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ADRWorks wants to help you develop effective strategies for dealing with disputes in your business.  Here are some recent articles offering information, ideas and suggestions for better ways of dealing with conflict in your workplace and
to help you stay out of court.
 

COPYRIGHT AND REPRINTS

Reprint permission is granted when the following credit appears: 

" © ADRWorks LLC 2007. Reprinted with permission from ADReport an internet newsletter.  For your own personal subscription, go to www.ADR-Works.com."


Topics coming soon from ADRWorks
 

Mandatory ADR and Class-action Lawsuits
Washington court says mandatory systems cannot bar
class-action suits
 

Disclose, Discuss and Mediate--A New Program Incorporating Apology
A new ADR process offers the benefits of Sorry Works!


Current articles
(Click on the title to see the full article)

Mandatory ADR and Unions
 Do unions have a say in ADR system implementation?


Project Mediation--A New ADR Process for Construction
A new ADR process offers the benefits of Dispute Review Boards at a lower cost
 

Mandatory ADR Has a Place in the US Legal System
A response to “Is the Price of Mandatory ADR Too High?”

 

Is the Price of Mandatory ADR Too High?
An argument that compelling the use of ADR is having a
negative influence on our legal system


Harassment Issues in the Health Care Workplace
Health care providers face added challenges when
faced with dealing with harassment

 Project Dispute Resolution Program TM
A new program offered for speedy, low-cost resolution of construction disputes

Project ReAlignment™—When Projects Start to Go Bad
A new process makes use of ADR

 Mediator and Arbitrator Neutrality--Whose Responsibility Is It?
Users of the process need to do their part

Managing Litigation Risk for Community Banks
How Community Banks Can Guard Against Being
Sued Just Like the Big Guys

"Sorry Works" Comes to Washington
Washington Legislature Incorporates Apologies in Medical Malpractice Reform

 Stockmarket Losses?  Arbitration May Be Mandatory
An overview of the securities arbitration process

Making ADR Appealing to Employees
Some ideas for making an ADR system easier to swallow
for your employees

What Are Dispute Review Boards?
 A specialized form of early neutral evaluation used in the construction industry is being tried in other businesses

Reference Liability Reduced
 A new law in Washington reduces employer liability for employee references

"Say You're Sorry"--Mother Was Right
New movement is encouraging health care providers to apologize for medical mistakes

Mandatory ADR is Official in Washington
Two recent Washington Supreme Court decisions support the use of mandatory ADR by Washington employers

Fighting the "Civil Wars"
Newsweek Magazine features cover
story on “Litigation Nation”

Using Job Analysis to Hire and Fire
A comprehensive job analysis will clearly define job expectations and avoid problems later

9th Circuit Court of Appeals
Rules on Arbitration Costs
If the other side can't pay, you may have to

Why Mediation?
Why does the ADRSystems process use
mediation as a first step?

Why Your Employees Quit
You may be missing important information
to help your company run better

The Job InterviewYour First "Date"
with a Prospective Employee
 Too often interviewers ignore that little voice
and hire the wrong person

Using Acknowledgement Forms
to Compel Arbitration
Federal Court holds that no formal agreement
is needed to use arbitration
 

 

Mandatory ADR and Unions
Do unions have a say in ADR system implementation?
(Published December 2007)

In a recent call, a client asked if the presence of unions in the workplace had an impact on mandatory ADR systems.  He indicated that his business is facing a potential effort to unionize his employees and was wondering if it would impact the mandatory ADR system that he has in place.  The answer is no.  The courts have held that statutory discrimination rights of individuals cannot be co-opted by unions.  In fact, the following article suggests that having a mandatory system in place may serve to discourage unionization efforts.

 A number of cases of dealt with the issue, but the most significant one involved Northwest Airlines.  Richard Faulkner, an attorney/arbitrator/mediator specializing in ADR in Dallas did an analysis of the ALPA v. Northwest Airlines case:

 The Court of Appeals for the District of Columbia Circuit provided a welcome guide for employers throughout America on mandatory arbitration and the union workplace.  This en banc decision by the DC Circuit unanimously held that Northwest Airlines could require individual employees to agree to final and binding arbitration of any claim for discrimination in employment without having first bargained with the union concerning those provisions.  This decision is particularly welcome and useful because it now stands for the proposition that an employer may individually bargain with unionized employees to obtain separate and independent contracts requiring the arbitration of statutory discrimination claims.

The underlying facts of this case are helpful in understanding the origin of this rare unanimous decision by the Court.  Northwest Airlines has for decades required newly hired pilot trainees to sign individual employment contracts called "Conditions of Employment."  In 1995 Northwest added several provisions which included a clause by which each trainee agreed to the binding arbitration of any statutory anti-discrimination claims they may have with Northwest Airlines.  The union filed suit asserting that the carrier violated the Railway Labor Act by requiring the individual pilot trainees to agree to the conditions, including the arbitration provisions, without having first bargained with the union over those provisions.  The airline maintained that it had no duty to bargain over the arbitration of individual statutory claims because a line of cases established that is not a mandatory subject of collective bargaining.  Therefore, Northwest was free to bargain individually with its employees over the arbitration clause.  The union contended that the almost interminable negotiation process required by the Railway Labor Act precluded the airline from unilaterally implementing the arbitration provisions.

The Railway Labor Act requires that all matters "directly related to rates of pay, rules, and working conditions" are considered "mandatory subjects of collective bargaining".  That phrase has been borrowed by the courts from the jurisprudence interpreting the National Labor Relations Act.  When a carrier and a union have a dispute over a proposed change to a mandatory subject of bargaining, the courts have held that the union can get an injunction prohibiting the carrier from unilaterally implementing the change before completing the negotiation process set out in section 6 of the R.L.A..  However, if the dispute is over a nonmandatory subject, then the carrier may unilaterally implement the change unless limited by an existing collective bargaining agreement.  Consequently, this dispute provided a perfect opportunity for the courts to determine whether or not an employer could require potential employees to agree to the arbitration of statutory disputes before they became members of an established union.

The Airline Pilots Association has represented the pilots of Northwest Airlines for six decades.  When a pilot first begins training he is not represented by the ALPA or any other union.  Only upon completion of his training and entry into service as a probationary employee does he become a member of the bargaining unit represented by the ALPA.  Since 1966 Northwest Airlines has required that each trainee pilot agree to the "Conditions of Employment" as part of his employment contract.  A number of the "Conditions" expressly or implicitly continue to apply as long as a signatory is employed as a pilot with Northwest Airlines and even after the pilot becomes a member of the ALPA.  Those "Conditions" have been changed numerous times by Northwest without consulting the ALPA.  In 1995 and arbitration clause requiring employees to submit to binding arbitration all claims against Northwest arising from the employment relationship was added.  Critical to the case, the arbitration clause "specifically requires binding arbitration of statutory employment discrimination claims brought under the Minnesota Human Rights Acts, Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, or any other state or federal law prohibiting employment discrimination".  Certain other changes were also made but do not relate to the arbitration provisions.

While disputing the termination of a probationary pilot the union objected to the "Conditions" and filed suit in federal court.  It sought an injunction and declaratory relief on the grounds that Northwest violated the R.L.A. by unilaterally implementing the "Conditions".  One of the key disputes concerned the arbitration clause.  Northwest maintained that it had the right to insist on the arbitration of non- contract claims as a condition of employment of new hires.  Northwest agreed that the arbitration clause did not apply to claims arising out of the collective bargaining agreement between the ALPA and Northwest.

