Alternative dispute resolution (ADR) covers a wide variety
of processes involving third-party neutrals intended to resolve disputes
between parties without formal judicial proceedings. Outside of the spectrum of
ADR processes at one end are unassisted direct-party negotiations; outside at
the other end is formal adjudication to a binding decision by a court. ADR
processes range from moderated dialogues to binding decisions by third parties
in proceedings much like proceedings in court. In the main their distinguishing
characteristics are that parties enter into such processes voluntarily (for the
most part), they (usually) have a great say in designing the process and the
manner in which its outcome will be formalized (if at all), and they involve a
third party who conducts or oversees the process. In general, ADR is seen as
offering opportunities to resolve disputes more quickly or more satisfactorily
to the parties than conventional litigation. Further, recognizing that most
cases settle before trial, the court system sees integration of ADR into
litigation as offering the opportunity to achieve these “inevitable”
settlements more quickly than would otherwise be the case.
The Michigan Court Rules define ADR broadly as “any
process designed to resolve a legal dispute in the place of court adjudication”
including process defined by the court rules or any other procedures “ordered
on stipulation of the parties.” MCR
2.410(A)(2) . The federal Alternative Dispute Resolution Act of 1998
defines alternative dispute resolution processes as those in which “a neutral
third party participates to assist in the resolutions of the issues in
controversy,” including early neutral evaluation, mediation, mini-trial and
arbitration. 28 USC 651.
Stated broadly, an “environmental dispute” is any set of
circumstances in which two or more parties have competing interests over some
matter within the very broad ambit of the environment. The concept of dispute
is broad. It encompasses typical environmental disputes like trespass, nuisance
and toxic tort cases between private parties, environmental cost recovery
cases, and environmental enforcement proceedings. These conventionally take the
form of civil litigation. But many environmental disputes involve questions of
federal, state and local public policy not usually resolved through litigation.
They play out through a public consultation or public hearing processes as well
as through less public lobbying efforts. Other environmental “disputes” are
more amorphous and involve neither regulatory rights nor obligations. For
example, there are occasions where an industry in compliance with all of its
permits may find it advantageous to resolve a dispute with its neighbors, even
when it is under no obligation to do so. Given the broad portal to the court
system and the imagination of lawyers, often environmental disputes not
initially within the scope of the legal or regulatory system morph into
conventional lawsuits when a party concludes that protection of its interests
so requires. Timely application of dispute resolution can avoid such
litigation.
The federal government has defined “environmental conflict
resolution” (ECR) as: “third-party assisted conflict resolution and
collaborative problem solving in the context of environmental, public lands, or
natural resources issues or conflicts, including matters related to energy,
transportation, and land use. The term ECR encompasses a range of assisted
negotiation processes and applications. These processes directly engage
affected interests and agency decision makers in conflict resolution and
collaborative problem solving. Multi-issue, multi-party environmental disputes
or controversies often take place in high conflict and low trust settings,
where the assistance of impartial facilitators or mediators can be instrumental
to reaching agreement and resolution. Such disputes range broadly from
administrative adjudicatory disputes, to civil judicial disputes, policy/rule
disputes, intra- and interagency disputes, as well as disputes with non-federal
persons/entities. ECR processes can be applied during a policy development or planning
process, or in the context of rulemaking, administrative decision making, enforcement,
or litigation and can include conflicts between federal, state, local, tribal,
public interest organizations, citizens groups and business and industry where
a federal agency has ultimate responsibility for decision-making.” Office of
Management & Budget & President’s Council on Environmental Quality, Memorandum on
Environmental Conflict Resolution (November 28, 2005).
ADR has been shown to resolve disputes quicker and at less
cost than litigation in many cases. Surveys generally show a higher
satisfaction by ADR participants with the outcome than those who participate in
litigation. See, Lipsky & Seeber, Patterns of ADR Use in Corporate
Disputes 54 Dis Res J 66 (1999) ; and Dispute-Wise Business Management –
Improving Economic and Non-Economic Outcomes in Managing Business Conflicts,
AAA
(2006). Often relief sought by a party is not a remedy recognized at law or within a court’s power to grant (e.g., an apology or an admission of fault with no further relief sought, or implementation of a reform not required by law). ADR permits the parties to fashion relief that may be outside remedies that a court can grant. The participants can structure the process to suit their needs and preferences. ADR processes can be structured to be completely private, unlike litigation where the proceedings are public. The presence of a skilled
third party will change the dynamics of the situation and can help diffuse or
direct strong feelings that would otherwise prevent negotiations from beginning
or proceeding to conclusion. The third-party neutral may bring specialized
subject matter expertise to bear on technical or complex disputes or special
skills in promoting resolution. Finally, the parties have more control over the
schedule.
ADR has potential disadvantages. Because the process is
consensual, a party cannot be forced to reach a settlement. Thus ADR, except in
the case of arbitration, does not provide a process certain to lead to a
binding resolution. A truly recalcitrant party can abuse the ADR process. Where
a right is seen by one party as essential to its interests, e.g., determination
or enforcement of constitutional rights, there may be no substitute for the
binding and final nature of a court judgment. While generally quicker and less
costly, there are instances where the ADR process is neither. The control of
cost and time should be a major consideration when the parties develop an
agreement to use ADR processes. Finally, some third party neutrals are
ineffective at best and counterproductive at worst. Careful screening a
selection of the third party neutral is essential.
ADR is based on several key principles. First, consensual
processes (participation, scope and structure) are more likely to result in
outcomes satisfactory to the disputants than a solution imposed by a court. Inherent
in this principle is the ability of the parties to structure a process that is
tailored to the situation and to the dispute at hand. There is ample experience
demonstrating that disputants are more likely to achieve outcomes that serve
all disputants’ interests and purposes -- the “win/win” solution -- than solutions
imposed by an outside decision maker.
The second key principle is the involvement of a
third-party neutral whose presence can improve the dynamics of the dialogue
needed to achieve a settlement and, in environmental disputes, knowledge and
expertise to evaluate the merits and to help frame options for solution if so
desired by the parties. The third party’s role is to assist in the process, not
to dictate the outcome. This individual is neutral in the sense of having no
stake in the outcome or in the parties. A third-party neutral has no authority
except as granted under the order or agreement defining the ADR process.
One of the principal objectives of the ADR process is to
help the parties communicate with each other civilly, by providing a clear statement
of the interests driving the dispute and, most importantly, by truly listening
to the other side of the dispute. Parties often lack a clear idea of what they
are fighting for, much less a good idea of what needs are driving their
opponents.
Finally, ADR processes generally are confidential except
as otherwise agreed by the parties, with the exception of public policy
disputes that often facilitate in full public view. Agreements to engage in
most ADR processes typically have a confidentiality clause. Mediation conducted
in Michigan court proceedings is expressly made confidential by MCR
2.411(C)(5). As of mid 2010, the confidentiality provisions under MCR 2.411 are being considered for revision. SCAO August
2010 Report on MCR 2.411.
When the ADR process is not ordered under MCR
2.411, the parties must provide for confidentiality by agreement. Where disputes are mediated before or during civil litigation, MRE
408 and FRE 408 make settlement offers and conduct and statements made in settlement negotiations (i.e., during the ADR process), not admissible. These rules, however, do not require the exclusion of evidence otherwise discoverable merely because it is
presented in the course of settlement discussions.
The Michigan mediation rule expressly provides that a
mediator may not disclose anything that transpired during the mediation to the
trial judge except the date of completion of the process, who participated in
the mediation, whether settlement was reached and whether further ADR
proceedings are contemplated. MCR
2.411(C)(3). Best practice in drafting the mediation agreement should
provide the express requirement that the mediator make his or her report to the
court in writing with copies to the parties, so that the parties can be assured
this rule has been observed. Note that this rule does not permit the mediator
to report to the trial court whether any party appeared to be acting in good
faith.
Likewise, communications made during ADR processes
convened by a federal court are protected from disclosure, 28 USC 652(d), although the scope of the protection is not as broad as under the Michigan Court Rules. See discussion in §19.19.
