Alternative Dispute Resolution and Attorney-Client Privilege

HA 8450
Professor Nancy R. Mansfield

Objectives
Identify the purpose of ADR Compare & contrast ADR methods
Negotiation, mediation, arbitration, hybrids

Evaluate alternative ways to settle disputes

Which are best suited to business? Which are best suited to health care?

List the advantages and disadvantages of ADR

Why ADR? Litigation is Expensive

Total cost of litigation is estimated at $210 billion, equivalent to one-third of the after-tax profit of the Fortune 500
Total cost is increased by delaying case resolution Fortune 500 companies spend an average of 3 years to resolve litigation Only 3% of cases are tried
John B. Henry, elaw Forum Metropolitan Corporate Counsel (Feb 2008)

Resolution of Fortune 500 Cases by Trial (Feb 2008)

Reducing Litigation Costs

How can we reduce the cost of litigation in the US?
Penalize frivolous lawsuits Cap damage awards Require mediation or arbitration
Also reduces congestion in courts

ADR Methods
In order of party control:
Negotiation Mediation Med/Arb Arbitration Litigation
Negotiation Med/Arb Mediation Litigation

Arbitration

Classic ADR Models

Negotiation How represented Who decides Rules and procedures Standard for resolution How enforced Who pays By selves or counsel Parties Parties decide Mutual agreement Mediation Arbitration By selves or counsel By counsel Parties Parties decide Mutual agreement If binding, arbitrator Arbitration rules, such as AAA Arbitrators sense of fairness By courts Parties decide

Enforceable contract Each pays his own

Enforceable contract Parties decide

Negotiation
Simplest form of ADR Parties attempt to settle a dispute
Attorneys may negotiate on behalf of party More than 90% of corporate lawsuits are resolved before trial

Preparation is essential
Identify BATNA (Best Alternative To Negotiated Agreement) Rank issues to identify possible trade-offs

Negotiation: Planning

Mediation
Neutral third party helps parties reach a solution Role of the mediator
Help parties identify their interests, positions, and options Build trust between the parties to facilitate communication and resolution of their dispute

Role of parties

Standard Mediation Clause

The parties shall endeavor to resolve any dispute arising out of or relating to this Agreement by mediation under the CPR Mediation Procedure. Unless otherwise agreed, the parties will select a mediator from the CPR Panels of Distinguished Neutrals.

Mediating Disaster Problem

(page 229 Furrow Health Law text)

Advantages:
Disadvantages:

Arbitration Options for Medical Malpractice

A. B. C. D. Mandatory Non-binding Arbitration Mandatory Screening Panels Mandatory Binding Arbitrations Voluntary Pre-Dispute Contract of Binding Arbitration

Arbitration
Dispute

A
Contract

Arbitrator Decision

Arbitration
Resolution of the dispute by a neutral third party
Voluntary (contractual) or Compulsory (public sector employees)

Arbitrators decision final & binding

Federal Arbitration Act (FAA)

Enacted by Congress in 1925 - covers any arbitration clause in a contract
that involves interstate commerce

Federal policy clearly favors arbitration of commercial disputes Courts are to rigorously enforce arbitration agreements

Standard Arbitration Clause

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof.

Other Arbitration Terms

Arbitration clause should also specify
Scope types of issues to arbitrate Where and when arbitration will occur Selection of arbitrators, e.g., number, kind, and source Procedures, e.g., scope of permissible discovery, timetable, and types of damages that can be awarded

Arbitration Process
Parties agree to submission Pre-Hearing phase
-Selection of arbitrator -Limited discovery -Parties submit statements and briefs

Adversarial hearing - Arbitrator has subpoena power

- Less formal rules of evidence

Judicial Review of Awards

Under FAA, courts may set aside an arbitrators award only if
Award was obtained by fraud or corruption Arbitrator was demonstrably impartial or corrupt or manifestly disregarded the law Misconduct by arbitrator Arbitrator exceed his/her authority

Awards that violate public policy may be struck by courts

Case DiscussionArbitration in Health Care

Problem: Arbitrating Disaster
(Furrow Health Law text p. 228 -229)

