One of the most thoughtful and helpful projects undertaken for the arbitration community is the “Protocols for Expeditious, Cost Effective Commercial Arbitration,” produced by the College of Commercial Arbitrators with many of our world’s top arbitrators participating in the drafting and editing.
One key section that I want to highlight is focused on counsel’s preparation. It is true that in some respects we all know that counsel does the best it can with the hand that it is dealt. At the same time you want to be at your peak representing your client. Preparing for arbitration is not to be seen as the same as litigation. Counsel who approaches them as the same will potentially be injuring your client’s chances of success. It is important to have someone on your arbitration team who has an in depth familiarity with the arbitral process, its nuances, and how you can use this dynamic towards your and your client’s benefit. A couple of recommendations from the College have to do with the following – some obvious, others maybe not so much:
- Counsel should only participate when they have the time, the substantive knowledge, and the arbitral experience to represent their clients. Beyond substantive knowledge many in the field point to having the expertise to support an expeditious and cost effective arbitration.
- Counsel needs to be familiar with the rules that are governing the arbitration so they can focus on streamlining the matter. If you have read some of my earlier blogs you know that I am not advocating doing away with discovery, or moving towards documentary exchange as is customary in most European practice areas. What I am advocating is that counsel know that arguing for more depositions than necessary or setting up a hearing that gets bogged down is not going to go well with the decision makers.
- Know the law, know the arbitration procedures, and know your arbitration panel in terms of what are they looking for to assist in their decision. Give them what they want, not what you necessarily think they want. This does not mean you should compromise at all in putting on a complete and thoroughly persuasive case for your client.
One other point that is worth covering here is a recommendation that arbitration counsel, inside counsel, and the client have an agreement about the case, its scope, its estimated cost and time.
It is important for counsel, as in any attorney-client relationship, to carefully advise the client about the process, what is entailed and what they could expect.
Way too many disputes arise out of misunderstandings between counsel and client, only to have counsel to try to reverse something when a client learns about it too far down the road.
Best if you can have a separate engagement around the arbitration that outlines the expectations of counsel and client.
In later blogs I will address selecting the arbitrators(s), cooperation and agreement with opposing counsel, and a review of limiting discovery.
In mediation parlance the “All the Above” question has been debated like the chicken and the egg – except most mediators would say that humanity has been mediating even before the chicken. The question pertains to the manner and fashion that some mediators adhere to a particular style of practice – almost in a fundamentalist way. Why should consumers of mediation care?
In an ABA Commercial Mediation Survey taken a number of years ago with Fortune 200 Corporate Counsel, there was pretty clear consensus that the parties should play a role in the design and selecting the style of mediation required to resolve the matter. What are the key types of mediator styles?
Transformative – there is some agreement that a mediator who practices in this sphere is not going to direct the parties towards settlement. The mediator is going to ask questions and allow the parties interests, intentions, and needs to move them in the direction they need to go – if that does not include a settlement, then so be it. It is believed that the party’s autonomy and interdependence is of greater import than a deal in the moment. This method or style has traditionally been used in many family and employment disputes where there are palpable emotions on the table and the mediator recognizes that she is not going to be fixing those issues any time soon. Rather by empowering the parties to assume responsibility and recognizing their concerns, issues, needs so that everyone is hearing them, then maybe there is a chance for a transformative shift to take place in the relationship.
Facilitative – this is probably a well-known mediator style where the neutral focuses the parties on a particular course. For example, most 40 hour basic mediator training courses focus on the larger concepts of Interests, Options, and Settlement. A good facilitative mediator is keenly attuned to drawing out the interests, re-framing them in ways that all parties hear the concerns, and in so doing opens up a larger conversation around a vision and possibility for settlement. A good facilitative mediator has a strong and direct manner to keep the mediation process moving forward, will likely be prepared to shuttle between parties, and bring the parties back together.
It is the question of whether the mediator should move into an evaluative role that sets an Analytical or Evaluative Mediator a part from the Transformative or Facilitative described above. In many jurisdictions it is believed that once a mediator steps into the evaluative role they are no longer neutral and are serving in the role of counsel. This would certainly be problematic for the myriad of non-attorney mediators that are practicing across the US today, but also poses some concern for attorney-mediators.
