© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-1 THE LEGAL ENVIRONMENT OF BUSINESS 1 The Legal Environment of Business A Critical Thinking

1© 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-Ch. 4-11

THE LEGAL ENVIRONMENT OF BUSINESS

The Legal Environment of BusinessThe Legal Environment of Business

A Critical Thinking ApproachA Critical Thinking Approach

55thth Edition Edition

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne



CHAPTER 4CHAPTER 4

Alternative Tools of Dispute Alternative Tools of Dispute ResolutionResolution



Alternative Dispute Resolution (ADR)Alternative Dispute Resolution (ADR)

Negotiation and Settlement Negotiation and Settlement

ArbitrationArbitration

MediationMediation

Mini TrialsMini Trials

Private TrialsPrivate Trials

Summary Jury TrialsSummary Jury Trials

Court Annexed ADRCourt Annexed ADR

Methods other than litigation:Methods other than litigation:



Alternative Dispute ResolutionAlternative Dispute Resolution

Reasons for increasing popularity:Reasons for increasing popularity:

CostCost

TimeTime

Uncertainty and riskUncertainty and risk

Court-ordered ADRCourt-ordered ADR

FlexibilityFlexibility

ConfidentialityConfidentiality

Preservation of Preservation of business relationshipbusiness relationship



Negotiation and SettlementNegotiation and Settlement

An alternative dispute-resolution method in An alternative dispute-resolution method in which the disputant parties come together which the disputant parties come together informally to try to resolve their differencesinformally to try to resolve their differences



ArbitrationArbitrationResolution of a dispute by a neutral third party Resolution of a dispute by a neutral third party

set outside the judicial settingset outside the judicial setting



Alternative Dispute ResolutionAlternative Dispute Resolution

Arbitration-AwardArbitration-Award



The Arbitration ProcessThe Arbitration Process

Both sides submit briefs of facts and Both sides submit briefs of facts and law to a neutral arbitratorlaw to a neutral arbitrator

Proceedings are private, not publicProceedings are private, not public

No official record is madeNo official record is made

Witnesses and evidence presentedWitnesses and evidence presented

Rules of evidence are relaxedRules of evidence are relaxed

Decisions rendered within 30 daysDecisions rendered within 30 days



ArbitrationArbitration Arbitrator is selected by agreement of the Arbitrator is selected by agreement of the

partiesparties

Arbitrator usually has familiarity with type Arbitrator usually has familiarity with type of dispute. of dispute.

Compromise resolution is expectedCompromise resolution is expected

Results called Award in ArbitrationResults called Award in Arbitration

Arbitrator not required to follow precedentArbitrator not required to follow precedent

Courts routinely enforce awards: Arbitrator Courts routinely enforce awards: Arbitrator has power to decide and the results are has power to decide and the results are legally binding—few are challengedlegally binding—few are challenged



Methods of Securing ArbitrationMethods of Securing Arbitration By Arbitration clause in agreement-By Arbitration clause in agreement- Binding Binding

arbitration clause-A provision in a contract arbitration clause-A provision in a contract mandating that all disputes arising under mandating that all disputes arising under the contract be settled by arbitration.the contract be settled by arbitration.

By Submission agreement-By Submission agreement- Separate Separate agreement providing that a specific dispute agreement providing that a specific dispute be resolved through arbitration.be resolved through arbitration.

Note: Concerns have been raised about employees waiver Note: Concerns have been raised about employees waiver of statutory rights by accepting arbitration clausesof statutory rights by accepting arbitration clauses



Selection of the ArbitratorSelection of the Arbitrator

Lists of candidates for Lists of candidates for arbitrator provided to arbitrator provided to each partyeach party

Parties select Parties select arbitrator, time and arbitrator, time and placeplace

Parties agree to follow Parties agree to follow the rules: AAA, ICCthe rules: AAA, ICC

Who are they?Who are they?

Generally lawyers, retired Generally lawyers, retired judges, professors or judges, professors or other professionals in the other professionals in the fieldfield



Common Uses of ArbitrationCommon Uses of Arbitration

Labor disputesLabor disputes

Business conflictsBusiness conflicts

Consumer complaintsConsumer complaints

Various matters Various matters typically found in civil typically found in civil litigation: tort, contract litigation: tort, contract casescases



Problems with ArbitrationProblems with Arbitration

Concerns with discrimination casesConcerns with discrimination cases

Concerns with Arbitrators’ backgroundConcerns with Arbitrators’ background

Absence of written opinionsAbsence of written opinions

Costs typically shared in arbitration—Costs typically shared in arbitration—poses greater impact on employee than poses greater impact on employee than on employer—may have a ‘chilling effect’on employer—may have a ‘chilling effect’



MediationMediationInformal process where the two sides select a Informal process where the two sides select a party to help resolve their differencesparty to help resolve their differences



MediationMediation

The mediator facilitates the parties The mediator facilitates the parties themselves in reaching agreement.themselves in reaching agreement.

