Brief History of Alternative Dispute Resolution in the United States

Abstract

[...]mediation is most frequently mandated for those disputes . . . which courts despair of handling well and whose continuation is commonly thought to affect those not at the bargaining table." While mediation may entail regular meetings between the parties, conciliation may be as informal as a telephone call. [...]conciliation usually assumes that the parties have already achieved some form of reconciliation and that the relationship has been mended, requiring only that the details of the matter be resolved.

Editor's note: This issue of Cadmus focuses on the power of organizational innovation to address social problems and enhance social effectiveness. The development of law marks the evolution of civilization. Survival of the fittest is the law of the jungle based on strength alone. As society developed, rule by the governing principle of physical strength on the battle field was progressively supplanted by the rule of social authority as determined by those in power. Monarchy, dictatorship, plutocracy have gradually given way to principles of justice as rule of law and administered government through legislation and the courts. The settlement of disputes based on rationality and a sense of fairness marks a still higher evolutionary stage in which the authority of the state is progressively replaced by reason and values. The growing prevalence of various mechanisms of alternative dispute resolution denotes different stages ofthat evolutionary advance.

Although widely known for its propensity for litigation, the USA has one of the world's most advanced and successful systems for settlement of disputes outside the formal legal system through mechanisms of mediation and arbitration. More extensive use of this system internationally and by other countries can dramatically enhance the speed and quality of social justice globally. Usage within the USA varies widely. About 11 percent of civil cases in Northern California are settled by mediation, compared to around 2 percent in eastern New York and 0.5 percent of civil cases in Europe. About 10 percent of divorce cases in Germany are submitted for mediation.

The growing complexity of modern life has multiplied the burden on the legal justice system, rendering it increasingly inadequate and ineffective. In year 2000 the Italian government was required to pay euro600m to litigants claiming damages caused by trial delays. The potential importance of mediation is illustrated by the fact that at the present pace India will not clear its current backlog of cases until 2330. This article is by a very experienced American trial and arbitration attorney and practicing mediator who has extensive experience working with this system.

The wide range of innovative mechanisms commonly employed to settle disputes outside the courtroom is illustrative of the larger potential for organizational innovation in other fields designed to enhance governance nationally and globally. Alternative Dispute Resolution (ADR) in the common law tradition has its origins rooted in English legal development. As early as the Norman Conquest, legal charters and documents indicate that English citizenry instituted actions concerning private wrongs, officiated by highly respected male members of a community, in informal, quasi-adjudicatory settings. In some instances, the king utilized these local forums as an extension of his own legal authority; rather than adjudicate a suit via the more formal king's court, the king would simply adopt the decision of a local, but highly respected layperson without ever "reaching the merits" of the suit, creating one of the first forms of arbitration. In some sense, then, common law ADR has been around for centuries.

In the United States, commercial arbitration existed in the early Dutch and British colonial periods in New York City. "Pilgrim colonists, convinced that lawyers threatened Christian harmony, scrupulously avoided lawyers and courts, preferring to use their own mediation process to deal with community conflicts." When disagreements occurred, a body of male members of the community would hear claims, determine fault, assess damages, and ensure that the parties reconciled with one another. For much of the colonial period, these informal arbitrations were the norm.

Shortly after independence and the creation of a new government, ADR found its place in a number of applications, albeit sporadically. For instance, in the Patent Act of 1790, Congress provided for an arbitration system of competing patent claims. In such a dispute, the Act authorized the creation of an adjudicative board, consisting of one member appointed by each patent applicant and another by the secretary of state. Decisions by the board were binding and, should an applicant opt out of this arbitration, the other applicant's patent would be summarily approved.

While these early attempts at ADR were essential to its development in the United States, ADR did not receive formal institutionalization until the late- 19th Century. For instance, "[i]n 1898 Congress followed initiatives begun a few years earlier in Massachusetts and New York and authorized mediation for collective bargaining disputes." Special mediation agencies, like the Board of Mediation and Conciliation for railway labor and the Federal Mediation and Conciliation Service ("FMCS"), which are still operative today, were formed to carry out negotiations regarding employment. At this stage of ADR's development, it was perceived of less as an alternative to litigation and more as a tool to avoid unrest, strikes, and the resultant economic disruption.

Early in the 20th Century, states began taking a concerted interest in systematic ADR as a litigation alternative. In the 1920s, over a dozen states passed modern arbitration laws and Congress enacted a federal cognate, the Federal Arbitration Act. All of these laws significantly improved the nature of U.S. arbitration by:

* Making agreements to arbitrate future disputes legally valid and enforceable and revocable only as any contract could be revoked;

* Closing the court to parties to an arbitration agreement by requiring them to comply with their agreement;

* Authorizing courts to enforce arbitration awards; and

* Authorizing courts to appoint arbitrators and otherwise expedite arbitration when one party has failed to move forward with the agreement to arbitrate.