The Analytic mediator is probably, in my experience, what parties involved in complex business settlement negotiations and mediation require. The ABA survey mentioned above bears this fact out. It is important to emphasize that the Analytical Mediator does not forfeit any of the processes discussed above. I propound an all the above approach that usually builds into an Analytic approach if the parties are interested and want a non-binding opinion.
I have spent a fair amount of time in some early writings that suggest ways to avoid having to move into an analytic or evaluative stage. However, in a party self -determined matter, if counsel and the parties request an evaluation or analysis of the dispute, I am prepared to give them one. I will only go there after exploring all other possibilities for settlement.Steve Shapiro
Over the past 2 weeks I have had the privilege of viewing the most beautiful colors and shapes of coral that make up the Great Barrier Reef — nearly the size of the US Pacific Coast.
I also had the opportunity to travel with my family to Port Arthur, one of the first penal colonies in Australia where the British established their rule in the late 1800′s. Both diverse regions showed an aspect of life where certain species have a greater capacity to live among predators, which is true at the Reef as well as the Penal Colony.
What’s it got to do with Dispute Resolution?
We know that dispute resolution involves a colorable claim either through a breach under a contract, a grievance, tariff violation, and possibly a policy decision. If we use the contract violation as a backdrop we know that there are multiple dynamics at play in gaining the deepest understanding of the case.
The original contract formation, financing, specifications, periods of performance, payment terms, who the project teams are, the management structures, corporate cultures all play into understanding the fullest context of the dispute. And understanding the dispute itself, the perceptions, the documentary evidence, depositions, expert testimony, – - all shape the fullest context surrounding the matter.
The Barrier Reef helps you put time into perspective. Many of the formations may exceed 100 or more million years of age. A dispute that you are involved in may be only 1-5-10-25-or 60 years old is still considered a young dispute relative to the ageless aspect of this natural wonder. How is this helpful?
Gaining insight into the timeline of events surrounding a claim is a good technique to cross reference the span of time with the key facts and events.
If you have witnessed the beauty of the coral you learned that it is alive; there are hundreds and thousands of species of fish living in the coral beds— all bearing electric colors that light up this under water universe. A dispute’s time line can be seen as represented to the parties as a set of bright and clear foundations (corals) forming the strength and bonds of the working relationships. Take the time to appreciate the history and stories that have evolved over time. Then weave the dispute around the history in a nonjudgmental and neutral manner.
Yes, I know you’re probably thinking this guy Shapiro lost his marbles at the Reef. Well, don’t worry; since we still have the penal colony to discuss. When the British set up Port Arthur in Tasmania, Australia, they did so because the cost of housing inmates in the British Isles was way too costly to the Crown. The idea that ensued was establish a community at Port Arthur where the inmates can learn a trade, be rehabilitated and move back into society. This came at an additional price as solitary confinement and breaking each prisoner’s spirits was a key to the transforming process.
This left a harsh and bitter taste in the prisoners, but it was this combined impact that brutalized soldier/guard and prisoner. Ok how does this relate to dispute resolution? In every conflict one side will typically feel wronged. Yet in the Australian context, the inmates went on, with their guards, to establish one of the more progressive, peace loving countries on the planet today.
A dispute today may be an answer for tomorrow. We all need to be careful to not stay too focused on the pain that is there (and I am not minimizing an individual’s experience), but also stay tuned to the beauty that can ensue by pushing through.
Australia is a beautiful, dynamic country – definitely worth the trip whether you are in the ADR business or not.Steve Shapiro
In this one man’s opinion, this question is critical. If we are going to succeed in becoming energy independent, as well as a resource to Western Europe during trying times with Russia, and stewards over the earth; ensuring a safe and toxin free environment for generations that follow, we must understand ADR.
The question is critical in this one man’s opinion if we are going to succeed in becoming energy independent, a resource to Western Europe during trying times with Russia, and stewards over the earth ensuring a safe and toxin free environment for the generations that follow.
