are generally said to be confidential and privileged. Why? This is done in order to encourage parties to be forthcoming, ready to offer solutions to the problem which may not be prudent risks to take in the litigation setting. - However, the reality of settlement negotiations and privilege do not match the rhetoric of confidentiality. The protection for offers, statements, etc. made in settlement negotiations is semipermeable. FRE 408 allows for statements and other evidence made/presented in settlement discussions to be discoverable. - This case set contains three cases: 1. This case illustrates the tension between policies favoring privacy in settlement negotiations, to encourage flexibility in demands and concessions; contrasted with policies favoring transparency when matters of public health and safety are at stake. [Gutter v. E.I. DuPont Co., et al. (S.D. Fla. 2001)] 2. This case illustrates the how paperwork generated in the course of settlement negotiations or mediation hearings can become part of future litigation. Note the primary method of resolving such disputes: in camera review of the documents by the judge to determine whether the documents fall into a category that is either confidential or privileged. [Allen County v. Reilly Industries and S.E. Johnson Cos. (N.D. Ohio 2000) 3. In our last case, note how some oral and written evidence may be considered privileged for specific purposes, but not for others. [U.S. v. Barrier Industries, Inc. (S.D. N.Y. 1997]

[6]

MEDIATION Overview - An effective third party is involved to: - Provide a controlled setting - Facilitate information sharing - Promotes settlement that meets all parties needs - Helps continue the relationship between the parties (leads to voluntary compliance with K) - Characteristics of mediation: - Private, voluntary (sort of), informal and non-binding - Parties can decide whether or not to include attorneys (you help client decide) - Outcomes can differ from what a trial would offer (not winner takes all) The Mediation Process Itself - Mediators introduction and description of process (sometimes suggested by the court, sometimes by the parties-often from JAMS); usually have law degrees or counseling experience - Parties agree to mediate - buy in (some negotiation can occur about process) - Opening statements by participants - Brainstorm options - be creative and focus on interests - Mediator promotes mutual understanding of interests - Narrowing of options - Resolution? Drafted agreement Primary types of mediation - In facilitated meditation the mediator: - Refrains from presenting own view on issues - Focuses on clarifying issues and each partys determination of strengths and weaknesses. - Enhances communication between the parties in order to help them decide what to do - In evaluative mediation the mediator: - Assesses the strengths and weaknesses of claims - Proposes and defends a particular resolution - If legal issues are involved and is qualified, might predict court outcomes and the impact of not settling. - Warning: Doesnt necessarily make parties want to settle. May make parties freeze in their position. If mediator says one side will win for sure- no more incentive to settle (like a really strong anchor for that side.) - In transformative mediation the mediator - Transforming the individuals themselves. Mediators trying to make parties better conflict resolvers in general-do not make dispositive comments (i.e. Devil Dog) - Controversy for resolving legal decisions-Mediators arent necessarily trained counselors. Legal and Ethical Obligations -

[7]

ARBITRATION

Overview: - Arbitration is a form of alternative dispute resolution wherein the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. - It is a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides. - It is more helpful, however, simply to classify arbitration as a form of binding dispute resolution, equivalent to litigation in the courts, and entirely distinct from the other forms of dispute resolution, such as negotiation, mediation, or determinations by experts, which are usually non-binding. - Arbitration can be either voluntary or mandatory and can be either binding or non-binding. - Advantages and disadvantages - Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings: - when the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed (as one cannot "choose the judge" in litigation) - arbitration is often faster than litigation in court - arbitration can be cheaper and more flexible for businesses - arbitral proceedings and an arbitral award are generally non-public, and can be made confidential - because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court judgments - in most legal systems, there are very limited avenues for appeal of an arbitral award - However, some of the disadvantages of arbitration can be that: - arbitration agreements are sometimes contained in ancillary agreements, or in small print in other agreements, and consumers and employees sometimes do not know in advance that they have agreed to mandatory binding pre-dispute arbitration by purchasing a product or taking a job - if the arbitration is mandatory and binding, the parties waive their rights to access the courts and have a judge or jury decide the case - in some arbitration agreements, the parties are required to pay for the arbitrators, which adds an additional layer of legal cost that can be prohibitive, especially in small consumer disputes - in some arbitration agreements and systems, the recovery of attorneys' fees is unavailable, making it difficult or impossible for consumers or employees to get legal representation; however most arbitration codes and agreements provide for the same relief that could be granted in court - if the arbitrator or the arbitration forum depends on the corporation for repeat business, there may be an inherent incentive to rule against the consumer or employee - there are very limited avenues for appeal, which means that an erroneous decision cannot be easily overturned - although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays - arbitrators are generally unable to enforce interlocutory measures against a party, making it easier for a party to take steps to avoid enforcement of an award, such as the relocation of assets offshore - rule of applicable law is not necessarily binding on the arbitrators, although they cannot disregard the law. - discovery may be more limited in arbitration - the potential to generate billings by attorneys may be less than pursuing the dispute through trial - unlike court judgments, arbitration awards themselves are not directly enforceable. A party seeking to enforce an arbitration award must resort to judicial remedies, called an action to "confirm" an award [8]

