Alternative Dispute Resolution
and Settlement
Litigation costs
• Median time-to-trial in patent suits from 1995
to 2015 averaged well over two years (PwC,
2015).
• For firms battling over intellectual property
(IP), it is a time-consuming, expensive, and
seemingly unpredictable process.
• Also, you are never quite sure what the jury
might award.
Facts
• By some estimates, 97 percent of civil cases
are settled.
• Among those cases that are settled, large
percentages are resolved through courtordered arbitration.
• Other times, because of an arbitration clause,
a conflict is resolved without ever filing suit.
Outline
• Arbitration
• Mediation
• Settlement
Arbitration
• Arbitration is a process in which a third-party
neutral arbitrator, or a panel of arbitrators,
decides outcome of a dispute.
• The arbitral award is usually final.
• Arbitration can be selected before or after the
dispute.
• Parties can select their own rules or use
procedural rules from an international board like
the American Arbitration Association or the
International Chamber of Commerce.
Example of Arbitrator in Korea
•
Benjamin Hughes, SNU Associate Professor
•
Professor Hughes has extensive experience as counsel in international arbitrations around the
world and under most major arbitration rules. He practiced international arbitration at a large US
firm (in the US and Singapore), and was the founding co-chair of the international dispute
resolution practice group at one of Korea's oldest and largest full service law firms.
•
Professor Hughes ceased practice as a lawyer and has practiced only as an arbitrator and mediator
since March 2013. Since then, he has been appointed as the sole, chair or co-arbitrator in
arbitrations under rules of the ICC, AAA/ICDR, SIAC, HKIAC, UNCITRAL (administered and ad-hoc),
KLRCA, JCAA, CIETAC, ACICA and KCAB, as well as purely ad-hoc arbitrations. He has also been
appointed in both emergency and expedited proceedings.
•
Professor Hughes is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of
Arbitrators, the Hong Kong Institute of Arbitrators and the Australian Centre for International
Commercial Arbitration. He also serves as an Executive Committee Member of the Seoul
International Dispute Resolution Center and as a Member of the International Arbitration
Committee of the KCAB, and was the founding chair of the Korea Chapter of the Chartered Institute
of Arbitrators.
How much do arbitrators make?
•
Federal Arbitration Act
• This act provides for arbitration in federal courts and
the state courts through the commerce act.
• The Federal Arbitration Act provides for contractuallybased compulsory and binding arbitration, resulting in
an arbitration award entered by an arbitrator or
arbitration panel as opposed to a judgment entered by
a court of law. In an arbitration the parties give up the
right to an appeal on substantive grounds to a court.
• The Federal Arbitration Act requires that where the
parties have agreed to arbitrate, they must do so in lieu
of going to court.
FAA
• Once an award is entered by an arbitrator or
arbitration panel, it must be "confirmed" in a
court of law. Once confirmed, the award is
then reduced to an enforceable judgment,
which may be enforced by the winning party
in court, like any other judgment.
Bowen v. Amoco Pipeline Company
• FACTS: The parties agreed that they would
have the right to appeal any arbitration award
to the district court within thirty days “on the
grounds that the award is not supported by
the evidence.”
Bowen v. Amoco Pipeline Company
• Issue: Can their clause expand the judicial
review of arbitrator’s judgment by district
courts?
• Conclusion: 10th Circuit said the intent behind
the FAA as well as Supreme Court cases do not
support a rule allowing parties to alter the
judicial process by private contract.
• Which means the parties will just have to
accept the arbitrator’s decision.
Bowen v. Amoco Pipeline Company
• Analysis: “By agreeing to arbitrate, a party
trades the procedures and opportunity for
review of the courtroom for the simplicity,
informality, and expedition of arbitration.”
• Courts will only vacate an arbitration award
only in limited circumstances or in accordance
with a few judicially created exceptions.
Bowen v. Amoco Pipeline Company
• Vacation of arbitrator’s award is proper in:
cases of fraud, corruption, arbitrator
misconduct.
• Court found that the agreement to challenge
award “on the grounds that the award is not
supported by the evidence” would undermine
the policies behind the FAA.
• Lesson: Arbitration is a very powerful form of
dispute resolution.
Arbitration
• Arbitration is treated as a creature of contract.
• Courts will enforce arbitration clauses absent
fraud or duress and even if there is an
imbalance of power between the parties or
even in adhesion contracts.
• Hence, large firms and credit card firms and
car sales often times include arbitration
clauses. Why? Anything wrong here?
Mediation
• Mediation is best described as “facilitated
negotiation.”
• Mediator has no power to resolve the dispute
for the parties.
• Instead parties attempt to reach their own
agreement with the assistance of the
mediator.
Mediation Process
• Mediator starts with an explanation of the
process.
• Then each party presents their viewpoint.
• Then joint session moderated by mediator.
• Then mediator may break up the groups for
private discussions called caucus meetings.
• If agreement is reached, a MOU is signed.
• If no MOU, then arbitration or litigation could
ensue.
Benefits of Mediation
• Unlike In Re MSTG, mediation negotiations are
usually privileged under discovery, trial, etc.
by state laws.
• Parties are encouraged to speak freely and
without fear so that an agreement can be
reached.
Why a Mediator?
•
•
•
•
Speed up negotiations
Reduce likelihood of miscalculation
Help the parties reach a sounder agreement
He can do this by holding separate
confidential meetings with both parties and
armed with that information but without
disclosing the details, help shape the
negotiations toward a common goal.
