TRIALS AND RESOLVING
DISPUTES
Chapter 3
Meiners, Ringleb & Edwards
The Legal Environment of Business, 12th Edition
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CHAPTER ISSUES
Basic Trial Procedures
Procedures and Processes of Litigating a Dispute
Remedies in Civil Litigation
Appellate Stage
Enforcement Stage
Alternative Dispute Resolution (ADR)
Arbitration
Negotiation-Settlement
Mediation
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THE JUDICIAL SYSTEM
The court system is
adversarial in nature.
Parties have the
responsibility for
bringing a lawsuit,
shaping issues and
presenting evidence.
Lawyers represent the
parties’ claims.
Judges don’t
investigate.
Court applies legal
rules to facts
presented.
Trials are often costly
and uncertain.
Complex facts,
extensive evidence,
mountains of business
records involved.
Juries tend to be less
sympathetic to
businesses
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BASIC TRIAL PROCEDURES
Pleading Stage
Discovery Stage
Pretrial Stage
Trial Stage
Appellate Stage
Enforcement Stage
See Exhibit 3.2
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THE PLEADINGS STAGE
Formal statements made to the court by the parties
Jurisdiction needed over subject matter & parties
Notice given of lawsuit by service of process through summons
Complaint
Alleges facts for jurisdiction & remedy/remedies
Requests remedy(ies)
Responses to Complaint
Motion to Dismiss (Demurrer)
By defendant
Answer (may include affirmative defenses – usually by defendant)
Counterclaim
Reply
See Exhibit 3.1 (Casino owner pokes a hole in a Picasso, and sues Lloyds of London for
compensation for losses under his insurance policy with them.)
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PURPOSE OF DISCOVERY
(Legal Tools to Obtain Evidence)
Rules of Civil Procedure set guidelines & limits to the process
Purposes to (1) preserve evidence, (2) limit element of surprise, (3) encourage
settlement
Depositions of parties and witnesses (including experts) – sometimes videotaped
Interrogatories of the parties
Use of Expert Witnesses
Requests for Admissions
Orders of Production of Documents
Physical/Mental Examinations
Impacts on business – expensive & time-consuming
Court may sanction a party who fails to comply with discovery requirements .
Default Judgment
Contempt of court (fines, pay costs to the other party)
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CASE
BARABIN V. ASTENJOHNSON, INC.
Henry Barabin was exposed to asbestos from 1964-1984.
Mostly worked at a paper mill that used dryer felts containing asbestos
Suppler was AstenJohnson
In 2006 Barabin was diagnosed with rare lung cancer; cause was
exposure to asbestos
He sued
AstenJohnson moved to exclude expert testimony of Barabin’s Dr.
Cohen because he had “dubious credentials and his lack of expertise
with regard to dryer felts and paper mills.”
District Court chose not to hold a Daubert hearing to determine if
Cohen was qualified expert
Jury was to determine if Cohen’s testimony was credible
Jury found for Barabin
Awarded damages of $10,200,000
AstenJohnson appealed.
(Continued)
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CASE
BARABIN V. ASTENJOHNSON, INC.
District court determines relevance and reliability of expert testimony
Admission or exclusion under Daubert rests on scientific reliability/relevance of
expert testimony
Expert’s opinion must be deduced from a “scientific method” to be admissible
Test under Daubert is not correctness of expert’s conclusions:
Rather the “soundness of expert’s methodology”
Factors in assessing reliability of expert testimony:
(1) whether scientific theory/technique can be (has been) tested
(2) whether theory/technique has been subjected to peer review & publication
(3) whether there is a known or potential error rate, and
(4) whether the theory/technique is generally accepted in the relevant scientific
community
HELD: District erred. New Trial is provided.
Because no Daubert hearing was conducted, District Court failed to assess if Dr.
Cohen applied scientific methodologies, reasoning or principles
Court merely allowed parties to submit experts’ unfiltered testimony to the jury
District court abused discretion when denying AstenJohnson’s motions for new trial
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INTERNATIONAL PROSPECTIVE
“BRITISH COURTROOM PROCEDURE”
Both British & U.S. court proceedings based on adversarial model
However, significant differences in the implementation of the model
British bar divides into solicitors and barristers
Solicitors handle advising commercial and private clients on
business/property matters
Barristers do mostly litigation
Much more specialization in the U.S. than in the British system
British Courts: “a more civil & cooperative atmosphere” than the U.S.
