Exam #2 Study Guide SPEA-V 435

Stages of Mediation & Arbitration

Mediation Process	Arbitration Process
Initiation	Initiation
Preparation	Preparation
Introduction	Prehearing Conference
Problem Statement Problem Clarification	Hearing
Generation & Evaluation of Alternatives Selection of Alternatives	Decision Making
Agreement	Award

Arbitration award

The binding decision issued by an arbitrator at the conclusion of the arbitration proceeding.

Executory agreement to arbitrate

An agreement made before any dispute arises, typically embedded in a contract, committing the parties to resolve future disputes through arbitration rather than litigation.

Ad-hoc arbitration

Arbitration arranged after a dispute has already arisen, rather than pursuant to a pre-existing executory clause.

Administered arbitration

Arbitration conducted under the rules and administrative support of an established arbitration organization (like the AAA), which provides procedural infrastructure.

Nonadministered arbitration

Arbitration in which the parties create their own rules and procedures from scratch, without organizational support.

Informal arbitration

Arbitration with minimal formality; lawyers may or may not participate, and procedural rules are relaxed.

Formal arbitration

Arbitration resembling litigation in its procedural rigor, with formal discovery, strict evidentiary rules, and legal representation.

Binding arbitration

Arbitration in which the arbitrator's decision is final and legally enforceable, and neither party may appeal on the merits.

Nonbinding arbitration

Arbitration in which the arbitrator renders a decision, but either party may reject it and proceed to litigation.

Interest arbitration

Arbitration used to determine the terms of a collective bargaining agreement (i.e., what the contract should say).

Rights arbitration

Arbitration used to resolve disputes over the interpretation or application of an existing collective bargaining agreement.

Private arbitration

Arbitration not conducted under the auspices of any organization; the arbitrator is hired privately.

Court-connected arbitration

Arbitration that is part of the court system, typically nonbinding, used as a preliminary step before trial.

High-low arbitration

A form in which the parties secretly agree in advance on a range: the award cannot fall below the floor or exceed the ceiling, regardless of what the arbitrator decides.

Final-offer (baseball) arbitration

The arbitrator must choose one party's final offer in its entirety; no splitting the difference. Designed to incentivize reasonable positions.

Incentive arbitration

A variant where penalties are assessed against a party who refuses to accept the arbitrator's decision, if the final court outcome is no better than the arbitration award.

Enforceability

Whether an arbitration agreement is valid and can be legally compelled.

Arbitrability

Whether a particular dispute falls within the scope of an arbitration agreement and is therefore subject to arbitration rather than litigation.

Procedural arbitrability

Whether the correct steps were followed in initiating arbitration (a procedural question).

Substantive arbitrability

Whether the dispute itself is of a type that is covered by the arbitration agreement (a substantive question).

De novo

Latin for "anew"; refers to a full reconsideration of a dispute, as if the prior arbitration had not occurred.

Vacatur

The legal process of overturning (setting aside) an arbitration award in court.

Dicta

Plural of dictum; Latin for statements in a court opinion that are not essential to the ruling and therefore not binding precedent.

Choice of law

The determination of which jurisdiction's legal rules govern a dispute or contract.

Lex mercatoria

Latin for "law merchant"; a body of internationally recognized trade customs and norms increasingly relied upon in international arbitration.

Stay of litigation

A court order pausing a lawsuit, often issued when the dispute is subject to an arbitration agreement.

UNCITRAL

The United Nations Commission on International Trade Law; its model arbitration rules are widely used in international disputes.

Administered arbitration

run by an organization like the AAA, which provides procedural rules, arbitrator rosters, and logistical support

Nonadministered arbitration

the parties design the process themselves

Executory arbitration

agreed to before any dispute arises, typically in a contract clause

Ad-hoc arbitration

agreed to after a dispute has already emerged

Binding arbitration

the award is final and enforceable; appeal on the merits is essentially unavailable

Nonbinding arbitration

either party may reject the award and proceed to court

Labor/interest arbitration

sets new contract terms in collective bargaining

Labor/rights arbitration

interprets or enforces existing contract terms

Consumer arbitration

resolves disputes between businesses and individual consumers, increasingly mandatory through fine-print clauses

International/multinational arbitration

resolves cross-border commercial disputes, often governed by UNCITRAL or similar frameworks