The District Court held that the arbitration clause dealt with a mandatory subject of bargaining and enjoined Northwest from applying the arbitration clause to any pilot represented by the ALPA.  The issue presented in the Court of Appeal was: "is the arbitration of statutory discrimination claims a mandatory subject of bargaining?"

Northwest Airlines contended that the arbitration of statutory discrimination claims is not a mandatory subject of bargaining because under the Alexander vs. Gardner Denver line of cases, a union can not waive the right of the employees or represents to bring a statutory discrimination claim in a judicial forum.  Therefore, since the ALPA can not agree to such a provision, it cannot be a mandatory subject of bargaining.  Thus, Northwest, and by implication every other employer, is free to deal with its employees directly concerning the arbitration of statutory claims.

The Supreme Court in Alexander vs. Gardner Denver considered whether an employee who had pursued the arbitration of a racial discrimination claim under a CBA was precluded from judicially asserting a Title 7 claim based upon the same facts.  The Court held that "there can be no prospect of waiver of an employee's rights under Title 7."  Because Title 7 provides each individual with the right to be free of discrimination, "the rights conferred can form no part of the collective bargaining process since waiver of these rights would defeat the paramount congressional purpose behind Title 7".  The court was particularly concerned that a union, which ordinarily controls the arbitration of an employee's claim, might, if allowed, compromise the would be Title 7 plaintiff's statutory rights.  "In arbitration, as in the collective bargaining process, the rights of the individual employee may be subordinated to the collective interests of all employees in the bargaining unit."  Id. at 58 n. 19.  The Supreme Court reiterated this viewpoint and Barrentine vs. Arkansas -- Best Freight System, Inc., 450 U.S. 728, infra, when it interpreted employees rights to file suit under the Fair Labor Standards Act after losing the same issue in arbitration.  The Court declared the rights granted by statute to be independent of the collective bargaining process.  Those rights "devolve on petitioners (employees) as individual workers, not as members of a collective organization."  Consequently, the court resolved the tension between collective representation and individual statutory rights in favor of the individual employee exclusively controlling the method of determining their personal statutory rights.

The Circuit Court believed it had discovered a clear rule of law emerging from the Alexander vs. Gardner Denver and Gilmer jurisprudence.  That Rule essentially states that unless the Congress has precluded an individual from doing so, he may prospectively waive his own statutory right to a judicial forum, but a union may not prospectively waive that right for him.  Absent congressional intent to the contrary, a union may not use the employees' individual statutory right to a judicial forum as a bargaining chip to be exchanged for some benefit to the group.  Alexander vs. Gardner Denver, supra, at 51.  Consequently, because the Alexander vs. Gardner Denver jurisprudence precluded the union from agreeing to binding arbitration of the individual statutory claims, the court concluded that the arbitration clause was not a mandatory subject of bargaining.  Thus, the Court held that "only the individual can determine in what forum he will vindicate he is statutory rights, and its choice should not be burdened by the majoritarian concerns that motivate a union.  If a union has a mandatory role in negotiating the terms that will apply to arbitration, then it could also could contrive to discourage the exercise of the employee's right to choose a forum." 

This decision reflects the federal courts continued skepticism that a labor union can be safely trusted to vindicate an employees statutory rights.  It also holds the promise that it employer may directly, and even unilaterally, contract with each individual employee for the arbitration of statutory rights disputes.  Unquestionably, this decision causes great consternation within organized labor.  Since an employer may now directly contract with each employee for the arbitration of their statutory rights, the employees will now be able to better evaluate the "value" of the union grievance procedure.  Where an astute employer arranges a fair and legitimate forum for the arbitration of those statutory claims, it may well not only avoid a multiplicity of procedures but demonstrate its trustworthiness without union interference.  This decision also suggests that a well crafted arbitration agreement can be effectively used to frustrate and defeat union organizing efforts.◘
 

 

Project Mediation--A New ADR Process
for Construction
 A new ADR process offers the benefits of
Dispute Review Boards at a lower cost
(Published May 2007)
 

The following article appeared in the December 8, 2006 issue of Building magazine.  It is an interview by Chloë McCulloch, legal editor of Building with Andy Grossman of the Centre for Effective Dispute Resolution (CEDR), and Nicholas Gould and Simon Tolson of Fenwick Elliott, Mike Spencer of EC Harris, and Tim Tapper of Cyril Sweett.

Building, a weekly publication, is the UKs oldest and best-read construction magazine.  It was launched in 1843 by Joseph Aloysius Hansom architect of Birmingham Town Hall and designer of the hansom safety cab and once counted Prince Albert, Charles Dickens and Florence Nightingale among its readers.  The magazine is read by over 100,000 professionals throughout the building industry, including building contractors, housebuilders, architects, quantity surveyors and building surveyors.

CEDR is an independent non-profit organisation launched in 1990 with the support of The Confederation of British Industry.  Its mission is to encourage and develop mediation and other cost-effective dispute resolution and prevention techniques in commercial and public-sector disputes and civil litigation.

It is reprinted here with permission.

 It’s Like Partnering with Teeth

Brief encounter:  A new form of project mediation was launched this week to nip problems in the bud.  We brought together its inventors and industry experts to discuss the pros and cons.

Chloë McCulloch  Let’s discuss this week’s launch of a dispute resolution technique: project mediation.  The idea, most recently developed by Fenwick Elliott and the Centre for Effective Dispute Resolution (CEDR), is that an impartial project mediation panel is appointed at the outset of the project.  It visits the site periodically and may conduct workshops. The panel consists of one lawyer and one commercial expert who are trained mediators.

It seems the main argument in favour of this process, rather than dispute review boards, is that it is cheaper and can be used on projects around the £10m mark instead of only being suitable for £100m-plus schemes.

 Nick Gould  In terms of cost, it’s much cheaper than a dispute board.  If a dispute arises, a dispute board requires detailed statements of case, evidence, experts’ reports and a hearing.  If a dispute arises on a project with project mediation, the parties exchange position statements and supporting documents.  There would then usually be a one-day mediation with a high chance of resolving the dispute.  The mediators already have valuable knowledge of the project and of the individuals working on the project.

Chloë  So, Nick, given the industry already has a range of dispute resolution techniques, as well as partnering, is this just a variation on what’s gone before?

Nick  It builds on what has gone on before, but is tailored to the needs of the industry.  It is more about dispute avoidance then resolution. The mediators assist with problem-solving during the project. They can’t make decisions, so the power to deal with issues remains with the parties. But they can inject some reality that might otherwise be overlooked. It’s like partnering with teeth.

Chloë  Project mediation is already used by some parties, so what’s new about this form?

 Nick  The new aspect is that the CEDR now provides guidance on how to set up project mediation on a scheme.  They also can provide parties with a project mediation agreement and appoint mediators.  The launch was on 7 December and, after that date, anyone will be able to download for free the guidance and agreement from the CEDR’s website.

 Chloë  Andy, the CEDR will provide the project mediators for an appointment fee.  How much cheaper will the process be than dispute review boards?

 Andy Grossman  The appointment fee is one component of the cost.  A monthly retainer and hourly rate is agreed for each project mediator with the parties.  If a formal mediation is required, where the parties are unable to resolve their conflict through discussions and interventions by the project mediators, a separate daily rate is agreed.  We estimate project mediation will be at least 30% cheaper than dispute review boards.

 Tim Tapper  I understand that FIDIC and the World Bank encourage one-person dispute boards for smaller projects, which means these boards can be suitable for projects worth less than £100m.  Are you saying the saving with a dispute board is at the dispute resolution stage?