Barristers don’t walk around the court while questioning witnesses
In UK, most objections re: evidence raised outside the presence of the jury –
resolved before the witness is called
Barristers rely on judge to object to evidence
Jury in Britain sees continuous flow of information and less maneuverings by
attorneys as in the U.S.
At end of evidence, in British court, judge summarizes evidence for the jury.
In U.S. judges do not discuss evidence with jury.
(Continued)
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INTERNATIONAL PROSPECTIVE
“BRITISH COURTROOM PROCEDURE”
Order of trial is different
•
In UK defense starts the opening statement at the end of the
plaintiff’s/prosecution’s evidence
Some say British trials are superior
Others worry re: active role the judge takes
•
Concern that one party is prejudiced by judge’ non-verbal behavior
(sighing, frowning, etc.)
U.S. Court of Appeals have actually overturned trial verdicts based on such
a judge’s behavior.
General agreement from social science experiment of tapes of trials shown
to people:
Shown trials conducted under U.S. and UK rules
UK version more civil & view judge more positively than in the U.S.
However participants still prefer the U.S. procedure overall
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PRETRIAL STAGE
Summary Judgment – either party may request
o
Judge renders it
Pretrial Conference – either party or court may request
Usually attorneys and judge attend
Simplify issues
Plan course of the trial
Judges get parties to drop certain parts of case
Helps to focus on key issues
Judges often encourage parties to reach out-of-court
settlement
See “Test Yourself”
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JURY SELECTION
6th and 7th Amendments gives right to a jury in certain
cases
If no use of jury, judge becomes trier of fact
Selection of jury involves voir dire
Attorneys allowed limited number of challenges to
reject prospective jurors without stating reason –
peremptory challenges
Usually 12 persons on jury panel
Some states have fewer – such as 6 jurors
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TRIAL STAGE
Opening Statements by attorneys
Presentation of Direct Testimony
Direct Examination, Cross Examination, Redirect Examination, ReCross Examination
Closing arguments
Instructions to Jury (also called charges)
Verdict by jury. Judgment may be set aside for jury misconduct.
•
Example: Juror in Florida used Facebook to friend a defendant in a personal-injury case
Juror was sentenced 3 days in jail
•
Example: Murder conviction in Arkansas thrown out
Juror tweeted information about trial despite warning by judge not do
Motions For A Verdict
Motion For A Directed Verdict/Motion For Judgment As A Matter of
Law/Judgment on the Pleadings
Cases have been presented, but before going to jury, either party requests entering judgment in its favor
Motion for Judgment As A Matter of Law/Motion For Judgment
Notwithstanding the Verdict (N.O.V.)
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REMEDIES IN CIVIL LITIGATION
(See Exhibit 3.4)
o
o
Monetary damages
Equitable remedies
Compensatory
Specific performance
Punitive or exemplary
Injunction
Nominal
See Naples v. Keystone
Case
Permanent
Temporary
Preliminary
See Pre-Paid Legal
Services, Inc. v. Cahill
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CASE
NAPLES V. KEYSTONE BUILDING AND DEVELOPMENT
CORP.
The Naples contracted with Keystone to build their new home.
Work was warranted. Cost was $620,000.
Major problems occurred soon after they moved in.
Crews were sent several times to do repair work.
Problems continued
Expert, Dykins, was hired to evaluate the home. Said extensive work
would be needed.
Estimated costs of repairs: $113,511 + painting for $15, 819.
Naples sued Keystone for the amount.
Trial court held for the Naples, awarding them only $59,140.
Stated that a higher damage figure had “not been established with a
sufficient degree of certainty.”
Naples appealed.
(Continued)
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CASE
NAPLES V. KEYSTONE BUILDING AND DEVELOPMENT CORP.
General rule: Place the party entitled to compensation in position it would
have been if there had been no breach
In unfinished construction damages are measured by
(1) Reasonable cost of construction & completion, if this does not involve
“unreasonable economic waste” OR
(2) Difference between value contracted for and value of performance that was
received (without involving “unreasonable economic waste”)
Repairs, however, may not result in improvements on the property – as such
repairs would be above the work that was warranted.