High-low arbitration

outcome bounded by a secret floor and ceiling agreed in advance

Final-offer (baseball) arbitration

arbitrator must choose one side's final number, no compromise

Incentive arbitration

penalties attach if a rejecting party fares no better in subsequent litigation

Private arbitration

entirely outside the court system

Court-connected arbitration

linked to the court system, often as a nonbinding preliminary step

FAA Grounds for Vacatur

1. Award was procured by corruption, fraud, or undue means

2. Evident partiality or corruption by the arbitrators

3. Arbitrator misconduct → e.g., refusing to hear material evidence or other prejudicial misbehavior

4. Arbitrators exceeded their powers, or executed them so imperfectly that no final definite award was produced

Ex parte communication

• private, one-sided communication between the neutral and one party, outside the presence of the other party

• Mediation → relies on ex parte communication (private caucuses); essential for candor and reality-testing

• Arbitration → strictly prohibits ex parte communication ; arbitrator decides only on jointly presented evidence

• Med-arb → creates a structural contradiction

  • the same neutral acquires private information in mediation, then carries it into arbitration where such communication is forbidden

• This tension is the root of nearly every ethical problem in med-arb

Prescriptive paradigm

culture is not a barrier; processes are transferable (typical American approach)

Elicitive paradigm

cultures are unique; their own mechanisms don't translate easily

Dispute Systems Design (DSD)

A method for designing more efficient ways to resolve intractable or frequently recurring conflicts in troubled organizations, businesses, or entire industries

Four Stages of Implementation (Third Heuristic)

1. Diagnosis → identify the patterns of conflict and why the current system is failing

2. Design → develop a tailored system based on the diagnosis

3. Implementation → put the system into practice

4. Exit, evaluation, and diffusion → third-party interveners step back; assess effectiveness; spread lessons learned

• No single template exists → each system must be tailored to the groups involved

• A well-designed system should ultimately be self-sustaining

The Six System Design Principles (Second Heuristic)

1. Put the focus on interests → start with negotiation or mediation; move to rights or power only if interest-based approaches fail

2. Provide low-cost rights and power backups → arbitration, voting, protests are cheaper alternatives to full adjudication or violent force

3. Build in loop-backs to negotiation → rights and power contests rarely need to play out fully; once it becomes clear who will likely win, parties should return to negotiation to craft a solution (e.g., settling a lawsuit out of court)

4. Build in consultation before, feedback after → shared information reduces conflict; consistent feedback mechanisms between parties help prevent recurrences

5. Arrange procedures in a low-to-high-cost sequence → start cheap and escalate only as needed; reduces rapid escalation, builds faith in the system

6. Provide necessary motivation, skills, and resources → a new system only works if people buy into it; elites and third-party interveners must invest in spreading skills, habits, and knowledge that reinforce the new system

Grounds for Overturning an Award

• FAA

• Manifest disregard of the law

• Public policy violation

• Arbitrator misconduct/conflict of interest

• State statutory grounds

• Unconscionability/enforceability attack

• expanded review by contract

manifest disregard of the law

Grounds for Overturning an Award

• a judge-made doctrine requiring proof that the arbitrator knew the applicable law, recognized it applied, and consciously ignored it anyway

• extremely high bar, rarely succeeds

public policy violation

Grounds for Overturning an Award

• award can be vacated if it violates an explicit, well-defined, dominant public policy rooted in law and legal precedent

• general moral or societal concerns don't qualify

arbitrator misconduct/conflict of interest

Grounds for Overturning an Award

• acting simultaneously as mediator and arbitrator in the same dispute

• acting in bad faith or outside the scope of authority

state statutory grounds

Grounds for Overturning an Award

some states permit vacatur for:

• evident material miscalculation of figures

• award on a matter not submitted to arbitration

• award on procedural form that doesn't affect the merits

unconscionability/enforceability attack

Grounds for Overturning an Award

a party may attack the underlying arbitration agreement itself as unconscionable or fraudulently induced, which would unwind the entire proceeding

expanded review by contract

Grounds for Overturning an Award

• parties sometimes agree to broader judicial review than the FAA provides

• courts are split on enforceability

• Hall Street held this is not permitted in federal court, though state courts are less settled on the issue

enforcing arbitration

• Losing party's failure to comply = breach of contract

• Prevailing party can go to court to confirm the award, turning it into an enforceable court judgment

• Once confirmed, standard enforcement tools apply: property seizure, wage/fund garnishment, etc.