There is a wide and divergent body of scholarship and
experience with regard to the philosophical, psychological and ethical bases
for the manner and purpose under which a third party acts to mediate or
facilitate disputes. This short summary cannot do justice to any of them. On
the other hand, several of the principal models are relevant to structuring
processes and giving the neutral clear direction as to the neutral’s role.
For two or three-party disputes, as distinguished from
public policy disputes, there are at least two principal philosophies with
regard to the function of the process and the neutral’s approach to conducting
the process.
The dominant theoretical model, which has been
incorporated in the Michigan State Court Administrator Office’s curriculum for
training neutrals, is the facilitative model. It is based on the principle that
it is up to the parties to reach their own decision and the best result from
the disputants’ point of view will be reached with minimal input from the
neutral as to likely outcomes if the dispute were adjudicated. The neutral is
there to facilitate the disputants’ negotiations and not to add anything to
those negotiations. This does not mean that the neutral cannot challenge the
parties’ assumptions or raise issues for the parties to consider. This approach
puts an emphasis on direct discussions between the parties.
By comparison, the evaluative model permits or asks the
third party neutral, at an appropriate time, to give the neutral’s valuation of
a likely outcome or range of outcomes in order to assist the parties to better
determine the merits of their positions and likely outcomes if the dispute were
resolved in court. As a variation, the neutral is asked to take an active role
in fashioning a solution. Proceedings under Michigan’s case evaluation rule,
MCR 2.403, are purely evaluative. In factually complex disputes, there can be
an advantage to using a process in which a third party neutral has a
fact-finding function. For example, the role of a third party neutral in
developing Superfund or Part 201 allocation recommendations is often as a
neutral fact finder.
It is important when structuring the ADR process that the
parties discuss and then reach an understanding with the neutral whether the
neutral is to have an evaluative role.
The Western District of Michigan’s ADR rules differentiate
between Voluntary Facilitative Mediation and Early Neutral Evaluation. See WD
Mich LCiv R16.3 and 16.4, respectively.
A process is any procedure agreed to by the parties
and the third party neutral by which the parties will work to resolve their
dispute. Figure 19-1 illustrates the spectrum of ADR processes. For further
discussion see SCAO’s Taxonomy of
Alternative Dispute Resolution Processes. The most common ADR procedures are as follows.
Convening (also called conflict assessment)
involves the use of a neutral third party to help assess the causes of the
conflict, to identify the persons or entities that would be affected by the
outcome of the conflict, and to help these parties consider the best process
(for example, mediation, consensus-building, or a lawsuit) for them to deal
with the conflict. The convener may also help get the parties ready for
participation in a dispute resolution process by providing educating the
parties on the nature of the selected process.
Facilitation or Consensus Building is a
process used to help a group of people or parties have constructive discussions
about complex or potentially controversial issues. The facilitator helps the
parties set ground rules for these discussions, promotes effective
communication, elicits creative options, and keeps the group focused and on
track. Facilitation can be used even where parties have not yet agreed to
attempt to resolve a conflict.
Mediation is a process in which a neutral third
party (the mediator) assists disputants in reaching a mutually satisfying
settlement of their differences. Mediation is voluntary, informal, and
confidential. The mediator helps the disputants to communicate clearly, to listen
carefully, and to consider creative ways for reaching resolution. The mediator
makes no judgments about the people or the conflict (unless requested under the
evaluative model), and issues no decision. Any agreement that is reached must
satisfy all the disputants. The Michigan Court Rules define mediation as a
“process in which a neutral third party facilitates communication between
parties, assists in identifying issue, and helps explore solutions to promote a
mutually acceptable settlement.” MCR
2.411(A)(2). A mediator has no authoritative decision-making power. Id.
In Michigan, the terms mediation and facilitation are
often used interchangeably to describe what is known generally elsewhere as
mediation.
Case Evaluation is an ADR process created by MCR
2.403 in which a three-person panel hears presentations by litigants and provides a written evaluation of the value of the case. If all of the parties
accept, a final judgment is entered on all claims asserted in the case in the
amount of the evaluation. If one or both parties reject, the rule provides for
the imposition of sanctions in certain circumstances. The evaluation is limited
to a monetary amount, so it is not well suited to resolving disputes seeking
any form of injunctive or other equitable relief. Although case evaluation
panels are usually assigned by the office carrying out a circuit court’s case
evaluation program, see generally MCR
2.404, in more complex disputes the parties often stipulate to specific panel members who the disputants believe have expertise in the subject matter involved in the dispute. This has the effect of giving the parties more confidence in
the case evaluation award when made. This deviation from usual procedure should
be undertaken after obtaining an appropriate court order.
Early Neutral Evaluation is an evaluative ADR
process initiated early in a case, often at the direction of the court, in
which the third party, who has experience or expertise in the subject matter of
the suit, meets with the parties and may receive presentations, after which the
neutral provides the parties with an evaluation of the likelihood of success
and likely ranges of damages. The expectation is that an early evaluation from
a knowledgeable, objective expert will prompt the parties to take a more
realistic approach to settling their dispute. There are many variations on this
process, including use of the process to simplify or focus issues. In some
cases, the neutral may withhold the evaluation from the parties and proceed to
mediate the conflict, revealing the evaluation only if the mediation is
unsuccessful.
Mini and Summary Jury Trials involve
advisory trial proceedings. In the first case, the dispute is presented to a
third-party neutral. A summary jury trial involves impaneling an advisory
jury to whom the parties make an abbreviated presentation of their cases. The
neutral or the jury, as the case may be, then deliberates and renders an
advisory verdict. Where the credibility of key witness is central to a case,
such a trial may provide valuable guidance to counsel about the likely success
of their case.
Arbitration is an adjudicatory process in which a
person or panel, other than a judge, controls pretrial procedures, takes
evidence, and renders an award which is the equivalent of a verdict. To be
enforceable in a court the award must be entered as a judgment in a court of
competent jurisdiction. MCL 600.5025 There are narrow grounds for appeal and the parties may agree that no appeal will be permitted. Although some treatises discuss “non binding” arbitration, any nonbinding process is some form of mediation and that the term
“arbitration” is best used only for a binding process. Arbitration offers
several advantages over adjudication by a court. First, the parties can assert
more control in defining the procedure. Second, arbitrations are private
although awards usually are entered as judgments by a court, making the terms
of the outcome public. The process generally is quicker than court proceedings
and is intended to be, and usually is, less expensive than litigation.
The American Arbitration Association (AAA) is a major
arbitration service provider but there are many other service providers. The
parties are free to fashion their own approach to arbitration but, unlike other
ADR processes, the parties cannot withdraw from arbitration once it has been
commenced. Because arbitration is binding, the parties should be very familiar
with the Michigan Arbitration
Act and the Federal
Arbitration Act (discussed in § 19.19)
before agreeing to arbitration. In addition, because AAA’s arbitration rules
are often incorporated into agreements whether or not the AAA is the
arbitration services provider, parties should be familiar with these procedures
before agreeing to be bound by them.
Practitioners should review the arbitrator’s authority to
compel discovery and attendance of witnesses under any applicable statute and
the procedures under which the arbitration is conducted. For example, the
arbitrator’s authority is broader under the Federal Arbitration Act and
narrower under the AAA’s procedures. The parties’ agreement to arbitrate may
specify discovery obligations as a matter of contract.
If arbitration may be subject to international rules,
particular care should be taken because these procedures may be very different
from the American norm.
Med-Arb is an ADR process in which the parties
agree in advance to commence mediation but to continue to binding arbitration
of any issues not resolved by mediation. A different neutral generally is used
for the arbitration after the mediation is completed. This process offers the
advantage of achieving a final resolution if mediation does not fully settle
all matters. It is not often used in environmental disputes.
The most common approaches in Michigan for environmental
disputes are mediation (both evaluative and facilitative models), third-party
neutral fact finding, and facilitated rule or policy development.