Why is ADR critical in accomplishing these goals? The obvious answer, yet challenging aspect, are the multiple opinions, economics, and politics surrounding each and every energy decision. All one has to do is look at the tension around the decision-making process surrounding the Keystone Pipeline. Whatever your predilection is, if we are going to be making sound decisions in the future around the development and allocation of important resources then all views must be respected, heard, and understood. There are important and heartfelt views on topics such as tar sands oil production, or shale gas production – - but without some forum to work through the issues how are we going to get there?.
I remember a water rights dispute that I was mediating in Southern California where there was a very difficult trade-off being negotiated between water flow for fish, and water flow for human health as the local water districts required the water for agriculture and human consumption. Yes it was a lengthy negotiation, yes there was a somewhat manageable group of people involved in the negotiations, and yes there was a clear administrative and litigation appeals process, but when participants clearly listened and understood the difficult issues there was a sense of decency in working through the trade-offs. We see efforts like this all the time. Yet how can it become the norm on larger and somewhat more challenging matters?
These types of development questions are usually termed as “upstream” matters. The “downstream” questions are equally as important. For example, we know that there are millions if not billions of dollars being spent on lobbying on all sides of the coal issue. The EPA continues to promulgate regulations that pose stricter emission standards on coal production. However, unless there is an economic solution to care for the towns and employees whose livelihoods have depended on coal production, finding the right transitional model is going to be difficult. This stands true for the mines, the transportation contracts, and production/generating facilities, and all the workers and investors whose lives are tied into these decisions. ADR can, should, and will play an important role in this effort.
I do not pretend to have any of the answers here, and admittedly maybe the questions can be focused in a more open way to draw a more directed dialogue, but they must be asked. I will address other issues like spent nuclear fuel, transmission infrastructure development, and distributed forms of generation in later blogs. In the meantime what can we do to raise the question: how do we make these decisions in transparent and thoughtful ways that are in our great nation’s best interests?Steve Shapiro
Every dispute is subject to an understanding of the law. The law presents a clear framework and factual background of each dispute. Understanding the law helps us form both the contractual/business context and the relationships that reveal the way individuals react in times of stress.
This relationship piece is often times magnified in family business matters and closely held corporations, even when there may not be a familial relationship, or long standing partnerships whose personal and business dealings have intertwined over years of operation.
Almost all such cases are fact based and require an unwinding of the contract formation, the expectations of the parties, and the customs that may have resulted over the course of years of operation.
When overlaid with the legal principles, case law and statutes that apply in most commercial cases can be approached with an eye towards settlement.
If you have read any of my prior blogs you understand the import placed on the interests, concerns, and needs of the principals involved in the dispute. Without an opportunity for these concerns to be aired, the legal frameworks and interpretations will sometimes push towards a zero sum result, moving the parties closer to litigation.
A family business matter presents the same baseline of structural issues with the family relationships fully present. One case I want to use to illustrate this complexity is a matter involving a multi-million dollar business owned by brothers. This case involved two competent men who had been in business together for decades with their father. The father started the business, while the sons grew up around the office till eventually the father divested his ownership shares to the sons, 50-50, wanting to seem fair and equitable.
The dad unfortunately did not have a crystal ball to anticipate how decisions would be made or not made when the brothers disagreed. The business owned a series of office parks outside a major metropolitan area that required intensive marketing, collections, business networking, sales, accounting, maintenance, design, renovation and basically all that is required in keeping a commercial industrial park successful. For many years after the father sold his interest to his sons, the business ran well. At some point that is still undefined, their business relationship began to sour. As this downward trend was occurring the brothers were expected to put on a happy face for the employees, their parents, their spouses, their children, and their tenants. Underneath this presented image, they each knew that the relationship had turned.
After being selected as the mediator, and through the course of a case assessment, it became clear that the brothers were not reconciling and working out a division of responsibilities. As long as they each shared ownership, it was going to be an unacceptable situation. So the only outcome left was who would keep the business, and who would be bought out.
This dynamic put each sibling in the buyer and seller’s shoes with an important set of economic and personal financial questions to be addressed. Is the sale price based on a realistic market appraisal, and how do you effectively analyze the future cash flow and net present value to determine if the business could afford the payout? Or conversely, was the payout attractive enough to cause one or the other to walk away with a cash flow that would come close to equaling the income and benefits they were drawing to date from the business?