The court did not point to conflicting evidence or explanation why it elected to
discredit some portions of the estimate (trim, siding + repair & paint portions
of interior) while accepting others verbatim.
Trial court’s award was therefore illogical.
HELD: Trial court was in error.
New trial ordered and limited to issue damages to compensate plaintiffs
adequately.
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CASE
PRE-PAID LEGAL SERVICES, INC. V. CAHILL
Pre-Paid Legal Services, Inc. (PPLSI) sells legal service plans. Members pay a monthly fee
May call a toll-free number to be connected to law firms that contracted with PPLSI
Firms provide free or discounted legal assistance
Cahill was a successful sales rep. for PPLSI – rose to a senior position
Had access to sales records of all representatives
Knew the top performers in the country
Signed an agreement with PPLSI prohibiting use of such information outside PPLSI
Cahill met with top sales associates, including Cabradilla.
Told them he was going to work with another company, Nerium
Wanted the sales associates to come with him
Cahill resigned; posted material about Nerium on PPLSI private website
Posting seen only by top sales associates
Cahill’s access to PPLSI materials & websites was terminated
PPLSI sued Cahill for breach of contract and in tort.
It would be some time before dispute would go to arbitration & PPLSI requested the court to
issue a preliminary injunction
Injunction would prohibit Cahill from exploiting information he had learned from PPLSI
Magistrate Judge reviewed request, issued a report & recommendation to be reviewed by the
District Judge
(Continued)
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CASE
PRE-PAID LEGAL SERVICES, INC. V. CAHILL
CASE DECISION: Preliminary Injunction is extraordinary remedy – exception rather than the rule
Purpose of preliminary injunction is to preserve status quo – pending outcome of the case
In order for court to grant this kind of injunction, request must meet 4-part test. Requesting party must
demonstrate
(1) there is a substantial likelihood it will prevail on the merits of case;
(2) it will suffer irreparable harm unless injunction is issued;
(3) the threatened injury outweighs the harm the injunction might cause the opposing party; AND
(4) preliminary injunction if issued will not adversely affect he public interest
If Cahill is permitted to breach the non-solicitation agreement, PPLSI will suffer irreparable harm
Cahill continued to send text messages to Cabradilla after he rejected his offer to go to Nerium PLUS
engaged in another multi-level marketing company
Defendant will need to recruit sales associates to Nerium shows PPLSI faces “significant risk” that Cahill
will solicit PPLSI associations if not enjoined from contacting them
Harm to Cahill being enjoined is minimal
He can still recruit sales associates to Nerium & build his business
Only restriction Cahill will face is that he abides by the contract provisions that he agreed to when he started
with PPLSI
Public interest is promoted through enforcement of valid contracts
HELD: PPLSI has satisfied the four requirements
HELD: Preliminary injunction should be issued barring Cahill contacting PPLSI sales associates for them to
join Nerium
HELD: PPLSI entitled to preliminary injunction until issues can be presented to arbitrators
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APPELLATE STAGE
(Appeal Based on Error of Law)
Arguments before the
court
Outcomes of decisions
Affirmed
Written Briefs
Modified
Oral Arguments
Reversed
Remanded
Decisions by the court
Majority opinion
Concurring opinions
Dissenting opinions
See “German Trial
Procedure” re: a different
country’s system
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ENFORCING JUDGMENTS
If no further appeal is available, judgment becomes final
It is res judicata
Enforcement of judgment is through writ of execution
Court orders an official (i.e. sheriff) to satisfy judgment through an
act (such as seizure of property, garnishment, etc.)