Most two-party environmental disputes utilize mediation at
some point, whether initiated by the parties or ordered by the court. Participants
usually include attorneys, party representatives and experts. Where the
facilitative model is employed, the third-party neutral is usually one
individual. Where the parties seek evaluative input, it is not uncommon to use
a three-person panel. In some cases, the mediation follows the facilitative
model but if the parties do not reach an agreement, the neutral is asked to
provide an evaluation either as a general advisory number or in the form of an
evaluation to be accepted or rejected by the parties. In the latter case, the
evaluator receives the acceptance or rejections from each party in confidence. Only
if both sides accept does the neutral disclose the parties’ responses. This
way, if only one party accepts, it does not lose any bargaining position by
having its acceptance disclosed to the other side.
Because many environmental disputes deal with not just a
specific sum certain but often involve definition of the respective parties’
duties and liabilities after the settlement, neutrals in environmental
mediations may play a more active role than in more typical tort or contract
disputes where the principal dispute is usually money. For this same reason,
environmental mediation may result in numerous sessions conducted over a
substantial time period.
A. In General §19.7
Because many environmental disputes occur outside of the
legal system and because ADR processes are consensual in nature, federal and
state procedural law has little relevance to many disputes where no lawsuit has
been filed. With the exception of state and federal law relating to
arbitration, federal and state law and procedure related to ADR are limited to
those circumstances where ADR has been ordered by a court during litigation.
a. Alternative
Dispute Resolution Act of 1998 §19.8
The Alternative Dispute Resolution Act of 1998, 28
USC 651 et seq. gives Congress’ encouragement for proactive use of
ADR processes in the district courts. The ADR Act makes clear that the district
court can employ a wide range of ADR processes for the cases before it. 28
USC 652. The statute requires the district court to develop process for making neutrals available and requires that the court insure that neutrals so
identified are appropriately trained and qualified. 28
USC 653. The ADR Act provides for the referral to arbitration with the parties’ consent of cases where less than $150,0000 is in dispute and provides for the powers of the arbitrators. 28
USC 654-655. The statute provides for the method of entering judgments on and appealing from arbitration awards delivered under this act. 28 USC
657.
Confidentiality protection for communications for ADR
processes convened under the federal Act is not as broad as under Michigan law.
See discussion in preamble to Confidentiality in Federal Alternative Dispute
Resolution Programs, 65 Fed
Reg 83085 (Dec. 29, 2000).
Congress has established national law covering
arbitration. Federal Arbitration Act, 9 USC 1 et
seq. The Act applies to any contract involving interstate commerce and, where it applies, it generally preempts any contradictory state law. Southland Corp v Keating, 465
US 1; 104 S CT 852 (1984). It may be enforced in state or federal court. See generally, Drahozal, Federal
Arbitration Act Preemption It applies where the parties by contract have agreed to arbitrate the issues that are subject to dispute. A party may go to court under the Act to force the other party to a contract to arbitrate. When the arbitrator has made an award, a party may move to have the award
confirmed by the court. There are limited grounds to challenge an arbitration
award, 9 USC 10(a), and are generally limited to fraud, arbitrator partiality, undue influence, certain procedural misconduct, and actions beyond the arbitrator’s authority. The most recent U.S. Supreme Court decision on this issue, Hall Street Associates, Inc v
Mattel, Inc, 552 US 576; 128 S Ct 1396 (2008), held that the review provisions of the FAA were exclusive. This has already spawned numerous lower court decisions providing varying views on its holding. There
is substantial and continuing case law development under this statute that
should be reviewed by the practitioner before proceeding under the statute.
In 1990, Congress amended the Administrative Procedure Act
to expressly sanction “negotiated” rule making. The Negotiated Rulemaking Act, 5
U.S.C. 561-570 allows
a federal agency engaged in rulemaking to establish a collaborative process to
engage with stakeholders in developing regulations. Negotiated rulemaking (or
RegNeg) is a voluntary process for drafting regulations that brings together
those parties who would be affected by a rule, including the government,
chartered as an advisory committee under the Federal Advisory Committee Act, 5
USC App 2, to reach consensus on some or all of its aspects before the proposed rule is formally published. An impartial facilitator is used to promote intensive discussions among the participants, who operate as a committee open to the
public. Regulations drafted using this process tend to be more technically
accurate, clear and specific, and less likely to be challenged in litigation
than are rules drafted by the agency alone without input from outside parties.
Closely related to the Negotiated Rulemaking Act is the
Federal Advisory Committee Act, 5
USC App 2 which prescribes standards for the establishment and operation of
such committees. For a description of process under FACA, see the EPA Website here. A
good example of this process is the development of the “All Appropriate
Inquiry” Rule, 40
CFR Part 312, which established due diligence standards under CERCLA. 42 USC 9601(35)(B) and 42 USC 9607. See
EPA’s website for the RegNeg
process followed in developing those rules.
The Federal Rules of Civil Procedure provide for
appointment of masters whose role can include assistance in settling disputes. FR Civ P 53; Advisory Committee Notes, 2003 Amendments, subdivisions (a)(1) and (b). The
procedural issues involved in appointing a master and defining the master’s
role are beyond the scope of this chapter. When the court or parties consider
such an appointment, practitioners should carefully read Rule 53, its comments
and an appropriate treatise.
The Comments note a particular need to define the scope of ex parte
communications (if any) to be permitted when the master is acting in the role
of a mediator. Comment, subdivision (b). For a general
discussion of issues related to appointment and use of masters under Rule 53,
see Federal
Judicial Center, Reference Manual of Scientific Evidence (2d ed) (2000) ; ALI-ABA, The
Art and Science of Serving as a Special Master in Federal and State Courts (November
1 - 2, 2007).
In some cases, federal courts have appointed special
masters under Rule 53 to address complex environmental or scientific issues and
to perform fact-finding. See, e.g., Votteler & Moore, The Use of
Masters in Environmental Litigation, ABA-Natural Resources & Environmental
Journal, V.
12, No. 2, p. 126 (1997). These efforts have not always been successful when an appellate court concludes the trial court has used to special master to avoid making its own independent determination. See, e.g., Sierra Club v Clifford, 257 F3d 444
(5th Cir 2001).
There are two basic references for use of ADR processes in
federal courts: the Judicial Conference of the United States, Civil
Litigation Management Manual. Ch.V.B, Alternative Dispute Resolution Procedures
(2001), and Niemic, Sienstra & Ravitz, Guide
to Judicial Management of Cases in ADR (Federal Judicial Center, 2001). These are general references. Court rules and procedures give the individual judge broad discretion on how he or she may respond to a request for an order directing the parties to mediation. Thus these reports from the Federal Judicial Center are largely advisory.
While ADR is actively supported by judges in both the
Eastern and Western Districts of Michigan, only the Western District has a
formal ADR plan and process. See WD Mich
L CivR 16.2 et seq. The Western District’s ADR programs are set forth in detail on their website. The Western District
has an ADR department and maintains a roster of mediators and arbitrators. See
or contact the ADR Department, 616-456-2381 or adr@miwduscourts.gov.
Under the rules of the Western District, the attorneys for
the parties are personally responsible for the mediator’s fees. WD
Mich LCivR 16(g).
The only specific reference to an ADR procedure in the
Eastern District’s local rules is to provide for the referral of cases to the
Wayne County case evaluation process under MCR
2.403. ED Mich
LCivR 16.3.
There is also guidance from the Federal Judicial Center on
ADR processes in the circuit courts of appeal. Niemic, Mediation
& Conference Programs in the Federal Courts of Appeals: A Sourcebook for
Judges and Lawyers, Second Edition (2006). The Sixth Circuit by local rule, 6 Cir R 33(c), requires that all cases be reviewed for their suitability for further settlement discussions. If so, the rule permits the Sixth Circuit to initiate a settlement conference to consider the possibility of settlement and the simplification
of issues and any other matters which may aid in the handling of the
disposition of proceedings.