Mike Spencer  Savings between project mediation and adjudication at dispute resolution stage must surely be minimal.

 Simon  Agreed, but the time wasted is still likely to be less than with dispute boards. Project mediation is great at heading off things, so parties can focus on the build not the fight.

 Mike  In my view, the benefit of project mediation lies with encouragement of   collaborative working and the use of an effective early warning system.  Such a process would encourage parties to look ahead together and eliminate financial and programme risks.

Andy  Savings are being achieved in the improved management of supplier relations and driving the collaborative effort. Nick used the term “partnering with teeth” and this lies at the heart of project mediation.  In most cases, collaborative working needs to be driven.

Mike  The challenge is to change the attitudes of the contracting parties and to encourage project controls, records management and an early notification process so parties can work together to resolve any problems, which the mediation panel can facilitate.  I foresee two key challenges:  the attitudes of the parties and the way in which they work and the fact that the NEC encourages a similar method of contracting.

Nick  I think it would work well with the NEC approach. It’s a front-end dispute avoidance technique.  The benefit is the interaction of mediators that are removed from day-to-day dealings of individuals.

 Simon  The challenge, as Mike says, is changing attitudes.  I am in a major project battle at present where more exchange and effective project controls might have made the difference, but they were not embraced.  A project mediator would now be a welcome third party to the scene.

Andy  Just going back to the cost. As an indication, the cost of project mediation on a £35m contract lasting 24 months would be in the region of 0.3% of the contract value.

 Tim  Dispute boards have generally been 0.05-0.3% for a three-man board.  This is on major projects, admittedly, so does the process really win on smaller projects or is it also suitable for the big ones?

 Nick  Dispute boards are too expensive for smaller projects, but project mediation isn’t.

 Tim  My concern is that project mediation is straying into “soft” areas such as the promotion of collaborative working and the softer side of risk management.  Is it trying to do too much?

Nick  It is just trying to focus on the part where a difference can be made. It focuses on the people and getting the job done.  The project mediators can test whether the participants are really collaborating or just going through the motions.

 Tim  Project mediation seems to be partly intended to promote partnering.  We have found that partnering only works when there is someone there to train the parties, bring them together with workshops and team building exercises and then to reinforce this throughout the project.  Will the mediator be taking on this role?

 Andy  Project mediation is suited to the big ones as well – even the 2012 Olympics!  Nick’s point is that PM is not out of the reach of smaller projects.  The smaller projects might be highly complex ones where the use of project mediation would be an advantage.  Whether we use the term partnering or collaborative working, project mediation takes on the training role.

 Chloë  We’re out of time. Any final comments about the main selling points or challenges of this method of dispute resolution?

 Simon  The main selling point for will be its ability to fuse team building, dispute avoidance and dispute resolution in one procedure.

 Tim  Taking the ethos of dispute boards and refining the process makes good sense.  However, for me, it appears to be attempting to be all things to all men and strays too far into specialist areas such as risk management and the role of partnering adviser.  This may dilute its effectiveness.

 Andy  Project mediation provides a better response to project finance and risk management.  Banks and funders are increasingly having to look at operational risk and having effective measures available to deal with conflicts.

 Mike  The main challenge is changing the attitudes and encouraging good project controls and records.  The introduction of a project mediator, extended to all contracting parties, may encourage all parties to address the issues on their project before they arise in the form of a dispute.  An independent project mediation panel will also assist the parties in managing their expectations at an early stage and avoid a costly and protracted dispute.

 Find out more at www.building.co.uk/legaltoolkit or  www.cedr.co.uk◘
 

 

Mandatory ADR Has a Place in the US Legal System
A Response to “Is the Price of Mandatory ADR Too High?”
by
 Professor Corbett Haselgrove-Spurin
 (Published March 2007)

 Landsman identifies potential - though not necessarily proven problems with both arbitration and court annexed mediation in the US.  Many of his references relate to bold assertions by commentators rather than proven problems and many of the commentators have their own axes to grind.

Much of the problem with his analysis is that he fails to address potential problems with cost, time, jury time, variable quality of judiciary etc within the US system.  His assumption is that the US legal system is fine - so the problems vest with ADR. 

There is an implicit assertion that commercial enterprises seek to gain an unfair advantage - whereas it may well be that if the US legal system was cost effective, speedy and guaranteed fair outcomes then commerce might not be attracted to ADR in the first place.  The assumption that all this is about David (clients) v Goliath (big business) is misconceived.  Business can be jerked around by clients as much as clients may be bullied by enterprise.

 Secondly, the problems with quality assurance in arbitration lie in the fact that unlike most of the world that follows the Model Law Guidelines US law tends not to mandate reasoned decisions, rendering judicial review virtually impossible.  If arbitrators had to provide reasoned decisions and awards were susceptible to judicial review there would be no need to resort to complicated measures to vet the quality of arbitrators.  The process would become transparent at the enforcement stage without any fancy scrutiny methods.  Biased decisions would automatically be screened out and a culture of accountable decision-making would take hold instantly.

 The proposition that mediators operate in a manner that favors regular clients over consumers and that the lower strata of society and particularly females, etc are vulnerable to coercion may have some basis in fact - I am not in the position to disprove the assertion - but whether or not the courts offer a viable alternative is questionable.  How many of these cases would be undertaken on a contingency fee basis?  Few I imagine unless there is a potential lucrative return for the lawyers.  Can the clients fund litigation? And if so, what is there to indicate that the outcomes would be any different or even better if they went to trial?  For many clients a settlement means they get something, rather than a potential nothing - and costs will have been minimal compared to litigation.

 There is a problem inherent in collating data on mediation settlement satisfaction after the event.  Every mediation involves the parties compromising - so the natural response to "Did you get what you wanted or deserved out of the process?" will inevitably be met with NO.

The party will settle for what they perceived was the best terms available or achievable at the time.

It is hardly surprising that many would later assert that they did not get what they wanted and that the process was not as effective as they would have liked. BUT:  No one made them settle - they did so to avoid the perceived risks of continuing with litigation - a risk which meant they may have done better or alternatively less well if they had continued with the litigation.  Thus any commentary that takes into account such criticisms/complaints is actually meaningless unless it is also backed up with an evaluation of the likely as opposed to desired outcomes of continued litigation.

 It is submitted that Landsman has not established that a significant proportion of those criticizing ADR would in fact have been better off litigating instead.

 There is a problem in asserting that mediation is a profession.  It is not.  It is a vehicle for making business/social choices - a facilitated negotiation mechanism.  The law has legal rules against dishonesty - mistake - misrepresentation - undue influence - all these apply equally to mediation - though as with the general application of these laws, proof may not always be easy to establish.

There is no overarching mediation regulatory body - no equivalent to the Bar or the Law Society - perhaps there should be - BUT the Bar is effectively a monopoly - an aberration - an exception to the rules of open competition - justified on ethical grounds and the special circumstance of legal practice and the protection of society.  The cross over from direct personal negotiations to facilitated negotiation is blurred and making the later subject to professional codes but not the former would involve drawing complex and fine distinctions.

Mr. Landsman is one of those who would regulate the entire spectrum of human existence - an advocate of the Nanny State:  human beings need to be left free to make certain decisions in their lives - with or without assistance from experts where appropriate.