• FAA provides streamlined confirmation procedures; most states have adopted the Uniform Arbitration Act (UAA) or Revised UAA (RUAA) with similar mechanisms

decision-acceptance effect

disadvantages of arbitration

• less commitment to arbitrated outcomes because parties didn't shape them

• lower commitment = lower implementation

chilling effect

disadvantages of arbitration

• when anticipated arbitration discourages concessions during negotiation

  • Parties fear making compromises will hurt them if the arbitrator "splits the difference"

  • Incentivizes hard-line positions → conceding less = better arbitration outcome

• Final-offer arbitration is used to counter this effect

final-offer arbitration

disadvantages of arbitration

• Arbitrator selects one party's final offer → no splitting the difference

• Forces both sides to make their most reasonable offer to win the arbitrator's favor

• Incentivizes concessions during negotiation to close the gap before arbitration

• Extreme positions backfire → the more unreasonable the offer, the less likely the arbitrator rules for it

• this is used to counter the chilling effect

narcotic effect

disadvantages of arbitration

• repeated arbitration causes parties to become passive and dependent on the third party

  • Lose motivation to negotiate — attitude of "a settlement will be imposed anyway"

  • Become "addicted" to arbitration, taking less responsibility for resolving their own conflict

  • Parties with strong-willed constituencies may stay uncompromising during negotiation, then blame the arbitrator if the outcome is unpopular

half-life effect

disadvantages of arbitration

• Repeated arbitration leads to decreasing satisfaction with outcomes over time

• Parties become passive, lose control, and arbitration becomes ritualistic and ineffective

• Eventually parties refuse to participate, seek alternatives, or disengage entirely

biasing effect

disadvantages of arbitration

• Arbitrators may be perceived as partial rather than neutral

• Most likely when a pattern of decisions consistently favors one side

• Parties in conflict often try to bias the arbitrator, then reject them for being biased

• If seen as biased, parties seek a new arbitrator (ideally one who favors their position)

Labor arbitration

• occurs in the context of collective bargaining contracts or negotiations

• resolves disputes as a substitute for economic pressure (strikes/lockouts)

employment arbitration

• occurs through individual employment contracts, non-union company policies, or pre/post-dispute agreements

• substitute for civil litigation

Coverage → Employment disputes, discrimination claims, at-will termination; excludes unemployment, workers' comp, NLRB/EEOC charges

Mandatory Arbitration → Condition of employment; courts enforce; challengeable if employer controls arbitrator selection or limits remedies; class action waivers upheld; critics say this shields employers from small claims

How It Works → AAA or JAMS administered; attorney arbitrators; resembles civil trial with discovery, motions, testimony; not in courtrooms

Costs → Mandatory: employer bears arbitrator fees; discrimination winners can recover attorney fees; rates $300–400+/hour

Timeline → 4–8 months to hearing & 2–3 months for decision

Appeals → Very narrow grounds (fraud, corruption, egregious error); factual/legal errors insufficient; expanded review only under state law

nonbinding arbitration

types of nonbinding evaluation

• Most basic form; arbitrator issues an advisory (not binding) decision

• Common in court-connected programs as a mandatory first step

• Parties may reject the decision and proceed to trial

• Arbitrators are free to disregard it without violating mandatory arbitration rules

• Preserves privacy and confidentiality

• Useful for: general BATNA clarification

minitrial

types of nonbinding evaluation

• A summary version of a full trial, attended by corporate executives or other representatives with authority to settle

• Neutral presides but does not feature formal rules of evidence

• Presentations consist of strengths and weaknesses of each side's case

• After presentations, representatives attempt to negotiate a settlement

• If no settlement, the neutral may issue an advisory opinion

• Useful for: BATNA clarification for litigants; "day in court" experience; expert empowerment

• Also exists in a binding version

summary jury trial

types of nonbinding evaluation

• Invented by federal judge Thomas Lambros (1980s) as a settlement tool for complex cases

• An abbreviated version of a litigated case is tried before a jury drawn from the actual jury pool

• Jury deliberates and issues a nonbinding verdict

• Parties and attorneys observe the jury's reasoning to assess settlement prospects