The OMB and Council on Environmental Quality have reminded
federal environmental agencies of the federal government’s strong commitment to
ADR. Environmental Conflict
Resolution Policy Memorandum Joshua Bolten,
Director, Office of Management and Budget, and James L. Connaughton, Chairman,
Council on Environmental Quality November 28, 2005. There is also strong official support for ADR at the
Department of Justice. Reno,
Promoting the Broader Appropriate Use of Alternative Dispute Resolution Techniques.
Links to the relevant policy statements on ADR from EPA,
DOJ and other agencies are included in the reference section at the end of this
chapter. While in general the principal federal environmental agencies express
strong support for ADR at the headquarters level, it is not always evident that
regional offices have embraced ADR processes.
Federal consent decrees typically contain dispute
resolution provisions. In general they do not contemplate ADR processes. See
generally examples in dispute resolution sections of pending federal consent
decrees .
As noted in §19.7, unless the
ADR process is part of a dispute which is pending in court, the court rules
discussed in §19.17 through §19.19 will not apply unless the parties
expressly incorporate some part of the rules’ provisions into the agreement to undertake
the ADR process.
Although common law arbitration has not been completely
displaced in Michigan, only arbitration agreements that conform to Michigan’s
Arbitration Act (MAA), MCL
600.5001 et seq., are enforceable in court. That statute provides for enforceable arbitration when the parties have agreed in writing to arbitrate
and their agreement provides that a judgment of any circuit court shall be
rendered upon the arbitration. MCL 600.5025 Such an agreement is valid, enforceable and irrevocable, except on
grounds as exist at law or in equity for the rescission or revocation of any
contract, with regard to any controversy arising under the contract not
expressly exempt from arbitration by the terms of the contract. MCL 600.5001. MCL 600.5011 divests parties of the power to unilaterally revoke agreements made pursuant to MCL 600.5001. The statute provides that if a party fails to appear before the arbitrator after due notice, the arbitrator may nevertheless proceed to
hear and determine the matter submitted for decision upon the evidence produced
by the other party. MCL
600.5011 A court may render judgment on the award even if relief given is such that it could not or would not be granted by a court of law or equity in
an ordinary civil action. MCL 600.5025
Pursuant to MCL 600.5021, the arbitration proceeds under the Michigan Court Rules. The arbitration court rule is MCR 3.602. See Konal v Forlini, 235 Mich App 69; 596 NW2d 630 (1999). If the court’s jurisdiction over the parties has not already been established by the filing of a civil complaint, a party who wishes to compel or stay arbitration or otherwise seek relief
must first file a complaint. MCR
3.602(B). Once the court has jurisdiction, the parties may move for relief.
If there is a question whether there is a binding agreement to arbitrate, the
trial court must summarily try the issue. Id. The arbitrator has the
power to issue subpoenas to require attendance of witnesses at the arbitration
hearing and may also permit, on terms designated by the arbitrator, the
depositions of witnesses who cannot be subpoenaed or are unable to attend the
hearing. MCR
3.602(F). Beyond providing that an arbitration award may be made by a
majority when there is an arbitration panel, the court rules say little about
procedures before or at the arbitration hearing, leaving the parties
considerable room to tailor the proceedings. An arbitration award must be filed
with the clerk of the court within one year after the award was rendered and
may be confirmed by the court unless vacated, corrected or modified. MCR
3.602(I). The procedures and grounds for vacating, modifying and correcting
awards are set forth at MCR
3.602 (J) and (K). See Konal. A complaint to vacate, modify or
vacate an award must be filed within 21 days after the date of the award and,
in most cases, a motion for relief must be filed within 91 days of the award. MCR
3.602(J) and (K).
If the parties agree to arbitrate but fail to comply with
the requirements of MCL
600.5001, the parties are said to have agreed to common-law arbitration. Frolich
v Walbridge-Aldinger Co, 236
Mich 425, 429; 210 NW 488 (1926). What characterizes common-law arbitration is its unilateral revocation rule. 4 Am Jur 2d, Alternative Dispute Resolution, § 94, p 148. This rule allows one party to terminate
arbitration at any time before the arbitrator renders an award. Wold Architects and Engineers v Strat, 474
Mich 223; 713 NW2d 750 (2006) (common law arbitration was not preempted by the MAA). The
Wold case involved two aborted attempts at arbitration. Because the
arbitration agreement did not provide that the award could be entered as a
judgment, it fell outside the MAA, giving the recalcitrant party the right to
back out of two different arbitration agreements.
The lesson from Wold is that any person who turns
to arbitration to resolve an environmental dispute must be careful to do so by
a writing which complies with the MAA, particularly its requirement that the
arbitration award may be entered as a judgment in court.
2. Case
Evaluation under MCR 2.403 §19.17
Case evaluation under MCR
2.403 does not provide an attractive ADR process except for the most
mundane of environmental disputes for several reasons. First, the technical
nature of environmental disputes means the outcome may often hinge on issues
outside the knowledge of the regular civil litigation attorney serving on
regular case evaluation panels. Second, the complexity of the issues is often
unsuited to explanation in the short time allotted to typical case evaluations.
On the other hand, a court, if requested by the parties, will appoint a special
panel and a special time for case evaluation that can greatly increase the
efficiency of the case evaluation approach. Third, environmental disputes
frequently seek equitable or non-monetary relief. The court rule provides that
the case evaluation monetary award encompasses all claims and relief sought. A
party seeking damages and equitable relief will lose its right to equitable
relief if it accepts the award.
In 2000 the court rules were amended to include MCR
2.410, which provides that all civil cases are subject to ADR. Under the rule, ADR means any process designed to resolve a legal dispute in the place
of court adjudication. The rule envisions the court will enter an order
directing the parties to undertake a specified ADR process. MCR
2.410(C). Counsel and representatives of the parties must attend and must have “information and authority adequate for responsible and effective participation” for all purposes including settlement. MCR
2.410(D). A failure to attend may be sanctioned with an order of dismissal. MCR 2.410. If the parties wish to utilize mediation rather than some other ADR process, mediation normally proceeds under MCR
2.411.
4. Mediation
under MCR 2.411 §19.19
Once mediation is ordered under MCR
2.411, the mediator is directed to promptly confer with the parties to
schedule the mediation, considering factors like the need for limited discovery
before mediation, the number of parties and issues, and the necessity for
multiple sessions. MCR
2.411(C)(1). The mediator may require the parties to submit summaries, documents or other information before the mediation or bring them to the session. Id.
The rule instructs the mediator to meet with counsel and
the parties, explain the process, and then get to work. MCR
2.411(C)(2). The mediator is directed to discuss the facts and issues
involved. The mediation continues until a settlement is reached or the mediator
determines that settlement is not likely. The rule recognizes that settlement
may take several mediation sessions. MCR2.411(C)(2).
Within seven days after the conclusion of mediation, the
mediator is required to advise the court, “stating only the date of completion
of the process, who participated in the mediation, whether settlement was
reached, and whether further ADR proceedings are contemplated.” MCR
2.411(C)(3). This rule makes clear that the mediator is barred from sharing
with the judge any information or opinion about the parties or their positions
if the mediation does not yield a settlement.
If the case is settled through mediation, counsel are
required to prepare and submit the documents to conclude the case within 21
days. MCR
2.411(C)(4).
The rule provides that the costs of mediation shall be
divided between the parties on a pro rata basis unless otherwise agreed
or ordered. The court has the power to enter an order enforcing payment of the
fee. MCR
2.411(D).
The Michigan State Court Administrative Office (SCAO),
Office of Dispute Resolution, is an excellent resource for ADR information. The
Office of Dispute Resolution is an active proponent of ADR, oversees
implementation of circuit court ADR plans, establishes training criteria for
neutral, and keeps statistics on ADR outcomes. Numerous ADR forms can be found
on the Office of
Dispute Resolution website. ADR staff can provide a great deal of help and
assistance on ADR issues as implemented under the court rules.