While all of these were positive developments, the most innovative was the expressed authorization for courts to enforce ADR remedies.

With the enactment of statutory ADR systems, lawyers and entrepreneurs realized the importance of providing nongovernmental voice to ADR-related policymaking. In 1926, the American Arbitration Association ("AAA") was formed to provide guidance to arbitrators and parties as to ADR methods and time-tested procedures. Using the collective expertise of individuals in the field, AAA developed and promulgated rules on the proper methods for arbitration. Over the years, AAA has become the premier organization promoting and nurturing business arbitration in the United States.

Throughout the 20th Century, ADR grew in popularity as an alternative to the litigation process. At the governmental level, state and federal governments began utilizing ADR in a number of programs. For instance, during the 1970s, the Department of Health, Education, and Welfare was designated as the administrator of the Age Discrimination Act of 1975, to resolve claims of age discrimination in federal workplaces. To facilitate speedy resolutions of the matters, the Department enlisted the help of FMCS to mediate complaints under the new law, a process that became routine in 1979. At the academic level, the 1980s brought significant interest from legal experts in the uses of ADR in a variety of fields. Universities and law schools began introducing courses and degrees in ADR related topics. By the turn of the 21st Century, an American Bar Association survey showed that the majority of law schools had some form of ADR related program, including extracurricular competitions.

Today, arbitration exists at all levels of the U.S. legal profession. Law firms regularly employ retired judges or AAA certified attorneys with ADR expertise to offer mediation, negotiation, and arbitration services to individuals and businesses. In 1979, retired Judge Warren Knight of California started the Judicial Arbitration and Mediation Service, an organization dedicated to providing law firms, businesses, and individuals with access to judges willing to serve in ADR capacities. And in 1995, database providers, like Martindale-Hubbell, began publishing routinely-updated directories of ADR practitioners, their firms, and areas of practice, affording more individuals access to ADR related services. Thus, ADR as a legal system has become firmly entrenched in the United States.

1. Forms and types of ADR in the United States

ADR comes in many iterations in the United States, ranging from highly formalized, quasi-judicial proceedings to informal, conference room conversations. In each of its forms, ADR offers U.S. clients and practitioners numerous options to obtaining non-litigation relief. The types of ADR available in the United States can be divided into three general categories: adjudicative, evaluative, and facilitative.

1. 1 Adjudicative ADR

In an adjudicative ADR proceeding, a quasi-judicial facilitator, called the "neutral," serves as the adjudicator or decision maker. This participation by an outside, impartial third-party is often desirable to parties unwilling to negotiate, yet preferring to avoid formal litigation. Additionally, while adjudication though the U.S. judicial system "always results in a binding decision," adjudicative ADR can provide various results, whether "binding, non-binding, or advisory."

Arbitration: Arbitration is a form of adjudicative ADR that is generally conducted by a single arbitrator or a panel of three. Typically, arbitration is used in situations where the parties cannot agree on the facts of a dispute or the conflict is purely monetary. Arbitration is also regularly utilized in cases in which a matter is highly technical, requiring an expert decision. Arbitration proceedings are often much more formal than other forms of ADR, mirroring adversarial, court-like proceedings. Often attorneys participate, witnesses are called, evidence is taken, motions are filed, and post-hearing briefs are submitted. Where the parties have previously contracted for arbitration, decisions are binding. Depending on the agreements entered into by the parties before arbitration and the relevant law of the jurisdiction (federal or state), an arbitration decision may be appealable to the court system.* Parties to arbitration must agree on applicable rules of procedure, and the amount of discovery allowable. In situations in which the parties have agreed to a three person panel, most often each party will select its own arbitrator and then agree upon a third neutral.

Neutral Fact-Finding: Another form of adjudicative ADR is neutral fact-finding. In situations in which parties to a dispute cannot agree on the facts or technical expertise is essential to their determination, the parties may employ a third-party to inquire into the underlying particulars of a case. This form of ADR may be employed at the outset of a matter or during litigation; indeed, some trial judges may order the parties to appear before a neutral factfinder to resolve factual issues. In some jurisdictions, a final decision maker, like a trial court judge, may be bound by the neutral fact-finder's determinations.

1.2 Evaluative ADR

The second category of ADR, evaluative ADR, is a process in which lawyers and litigants present their version of a particular case and receive feedback on the strengths and weaknesses of their claims and arguments. In many of these proceedings, the parties are not yet willing to discuss a settlement and an evaluation serves to provide context as to each party's bargaining power, both to reaffirm particular beliefs and to dispel unreasonable expectations.

Peer Evaluation: In peer evaluation, attorneys for each party appear before a neutral attorney or panel of attorneys experienced in the subject matter of the dispute, and present the case. In many instances, the panel may offer recommendations for argument development, may point the parties to issues not previously considered, and provide recommendations for settlement. Even if a settlement is not reached, the parties' decisions will be informed by these recommendations throughout any future litigation.