• Useful for: overcoming costly impasses and delays in complex litigation, especially products liability and construction cases

neutral evaluation

types of nonbinding evaluation

• Expert in the subject matter of the dispute is hired to assess strengths and weaknesses of each side's case

• Also called case evaluation or early neutral evaluation

• Can be oral or written; may include assessment of likely outcomes

• Disputants are free to use the information to conduct settlement negotiations at any point

• Particularly useful in highly technical disputes (e.g., intellectual property, scientific or technical innovations)

• Useful for: BATNA clarification; expert assessment in technical disputes

dispute review boards

types of nonbinding evaluation

• Panels of three members (typically experts) empaneled by contract to resolve disputes as they arise during large construction projects

• Designed to keep projects moving and on schedule (preventive rather than reactive)

• Issue advisory decisions on disputes in real time

• Only about 2% of construction projects using dispute review boards end with outstanding disputes

• Useful for: preventing conflict escalation and damages in complex, long-duration construction projects

med-arb

types of mixed/hybrid processes

• Begins with mediation; if no settlement, the same or a different person acts as arbitrator and issues a binding decision

• Advantage: combines the flexibility of mediation with the finality of arbitration

• Risk: parties may be less candid in mediation, knowing the mediator could become their arbitrator

• Med-arb-same → same person serves as both mediator and arbitrator

• Med-arb-different → different people fill each role

• Opt-out med-arb → mediation is the initial method; parties can change to med-arb-same if initially specified

MEDALOA

types of mixed/hybrid processes

• Med-Arb with a final-offer (baseball) arbitration component

• Mediation is followed by final-offer arbitration if no settlement

• Arbitrator chooses one party's final offer in its entirety → no splitting

arb-med

types of mixed/hybrid processes

• Arbitration occurs first; arbitrator reaches a decision but keeps it secret → Parties then attempt mediation → If mediation fails, the secret arbitration award is revealed and becomes binding

• Advantage: the existence of a secret award creates incentive to settle in mediation

• Disadvantage: arbitrator's facilitative role in mediation may be compromised by knowing the award

meditation windowing

types of mixed/hybrid processes

• Informal mediation facilitation occurs during arbitration hearings

• Arbitrator shifts into a mediator role ad hoc during the proceeding

• Can occur on an ad hoc basis or may be built into the process at predetermined intervals

• Mediator/arbitrator is often the same person

• Less susceptible to impasse; a purer process than med-arb but less formal

incentive arbitration

types of mixed/hybrid processes

• Hybrid of nonbinding evaluation and arbitration

• Award is nonbinding, but penalties attach for rejecting it

• Party who rejects the award and does worse at trial must pay the other side's attorney's fees and court costs

• Used in some state courts

• Sometimes called "neutral evaluation" in private-sector contexts

• Increasingly mandatory in some jurisdictions

ombuds

types of mixed/hybrid processes

• A person (not a process) who handles complaints informally on behalf of a government, institution, or organization

• Originated in Scandinavia; adopted in U.S. during the last quarter of the 20th century

• Provides an informal, flexible, human-scale alternative to bureaucratic complaint systems

• Has authority to investigate and resolve concerns, but typically does not adjudicate

• Designed to keep government responsive to the people

• Used increasingly within large organizations and universities

creeping legalism

• The gradual transformation of arbitration from its original informal, community-based process into something that increasingly resembles formal litigation → the very thing it was designed to replace

• Driven by lawyer involvement, court enforcement requirements, and corporate use of mandatory arbitration clauses, arbitration absorbed litigation features: discovery, motions, formal evidence rules, written briefs, and lengthy hearings

• The result is a process that is often as slow, expensive, and adversarial as litigation, undermining the core rationale for using arbitration in the first place

• Creates a paradox: arbitration must become more legalistic to survive judicial scrutiny, which makes it less distinguishable from the court system it was meant to avoid

healthy vs distressed systems

• A healthy system resolves most disputes at the interest level, fewer at the rights level, and fewest through power

• A distressed system (like Caney Creek before reform) is inverted → most disputes escalate to power immediately