For many years DNRE has used facilitated stakeholder
processes to address a number of public policy and rulemaking issues including
streamlining the air permit-to-install process in 2004, addressing issues with
the implementation
of Part 201 in 2006, and revising the Part 201 rules. Some divisions within
DNRE have also instituted informal dispute resolution processes. See, for
example, AQD
Permit to Install Dispute Resolution Process. The Attorney General’s office
has been willing to enter into mediation of environmental disputes in
appropriate circumstances as well. In addition, the administrative law judges
from the State Office Administrative Hearings and Rules who hear contested case
hearings under NREPA strongly support ADR processes.
Environmental disputes pose powerful challenges to civil
societies. More often than not, they are complex and hard fought affairs that
present urgent and practical problems to be solved. Frequently, they are laden
with contested scientific and technical information and important collisions of
social and economic values. Inevitably, they are also political fault lines in
larger ideological wars.
Environmental conflicts often tend to be broad in their
scale of impacts and laden with values that seemingly at odds. Environmental
disputes are also emotional. The parties may include both “conscience” as well
as ”beneficiary” constituents. At issue in many cases are matters of culture,
economics, justice, health, risk, jobs, power, uncertainty, and professional
and bureaucratic politics. Elections are sometimes won or lost because of
environmental conflicts. In some cases, the outcomes of specific conflicts have
inter-generational or global impacts.
Adler, et al., Managing Scientific and Technical
Information in Environmental Cases, at 5.
USIECR 2000. The US Institute for Environmental Conflict Resolution is a federally
chartered program for assisting all parties in federal environmental disputes. It
maintains a roster of reviewed environmental
dispute resolution and consensus building professionals as well as providing
independent conflict management service to federal
and other stakeholders in environmental disputes. Their research and
consultative service can be invaluable for disputes involving federal action.
Environmental disputes, like many technical disputes, have
special problems in evidence, experts, regulations, values and policy:
· Multiple
scientific and technical problems. Few disputes turn on a single problem in
a single field of science. The problem can begin in engineering, move to
chemistry, then to geology and then to biology or toxicology and then to risk
assessment. Disagreements between parties happen all along the way to defining
the environmental problem and thereafter the choices for solution multiply. The
ADR professional can often provide significant assistance in structuring the
scientific analyses that the parties need to complete in order to define a set
of solutions.
· Organizing
the data into a structure for decision. Testing information is often
collected by multiple organizations, usually under standard protocols, but is
not always quality controlled and shared among all the parties. This leads to
one-upmanship with the most current data as well as distrust among the parties.
Agreements on data sharing and quality control can contribute to more
consistent evaluations of problems and solutions by all parties.
· Identifying
the regulatory issues and the discretionary ranges available. Structure and
organization of the issues through an ADR process will often assist the parties
in exploring their options for settlement.
· Identifying
the value issues for the parties. Environmental issues are often highly
value laden. Identifying those values can provide options for satisfying both
parties because their goals can be significantly different. Environmental
disputes are not always the zero sum game they are often perceived to be.
Other environmental disputes include resource allocation
(such as fishing rights), facility siting and expansion (such as landfills),
the environmental impact and disparate impact of permitting, and governmental
action decisions.
The normal two-party dispute involves contamination in
some media, an assignment of responsibility, options for cleanup, options for
correction of the results, methods of dealing with the other impacts including public
impacts, and future actions by both the responsible parties and the affected
parties towards the property and people involved. Other chapters of this
Deskbook detail the specific requirements of the statutory scheme for the
media, the contaminant, and available remedies as well as common law liability
and general remedies available. The use of the ADR process in such disputes has
some common characteristics:
· Identifying
a common technical base of data on the identity of contaminants, how much
has been distributed, who may have been exposed, what the risks may be under
various scenarios and the competing assessments for joint review. In other
words, what are the numbers and where did they come from? EDR professionals
often help work through methods for mutual assurance of quality data, exchange
of data under appropriate restrictions, and methods for third-party data
assessment as a way of establishing a negotiation and problem description floor
for the parties.
· Identifying
and qualifying remedial goals for both sides to any environmental dispute. Mediators
often are employed to work with each side in a dispute to refine and quantify
the goals for a resolution. That process often yields an opportunity to work
through tradeoffs between goals.
· Hearings
and an opportunity to be heard. Particularly in cases of individual
exposure to contaminants, a neutral forum provides significant benefits for
working through the emotional component of the claim with an experienced
neutral party to assist, hear, and acknowledge the concerns beyond the
financial which drive many contamination disputes.
· Strategy
and solutions. Contamination remediation is almost always a long-term
process. Short-term solutions for making contamination go away (take it
somewhere else), buy my house (get me out of here) and insure my health forever
are not often within the financial resources of the parties. Crafting solutions
which proceed stepwise to provide short-term action to remove hazards, and then
to assess injury, and then to compensate injury often employ neutrals to
monitor the process and provide a way to keep the parties together.
An innovative use of ADR was documented by Paul Zugger in
the Michigan Environmental Law Journal, 26
Mich Env L J No 1, p8 (2008), reviewing MDEQ v Vreba-Hoff Dairy LLC, where facilitative mediation with a former judge resolved the permit and application of the prior consent judgment. The mediator assisted the parties in segregating technical issues on compliance activities from those related to
reporting, fines and costs. In addition, the mediator was asked to evaluate and
propose settlements on specific issues. Those proposals along with the agreed
portions resulted in a settlement
The passage of the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) (aka Superfund) in 1980, 42
USC 9601 et seq., created a massive strict liability scheme for cleanup of sites with few, but more often hundreds to thousands of contributing parties. The Manual for Complex Litigation, Fourth, available from the Federal
Judicial Center [www.fjc.gov] devotes a full
chapter to litigation and management of the technical issues under Superfund. The
statute encourages EPA to notify parties, after assessing their potential
liability, with the goal of having them conduct and pay for the problem
assessment (the Remedial Investigation and Feasibility Study (RI/FS)), and the
ultimate remedy. Groups of these Potentially Responsible Parties (PRPs) found
that one of their first problems was finding a rough justice method for paying
for the long process of cleaning up the site.
One innovative solution for many sites was the use of
third party neutral “allocators” to function as a database consultant, or
facilitator, or mediator up to acting as a private special master for assessing
shares of liability for the cleanup. Functions of the allocator include:
· Develop
the evidence database. This included all kinds of transactional information,
particularly at landfills: manifests, shippers, driver interviews, depositions
accounting records, and Christmas card lists.
· Assemble
and review that evidence for accuracy or assumptions.
· Organize
group process for review of the evidence by parties for their own evidence.
· Presentation
of papers on group issues.
· Decisions
on shares.
· Organization
into PRP groups for remedy performance: majors work parties, majors cash
parties, tiered buyouts with tiered releases, de minimis.
· Agency
assistance or obstacles.
· Gore
Factor allocation assessments and description.
· Remedy
differentiation and toxicity differentiation.
While the cost and cleanup standards to which the remedy
will aspire have been of great concern to PRPs, the conflicts and
representation issues have also received some attention. Michigan
Ethics opinion R-16 (1993) describes the multiple representation conflict during allocation at Superfund sites and resolves the issues by allowing multiple
representations within classes of PRPs (major, de minimis, or owner or
operator) as long as the clients consent. The neutral allocator facilitates
this representation by providing at least one degree of separation for
decisions on each client’s share.
Mediating the decisions on remedies has not been
successful at either the state or federal level.
Michigan has a history of engaging in facilitated
discussion of policy proposals. DNRE Remediation Division (RD) recently
undertook an effort the redefine and merge the Cleanup (Part 201) and Tank
(Part 213) programs in a two-year process of stakeholder meetings. The effort
had the direct involvement of senior managers and the DNRE Director along with
a stakeholder group of over 50 participants. DNRE engaged a facilitator to
staff both the 201 Workgroup as well as the Environmental Advisory Council. The
minutes and recommendations have been posted on DNRE
website.
There are other examples of collaborative partnerships
between DNRE and private parties. The Michigan Chemical Council led an effort
to clean up a backlog in air permits. The Memorandum of Understanding (MOU)
developed by DNRE and the group specified the terms of access and review by
independent consulting engineers paid by the group and supervised by DNRE. The
project reduced the backlog dramatically. A value-stream mapping project was
undertaken jointly by DNRE Air Division and a group led by the Michigan
Manufacturers Association (MMA). The re-engineered process cut approximately
66% off the time required to process a permit. One particular innovation was
the use of an informal pre-meeting between the permit engineers and the
facility engineers to generally define the information and documentation
necessary prior to submitting the application.