If the parties reach If the parties reach agreement, the matter agreement, the matter

is settled.is settled.

If not, the parties can If not, the parties can go on to arbitration or go on to arbitration or

litigation.litigation.

Note: The mediator is not empowered to impose a decision Note: The mediator is not empowered to impose a decision on the parties. on the parties.



The Mediation ProcessThe Mediation Process

Mediator points out strengths and weaknesses Mediator points out strengths and weaknesses of each sides’ case privatelyof each sides’ case privately

Mediator shuttles between opposing parties Mediator shuttles between opposing parties conveying informationconveying information

Offers and disclosures made in mediation Offers and disclosures made in mediation cannot be used as evidence at trialcannot be used as evidence at trial

Very flexible and creative processVery flexible and creative process

Mediators available via private ADR companiesMediators available via private ADR companies

Often, former judges serve as mediatorsOften, former judges serve as mediators



Common Uses of MediationCommon Uses of Mediation

Collective bargaining disputes

Insurance claim disputes

Commercial contract problems

Employment disputes

Environmental disputes



Advantages of MediationAdvantages of Mediation Applicable to almost all disputesApplicable to almost all disputes

Useful for multi-party disputesUseful for multi-party disputes

Potential for creative solutionsPotential for creative solutions

Non-adversarialNon-adversarial

Avoids win-lose outcomeAvoids win-lose outcome

Allows for continuing relationshipAllows for continuing relationship

Usually less expensive and time-consumingUsually less expensive and time-consuming

Online dispute resolution providersOnline dispute resolution providers



Criticisms of MediationCriticisms of Mediation

Glosses over fundamental Glosses over fundamental structural conflictsstructural conflicts

Misleading impression of Misleading impression of equality of partiesequality of parties

Subject to abuse by bad Subject to abuse by bad faith of one partyfaith of one party



MinitrialsMinitrials

Relatively new ADR methodRelatively new ADR method Abbreviated trial arguments submitted Abbreviated trial arguments submitted

to adviserto adviser Adviser may render an opinion as to Adviser may render an opinion as to

probable outcome at trialprobable outcome at trial Executives meet without attorneys to Executives meet without attorneys to

try and settle casetry and settle case

Neutral adviser presides over the conflict Neutral adviser presides over the conflict and the senior executives of the disputing and the senior executives of the disputing corporations have settlement authority.corporations have settlement authority.



Other ADR MethodsOther ADR Methods

Early Neutral Case EvaluationEarly Neutral Case Evaluation

Similar to MinitrialSimilar to Minitrial

Private TrialsPrivate Trials

Like an actual trial, but tried before a Like an actual trial, but tried before a referee selected and paid by the partiesreferee selected and paid by the parties

Summary Jury TrialsSummary Jury Trials

Streamlined, 1-day, actual trials leading to Streamlined, 1-day, actual trials leading to 95% settlement rate95% settlement rate



Court-Annexed ADRCourt-Annexed ADR

Implemented by court ruleImplemented by court rule

Many jurisdictions require ADR as a pre-Many jurisdictions require ADR as a pre-condition to access to courtroomcondition to access to courtroom

Requirements vary from state to state, and Requirements vary from state to state, and in federal courtin federal court

Usually, court-annexed ADR is NOT Usually, court-annexed ADR is NOT binding…the parties may go back to courtbinding…the parties may go back to court



The Future of ADRThe Future of ADR

Concerns:Concerns:

Is it really ‘voluntary’?Is it really ‘voluntary’?

Subject to bias?Subject to bias?

Loss of rights?Loss of rights?

Continuing growth of ADR is expectedContinuing growth of ADR is expected



Global Dimensions of ADRGlobal Dimensions of ADR

ADR is widely used in ADR is widely used in international contractsinternational contracts

Arbitration awards are Arbitration awards are easily enforceable in easily enforceable in other countries due to other countries due to UN TreatyUN Treaty

Only limited defenses Only limited defenses to enforceability are to enforceability are allowed under the rulesallowed under the rules



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© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-1 THE LEGAL ENVIRONMENT OF BUSINESS 1 The Legal Environment of Business A Critical Thinking