• Why interest-based resolution is preferable

  • Less expensive than rights or power approaches

  • Produces mutually satisfactory outcomes rather than win-lose results

  • Avoids the resentment and retaliation that often follow power-based losses

  • Less time-consuming

goal of DSD

design more efficient ways of resolving conflict before it escalates → not eliminating dissent, but channeling it productively

three ways of resolving disputes

• Interests → focus on what parties want/need; most negotiable; least costly; produces mutually satisfactory outcomes

• Rights → focus on legal entitlements; win-lose; more costly than interest-based approaches

• cr → strikes, lockouts, force; most costly; losing side often seeks retaliation

critiques & challenges of DSD

• focuses too narrowly on managing individual disputes rather than addressing underlying systemic problems

• effective DSD should also include ongoing processes that identify and resolve inefficient systemic outcomes not just manage disputes after they arise

conditions under which DSD works best

• Conflict prevention emphasized over conflict management

• Outside designers do not play too prominent a role

• Existing organizational culture is recognized

• Attention is paid to the narratives people tell about conflict

Baseball vs Night Baseball arbitration

Baseball (Final-Offer) Arbitration

• Arbitrator must choose one party's offer in its entirety (no splitting)

• Incentivizes reasonable offers since extreme positions likely lose

Night Baseball Arbitration

• parties submit final offers without the arbitrator seeing them

• Arbitrator rules on the merits independently; whichever offer is closest wins

• Arbitrator isn't anchored by the parties' positions → considered a purer form of adjudication

Core distinction:

• Baseball arbitration → arbitrator sees and picks an offer

• Night baseball → arbitrator decides blindly, offers are matched after the fact

Specific Ethical Violations in Standard Med-Arb

Violation of Self-Determination

• Parties waive the right to withdraw upfront — eliminating voluntariness

• Fear of an imposed award creates invisible coercion toward settlement

Violation of Impartiality

• Private caucus information travels with the neutral into arbitration → actual or apparent bias

• Parties can exploit this by feeding misleading info that influences the award, shielded by confidentiality

Violation of Confidentiality

• The neutral who received confidential disclosures becomes the decision-maker

• Parties share less, knowing their disclosures could influence the arbitration award

Med-Arb Variants → attempts & failures to solve the ethical dillema

Standard Med-Arb → No safeguards; full bias risk; confidential info possessed by arbitrator; no voluntary withdrawal

Overlapping Neutrals → Separate arbitrator excluded from caucuses; solves bias but parties still can't withdraw; arbitrator presence may chill candor; costly

Plenary Med-Arb → Joint sessions only, no caucuses; solves bias but eliminates the tool most essential to effective mediation; lower settlement rates

Braided Med-Arb → Mediation breaks built into arbitration; more settlement opportunities but any suggestion from an arbitrator feels coercive; ex parte bias remains

Med-Arb with Optional Withdrawal → Parties can opt out after mediation; restores self-determination but destroys finality and invites bad-faith manipulation; ex parte bias remains if arbitration proceeds

Arb-Med → Award written and sealed before mediation; solves contamination but sealed award creates enormous settlement pressure (undermining voluntariness) and arbitrator cannot revise a flawed award if mediation reveals new information

nonbinding evaluation

• Neutral issues an advisory opinion on the merits (not binding)

• Distinct from mediation (facilitates negotiation) and arbitration (binding decision)

• Neutral may be arbitrator, retired judge, or ADR professional

• Outcome can be a single decision, a range, or a strengths/weaknesses assessment

• May or may not include discovery or formal evidence

• Key function: gives parties a realistic preview of likely court outcomes → clarifies BATNAs, encourages settlement

  • Helps "sober up" overly optimistic clients and gives attorneys cover for managing expectations

• Critics: hard to distinguish from mediation in practice; lacks uniform rules

advantages of arbitration

• Clear solution is produced and can be mandated → parties can't simply ignore it

• The solution may be mandated on them (they can't choose whether to follow it or not).

• Arbitrators are seen as wise, fair, and impartial → decision carries credibility

• Avoids costs of prolonging the dispute & eecisions tend to mirror court outcomes

disadvantages of arbitration

• Parties relinquish control → outcome may be one neither prefers or can live with

• May impose additional costs or burdens on one or both parties

• Voluntary arbitration risks face-loss if a party refuses to follow the recommendation

• Decision-acceptance effect

• Chilling effect

• Narcotic effect

• Half-life effect

• Biasing effect