Query: Will Consumers suffer if Arbitration is used in a health care setting? Outline the Arguments: in support of the agreement in opposition of the agreement

Unconscionable Agreements
When is an agreement unconscionable?
If its terms are harsh and oppressive, grossly unfair and/or one-sided

Unconscionable arbitration clauses will not be enforced

Engalla v. Permanente Medical Group Inc. 64 Cal. Rptr. 2d 843 (Cal. 1997) The CA. S. Ct. held 1. HMO fraudulently induced pt. to agree to arbitrate 2. HMO waived rt. To arbitrate through dilatory tactics 3. Arbitration agreement was not per se unconscionable

Mediation vs Arbitration
MEDIATION Objective Authority Scope of Authority Compromise None: Parties must agree Free to fashion solution agreeable to both parties ARBITRATION Adjudication Decision is legally binding Must remain within four corners of agreement

Mediation vs Arbitration (contd)

Role

MEDIATION Facilitator

Qualifications None
Selection Criteria Hearing Format

Acceptable to both parties Less structured; Similar to a trial informal

ARBITRATION Judge-like decision-maker Labor exper. &/or Academic creden. Acceptable to both parties

Hybrid Forms of ADR

Med-Arb
If settlement isnt achieved, parties agree to binding arbitration Agreement should specify that the same person doesnt serve as mediator and arbitrator

Mini-trials
Summary presentation of case in trial format after discovery and submission of briefs After hearing adversarys case, parties may settle or third party may issue non-binding opinion

Hybrids (contd)
Summary jury trials
Real jury hears abbreviated case and renders non-binding decision Attorneys debrief jurors to understand why they reached a decision Parties often able to negotiate a settlement

Advantages of ADR over Litigation

Less formal discovery, procedure Less adversarial Win-win solutions possible Less costly Faster, less timeconsuming More control over outcome Agreements & awards can remain private Favored by legal system

Additional Advantages of Arbitration

Professional arbitrators can hear specialized disputes
Labor arbitrators Commercial arbitrators Health care

Produces binding, final result Can include punitive damages

Is arbitration always the answer?

If prior rulings are NOT precedent, are the results less predictable? If the parties establish the rules that govern the proceeding, is there any guarantee that they will be fair to both parties? Is arbitration always cheaper than litigation?

 Similar legis. introduced in 2009 by Senator Russ Feingold (WI) and Representative Hank Johnson (GA) Would amend FAA by invalidating pre-dispute agreements that require arbitration of
an employment, consumer, or franchise dispute, or a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power

Arbitration Fairness Act of 2011 http://www.govtrack.us/congress/bill.xpd?bill=s112-987

Would give the courts (under federal law) final authority to determine the validity or enforceability of an agreement to arbitrate (not the arbitrator) Referred to House and Senate Judiciary Committees

Supporters of the Legislation

Earlier versions of the bill were favored by Public Citizen and consumer groups who say
We cant trust companies to do the right thing AFA supports people over profits and levels the playing field for average Americans

Arbitration clauses in everyday contracts force individuals to forgo their right to court/jury, pre-trial discovery, etc.

Opponents of the Legislation

Earlier versions of the bill were opposed by US Chamber of Commerce, Consumer Bankers Association, etc Their arguments:

What are your thoughts?

If enacted, the bill would eliminate efficient, less costly means of resolving consumer disputes By casting doubt on arbitration agreements, it would cause widespread uncertainty and higher costs (discovery, legal fees, and court costs) Unnecessary as current law protects against unfair and unconscionable contracts

Attorney-Client Privilege and Physician Patient Privilege

***********

What are the elements of the privilege? What is the scope of protection? *********

Attorney - Client Privilege

Communications are privileged if made: With an attorney (acting as counsel for the clients) For the purpose of gaining legal advice In confidence

Attorney Work Product

Documents are privileged if developed By or under the direction of an attorney In anticipation of litigation In confidence

Recent Developments
SOX section 307requires reporting up the ladder noisy withdrawalwithdraw from representation and inform the SEC ABA Model Rules now permit attorneys to reveal client confidences Federal Sentencing Guidelines may require waiver of attny-client privilege

Policy Issues
What are the benefits of the privileges to the client? What is the benefit to society of these rules?