A complexity that causes parties to look for alternative dispute
resolution
In U.S. each side usually responsible for own costs
Not in Britain – loser usually pays winner’s legal costs
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INTERNATIONAL PERSPECTIVE
“GERMAN TRIAL PROCEDURE”
In Germany judges play a more active role in trial process than U.S. judges
Civil procedure is governed by rules called the Zivilprozessordnung (ZPO)
In U.S. judge’s role usually limited to applying law to facts of the case
In Germany:
Judge decides the facts of the case, then applies law to facts
Judge, not lawyers, decides which witnesses to call
Judge, not lawyers, interrogates witnesses and records their testimony
Judges may ask questions only about evidence that parties to the case
present themselves
What is presented is more limited than typical presentation at U.S. trials
German courts want to protect many more confidential relationships than do
U.S. courts
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ARBITRATION
Most widely recognized form of ADR
Usually results are faster in resolution of matters
3rd neutral party or panel (usually expert) is arbitrator or arbiter
Parties agree upon this ADR in the contract or during a later dispute
Federal Arbitration Act (FAA) states agreement to arbitrate must be
upheld
Arbitrator’s decision is binding
Arbitration decision is final and matter usually cannot be litigated again
or appealed
Usual rule: No right to go to trial (parties to the dispute give up this right)
Appeals from these decisions are very specific and limited.
Thousands of international disputes go to arbitration each year
Uniform Arbitration Act (UAA) upholds the integrity of this process
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THE ARBITRATION AGREEMENT
Decided at time of making the
contract or after dispute arises
Begins when party files a
submission
Parties agree on arbitrator(s)
The hearing procedure
Closed door
Less restrictive procedural and
evidentiary rules than a trial court
Procedures include on-line
arbitration
Arbitration associations have rules
that guide participants/arbitrators
Good faith cooperation
Voluntary and prompt exchange of
documents
Uncooperative parties may be required
to pay fees and compensation by
arbitrator
Arbitrators are usually attorneys, but
need not be – often are experts in a
field
The award (decision)
Usually given in writing within 30 days of
close of arbitration hearing
Arbitrators have broad powers to decide
remedies
Appealing the award
Attacks on arbitrators are rarely
successful
Errors of fact or law are usually not
reviewable
Grounds for overturning appeal: fraud,
partiality, serious procedural misconduct,
excessive use of power by arbitrator
Arbitrators have wide latitude in awards
Generally arbitration award is final
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CYBER LAW
“INTERNATIONAL ARBITRATION AND
MEDIATION OF DOMAIN NAME DISPUTES”
World Intellectual Property Organization (WIPO) in Geneva
establishes international rules for trademarks and other forms of
intellectual property
WIPO has domain name resolution service to protect domains (i.e.
.mx for Mexico and .edu for education)
WIPO has a Uniform Domain Name Dispute Resolution Policy
(UDRP) dealing with such problems as “cybersquatting”
Parties go to Arbitration and Mediation Center where experts
handle disputes
Fees are assessed
If 1-5 names included in a complaint -- $1,500
If 3 panelists are requested -- $3,000
Over 1,000 disputes/year submitted to the Center
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Least formal form of ADR
Parties decide to settle matter between themselves
Often use lawyers or representatives, though not
required
Lawyers, etc. are agents of the parties of the dispute
Negotiated settlement is usually a contract, which is
enforceable, like other contracts, by the courts
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STAGES OF NEGOTIATION
Stage 1: Study issues and information
Stage 2: Exchange of information
Different styles: i.e.“tough guy” vs. “problem solver”
Stage 3: Work your strategy
Usually involves compromise
Stage 4: Agreement is reached; usually a contract is
written
Policy of the courts is to enforce negotiated
settlements
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3rd neutral person (mediator) assists the parties of the
dispute
Parties mutually decide on a resolution
Mediator makes suggestions
Mediator’s suggestions are NOT BINDING on the
parties
Parties may go to trial after this ADR
Mediation often helps to maintain the relationship
between the parties
Mediation also involves labor disputes and marital
disputes
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THE MEDIATOR
Some states have no requirements at law, but many
states are moving toward some licensing
Most people prefer a trained or experienced person
Usually parties agree to maintain confidentiality
If no requirements, the mediator may be the choice of
the parties
If mediator fails to act professionally, may be subject to
liability to one of the parties
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THE MEDIATION PROCESS
Mediator collects information, outlines key issues, listens, asks
questions, observes the parties, discusses options, and
encourages compromise
Mediator often helps to draft the settlement agreement
The settlement agreement is enforceable in court
Mediator may assist in deciding the confidentiality of the case
If confidentiality is agreed upon, nothing can be said in public
Information revealed during negotiation or mediation should not be
used as evidence if the dispute goes to a later trial
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