The assertion that mediation does not comply with the Rule of Law is nonsense.  The Rule of Law states that everyone is equal under the law and has equal access under the law. No one makes anyone settle or give up the right to a trial in mediation.  Financial constraints may act as a coercive factor - but that's life - and life can be harsh.  Unless the State is the fund all aspects of litigation (in which case who would need mediation?) nothing can be done about this.  What is does not amount to is an absence of respect for the Rule of Law.

It should be remembered that mediation and arbitration operate within the Law:  if the law could be improved that is another matter - a concern for the legislators - not for the ADR providers.

•••••

 Corbett Haselgrove-Spurin is a Construction Adjudicator, Arbitrator, Educator, Mediator, Scheme Leader, LLM Commercial Dispute Resolution, Senior lecturer, Commercial & Construction Law at Glamorgan University.  He is a visiting lecturer in ADR to Cardiff Law School, the University of Wales, the sitting chairman of the Wales Branch, Chartered Institute of Arbitrators, member of the South Wales Court service mediation steering committee (The Association of Welsh Mediators)  and Her Majesties Court Service mediator coordinator for the Newport Gwent civil court. He is a Construction Law Consultant and Director Nationwide Academy of Dispute Resolution UK Ltd and Middle East Co Ltd.◘
 

 

Is the Price of Mandatory ADR Too High?
 An argument that compelling the use of ADR is having a
negative influence on our legal system
 (Published January 2007)

In our rush to spread ADR to the masses have we become too enthusiastic in using it at the cost of more important values?  In an article entitled “ADR and the Cost of Compulsion” appearing in the Stanford Law Review in April, 2005, the author raises questions concerning whether compelling the use of ADR by corporations and the courts is resulting in unintended, negative consequences.  Written by law professor Stephan Landsman of DePaul University College of Law in Chicago, the article suggests that the practice of requiring the use of ADR should be abandoned.

The article addresses two of the predominant forces at work in ADR—private predispute contracts requiring the use of ADR and court-annexed ADR programs.  In the private contract context, Landsman suggests that the drafters of ADR clauses use those clauses to circumvent existing legislation, and, in some cases, use the clauses to discourage claims.  He also suggests that some ADR providers, in their quest for business, ignore the over-reaching sometimes present in these contract provisions.

As for court-annexed programs, he suggests that users of the court mandated processes are exposed to “wildly varying ADR experiences” along with procedural problems and increased pressure to settle.

Finally, he suggests to ADR providers that we need to learn “humility and respect for the rule of law” or face the real possibility of ADR being discredited and politicized.

The Securities Industry Experience

The article looks to the development of ADR in the securities industry as an example of the over-reaching that can occur in situations where private companies mandate ADR.  (See “Stockmarket Losses?  Arbitration May Be Mandatory—An overview of the securities arbitration process” published in ADReport March 2006)  Beginning in the early 1970s, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) mandated the use of arbitration when requested by dissatisfied customers.  Through federal legislation and a number of court decisions culminating in the U.S. Supreme Court’s decision in Gilmer v Interstate/Johnson Lane Corp., in 1991, the use of arbitration was mandated in virtually all disputes including employment disputes.

Following Gilmer the securities industry faced increasing pressure to deal with employment issues including claims of sexual discrimination and harassment against female employees.  The 1990s saw the industry struggling to deal with these claims through mandated arbitration without much success.  Of major concern was the perceived bias of the arbitrators and the fact that, according to a General Accounting Office investigation, 89% were male and 97% were white.

Finally, in 1997, partly the result of intervention by the EEOC, the Securities and Exchange Commission (SEC) and the Securities Industry Conference on Arbitration (SICA), the NASD dropped its mandatory arbitration of employment disputes, and, in 1999, the NYSE followed suit.

Landsman points to a number of lessons to be taken from the experiences of the NYSE and the NASD.  First, the power of requiring ADR “is likely to lead to explosive growth in the number and variety of compelled arbitrations.”  Second, there is a likelihood that where an industry mandates arbitration, the arbitrators will be homogeneous, and different from the claimants whose cases they hear.  Third, claimants are likely to distrust mandatory arrangements created by the industry.  Fourth, mandated, “piecemeal”, private processes are unlikely to effectively deal with deeply rooted problems within an industry such as those encountered in the securities industry.  Fifth, to achieve real social progress and to reestablish trust, mandated processes need to be abandoned.  Finally, outside regulators like the EEOC, SEC and SICA may drive compulsory systems out of existence or, at least, toward improvement.

ADR and Compulsion

The article points to the paradox that, in spite of growth in mandatory ADR particularly involving consumer, banking, securities and employment disputes, ADR has a long history of choice.  The Federal Arbitration Act, that compels courts to honor agreements to arbitrate rather than litigate, was not passed until 1925, after significant debate.  The Model Standards of Conduct for Mediators says, “Self-determination is the fundamental principle of mediation.  It requires that the mediation process rely upon the ability of the parties to reach a voluntary, uncoerced agreement.”

Ironically, Landsman points out that ADR would not be so prevalent were it not for the compulsion to use it, pointing out that “the ADR push is ‘almost entirely a supply side phenomenon’ promoted by a number of interested judges and ADR providers.”

He then points to the two most popular means of achieving compulsion—predispute stipulations or agreements requiring the use of arbitration (characterized as adhesion contracts), and court-annexed programs requiring litigants to participate in ADR processes before being heard by a court.

The Costs

What are the costs of mandatory, predispute ADR?

First, the article points to substantive manipulation.  This manipulation occurs when drafters of mandatory ADR provisions effectively “redraft the law that governs them and the procedures available to redress wrongs committed.” 

As an example, it points to the Truth in Lending Act.  Created to deal with unethical practices in the lending industry, the act contemplated consumer litigation as a key enforcement mechanism, and provides for successful litigants to recover costs and attorneys’ fees associated along with damages.  Lenders have successfully blunted the effects of the act through contractual requirements that require arbitration and that don’t address the issues of costs and attorneys’ fees.

Landsman also points to similar effects concerning the Magnuson-Moss Warranty Act and some consumer protection laws.

The article also addresses procedural manipulations, and points to the use of mandatory provisions to remove the availability of class action lawsuits for those seeking redress.  Some courts have started to look at these provisions and have ruled that a simple arbitration clause does not bar class actions.

Landsman also suggests that the mandatory movement has “undercut” the American legal system moving it toward what he characterizes as the “far less robust” British civil legal system with its absence of juries, limited discovery and losers often paying the winners’ costs.

He also discusses attempts by businesses to place so many obstacles in the paths of potential claimants so as to discourage claims.  As an example, he points to Hooters of America, Inc. v. Phillips, a Fourth Circuit Court of Appeals case where the court held that the system required by Hooters was so biased in favor of the company that the court characterized the process as “a sham system unworthy even of the name of arbitration.”  While admitting that the Hooters situation was an extreme case, he points to numerous other efforts to discourage claims including delays, high costs, and limiting damages.

ADR providers are also at risk as a result of the mandatory movement.  Pointing out that the market for ADR services has not yet proven particularly lucrative, Landsman suggests that providers are often tempted to go along with drafters of agreements that limit both substantive and procedural rights.  He points to cases in Florida, New York and California involving the National Arbitration Forum where the courts expressed doubts concerning its neutrality and costs of its processes.  He goes so far as to suggest the need for more regulation of providers of ADR services particularly those involved in contractually mandated arbitration.

Challenges for Court-compelled ADR

The article cites three areas of fault for court-annexed ADR programs:  lack of uniformity of processes; divergent supervision and compensation of neutrals; and, pressure to settle.

