Alternative Dispute Resolution

Question 1

What is arbitration?

Answer 1

Arbitration = a private procedure, based on contract, for the BINDING resolution of disputes

** Two parties may agree to submit any existing or future dispute to arbitration (as a clause in a commercial contract)

Two major characteristics:

(i) arbitrators are NOT bound by the substantive law OR the rules of evidence (i.e. they do justice as they see fit); AND 
(ii) the scope of judicial review is EXTREMELY narrow

Court serves a “gatekeeping” function, deciding certain “threshold issues”, as to whether the arbitration should PROCEED (if ct decides in favor of arbitration, it retreats from scene)

NOTE: public policy of NY FAVORS arbitration (and the courts are guided by this principle when deciding whether a particular case should be arbitrated)

Question 2

What are the threshold issues that can be presented to the court to AVOID arbitration?

Answer 2

1) Did the parties agree to arbitrate?
(i) must be in writing;
(ii) agreement must be”clear, explicit & unequivocal”;
(iii) the right to arbitration NEED NOT be mutual (i.e. only one party has right to invoke)

2) Is the dispute within the scope of the arbitration clause?
* * Arbitrator can decide almost anything, so it depends on the scope of the cl as written

3) Is the arbitration clause valid?
* * Clause is PRESUMPTIVELY valid UNLESS induced by fraud, duress or coercion
* * Doctrine of severability – courts will examine validity of arbitration clause separately from validity of CONTRACT AS A WHOLE

4) Is there an express condition precedent to arbitration, AND has been complied with/?
5) Is there a SOL issue?

Question 3

How does a party bring a “threshold issue” to the court?

Answer 3

1) If already pending action&raquo_space; proponent should make motion to stay the action & compel arbitration
2) If NO pending action&raquo_space; proponent served opponent w/ Notice of Intention to Arbitrate

** Opponent who wants to avoid arbitration must commence a special proceeding for stay of arbitration

** Special proceeding MUST be within 20 DAYS of receipt of Notice of Intention or waives any of the threshold objections

Question 4

What are the grounds of judical review of arbitration awards?

Answer 4

3 grounds for VACATING an arbitration award…

1) “Corruption, fraud, misconduct” in the arbitration proceeding;
2) Bias of an arbitrator who was chosen to be neutral; OR 3) Arbitrator exceeded his powers (almost always loses because arbitrators usually have unlimited power unless the parties agree otherwise)

NOTE: In NY, an arbitrator CANNOT award punitive damages

Question 5

What are the other types of alternative dispute resolution (ADR)?

Answer 5

1) Mediation: A NON-BINDING process in which a neutral mediator attempts to facilitate a settlement by speaking confidentially to each party and then jointly with both parties present

** If there is an agreement, the parties can include a provision for confidentiality (or they can waive confidentiality)

2) Neutral Evaluation: A NON-BINDING process in which a neutral expert in a subject matter at issue received a condensed ppt about the merits of each side, evaluates the ppts and PREDICTS how a court would decide the dispute

3) Summary Jury Trial (SJT): a CONDENSED version of a real trial in which a REAL JUDGE presides and a REAL JURY is empanneled to hear the case and RENDER a verdict
- Rules of evidence are relaxed
- After trial, parties may question the jury about their thought processes
- Jury verdict can be binding or non-binding

NOTE:

- ADR is a creature of contract and is ENFORCED in accordance with the agreement
- NY public policy FAVORS ADR
- The court can recommend, but generally can't REQUIRE parties submit to ADR
- No specific statutory rules governing ADR (where there ARE such rules with arbitration; "judical gatekeeping")