although grounds for attacking an arbitration award in court are limited, efforts to confirm the award can be fiercely fought, thus necessitating huge legal expenses that negate the perceived economic incentive to arbitrate the dispute in the first place.

Interaction of State and Federal Law - Southland Corp. v. Keating: Southland Corp. 7 Eleven convenience; Keating was one of 800 franchisees. Dissatisfied with how Southland carried out its responsibilities under the franchising agreement. Agreement included arbitration clause under AAA with award entered as judgment of the court having jurisdiction thereof. - CA law stated that attempts to bind any person acquiring any franchise to arbitrate is void. - Ct. said Congress intended to foreclose state legislative attempts of states to undercut the enforceability of arbitration agreements, held CA law invalid as it violated the Supremacy Clause. - Involving commerce requirement in 2 of the FAA as a necessary qualification on a statute intended to apply in state and federal courts. - Interpretation given to the Arbitration Act by the CA S. Ct. would therefore encourage and reward forum shopping. - B/C overwhelming proportion of all civil litigation in US is in the state courts, Ct. could not believe Congress intended to limit the Arbitration Act to disputes subject only to federal court jurisdiction. Enforceability of Agreements to Arbitrate: - Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.: Problem with meeting sales volume, wanted to delay/cancel shipments of several orders. Wanted to arrange for transshipment of cars to US or Latin America. Mitsubishi refused, cars were built fit for use in that region not other regions. - What was the problem that brought the client to this point? Lack of research in market, lack of opt out clauses in the contract. Client AND lawyer should have been better informed in creating K. - Can the parties be forced to arbitrate? Is that justice? - Standard commercial contracts containing arbitration clauses are enforceable. - The American Safety Doctrine: - Matters of public policy so important that they cannot be settled in private behind closed doors. - Ct. said needed to balance American Safety Doctrine v. resolution of international commercial disputes - Problems w/ private solution of this claim: - Ct. said private parties play a pivotal role in aiding governmental enforcement of the antitrust laws by means of the private action for treble damages - The strong possibility that contracts which generate antitrust disputes may be contracts of adhesion militates against automatic forum determination by contract - Antitrust issues, prone to complication, require sophisticated legal and economic analysis, and thus are ill-adapted to strengths of the arbitral process - Decisions as to antitrust regulation of business are too important to be lodged in arbitrators chosen from the business community particularly those from a foreign community that has had no experience with or exposure to our law and values. - However, Ct. said arbitration warranted: - Ct. says that concerns of international comity, respect for the capacities of foreign and transactional tribunals, and sensitivity to the need for the international commercial system for predictability in the resolution of disputes require that we enforce the parties agreement, even assuming that a contrary result would be forthcoming in a domestic context. - Gilmer v. Interstate/Johnson Lane Corp.: Ps registration application agreed to arbitrate any dispute, claim or controversy arising between him and interstate that is required to be arbitrated under the rules, constitutions or by-laws of the organizations which he registered. Arbitration of any controversy b/t a [9]

registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative. - By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute it only submits to their resolution in an arbitral, rather than a judicial forum. - Having made the bargain to arbitrate, the party should be held to it UNLESS Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue. - Burden on Gilmer to show that Congress intended to preclude a waiver of judicial forum for ADEA claims. - Look to text, legislative history, or inherent conflict b/t arbitration and the ADEAs underlying purposes. - Ct. said nothing in the text of ADEA or its legislative history precludes arbitration. Choosing an Arbitrator - Arbitrability and the Division of Authority Between Courts and Arbitrators - First Options of Chicago, Inc. v. Kaplan: P cleared stock trades for D, which incurred losses in its trading account. P and D entered into agreement for repayment of debt. When D lost additional money, P demanded immediate repayment and insisted the stock trader and his wife personally pay deficiency. P sought arbitration under the FAA. Neither stock trader nor wife personally signed the repayment agreement. - A party can be forced to arbitrate only those issues it specifically agrees to submit to arbitration - When deciding whether the parties agreed to arbitrate a certain matter, including arbitrability, courts generally should apply ordinary state-law principles that govern the formation of contracts. - Party who doesnt agree to arbitrate will have a right to a court's decision about the merits of its dispute. - But, where the party agrees to arbitrate they relinquish much of that right's practical value. - Party can ask ct. to review arbitrator's decision, but ct. will set decision aside only in very unusual circumstances such as an award procured by corruption, fraud, undue means or where the arbitrator exceeds his powers. - The Court held: - Record did not show stock trader and wife agreed to have arbitrators decide question of arbitrability - Court of appeals correctly held the arbitrability of the dispute between the clearinghouse and the stock trader and his wife was subject to independent review by the courts. - Evident Partiality and Related Grounds for Disqualifying an Arbitrator - Arbitrators must disclose to the parties any dealings that might create an impression of possible bias. No proof of actual corruption or fraud was required. [Commonwealth Coatings Corp. v. Continental Casualty Co. (1968)] - The appearance of bias is a proper standard for disqualification of arbitrators; it is unnecessary (almost impossible, probably) to demonstrate that the arbitrator had an actual bias. [Merit Insurance Co. v. Leatherby Insurance Co. (7th Cir. 1983)] - Non-neutral Neutrals and Structural Bias [Harter v. Iowa Grain Co. (7th Cir. 2000)] Fairness in Arbitration Proceedings - Fairness of Arbitral Proceedings - A party may not sit idle through arbitration procedure and then collaterally attack that procedure on grounds not raised before arbitrators when result turns out to be adverse; This rule even extends to questions, such as arbitrator bias, that go to the very heart of arbitral fairness. [Marino v. Writers Guild of America, East, Inc. (9th Cir. 1993)] [ 10 ]

Employer materially breached agreement to arbitrate discrimination claims when it promulgated arbitration rules that, inter alia, required that all arbitrators be selected from list created by employer, placed no limits on whom employer could place on list, required employee to notice claims but did not require employer to notice defenses, and allowed employer but not employee to expand scope of proceedings; rules were so egregiously unfair as to constitute complete default of employer's contractual obligation to draft arbitration rules and to do so in good faith. [Hooters of America, Inc. v. Phillips (4th Cir. 1999)] - The Hooters rules, when taken as a whole, were so one-sided that their only possible purpose is to undermine the neutrality of the proceeding. Unconscionability and Related Contract Defenses - Generally applicable state-law contract defenses like fraud, forgery, duress, mistake, lack of consideration or mutual obligation, or unconscionability may invalidate arbitration agreements - Walker v. Ryans Family Steak Houses, Inc., 400 F.3d 370 (6th Cir. 2005) - Buckeye Check Cashing, Inc. v. Cardegna, 126 S.Ct. 1204 (2006)

Vacating or Modifying Arbitral Awards - Remedial Powers of Arbitrators - Halligan v. Piper Jaffray, Inc., 148 F.3d 197 (2d Cir. 1998) - Issue: Whether district courts denial to vacate the arbitral award to Piper was in err? - Facts: Mr. Halligan was pursuing an ADEA claim. He was a top broker for Piper, usually #1 but was #5 out of 25 at time of lawsuit. His annual salary was $500,000. During arbitration proceedings, he died. The process continued without him. The arbitrators denied relief for Mr. Halligan but did not provide an explanation. Piper had award confirmed in District Court.Mrs. Halligan continued to pursue suit and charges manifest disregard of the law. - Holding: The arbitrators manifesting disregarded the law. Reverse district courts orders denying vacation. Reverse order dismissing the complaint filed in district court by Mrs. Halligan no bar to the suit on res judicata principles. Remand for further proceedings *arbitrate again+. - Reason: In view of the strong evidence that Halligan was fired because of his age and the agreement by both parties that the arbitrators were correctly advised of the applicable legal principles, we are inclined to hold that they ignored the law or the evidence or both. Moreover, the arbitators did not explain their award. We have repeatedly stated that arbitrators have no obligation to explain the award But in Gilmore, when the SC ruled that an employee could be forced to assert an ADEA claim, the Court did so on the assumption that the Plaintiff simply changed forums, not gave up any statutory rights. - Rule: The absence of an explanation (written opinion) may reinforce the reviewing courts confidence that the arbitrators engaged in manifest disregard. - Judicial Review of Arbitration Awards - Moncharsch v. Heily & Blas, 832 P.2d 899 (Cal. 1992)

[ 11 ]