Citing the constitutional requirements of equal treatment and use of fair processes, the articles claims a wide variation in processes used by neutrals conducting ADR in a single court-annexed program.  The result can be widely different treatment for parties using a court program.  One cause of variation is attributed to the limited resources dedicated to the processes claiming that two or three hours is not sufficient to resolve most disputes.

Procedural failings are caused by divergent supervision and compensation of neutrals, and can result in threats to the integrity and consistency of the ADR process.

The article points out that if the services are free, volunteers are often used with varying skills and commitment to the process resulting in challenges for the court administering the program.  Low fees can result in creation of ADR “mills.”  Unrestricted fees can result in high costs and the specter of disputants dropping out of the process.  Negotiated fees can result in the disputants having to reach a deal with the “judge” hearing their case.

Representation by counsel can also be an issue.  In processes where the disputant rather than his or her counsel are engaged directly in the process may result in distrust of the court process.

The pressure to settle can also pose risks.  It can cause resentment on the part of the parties and can result in behaviors by practitioners driven to get settlements that may be considered questionable, and can raise questions of fairness of the process. 

The article goes on to discuss the reactions of those who face compulsory ADR both through predispute agreements and through court mandated processes.

Possible solutions

Landsman recognizes that the elimination of mandatory ADR is highly unlikely.  He suggests three steps to address the challenges:  diversification of the neutral panel, introduction of greater transparency into the programs; and that ADR should be thought of as an adjunct to the courtroom and not a substitute for it.

Pointing out that while most practitioners are white, middle-aged males, the majority of users of the process are women or members of minority groups.  This lack of diversity can influence outcomes and breeds distrust of the system.

Citing the “environment of secrecy” surrounding the ADR process, Landsman urges that rules governing the process should be clear and unambiguous with clearly defined provisions including costs, fees and the rights of appeal.  He also suggests that more information concerning neutrals hearing cases be provided and points to California ethics rules requiring disclosure of conflicts of interest, prior decisions and other matters.  He also urges more openness of the processes themselves.

Finally, he suggests a change in thinking of those involved about ADR and its relationship to litigation.  Rather than being a surrogate for litigation, ADR should be considered as an adjunct to litigation allowing those cases that need to be litigated to go to court.  The result will be less pressure to settle and more cooperation between the courts and ADR providers.  He also suggests that courts take closer looks at mandatory systems in an effort to rein in drafters seeking to overreach.

Conclusion

Landsmen contends that the current ADR movement and resulting privatization of dispute resolution “strikes at the heart of the rule of law.”  He suggests that the effect of ADR’s association with the tort-reform movement has “undermine[d] the system’s ability to convince a large part of the populace that ADR should ever be trusted.”  Finally, he suggests that as those seeking to counter the movement toward compulsion and corporate dominance might very well make ADR a major fatality in the battle.◘

 

 

Harassment Issues in the Health Care Workplace
Health care providers face added challenges when
faced with dealing with harassment
 (Published November 2006) 

 Title VII of the Civil Rights Act of 1964 is the centerpiece of discrimination law in the United States.  Along with state law, court cases, regulations and other federal statutes, including the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), the Rehabilitation Act, the Immigration Reform and Control Act, and others, it prohibits discrimination in the workplace because of race, color, religion, sex and national origin.  A recent study shows that health care providers face additional challenges in dealing with the impact of disruptive behavior related to discrimination issues in that such behavior in physicians and nurses not only has a significant impact on job satisfaction and retention of nurses, but also can have an enormous impact on health care delivery and its outcomes.

In addition to outright discrimination in hiring practices by employers including not hiring people or terminating them because of their sex, race, color, religion and national origin, another recognized area of “discrimination” in the workplace covered by Title VII is the area commonly referred to as “harassment”.  By far, most litigation in which employers find themselves concerns this area of discrimination.

 Discrimination and harassment are defined as actions or behaviors directed toward a person within a protected class that negatively affects the terms, conditions and privileges of his or her employment.  The behavior or action must be deliberate or repeated, unwelcome, not asked for, and not returned.  The behavior can be verbal, non-verbal or physical.  While some harassing and discriminatory behaviors are easy to identify, other behaviors are difficult to define.  The key is that the behavior is unwelcome.  This places responsibility on the receiver to tell the sender, a supervisor or a manager that the behavior is unwanted. 

It is important to remember that all harassing behavior in the workplace is not unlawful.  Isolated incidents of harassing behavior may not violate federal law but likely constitute workplace misconduct and require corrective action by the employer.

Recent statistics from the Equal Employment Opportunity Commission indicate a continuing challenge by employers to deal with harassment issues.  In 2004 the EEOC and state and local Fair Employment Practices Agencies around the country received 13,136 complaints alleging harassment.  Although the number of complaints has trended downward since 1997 when 15,889 complaints were received, the number still indicates significant work needs to be done by employers.  The statistics also indicates that the percentage of complaints filed by males has steadily increased from 9.1% in 1992 to 15.1% in 2004.  Monetary benefits resulting from complaints—excluding money recovered through litigation—totaled $37.1 million in 2004, down from $50.0 million in 2003.

For health care providers the challenges are even more critical.  A recent study published in the January 2005 Nursing Management indicates the impact of disruptive behavior—including sexual harassment—by physicians and nurses not only has a significant impact on job satisfaction and retention of nurses—not a minor concern during these times of the nursing shortage—but also has an “enormous” impact on health care delivery and its outcomes.  The study concluded: 

“While the incidence of disruptive behavior in the workplace may be low, such behavior can be an extremely destructive force that undermines employee morale, increases stress and frustration, stimulates staff turnover, and leads to adverse patient outcomes.”

Another concern to health care providers is the increasing view that harassment issues raise ethical concerns and can result in charges of ethical violations by physicians and nurses.  More regulatory agencies are characterizing harassing behavior as ethical violations and are pursuing health care professionals for those violations. 

What is Harassment?

Harassment concerns two types of unlawful activities in the workplace:

Quid pro quo

Harassment defined as when an employer, supervisor or manager conditions the granting of economic or job benefits upon the receipt of sexual favors or adherence to beliefs espoused by superiors (“this for that”).  Mere requests or threats of negative job actions are sufficient for an employer to be found guilty of such discrimination

Hostile work environment

Defined as offensive behavior that permeates the workplace, making it difficult or unpleasant for employees to be productive

It is also important to remember that retaliation against an employee, who complains about discrimination, including harassment, is also a violation of the law.  An employee who opposes an employer’s practices, and makes verbal objections to supervisors, files complaints with governmental agencies, along with other similar activities is therefore protected—no matter if the “practices” being opposed are in fact legal.

DEALING WITH HARASSMENT

Dealing with harassment and hostile work environment issues can be difficult for employers and employees.  Just because management is not hearing about problems does not mean they don’t exist.  Often employers are not aware of such issues because of reluctance on the part of employees to report such activities.  There are many reasons for employees not reporting harassing or hostile work environment issues:

  • People are embarrassed to talk about it

  • Emotional after-effects are strong and include feelings of loss, grief, anger, depression, guilt and self-blame

  • Fear of retaliation, loss of job, loss of promotion, rejection

  • Unwillingness to deal with conflict

  • It is easier to try to ignore it

 Age and cultural consideration also enter into not reporting issues:

  • People from different cultural backgrounds and age groups may react differently to harassment

  • Some people may choose to avoid it and not pursue it

  • Some may not know the law and their rights

  • Some may not understand the language

  • Some may not recognize that it is taking place

Any potential harassment or hostile work environment issue brought to the attention of the employer, its supervisors, managers or owners, must be dealt with in a serious and expeditious manner.  In order to avoid liability, an employer must be able to show that:  a) it exercised reasonable care to prevent and promptly correct any harassing behavior, and b) the complaining employee failed to take advantage of preventive and corrective opportunities provided by the employer.