Role of Mediator
• He must know the desires, aspirations,
working procedures, and business constraints
of the parties.
• He must be be a good translator by expressing
each parties needs in a respectful and faithful
way.
• He can be the agent of reality and tell the
parties bad news.
• Lastly, he / she can be the scapegoat.
Mediation Video
• https://www.youtube.com/watch?v=9Oji5dxQ
emQ
In Re Atlantic Pipe Corporation
• Facts: Plaintiff was suing Defendant over a
busted oil pipe in Puerto Rico. Defendants
filed counter claims and 3rd party compaints to
various parties. The district court ordered
mediation for all of the parties.
• Issue: May a court order a non-consenting
party to participate in mediation without any
authority based in statute or rule?
In Re Atlantic Pipe Corporation
• Rule: There are 4 ways in which courts can
order mandatory non-binding mediation:
1. Applying court’s local rules
2. An applicable statute – The ADR Act
3. FRCP 16
4. Court’s inherent powers
In Re Atlantic Pipe Corporation
• FRCP 16 – “The court may take appropriate
action with respect to settlement and the use
of special procedures to assist in resolving the
dispute when authorized by statue or local
rule”
In Re Atlantic Pipe Corporation
• Inherent Powers – FRCP 83 “Judges may regulate
practice in any manner consistent with federal law and
applicable rules”
• Limitations to inherent powers:
1. Inherent powers must be used to enhance judicial
process
2. Inherent powers cannot contradict applicable statute
or rule
3. Inherent powers must be procedurally fair
4. Inherent powers must be exercised with restraint and
discression
In Re Atlantic Pipe Corporation
• Analysis: In this case, the order requiring APC
to attend mediation was within the district
court’s inherent powers. The complexity of
the instant case makes mediation a potentially
beneficial process that has the possibility of
clarifying the issues that exist amongst the
parties.
Directions to District Court
• However, the district court’s mediation order
lacked certain procedural safeguards that are
required for such orders. In particular, the
district court must set time or cost limitations
to the mediation in order to avoid the time
and cost demands of the mediation process
from overwhelming the litigation.
Directions to District Court
• The district court should also make clear in its
order that participation in mediation does not
waive any litigation position that a party may
hold. Therefore, the district court’s order is
vacated and remanded.
• So yes, mediation is allowed to be ordered by
judge as long as it is procedurally fair.
Case Settlement
FRCP 68
•
•
•
•
(a) Making an Offer; Judgment on an Accepted Offer. At least 14 days before the
date set for trial, a party defending against a claim may serve on an opposing party
an offer to allow judgment on specified terms, with the costs then accrued. If,
within 14 days after being served, the opposing party serves written notice
accepting the offer, either party may then file the offer and notice of acceptance,
plus proof of service. The clerk must then enter judgment.
(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does
not preclude a later offer. Evidence of an unaccepted offer is not admissible except
in a proceeding to determine costs.
(c) Offer After Liability is Determined. When one party's liability to another has
been determined but the extent of liability remains to be determined by further
proceedings, the party held liable may make an offer of judgment. It must be
served within a reasonable time—but at least 14 days—before the date set for a
hearing to determine the extent of liability.
(d) Paying Costs After an Unaccepted Offer. If the judgment that the offeree
finally obtains is not more favorable than the unaccepted offer, the offeree must
pay the costs incurred after the offer was made.
Marek v. Chesny
Supreme Court Case
• Facts: Police officers shot and killed Marek.
Marek’s father sued for damages under 42
U.S.C. § 1983.
• Police officers put forward a settlement offer
for 100,000 dollars. Father refused and won
$60,000 at trial.
• Usually, under 42 U.S.C. § 1983, the winner is
awarded attorney’s fees.
Marek v. Chesny
• Issue: Whether attorneys fees incurred by a
plaintiff subsequent to an offer of settlement
under Rule 68 must be paid by the defendant
under 42 U.S.C. § 1988, when the plaintiff
receives a judgment less than the offer.
• Conclusion: NO!
Marek v. Chesny
• Analysis: Rule 68 states that if the judgment that
the plaintiff finally obtains is not more favorable
than the unaccepted offer, the plaintiff must pay
the costs incurred after the offer was made
• (d) Paying Costs After an Unaccepted Offer. If the
judgment that the offeree finally obtains is not
more favorable than the unaccepted offer, the
offeree must pay the costs incurred after the
offer was made.
Marek v. Chesny
• Analysis: Here, the question is whether the term
“costs” in Rule 68 applies to settlement offers in a
case where attorneys fees may otherwise be
awarded to the prevailing party under § 1988.
This court finds that it does. The term “costs” is
neither defined in the rule nor in the Advisory
Committee notes, and the meaning to be inferred
from that omission is clear: “costs,” for the
purposes of Rule 68, should include attorneys
fees, when the underlying statute defines costs as
incorporating attorneys fees.
Marek v. Chesny
• Please note that court’s decision was impersonal
to Marek’s father.
• Without any congressional intent to rely on, the
Supreme Court applied the law.
• Concurrence (Scalia, J.)
Although I previously dissented in Delta regarding
the application of the term “costs” in Rule 68, after
additional reflection I am persuaded that I was
wrong, and I concur with the court’s judgment here.
Conclusion
• Arbitration and mediation are common
methods of resolving disputes.
• Courts have the power to impose arbitration
and mediation.
• Most civil suits are settled and not tried. Same
goes for criminal cases.
• FRCP and specifically rule 68 seems to
encourage the settlement of lawsuits.