Critical to both efforts was the direct involvement and
commitment by the DNRE director senior managers in DNRE, and senior management
in the regulated community.
A party seeking to resolve a dispute through ADR processes
should consider the following questions in an effort to decide whether the time
is right for ADR, the suitability of part or all of the dispute for resolution
by ADR, and the structure of a suitable ADR process.
· What
interests predominate? – legal, factual, substantive, procedural, psychological,
emotional (Superfund practitioners can attest to the emotional component of
liability and allocation disputes under CERCLA).
· What
does the client really want to achieve? – which is not necessarily what the
client framed at the outset of the dispute.
· What
ADR process would be best suited to accomplish that end? A meditation may yield
an apology, arbitration will not.
· Are
the parties’ interests suitable for settlement?
· Are
there rights or principles that one party wants to establish as a matter of law
or precedent?
· Does
this type of case usually settle?
· Is
a speedy or inexpensive resolution desired?
· Are
there issues that could be resolved by summary disposition?
· Can
relief be obtained through ADR that could not be achieved in litigation?
· How
will the parties’ interests be advance by settlement?
· What
are the obstacles to negotiation; can ADR overcome them?
· Are
the relationships between counsel or the parties such that a third party
neutral may be needed to permit discussions to occur?
· Are
one or both parties’ expectations unrealistic and would the parties benefit
from evaluative ADR?
· Does
litigation or some other alternative offer a party a better outcome than a
negotiated settlement?
· Do
both parties appear willing to pursue settlement?
· Will
ADR offer a substantial cost savings to the parties?
· What
is the amount of the dispute?
· What
are likely trial and discovery expenses?
· What
economic losses will be incurred or opportunities foregone during the pendency
of the dispute?
· Are
complex factual issues central to the dispute?
· Can
an ADR structured to help the parties reach a consensus on key factual issues?
· Would
a third party neutral with expertise be preferable than a judge or jury for
assimilating and deciding complex factual matters?
Before initiating a facilitation process where public
disputes are being resolved, a very important consideration, once a participant
has suggested ADR, is defining those who have a real interest in the outcome
and whose support is essential to resolve the dispute with finality. These
interested parties are usually described as stakeholders. For example, in a
controversial zoning dispute, the stakeholders may be everyone in the community
in addition to the developer and various city bodies and employees. In public
policy disputes, the stakeholders often are selected and participate on a
representative or typicality basis. The committee engaged in the EPA’s AAI
RegNeg process included, for example, representatives from organizations
representing banks and lenders, real estate developers, environmental
consultants, and environmental regulators. Often the first step in initiating a
facilitation process is a conflict assessment to identify the spectrum of
issues, the stakeholders and their respective interests, conditions needed for
a productive process, whether the process is ripe, and the prospects for
settlement. Most of the questions posted above that are relevant to other ADR
processes, modified for context, are also relevant to this conflict assessment
inquiry.
The discussion in this section assumes for simplicity a
mediated two-party dispute. Multiparty disputes will tend to follow the same
steps, albeit with more complexity. Facilitation of public policy disputes and
convening processes may differ significantly and are tailored to the specific
circumstances.
In a mediation process
a typical sequence to initiate the process is:
· The
parties identify those issues subject to resolution, the form of ADR process
desired and the qualifications and style of the third party neutral(s).
· If
the dispute involves issues beyond a relatively simple dispute over money
damages, and there is not a preexisting agreement to mediate or arbitrate, it
is good practice to enter into a written understanding covering the parameters
of the mediation or arbitration, including issues to be resolved and the scope
of relief that may be awarded. When the mediator or arbitrator is engaged, this
understanding typically will be expanded into a more formal agreement to which
the mediator will be a party.
· The
parties identify and interview candidate mediators.
· Generally
candidate mediators are requested to perform preliminary conflict checks based
on a disclosure of the identity of parties to cut short the selection process
if there are obvious conflicts.
· The
parties tentatively select a mediator and a full conflict check and disclosure
are made. The parties may want the conflict check to include not only the
parties and their counsel but also related businesses, key witnesses and
experts.
· Once
conflicts are cleared, parties work with the mediator to finalize the
parameters of the mediation, which should be memorialized in a written
agreement between the parties and the mediator. Key topics include:
· Issues
in dispute.
· Fees
– amount, allocation between the parties, whether the engaging attorneys are
responsible for the mediator’s fees (recommended), advance payments, minimum
charge, and cancellation charge.
· Schedule
of submissions and meetings.
· Time
for completion, particularly if specified in a court order.
· Persons
required to be in attendance and scope of settlement authority (usually full
settlement authority).
· Ex
parte contact between the mediator and counsel and their clients before and
during mediation.
· The
need for and scope of written submissions.
· Confidentiality.
·
Keep in mind that where one party is a governmental entity,
public disclosure laws such as the Open Meetings Act and the Freedom of
Information Act, and political considerations may put limits on the scope of
confidentiality to which the governmental party may be willing or legally able
to agree.
·
Keep in mind that the confidentiality protection under EPA’s
policy as discussed in §19.8 is
not as broad as under the Michigan Court Rules.
· Incorporation
of standards of conduct for the mediator.
· If
mediated under MCR
2.411, incorporation of the limited reporting requirement to the court on
the completion of the mediation.
· Mediation
style – whether or not evaluative, and whether the mediator will render a case
evaluation award under MCR
2.403 if settlement is not achieved.
· Acknowledgment
that neither the mediator nor the mediator’s law firm, if the mediator is a
lawyer, is not acting as attorney for either side, that statements made by the
mediator in the course of the mediation do not constitute legal advice, and
that the parties have been advised to seek and rely on the advice of their own
counsel.
· It
may be appropriate to provide or require a waiver by the parties of any future
conflict if the mediator and the mediator’s law firm are retained after
completion of mediation as counsel by a party in a matter unrelated to the
subject matter of the mediated dispute.
· A
provision barring the parties from taking any form of discovery or testimony
from the mediator or seeking any statement or finding by the mediator related
to any factual or legal mater at issue in the dispute.
· Boilerplate:
execution by counterpart, law applicable to the agreement, entire agreement,
binding on parties, their representatives and those present during the
mediation.
Mediation agreements are typically executed in advance of
the mediation session. The mediator may have the agreement also signed or
acknowledged by those who attend the mediation session so it is clear that
terms such as the confidentiality provisions are binding on those who attend.
If the mediation is being conducted in federal or state
litigation, much of the subject matter of the agreement may be incorporated
into a court order
There are special considerations for arbitration
agreements. Often the arbitration agreement is part of a agreement executed
long before the dispute and “arrives” as a given to counsel engaged to
represent the parties in the dispute. As a general observation, standard
arbitration clauses often are unsuited to the exact dispute that has arisen. Where
possible when the parties are faced with a boilerplate arbitration clause, they
are well advised to amend the contract containing the clause to provide for a
procedure more appropriate. Drafting an appropriate arbitration agreement is
outside the scope of this treatise. There are numerous treatises and articles
on drafting arbitration clauses. See, e.g., Domke on Commercial
Arbitration, 3d, Vol I, pt III (West 2010) ; AAA, Drafting Dispute Resolution
Clauses, A Practical Guide (2007); Townsend, Drafting Arbitration Clauses: Avoiding the 7 Deadly Sins; ABA Dispute Resolution Journal Vol.
58, No. 1 (Feb/April 2003) Gattuso,
Drafting Arbitration Provisions for LLC Agreements.
