New Trends in Domestic and International

. New Trends:
Increased court ordered arbitration and mediation;
Increased contractual mandatory binding arbitration and use of mediation:
consumer disputes;
employment disputes;
commercial disputes
II. Most frequently used forms of alternative dispute resolution
Arbitration- private trial before one arbitrator or a panel of arbitrators.
Mediation- facilitation of settlement negotiations between the parties and their counsel by neutral mediator.
III. Arbitration and mediation are increasingly used to avoid court litigation because of:
Court congestion, pressures on judiciary, counsel and parties to dispose of cases; delay vs accelerated docket.
Dissatisfaction of domestic and foreign corporations with specific features of U.S. legal system: excessive discovery, high litigation costs, adverse publicity, destruction of long term relationships between parties; punitive damages; class actions; jury trials and unpredictability of jury verdicts.
Advantages of arbitration and mediation: less expense, less discovery, less technical rules of procedure and evidence, confidentiality of proceedings, and expertise of arbitrator or mediator. In mediation, flexibility in designing remedy, controlling result and preservation of parties' relationship.
Recent survey by ABA Litigation Section Task Force on ADR: arbitration more efficient (78%) and cost effective (56%) than litigation.
IV. Court ordered proceedings.
New rules and decisions in almost every state and federal court requiring arbitration and/or mediation:
1. Mandatory, nonbinding arbitration of lawsuits involving less than a certain amount. e.g. U.S. District Court in Arizona: optional non-binding arbitration of claims under $150,000 (Local Rule of Practice 2.11); Arizona Superior Court: mandatory non-binding arbitration of claims under specific amount, Rules 72-76, Ariz. R. Civ. Proc. Amount varies by county: e.g. Maricopa (Phoenix) County and Pima (Tucson) County- $50,000, Maricopa County Rule 3.10, Pima County Rule 3.9. Party can "appeal" arbitration award by requesting a jury trial de novo.
Waiver of mandatory arbitration if parties agree to mediation, Rule 72 (d), Ariz. R. Civ. Proc.
Mandatory meeting of counsel within 90 days after first appearance of a defendant to consider ADR options and file report with court within 30 days thereafter re potential settlement, Rule 16(g), Ariz. R. Civ. Proc. Under consideration: amendment that would require ADR before judge sets a trial date.
Settlement conferences, Rule 16.1, Ariz. R. Civ. Proc. and Maricopa County Rule 3.11.
Increased use of mediation: in mid May, 2003 Delaware House of Representatives approved creation of new task force to improve mediation of complex business cases in Court of Chancery; 1st Circuit ruled that a federal trial court has "inherent power" to order mediation, In re Atlantic Pipe I, 304 F. 3d 135 (1st Cir. 2002); 2nd Circuit has extended its mediation pilot program.
Practical effect: corporate and individual litigants and counsel are forced into earlier evaluation of cases and initiation of settlement discussions thereby changing the prior "culture of litigation" to a "culture of settlement".
V. Increased contractual use of mandatory binding arbitration as a result of recent U.S. Supreme Court decisions that have approved such clauses. This has been highly controversial and has been subject to continuing challenges in lower courts.
Consumer Agreements:
Green Tree Financial Corp- Alabama v. Randolph, 531 U.S. 79 (2000) upholding mandatory arbitration clause in mobile home financing agreement. But see Ting v. AT&T, (No. 02-15416, 9th Cir. 2003), cert. den. Oct. 6, 2003, invalidating service agreement with mandatory arbitration clause barring class action and punitive damages.
Where contract is silent as to class actions, split in authority as to whether they can be brought. Allowed: Keating v. Superior Court, 183 Cal. Rptr. 36 (Cal. 1982), Dunlap v. Berger, 567 S.E. 2d 265 (W. Va. 2002), cert. granted January 10, 2003; Denied: Champ v. Trading Co., 55 F.3d 269 (7th Cir. 1995); Green Tree Financial Corp v. Bazzle, (U.S. Supreme Ct. No. 02-634, June 23, 2003) reversing 569 S.E. 2d 349 (S.C. 2002). Discover Bank v. Superior Court, 129 Cal. Rptr. 2d 393 (Cal. App. 2003) denied class action and held that Federal Arbitration Act § 2 preempts California consumer laws that allow class actions. On appeal to California Supreme Court.
Employment Contracts:
Circuit City Stores, Inc. v. Adams, 532 U.S.105 (2001) upheld mandatory arbitration clause in employment agreement. Accord, Martindale v. Sandvik, 801 A. 2d 872 (N.J. 2002), In re Halliburton, 80 S.W. 3d 566 (Tex. 2002) upheld binding mandatory arbitration provision adopted after employee was hired. Contra, Leodori v. Cigna Corp., (No. A-120-01, N. J. 2003). See also Ferguson v. Countrywide Credit Industries, Inc., 298 F. 3d 778 (9th Cir.2002) invalidating clause on grounds of lack of mutuality.
9th Circuit (en banc) upheld refusal of law firm to hire a prospective secretary who refused to sign an employment arbitration agreement on grounds it was discriminatory under federal discrimination statutes, EEOC v. Luce, Forward, Hamilton & Scripps (No. 00-57222, 9th Cir., Sep. 30, 2003) On May 13, 2003, the 9th Circuit struck down Circuit City's arbitration clause, citing California law, because the prospective employee could not refuse to sign it or opt out altogether, Ingle v. Circuit City, 328 F. 3d 1165 (9th Cir. 2003).
Insurance Policies:
Automobile - Uninsured/Underinsured Motorist first party claims-usually binding arbitration as to amount of claim, but not coverage issues or bad faith claims. Arbitration cannot be compelled to determine if insured sufficiently corroborated UM claim. Scruggs v. State Farm Mut. Auto. Ins. Co., 62 P. 3d 989 (Ariz. App. 2003);
Homeowners, Inland Marine, Umbrella first party claims- usually, binding appraisal as to amount of loss, but not coverage issues or bad faith claim;
Comprehensive General Business Liability, Workers Compensation, Professional Liability. Generally, no arbitration of first party disputes;
Reinsurance - Binding arbitration extensively used in cedent-reinsurer treaties.