This lead to a challenging, but necessary, stage of negotiation to test the mettle and see who had the greater commitment to run the business, and who was willing to walk away from a business that they grew up with and was so much a part of them.
How sibling rivalry, jealousy, and history played a key role in these negotiations will not be delved into here; but suffice it say they were factors. In order to get to this point of clarity, the brothers had to come together in a way that they hadn’t in years. It led to the families, spouses and parents having to come together to explore some of the past.
Could the brothers, their attorneys, accountants, and estate planners achieve the necessary result without getting into the family history and drama? With some discussion around the family history to help understand the behaviors and dynamics we spent some limited time exploring how each of their paths as youths, students, work ethic, and family life shaped who they are. These factors cannot be ignored.
One aspect that is worth paying attention to and knowing is that a family dispute requires a careful balancing of all the dynamics discussed above.
A skilled mediator knows where to move with the parties to meet these needs and work towards a settlement. The case described above settled with one brother sharing in a sophisticated trust arrangement that involved a tax planning instrument, affording him a steady steam of income to start a new venture or sail off into the sunset.
The buying brother who, here-to-fore was feeling stifled by the other brother, retained a 100% interest in the business and was able to operate with a degree of freedom. He was able to bring his son into the business as a principal, and to see the business grow as a result.Steve Shapiro
In the arbitration context, discovery requests vary greatly, none wider than the U.S. and European practice areas. At its heart, European practitioners have sculpted a discovery and arbitral process that is generally quicker and less expensive than US models.
The European practice around discovery is focused on document requests and in turn careful analysis that drives the order of witnesses, cross examination, and demonstrative proof. The current US model is felt to more closely resemble litigation. Although more arbitrators are becoming skilled in attempting to reduce the scope of discovery without compromising the quality of the hearing preparation.
How can US practitioners achieve more of a balance between targeted discovery, effective hearing preparation, while also permitting the correct mix of deposition testimony is all of our test as practitioners, advocates and clients?
One view is that party self – determination still has to govern the discovery schedule. I agree.
At the same time, traditional arbitrated cases and procedures have gotten more complex and parties are able to design approaches that meet the needs of their case – - not because arbitrators are not flexing their muscles and pushing the parties into a more streamlined approach, but because the nature and complexity of the cases requires a comprehensive approach to setting the right course and arbitral procedure.
Why not have depositions if it serves the fact finding and efficiency of the hearings, why not have expert reports that provide a thorough explanation of the theories on the case, and why not utilize pre and post hearing briefs if it supports an educational exchange that is crucial for a fair and honest decision?
Some American protocols such as JAMS Streamlined Arbitration Rules & Procedures, and The CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration provide an excellent resource to drafters who can help shape any future discovery rules in subsequent claims.
ICDR Guidelines provide that an arbitrator can inquire into a discovery request made by one party by understanding the value and need behind the request, and can order the requesting party to pay the responding party for all or part of their expected costs in responding.
Is this the future of discovery in the US?
There will be greater discussion to follow on questions of Motions, Expert Witnesses, and Direct Testimony.Steve Shapiro
The Preliminary Hearing shapes the integrity and success of the entire dispute process. How parties prepare for an arbitral hearing, and how opposing counsel work together to clear through as many issues in advance of the hearing as possible, will shape the course of a successful prelim and provide the foundation for a solid and fair outcome.
First and foremost, which you have probably accomplished prior to selecting the panel or the arbitrator, is determining the subject matter and procedural jurisdiction that will apply the scope of authority of the arbitrator(s), and the issues to be arbitrated.
The contractual provision will likely determine the outcome to these questions in part. However, what happens if a clause is ambiguous? In almost all cases counsel will work together to draft a fresh provision that is relevant and meaningful to the matter at hand, and not rely on a provision that may have been boiler plated text, added into the document at the eleventh hour – understanding the agreement may have been drafted 10 years, 20 years or 50 years ago.