Lay Evaluation or Summary Jury Trial: Lay evaluation or summary jury trial ("SJT") is essentially an expedited and abbreviated jury trial. Attorneys for both sides of the dispute present to a pool of possible jurors opening arguments, a summation of the evidence one witness each and closing arguments. On this basis, the "jury" deliberates and returns a verdict, with time for the parties to then poll the panel. This proceeding allows parties to get a sense of how an actual jury may resolve a case.

Judicial Evaluation: Judicial evaluation is similar to an SJT, but in place of a jury it utilizes a retired judge who only provides feedback to the parties on the merits of a dispute.

Specialist or Expert Evaluation: This proceeding is often employed where the conflict raises highly technical issues, requiring opinions from experts in the field, such as in construction, computer design, or biomedical technology matters. The parties may agree beforehand that the expert's determination of the issues is definitive and this may be used as common ground in a settlement discussion or trial. The informality of the proceeding may engender open dialogue between the parties and the experts, without the pressure to "one up" one another.

1.3 Facultative ADR

In facultative ADR, the neutral does not render a binding decision nor does he or she actually "reach the merits" of a dispute. Instead, a neutral serves more as a referee or advisor to the parties, to encourage discussion, dialogue, and settlement. The three most common forms of facultative ADR are mediation, conciliation, and consensus building.

Mediation: Mediation is the least adversarial form of ADR. The mediator helps the parties identify real issues, frame the discussion, and generate options for settlement. The goal of mediation is to provide a "win-win" resolution, enabling both parties to obtain a satisfactory remedy. Mediators come from a number of different backgrounds, but most are practicing attorneys, familiar with the underlying subject matter of a conflict. Mediation can be utilized at all stages of a dispute, whether before or during trial or throughout the appellate process.

Of all the types of ADR, "[mediation has emerged as the primary ADR process in the federal district courts."* Most federal jurisdictions offer some form of mediation and many require it. Mandatory mediation either requires parties to engage in mediation in certain cases or creates disincentives for parties to decline it. The cases in which parties are often required to participate in mediation include family law cases such as divorce proceedings, farm mortgages cases, collective bargaining disputes, agricultural producer-distributor bargaining, and medical malpractice cases. In fact, "[mediation is most frequently mandated for those disputes . . . which courts despair of handling well and whose continuation is commonly thought to affect those not at the bargaining table." Even when parties are not required to engage in mediation, courts may nonetheless have incentives to encourage mediation, such as imposition of costs or the leveling of sanctions on parties that opt-out. Some courts have even gone so far as to find that failure to engage in mediation deprives the court of subject matter jurisdiction to hear the parties' case.1"

Conciliation: Conciliation is very similar to mediation, with much less formality. While mediation may entail regular meetings between the parties, conciliation may be as informal as a telephone call. Moreover, conciliation usually assumes that the parties have already achieved some form of reconciliation and that the relationship has been mended, requiring only that the details of the matter be resolved.

Consensus Building: Consensus building may be thought of as mediation on a large scale where a large number of parties are involved and representatives may be charged to appear and obtain decisions on behalf of their constituencies. Consensus building may proceed over an extended period of time. In these situations, because of the sheer number of parties involved, individuals may not attend the actual deliberations, but send a representative.

2. Conclusion

While ADR as a system has gone through a number of iterations in the United States, the ultimate purpose of the many types of ADR remains similar to that of the early common law equivalents - to provide parties with a satisfactory resolution of a conflict short of formal court proceedings. It is for this purpose that ADR continues to be an important and popular option for individuals and businesses in the United States.

Footnote

* For a discussion of the intricacies of appellate proceedings for arbitration see Ian Macneil, Richard Speidel and Thomas J. Stipanowich, Federal Arbitration Law: Agreements, Awards & Remedies Under the Federal Arbitration Act (1994).

Footnote

* Elizabeth Phlapinger & Donna Stienstra, ADR and Settlement in the Federal District Courts 4 (1996).

[dagger] See Blackmon-Malloy v. United States Capitol Police Bd., 338 F. Supp. 2d 91 (D.D.C. 2004).

Footnote

Notes

1. Valerie A. Sanchez, Towards a History of ADR: The Dispute Processing Continuum in Anglo-Saxon England and Today, 1 1 Ohio St. J. on Disp. Resol. 1, 16 (1996).

2. Jerome T. Barrett, A History of Alternative Dispute Resolution: The Story of a Political, Cultural, and Social Movement 41 (2004).

3. Cole, McEwen and Rogers, Mediation: Law, Policy, and Practice § 5:1 (3d ed.).

4. Kimberlee K. Kovach, Mediation: Principles and Practice 6 (2d ed. 2000).