“[R]easonable care to prevent and correct any harassing behavior” means that the employer must establish, disseminate and enforce an anti-harassment policy and complaint procedure and take other steps to prevent and correct harassment including periodic training of staff.  In addition to implementation of policies and procedures, and training, all complaints by employees must be taken seriously and management must investigate those complaints promptly and fully.  If the investigation finds unlawful behavior, the employer must take all appropriate action to see that the behavior stops. 

While it is commonly believed that harassment and hostile work environment issues must involve sexual situations, recent years have seen a move by the courts to include non-sexual matter within the definitions of harassment and hostile work environment.  Thus, the law does not draw distinctions between racial or sexual slurs, pornography, religious or social commentary, jokes, art and other forms of speech.  Courts have held that harassment can be based not just on sex, but on gender, race, religion, national origin, age and disability.  All that is necessary to prove a hostile work environment is that the behavior is repeated and pervasive, not welcome, not returned, and interfering with the employee’s ability to perform his or her job.  Thus, political, artistic, religious and socially themed speech may constitute harassment under the law.  This is especially true of situations involving supervisors, managers and owners. 

Same-sex harassment is also now actionable.  The harasser and victim need not be gay, and the harassment must be “because of gender.” 

Special Concerns FOR HEALTH CARE Supervisors, Managers and Owners

While quid pro quo situations almost always involve employees and superiors holding power to grant or withhold job related benefits, hostile work environment can arise from both fellow employees and from superiors, managers or owners.  The Supreme Court of the United States has held in a number of cases that the employer will be held liable for the unlawful harassment by supervisors, managers, owners, partners and corporate officers of the employer.  

The superior/subordinate situation raises additional concerns and risks of liability because of the power of the superior over the subordinate.  Supervisors, managers and owners who push beliefs and values on those under their chain of command have a captive audience that can give rise to the perception that any perceived negative personnel action is because the subordinate’s beliefs are not in alignment with those of his or her superior’s.  There is also a greater reluctance on the part of employees to complain when potentially harassing behavior is coming from a superior.  It is also likely that rather than going to the employer with a complaint, the employee will go outside the workplace to make a complaint, feeling that if harassing behavior is coming from a superior, manager or owner, the employer will not deal with the problem in an appropriate manner.

Therefore, even if it can be shown that the employer met its responsibility of adopting policies and investigating and handling complaints promptly, if those complaints involve charges against a supervisor, manager or owner, the risk of liability is higher.

Management’s Role

With the above in mind and in view of the large number of claims of harassment and hostile work environment employers must be ever vigilant that the work place be kept free of potential claims.  The following are necessary:

  • Model appropriate professional behavior

  • Avoid potential quid pro quo social situations  (Dating between owners and management personnel on the one hand and employees on the other creates significant risk of potential problems)

  • Educate the work force

  • Monitor the work environment

  • Investigate all complaints of harassment and hostile work environment

  • Be unbiased

  • Ensure that any harassment and hostile work environment ceases

  • Communicate that harassment and hostile work environment will not be tolerated

  • Do not retaliate

  • Take all issues seriously

  • Use resources

 Employees’ Role

 Employees also have a role: 

  • To promptly report harassing conduct to management

  • To conduct him/herself in a professional manner at all times

  • To support coworkers when they are the object of harassing conduct

 CONCLUSION

 Those in health care face special risks when it comes to dealing with harassment.  Providers not only face potential legal liability for actions rising to the level of harassment under the law like other employers, but face additional challenges dealing with the impact of harassing behaviors by physicians and staff as they affect ethical considerations, nurses’ job satisfaction, morale and retention.  These behaviors also impact communications and collaboration among clinicians, and, most importantly, the role of these behaviors on adverse events, medical errors, patient safety, patient mortality, the quality of care and patient satisfaction.

 Health care providers should assure that they have done everything necessary to prevent harassing behavior in the workplace and to deal with it quickly and efficiently when it happens.◘

Project Dispute Resolution ProgramTM
A new program offers speedy, low-cost resolution
of construction disputes
(Published September 2006)

The Project Dispute Resolution (PDR) Program offers low cost, speedy resolution of issues associated with the construction process through pro-active, contemporaneous, on-site procedures designed to quickly and efficiently deal with issues before they become full-blown disputes.  For all types of contractors from home builders to heavy construction, the PDR Program offers cost-effective, on-site support for all project participants in dealing with issues and disputes that arise in construction projects through the use of proven alternative dispute resolution processes while keeping the parties out of court.  The PDR Program offers two different approaches depending upon the size and complexity of the project:

 PDR Small Project Program

 Intended for smaller projects such as homes and commercial complexes, the PDR Small Project Program is designed to encourage early discussion and resolution through a prepaid program that offers analysis and resolution by experts in smaller construction processes and issues.  The PDR Program is incorporated into the contract documents and establishes a process for quickly and effectively dealing with disputes as they arise, not after the project is completed.  The program uses early neutral evaluation, mediation and arbitration, and, if selected, adjudication to quickly deal with issues.

 Once an issue is raised, the program’s first step offers an analysis of what went wrong and how it can be corrected.  Using a specialized form of early neutral evaluation, this process is conducted by an impartial expert whose function is to analyze the progress of the project, work with the participants to address the emerging issue and offer recommendations on resolution.

 If informal discussions fail to resolve the issue, mediation is used to resolve the dispute.  Mediation is a structured process wherein a neutral mediator serves as an impartial facilitator in formal, scheduled negotiation sessions through which mutually acceptable settlement agreements are reached by the parties.  The agreements are then written down and signed by the parties, and are legally binding.

 If all else fails, the issue is resolve through binding arbitration.  Arbitration is a more formal, private, confidential, and binding process for settling disputes.  The arbitrator hears the evidence presented by each side and then render a decision that is binding and enforceable in court.  Arbitration costs substantially less than litigation.  The parties never go to court. 

 The PDR Program also offers an optional process called adjudication.  A new process that is just being introduced in the U.S., adjudication has been used very successfully in Great Britain since 1996.  Adjudication is a quick and relatively inexpensive way of resolving a dispute, where an impartial third party (adjudicator) decides the issues between the parties.  Adjudication is quicker and less expensive than arbitration or litigation.

 Adjudication can be used at any time during the course of the project.  If a dispute is referred to adjudication, the adjudicator is selected within seven days and must decide the dispute within four weeks (subject to any agreed extension).   Once the adjudicator has made his decision, the parties must immediately comply with the decision.  Either of the parties has the right to have the same dispute heard afresh in court or in arbitration following conclusion of the project.  The majority of adjudication decisions are accepted by the parties as the final result.

 The advantages of the PDR Program for small projects are that the process and costs are incorporated into the construction documents and included in the contract price, so that the parties can use the process without additional cost.  It offers speedy resolution of issues so that they are dealt with as they arise, during the course of the project, not later when associated costs have increased and positions of the parties have become entrenched.  By using proven alternative dispute resolution processes, the issue can be resolved—usually in less than 30 days.

 The PDR Program is initiated by inclusion of special language in the project construction documents, including any documents executed between the contractor and the owner; between the general contractor and suppliers or subcontractors; and others.  The language requires the use of the PDR Program as the exclusive method of dispute resolution, establishes the various steps involved in the program and helps keep everyone out of court.