Picking the hearing date may seem inconsequential. If agreed upon between the parties, this can assist in moving towards an early agreement on key procedural issues. In some cases the arbitrators are provided a range of dates to ensure availability as part of the arbitrator selection process; and in others the arbitrators will require the parties to agree on a date and select a venue in advance of the preliminary hearing.
The amount of time for hearing is also not inconsequential. Often parties will underestimate the amount of time required to put on its case in chief causing a fit over scheduling dates and the need to come back. It is a serious situation if the claimant puts on its case and the respondent is not left with adequate time to present its case until weeks and more likely months after the initial evidentiary hearing.
A skilled arbitrator will remind parties of this concern and it is important to say this is not about fees, this is about developing an adequate time period for a fair and honest presentation of each side’s case. Yes, only counsel knows how long it should take to put on its case – the arbitrator’s view, just to be safe, add an additional day.
One other area that must be addressed at the preliminary hearing is the question of motions. Litigation counsel is used to managing a motions practice and may not fully see any distinction with arbitration. In most cases, arbitrators are finding a tension between the public policy that is pushing for expedited time frames for hearing and final award, and achieving an expedited schedule when the parties desire to file a Motion for Summary Judgment and countless Motions to Compel.
Where does the answer lie?
Of course in party self-determination, and what the clients and counsel believe is warranted in any particular given case. It does not mean, however, that a skilled arbitrator should not push back a little here. I often strongly encourage a senior representative from each side to be at the preliminary hearing so they buy into these issues of scheduling Motions and the scope of discovery in advance, understanding that this may cause delays and additional cost to the effort.
We will address discovery and scope in another installment.Steve Shapiro
Tired of dining? I hope not – there is plenty of food for thought when planning this next table.
If you have been following the outline you understand that counsel has presented the strengths of their case to the opposing side and the principal at the table has carefully begun to assess litigation risks. After the legal discussion, the principals discussed their business case, concerns, interests, and are beginning to move towards what they really need to resolve the matter.
The next table involves defining the problem and inventing options for a possible settlement. In professor Fisher’s early work on Getting to Yes, he discusses inventing options as brainstorming. For some, brainstorming conjures up memories of sitting with a facilitator posting yellow post-its on a wall and maybe voting on them.
In this setting we are focused on a problem or series of problems that are at the heart of the matter. These are the fulcrums that integrate the core interests into a cohesive statement where the options will become levers. The more clearly defined the problem statement is, the more focused and productive the option period is.
The mediator with the parties will define the problem in as neutral and open-ended language as possible. In the example I gave about the pipeline constraint feeding a major urban area the problem was a simple one – but the solutions seemed complex: how do the parties insure natural gas into the city with zero possibility of a shut down in the pipe permitting the inspection to proceed and no loss of service?
If you notice, the wording was not “how does one side do X while the other does Y?” It was worded in the third person enabling the parties to begin sitting literally side by side as partners trying to solve this quagmire that it was.
Two important ground rules when inventing options, and this is always a challenge for everyone around the table:
1. no attribution
2. these are not settlement offers.When you understand and trust the first, the second falls into place more easily. When you have individuals at the table representing different divisions on a project team, the corporate culture may be only one spokesperson.
What are some ways this can workout for the best? As discussed in the first session regarding planning the mediation process and stages, defining the problem/option generation stage needs to get explored. The mediator must inform counsel and the negotiating team about the expectations and benefits that follow when this stage is properly exercised.
We will discuss grouping options and proposed settlement offers in an upcoming blog.Steve Shapiro
I wanted to share a brief history of how I moved into the world of conflict resolution and Alternative Dispute Resolution. I share this story not about me so much as about how powerful each of our personal stories can be in context to the changing world of our political times, the profession, and when we are clear about our personal goals and aspirations.
My first introduction into the formal ADR world came at a challenging transition in my life. I had decided to leave my position as Associate General Counsel at Verizon to move into a private practice. I was in a small firm and the chemistry between the principal partner and me did not work out. With a young daughter and a second child on the way I decided to move with a colleague and friend from Verizon into the federal government.