For mediation under MCR
2.411 each circuit court’s ADR clerk is required to maintain a list of
mediators, MCR
2.411(E), who meet the qualifications set forth at MCR
2.411(F). When the parties have not stipulated to a mediator, the court is
required to select a mediator from the roster according to the court’s local
ADR plan. The plan directs the ADR clerk to assign mediations in a rotational
manner that assures as nearly as possible that each mediator is assigned
approximately the same number of cases. MCR
2.411(3). In environmental cases, we recommend that the parties agree upon a mediator who can bring suitable environmental expertise. In most cases, a random draw for a court’s ADR list is less likely to result in the best mediator for an
environmental dispute.
The Environmental Law Section of the State Bar of Michigan
maintains a roster
of lawyers holding themselves out as mediators with expertise in environmental
disputes.
The American Arbitration Association maintains a roster of
mediators as well as arbitrators. http://www.aaamediation.com/.
AAA’s office in Michigan is 27777 Franklin Rd # 1150,
Southfield, MI 48034 (248) 352-5500.
The Michigan State Bar Journal and Lawyer’s Weekly contain
advertisements by lawyers holding themselves out as arbitrators and mediators.
Word of mouth among environmental lawyers is often a
productive source of recommendations.
The Michigan Court Rules establish standards for training
and qualification of mediators certified under MCR
2.411(F). These include completing a training program approved by the State
Court Administrator. MCR
2.411(F)(2). The rule permits certifications of other individuals with specialized experience or training upon application to the circuit court clerk. MCR
2.411(F)(3). These qualifications apply only to individuals wishing to be listed on mediator rosters developed pursuant to circuit court ADR plans. The rule establishing specified qualifications for mediation does not apply when the
parties stipulate the third party neutral. MCR
2.411(B)(1). The court must appoint a mediator stipulated to by the parties so long as the court’s trial schedule will not be affected. Id.
When selecting a facilitator, remember that you will want
someone who:
- serves as a facilitator rather than a lecturer,
- remains impartial, shows respect for all opinions, and
does not use the position to influence the outcome of the discussion,
- creates opportunities for everyone to speak,
- helps participants look for common ground, but avoids
pushing for a consensus,
- keeps the conversation moving and on track by occasionally
summarizing points, and bringing the discussion back to the topic if it
wanders unproductively,
- raises views that have not been considered by the
disputants,
- asks questions that challenge old assumptions, and
- deals effectively with any problems or conflicts that
arise.
The Michigan Court Rules direct the State Court
Administrator to develop standards
of conduct for mediators “designed to promote honesty, integrity, and
impartiality.” MCR
2.411(G). These standards are under review in 2010. SCAO
June 2010 Proposal for Revising Michigan’s Standards of Conduct for Mediators.
The ABA has adopted policies addressing a variety of the
issues arising from the mediation and arbitration process. See generally, the
ABA’s Section of Dispute
Resolution website. Three organizations, the ABA, ACR and AAA adopted a
common Model
Standards of Conduct for Mediators.
The American Arbitration Association has adopted a code of
ethics for AAA arbitrators. The Code of Ethics for Arbitrators in Commercial
Disputes was originally prepared in 1977 by a joint committee consisting of a
special committee of the American Arbitration Association and a special
committee of the American Bar Association. In 2003, an ABA Task Force and
special committee of the AAA revised the Code. Both organizations approved and
recommended both the original 1977 Code and the 2003 Revision.
When an attorney serves as a third party neutral in any
ADR process, there are several ethics issues to be considered.
First and foremost, in acting in an ADR role is the lawyer
acting as a lawyer for the parties? Although the subject of much debate ten
years ago, the settled view today is that when the lawyer is acting as a
mediator, he or she is not acting as an attorney by providing mediation
services. The Michigan Supreme Court does not consider provision of mediation
services as the practice of law because the court rules specifically permit
non-lawyers to serve as mediators. MCR
2.411(F)(2). See also MRPC 2.2, Comments: “The rule [governing lawyers acting as intermediaries] does not apply to a lawyer acing as arbitrator or mediator between or among parties who are not clients of the lawyer, even where the lawyer has been appointed with the
concurrence of the parties. In performing such a role, the lawyer may be
subject to applicable codes of ethics such as the Code of Ethics for
Arbitration for Commercial Disputes . . . .”
The ABA Section of Dispute Resolution has adopted the
position that mediation services are not the practice of law. ABA
Section of Dispute Resolution, Resolution on Mediation
and the Unauthorized Practice of Law (adopted February 2, 2002).
There may be duties and standards of conduct arising under
Michigan’s Rules of Professional Conduct that apply to a lawyer who acts as a
mediator, but they will not arise out of or pertain to the attorney client
relationship.
A very important caution attaches, however and is
specifically addressed in the new MRPC 2.4 which both
defines the attorney serving as a neutral and addresses the caution for
informing unrepresented parties of the lawyer’s role. The attorney mediator can
undertake actions that could well be determined to amount to the assumption of
the lawyer’s role, for example, by drafting substantive provisions of any
settlement agreement that the parties reach or offering legal advice during the
mediation that falls outside of the context of evaluative statements made
during the process. As another example, a statement to a disputant that a
settlement would receive a specific tax treatment might be heard very differently
by the party than the statement that the party would be well advised to consult
his or her attorney as to the tax consequences of the settlement. This risk
increases if one or both parties are unrepresented by counsel. The new Rule
mandates the explanation of the role. Best practice is to have the ADR
agreement specifically acknowledge that the mediator is not acting as an
attorney for any party. An additional signed acknowledgement at the outset of
the first mediation session may also be warranted.
Michigan’s Code of Judicial Conduct provides that “a
judge should not act as an arbitrator or mediator, except in the performance of
judicial duties.” Canon
5(E). The Canon, however, does not address how it might apply to a retired judge who regularly sits as a visiting judge.
The second issue is how conflict of interest rules apply
when a lawyer is asked to serve as a mediator in a dispute concerning a present
or former client or if a party to the ADR process later seeks to engage the
lawyer in general or to represent the client with regard to some matter that
was subject to or related to the dispute subject to the ADR process.
A conflict of interest is a dealing or relationship that
might create an impression of possible bias or could reasonably be seen as
raising a question about impartiality. The mediator has a duty to disclose all
actual and potential conflicts of interest reasonably known to the mediator. Michigan’s
Standards of Conduct require that if a potential conflict is identified the
mediator must decline to mediate unless all parties choose to retain the
mediator. If all parties agree to mediate after being informed of conflicts,
the mediator may proceed with the mediation unless the conflict of interest
casts serious doubts on the integrity of the process, in which case the
mediator must decline to proceed. SCAO
Standards of Conduct for Mediators, Sec. 4. Other codes of conduct have similar requirements. The Michigan Court Rules provide for disqualification of case evaluators under MCR 2.403(E) on the same grounds as for disqualification of a judge pursuant to MCR
2.003. Although this rule does not expressly refer to mediators under MCR
2.411, it seems likely that if an issue of disqualification were to arise,
a court would look to MCR
2.403 for guidance.
Michigan Rule of Professional Conduct MRPC
1.12(a) provides that a lawyer shall not represent anyone in connection
with a matter in which the lawyer participated as an arbitrator or other
adjudicative officer, subject to limited exceptions pursuant to MRPC 1.12(c). This rule does not address mediators. The SCAO’s Code of Conduct for Mediators,
however, does address mediators. Without the consent of all parties, a mediator
shall not subsequently establish a professional relationship with one of the
parties in a related matter or in an unrelated matter under circumstances that
would raise legitimate questions about the integrity of the mediation process. SCAO,
Standards
of Conduct for Mediators, Sec. 4.
Because the SCAO’s Standards apply as a matter of course
only to mediations under MCR
2.411, the parties to a mediation agreement are well advised to incorporate
those standards into their agreement with the mediator.
Prepare for ADR recognizing several truths. First, neither
you nor the other side would be pursuing settlement if one side’s position were
strong enough to prevail outright. Because neither side has a “lay down hand,”
persuasion not dominance is more likely to yield the best outcome in the
settlement process. Second, the ADR process gives an opportunity to exercise
persuasion directly on the decision maker on the other side, unfiltered by
opposing counsel. Likewise, your client will be forced to listen to others
about the merits of the case. Third, the odds of settling will be increased to
the extent the other side gets what it needs; the trick is figuring out how to
satisfy the other side’s bottom line needs while maximizing what your client
achieves. Finally, you have engaged a third-party neutral who can help identify
outcomes that work for both and can help each side persuade the other to reach
a settlement that offers something to both. Whatever the facts, law, and
subject of the dispute, mediation preparation and participation by the client
and its attorney that does not reflect and take advantage of those truths will
be inadequate.