 The PDR Small Project Program fee is 1% of the total contract price of each project.  If the project is successfully completed with no disputes, the fee is refunded—one-half to the owner and one-half to the general contractor—less an administrative fee paid to ADRWorks, the administrator of the program.

PDR Large Project Program

 The PDR Large Project Program is designed for larger construction projects and begins with a 2-3 day Project Issues Management (PIM) program that introduces the PDR Program processes; explains how the project participants will use the PDR Program during the project; introduces the project, addresses potential issues that might be encountered on the project and develops action plans for handling them; and establishes processes, responsibilities and authority for dealing with issues and disputes when they arise.  The goal of the PIM program is to develop a matrix of communication, cooperation, and collaboration made up of management and executives members from the project participants to proactively deal with issues as soon as they arise rather than waiting for them to become disputes.  Additional meetings are scheduled during the course of the project to address the progress of the PDR Program, and .

 The initial PIM program is followed by regularly scheduled PIM meetings (every 30 to 60 days) during the course of the project to review the progress of the project, make necessary changes to facilitate its function and the success of the project, and to raise issues, determine their cause, and develop solutions to deal with them in an immediate and prompt manner in order to minimize their impact on the project and its participants.  This process is conducted by the one- or three-member PDR Board made up of impartial experts whose function is to analyze the progress of the project, attend the regularly scheduled project meetings, work with the participants to address emerging issues and offer recommendations on resolution.

 Should the parties fail to resolve an issue in a timely manner, the PDR Program includes Project Dispute Intervention (PDI) to immediately address more serious project situations in which early attempts at resolution have failed.  Intended for dealing with serious situations threatening the successful conclusion of the project, PDI provides for intervention by the PDR Program team in the form of project “stand-downs” to address the problem, uses various processes for determining the cause and most effective solution to the problem, and development of an agreed plan for dealing with the issue.  The process can involve retained experienced construction professionals with specific expertise in appropriate forensic fields (changed condition, design defects, quantification, scheduling, etc.), and independent legal advisors—third-party construction attorneys—to deal with issues of contract interpretation, entitlement and other legal matters.  The cost of these independent project experts is shared by all of the parties; and they are intended to represent all of the parties to the dispute.  The goal of the PDI process is the development and implementation of a strategy for effectively and immediately resolving the issue to get the project back on track.

 An additional element of the PDR Program is the use of proven ADR processes.  The PDR Program also uses—where appropriate—facilitation, mediation, adjudication, med/arb and final, binding arbitration to resolve disputes that cannot be resolved through other means.

 The final element of the PDR Large Project Program is to analyze the avoided costs—cost savings—realized by the use of the PDR Program instead of use of traditional conflict resolution processes such as litigation.

 Conclusion

 The Project Dispute Resolution (PDR) ProgramTM offers contemporaneous, low cost, speedy resolution of issues associated with the construction process through a pro-active, on-site program that quickly and efficiently deals with issues before they become disputes.  For those issues that do become disputes, it uses proven alternative dispute resolution processes to resolve the dispute more quickly and at a lower cost than traditional litigation.◘

 Project ReAlignment™—When Projects Start to Go Bad
 A new process makes use of ADR
(Published July 2006)

Project ReAlignment™ is a method of resolving deep-seated construction disputes on large projects, especially those involving multiple parties.  It is used when direct negotiation has failed, and the parties realize that fighting claims through litigation or arbitration is a lose/lose proposition.  It realigns the parties' interests, systems, and resources to Wipe the Slate Clean™ and get the project back on track.  With tens of millions of disputed dollars at stake, Project ReAlignment™ has successfully transformed nearly 40 projects ranging in size from $10 million to over $100 million.  The method is logical and can be applied to any phase of the project.
 
Phase One: Time Out

The project's executives call a one-day “time out” to consider the status of the project.  The project executives (owner, designer, prime contractor and major subcontractors) and their project managers are gathered together to assess the current status of the project, define the extent of the existing problems and explore alternatives to litigation and arbitration.  Various realignment methodologies are discussed with the goal being to achieve an economical, effective agreement within sixty days and for a fraction of the anticipated battle costs.  The Executive Team is called upon to make a “go/no-go” decision as to whether to accept the status quo or explore alternatives.

Phase Two: The Turnaround Plan

If the Executive Team chooses to explore a better course of action, in a separate session the ReAlignment Group's facilitator works with the Project Manager Team to devise a recovery plan, which is proposed to the Executive Team in a follow-up session for a second “go/no-go” decision.

Part of the re-alignment plan involves assessing barriers to recovery: what could keep the group from achieving the goal of realignment.  One typical barrier is the cluster of unresolved disputes between the parties.  The “slate” of delays, cash flow interruptions and general bad feelings which have accumulated during the festering of the disputes must be corrected quickly and efficiently.  The realignment process has a methodology to Wipe the Slate Clean™—a completely unique business process with quantifiable, measurable standards.

Phase Three: Implement the Turnaround Plan

In order to Wipe the Slate Clean™ the parties may retain a Technical Assistance Specialist (TAS), an experienced construction professional with specific expertise in the necessary forensic field (quantification, scheduling, etc.).  The parties may also need an Independent Project Advisor (IPA), a distinguished third-party construction attorney dealing primarily with issues of entitlement and interpretation.  These project experts represent all of the parties to the dispute—and more importantly, the project—equally, fairly and without bias.  The costs for these services are split among the warring parties: typically the owner, the general contractor, and possibly several subcontractors.  Mediation confidentiality laws and specific agreements with the parties allow broad and deep data gathering without fear that party input will be used against them in a subsequent court action or arbitration.  Usually within two weeks the TAS and IPA meet with the Executive Team and PM Team for a Preliminary Assessment—a quick look at the facts of the case and the likely outcome.  The IPA provides independent analysis to allow the team to move away from entrenched positions.  The parties still have their own legal counsel and often have their own expert, but everyone works from the factual report and analysis by the Project's forensics team and Independent Project quick look at the facts of the case and the likely outcome.

Phase Four: Preliminary Analysis

The parties review and comment on the Preliminary Assessment, leading to a fuller gathering of data and analysis by the IPA and forensics team—usually accomplished within another four weeks.  Because the parties are working under the change order process, this “Preliminary Analysis” becomes industrial strength change order backup.  Through it, parties approach settlement with greater confidence in the neutrality of the data and the interpretations (two things that tend to keep parties at bay in any dispute).

Benefits

The method works even on very large projects with strongly adversarial parties deeply entrenched in their positions.  The process generates a number of benefits.

• A separate team (1) avoids ties to past positions and allows a fresh look at the issues, while (2) providing resources to complete the analysis within a short time period (45 to 60 days on average projects, and 90 days on extremely large or complex projects).
• The ReAlignment Group's team building effort with the executives from each of the organizations is key to success.  It reduces the influence of any single obstructive party, so that the Executive Team can move forward together and it brings the decision makers to the table.
• If new problems are encountered during later phases, the executive team has the skill set to maintain the project momentum by preventing the project managers or field supervisors from derailing the process.
• The IPA eliminates unrealistic legal posturing by informing the parties' counsel about the 'facts of life' in construction law.
• The contractor and subcontractors are paid current during the process, eliminating financial pressure on the subcontractors preventing further delay or the poisoning of relationships.
• The process allows the parties to Wipe the Slate Clean™ and resume working together as a team to complete the project without the animosity of unresolved conflict.
• Using the Change Order process instead of the Claims procedure simplifies contract administration and reduces the possibility of unfavorable publicity.
• Coaching is available to assist those parties with dysfunctional attitudes or work habits in correcting their behavior and improving their performance and contribution to the team effort.
• The cost to the parties is a fraction of the cost to carry the claim through to final adjudication.
• Only one set of experts is retained eliminating the disorder caused by the hiring of individual experts for each party.  In addition, the cost is split by multiple parties so that the each party's cost is relatively minor, especially compared to the savings.
• A troubled project is back on track within 45 to 60 days with continuing delays and cost impacts replaced by timely, economical progress.