At the time that I entered federal practice as counsel at the Federal Energy Regulatory Commission (FERC) in 1990 Congress had just passed the Administrative Dispute Resolution Act (ADRA) and the Negotiated Rule Making Act (REGNEG).
These two seminal pieces of legislation served as a platform for much of my work and career advancements for the next eighteen years.
ADRA and REGNEG turned into the blue print for a cultural change in federal administrative procedures. ADRA required every federal agency to appoint a Dispute Resolution Specialist who would have the charge of implementing the Act, require that a systems design be implemented that fits the needs of each agency, and that staff be trained in all aspects of the program. I had the honor of serving as a Dispute Resolution Specialist for my agency for most of my years of federal service.
My work at the FERC had its foundational core education and training of Staff, Federal employees and the Private Sector executive leadership. My introductory training was a week-long intensive program sponsored by the Office of Personnel Management’s Executive Training Center where I had the privilege to sit in for Dave Cook the General Counsel.
I would not have expected at that point I would have wound up as one of the lead faculty for the Executive Training Center teaching mediator ethics, confidentiality, and multiparty mediation just a few years later.
I did learn and promote the importance for federal agencies to invest in their work force in this area to build capacity and knowledge of how ADR practices can have positive impacts in employment disputes, contract disputes, and other regulatory dealings.
Out of this preliminary work I was detailed to a small federal agency known as the Administrative Conference of the U.S. (ACUS) The detail involved my working as part of a team with some pioneers in the Federal Dispute Resolution world including Phil Harter, Les Adelman, Frank Carr, Charles Pou, John Settle, Neil Kaufman, Richard Miles and many more senior dispute specialists who worked to change the federal administrative culture from a litigious world to one that was focused on weighing alternatives and resolving conflict.
With this goal in mind, one major project focused on working with Senior Counsel from 24 Federal Departments including all cabinet agencies to commit to using ADR to resolve all contract disputes that arise pre and post a final contracting officer’s decision. This effort ultimately lead to a change in the Contract Dispute’s Act making it a requirement for contracting officer’s to enter into ADR prior to formal litigation. This change that was implemented in 1995 serves as a foundation for clause drafting that focuses on a stepped approach such as: executive negotiation, mediation, and then arbitration. At the administrative level, a hearing board certainly can be seen as substituting for arbitration, albeit not binding.Steve Shapiro
The interests are often not easily bundled into a list, or clearly called out, but are often lurking below the surface. The mediator/neutral and the principal party will usually engage in a dialogue or an “appreciative inquiry” of understanding why the client is taking a certain view or position on an issue in order to get to the underlying interests.
One instructive example involved an electric utility responsible for providing transmission and distribution of natural gas into a major urban area. The utility provided its customers in this million plus metropolitan area with natural gas served from this one major pipeline. In essence every major hospital, university, business, governmental agency, etc., that was using natural gas for heat and/or electricity was reliant on this pipeline.
The problem facing the parties was that the gas company who owned and maintained the pipeline was required under federal pipeline safety laws to ensure that the pipe was free of debris or other substances.
This law was closely monitored after 9-11 and an increased watch of the nation’s infrastructure. This required what is known as “Pigging” the system or sending a remote controlled camera through the pipeline to check flow, blockage, etc. In some circumstances the pigging device can get stuck and shut down gas flow altogether that would curtail gas flow on the line and essentially shut down the heat and a significant amount of the electrical generation for this major urban area.
The interests boiled down to on one hand the pipeline company was required to inspect and ensure the safety of the line or it could lose its certification to operate; and the utility had the health and safety requirements of its customers at the fore by ensuring natural gas and/or electricity was available. The solution which will be addressed in the next writing focused on how to meet both sets of interests. This almost always the case in reaching a durable agreement that the parties in the end determine they can live with.
Getting to the place of understanding and recognition so each party knows that they are being heard is critical to getting to yes. This is an aspect of the various stages that cannot be overstepped – - nor is it a touchy feel-y stage that some principals and counsel fear. It is a pragmatic dialogue that produces a deep recognition of the problems and concerns gripping each party.
As a mediator I feel responsible when this is not achieved, and when it is I am happy to give full credit to counsel and their clients in doing the necessary work to get to an agreement.