In poker terms, if you are dealt four aces, you do not
have to analyze how your opponent bets, you lay down your hand and rake in the
pot. In litigation with a lay down hand, you move for summary judgment and
claim victory. Your client is engaged in settlement, however, because the
client does not have a lay down hand. You and your client must learn a little
about the other player’s hand and how he or she bets if you want to
intelligently maximize the possible outcome. Utilized well, the ADR process
will serve this function. This process requires a focus on the other player. In
ADR processes this focus involves listening carefully and asking questions to
understand the other side’s position better and to more realistically assess
the strengths and weaknesses of your hand.
Further, unlike poker, settlements mostly are not
“zero-sum” games where whatever one party gains the other must lose. This is
particularly true when litigation costs, opportunity costs and management
distraction are factored in. Effectively engaged, ADR processes offer the
promise of persuading your opponent to accept a solution beneficial to you and
to identify a settlement that offers both sides more than could be achieved in
litigation.
It cannot be overemphasized that there is a difference
between winning an argument and persuading the other side to adopt your point
of view, as anyone who reflects on his or her own response to losing an
argument can attest. Stereotypically lawyers are trained to win arguments, not
persuade. Clients come to most disputes convinced they are right and intent on
focusing on imposing that view on the other side. Effective participation in
ADR processes may require a reorientation of both the lawyer’s and client’s
instinctive approach.
These truths mean that preparing and engaging in the ADR
process requires:
·
Helping your client clearly identify what it really needs to
achieve.
·
Probing the other side to learn what the other side needs to
achieve.
·
A willingness and open mind to listen to the other side, to
acknowledge the other side’s legitimate interests, and to consider creative
solutions.
·
Use of the facts and law to persuade the other side of the
strengths in your case and the weakness in their case.
·
Identifying solutions that address each side’s interests.
· Persuading
the other side that outcomes satisfactory to your client will also be satisfactory
to them.
There is nothing about the foregoing that is unique to ADR
processes; it applies to all negotiations. The points is that the parties have
engaged a third party neutral because the parties and their counsel have been
unable to get it done by themselves or expect that a third party neutral will
make it easier, quicker or more productive to achieve a settlement.
Certainly, in preparing yourself and your client for
mediation, mastery of the facts and the law is important. This is what lawyers
are trained to do. But unlike a motion for summary disposition or a trial, this
preparation will not dictate the outcome. The lawyer and the client must
identify how the law and facts work for and against each party. Because the ADR
process (except arbitration) will not yield a binding determination, the facts
and law will not dictate the outcome; they are the materials to be used to
persuade the other side to accept a settlement that works for your client.
A settlement achieved through ADR becomes a contract
between the parties in which the compromises made by each side are
consideration supporting the compromises made by the other. When achieved
outside of litigation, settlements are enforceable according to standard
contract principles. No writing is required, although obviously highly
recommended. When a settlement is achieved in litigation, the court rule MCR
2.507(G) requires either that it be placed on the record in open court or that it be reduced to a writing and subscribed by the party against whom the agreement is offered or its attorneys. Fear v Rogers, 207
Mich App 642; 526 NW2d 197 (1994); Kloian v Domino’s Pizza, 273
Mich App 449; 733 NW2d 766 (2006) (settlement agreement not signed at bottom, is not “subscribed” and not enforceable). Thus when a settlement of a litigated matter is achieved as the product of an ADR process, the parties and their
third-party neutral must exercise the discipline to reduce the material terms
to a writing to be signed by the parties before the ADR process is
terminated. The Kloian case makes clear that courts will enforce
settlement agreements where a subscribed (i.e., signed at the bottom)
writing includes the material terms, even though a more complete or formal
document was intended to follow.
DOJ Office of Dispute Resolution: http://www.usdoj.gov/odr/.
Policy on the Use of Alternative Dispute Resolution, and
Case Identification Criteria for Alternative Dispute Resolution: http://www.usdoj.gov/crt/adr/notice.html.
EPA Final ADR Policy,
published at 65 Fed. Reg 81858 (12/27/2000): http://www.epa.gov/adr/epaadrpolicyfinal.pdf.
Key EPA websites on ADR are:
USEPA web portal: EPA ADR Web Portal http://www.epa.gov/adr/
EPA, Compliance and Enforcement: http://www.epa.gov/compliance/civil/adr/index.html
Use of ADR in
Compliance and Enforcement : http://www.epa.gov/oecaerth/civil/adr/usingadr.html.
EPA, Conflict Prevention and Resolution Center: http://www.epa.gov/adr/index.html.
EPA Conflict Prevention
and Resolution Center Documents: http://www.epa.gov/adr/cprc_documents.html
EPA Region 5 has two dispute resolution experts on staff: http://www.epa.gov/cgi-bin/r5experts.cgi?category=Compliance%20and%20Enforcement&subcategory=Dispute%20Resolution
DOT general policy Interim Statement of Policy on
Alternative Dispute Resolution, 65 Fed Reg 69121 (11/15/00): http://consensus.fsu.edu/ADR/PDFS/USDOT_DR_Policy.pdf
(applicable to the Coast Guard before it was transferred to the Department of
Homeland Security).
Office of Collaborative action and Dispute Resolution: http://www.doi.gov/cadr/
Bureau of Land Management: http://www.blm.gov/wo/st/en/prog/more/adr.html
Many organizations have worked in conflict resolution in
environmental and public policy disputes. Their websites contain a great deal
of valuable information and reports. A few of the leading organizations listed
below. Any student of conflict resolution and environmental disputes will find
a visit to their websites worthwhile. The publications available will provide
valuable insights and much practical advice on how to move through an
environmental dispute to a successful resolution.
RESOLVE. RESOLVE is a non-profit organization dedicated to
advancing the effective use of consensus building in public decision making. RESOLVE
specializes in mediating and facilitating complex issues in the areas of
energy, drinking water, rivers and watersheds, health and biotechnology,
environmental quality, natural resources, and community land use and
transportation and in helping individuals and organizations build their
capacity to engage diverse interests in collaborative problem solving. http://www.resolv.org/
U.S. Institute for Environmental Conflict Resolution. “The
U.S. Institute for Environmental Conflict Resolution, an independent and
impartial federal program, has a mission and history of helping people find
workable solutions to tough environmental conflicts . . . anywhere in the U.S.”
http://www.ecr.org/
National Policy Consensus Center – Policy Consensus
Initiative (PCI). PCI builds and supports networks that provide states with
leadership and capacity to achieve more collaborative governance. http://www.policyconsensus.org/
Federal Interagency ADR Working Group. Congress and the
President established the Working Group to coordinate, promote, and facilitate
the effective use of ADR throughout the federal government pursuant to the
Administrative Dispute Resolution Act of 1996, Publ. Law 104-320 and 5 USC 571 et
seq. www.justice.gov/adr/pdf/adra.pdf,
and a White House Presidential Memorandum. http://www.adr.gov/1998.05.01.CLINTON.pdf
Association for Conflict Resolution (ACR). The Association
for Conflict Resolution is a professional organization dedicated to enhancing
the practice and public understanding of conflict resolution. http://www.acrnet.org/
ABA Section of Dispute Resolution. The Section's objectives
include: providing information and technical assistance to members,
legislators, government departments and the general public on all aspects of
dispute resolution; studying existing methods for the prompt and effective
resolution of disputes; adapting current legal procedures to accommodate
court-annexed and court-directed dispute resolution processes; activating state
and local bar involvement in dispute resolution; and conducting public and
professional education programs. http://www.abanet.org/dispute/home.html
State Bar of Michigan,
ADR Section. http://www.michbar.org/adr/
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