Project Alignment™ and Project ReAlignment™ rely on a variety of processes aimed at detecting, heading off or settling disputed issues on construction projects. Among those processes are:

• A project neutral or project coach is common to all the processes.  This allows the parties at any stage of the construction project to determine what tools from the ADR toolbox they can use to facilitate a resolution of the problem, discuss project anomalies or plan for the future.
• Each process used revolves around realigning parties into project teams and elevating thinking to Project Level thinking, making parties responsible for project decisions rather than just company or agency decisions.
• All of the processes are voluntary and offer confidentiality to promote candid discussions.
• All the processes develop project information that the parties can trust and provide systems for effectively dealing with the developed information.  The cost of developing this information is shared by the parties, promoting team work and cost savings.
• A great benefit of all these processes for the public owner is that the contract need not be rewritten.  As long as the party stays in the change order spec of the contract, any kind of resolution process can be developed and used without ever invoking any of the specific claims provisions. In this context, lawyers become partners in resolution rather than a warrior setting the battlefield table.
• All of these processes give public officials political cover for decisions that they make. By relying on a project neutral or project coach or an independent project advisor that public officials can rationally defend their decisions to make settlement or resolution options available to make determinations from those options.

Because Project ReAlignment™ encourages the use of every ADR tool that is available rather than pre-selecting just one, it is different than all the other “processes” agencies currently use. Unlike a dispute resolution board, the project coach used in the key processes is proactive and assists the parties in developing issues and responses. Unlike traditional partnering, the project coach continues after the partnering sessions to make sure that there is a process for both raising issues and forming resolution strategies after the initial session.  Using SlateTracker, it develops timely relevant information, judges it against objective standards and provides a system for timely addressing and resolving any kind of controversy or anomaly that appears.  And finally, Project ReAlignment™ specifically uses a project coach to assist the parties in designing the specific resolution process that's going to be necessary (what expert information do we need? what systems of resolution are available? etc.).
      
            What chiefly distinguishes Project ReAlignment™ from other processes available in the marketplace is that it is not hidebound by one kind of process—it uses everything that's been developed in the dispute resolution field and all the expertise available in the construction industry to the extent necessary help resolve the claims of the parties and move the construction project forward without undue delay or expense.◘

For more information about Project Re-Alignment, go to www.projectrealign.com.
 
Mediator and Arbitrator Neutrality--Whose Responsibility Is It?
Users of the process need to do their part
(Published June 2006)
 

An article in the June 18 New York Times* raised some interesting questions about the NASD arbitration program.  The program was the subject of an article by Richard Brady in the March ADReport.  The ADReport article, entitled “Stockmarket Losses? Arbitration May Be Mandatory” provided an overview of the NASD securities arbitration program, and discussed how the process is initiated.

Entitled “Is This Game Already Over?” the New York Times article discusses two recent situations involving NASD arbitrations raising questions concerning the neutrality of some NASD arbitrators.

The first situation involves a Long Island charity that lost $614,036 in the stock market during the Internet bubble, and subsequently filed for arbitration against its former broker contending he churned the account and invested in improper securities.  The problem in this matter concerns the selection of the three-member arbitration panel to hear the case.  According to the article the panel is suppose to be made up of one securities industry representative and two “public investor” representatives.  The charity has taken the position that the so-called “public investor” representatives are not that at all, but rather, all five of the potential panelists assigned to the case by NASD have conflicts of interest and are closely associated with the brokerage industry.  The case was filed 15 months ago and is not yet ready for hearing as the attorney representing the charity struggles to get a neutral panel to hear the case.

The second situation involves an arbitration involving an investor from Colorado who filed for arbitration against Citigroup in 2003.  The case involved a wealthy businessman who sold his interest in a company to WorldCom and then proceeded to lose $900 million when WorldCom collapsed.  An NASD arbitration panel ruled against the businessman, and he appealed to a federal court to overturn the decision because one of the arbitrators who heard the case failed to disclose earlier incidents involving charges of securities fraud by a firm that employed the arbitrator.

The article, and the two cases it discusses, raises questions about the screening processes employed by NASD in determining whether an arbitrator is a “public investor” representative, or is even qualified to serve in any capacity on a NASD panel because of past misconduct.

I asked Richard to read and comment on the article:

“The securities arbitration process works well for investors despite the implications to the contrary in the recent New York Times article.  The fact is, most investors who file arbitration claims recover, at a minimum, at least some of their investment losses, whether by settlement, mediation or award.  Many investors receive all of their money back, plus interest and attorney fees.  These results are far better than would be obtained if these cases had to be tried in court, and are quicker, too.

“Sure, the percentage of cases in which the investor won an award has declined from 2001 to 2005.  But remember, Wall Street has cleaned up its act a lot since 2000.  I attribute the decline to this, rather than increased occurrences of arbitrator bias as the New York Times suggests.

“The main problem I have with the article is that it suggests that arbitration is bad for investors simply because the NASD and NYSE cannot guarantee the neutrality of the thousands of public arbitrators on their panels.  No one can guarantee the neutrality of another person, whether judge, juror or arbitrator.

“The NASD and NYSE screening processes for arbitrators are good, but no process is perfect and constructive criticism is always appreciated.  That’s why, despite my disagreement with much of its message, I applaud the Times for pointing out instances in which mistakes may have occurred.

“[T]he hard truth is that no matter how good the screening process, parties and their attorneys will still have to dig to uncover any bias or potential bias.”

One of the bedrocks of all ADR has always been the concepts of neutrality and impartiality.  All of the classes and seminars that I have taught have always discussed the importance of neutrality and impartiality of whoever is mediating or arbitrating.  Nevertheless, some situations slip through the cracks.

The article seems to raise questions concerning whether an ADR program covering the securities industry should be administered by the securities industry.  It also points to the level of work that needs to be done by any provider of ADR services when it comes to assuring that the mediators and arbitrators are really neutral and impartial, and without conflicts of interest. This issue is all the more important when it involves a mandatory system like the NASD system that preempts the right to go to court.

ADR providers need to work hard to try and assure the neutrality and impartiality of the member of their panels.  However, the job doesn’t stop there.  Users of ADR also need to do more than simply accept a mediator or arbitrator.  They must do their own due diligence to assure that the mediator or arbitrator meets their needs in order to assure their satisfaction with the process, and, more importantly, the outcome.

Users should be satisfied with the mediator or arbitrator going into the ADR process.  The user and/or his or her attorney should carefully investigate the designated mediator or arbitrator to assure that he or she is not only impartial, but experienced and technically qualified both in the process to be used and in the subject matter of the dispute.

Due diligence should include the assurance that the mediator or arbitrator has the following qualifications:

  • Total neutrality, impartiality, objectivity and freedom from bias

  • Free of conflicts of interest

  • Experience, training and and understanding of  the ADR process to be used

  • Experience in the resoluti