© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-1 THE LEGAL ENVIRONMENT OF BUSINESS 1 The Legal Environment of Business A Critical Thinking Approach 5 th Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-2 THE LEGAL ENVIRONMENT OF BUSINESS 2 CHAPTER 4 Alternative Tools of Dispute Resolution

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-3 THE LEGAL ENVIRONMENT OF BUSINESS 3 Alternative Dispute Resolution (ADR)  Negotiation and Settlement  Arbitration  Mediation  Mini Trials  Private Trials  Summary Jury Trials  Court Annexed ADR Methods other than litigation:

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-4 THE LEGAL ENVIRONMENT OF BUSINESS 4 Alternative Dispute Resolution Reasons for increasing popularity:  Cost  Time  Uncertainty and risk  Court-ordered ADR  Flexibility  Confidentiality  Preservation of business relationship

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-5 THE LEGAL ENVIRONMENT OF BUSINESS 5 Negotiation and Settlement An alternative dispute-resolution method in which the disputant parties come together informally to try to resolve their differences

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-6 THE LEGAL ENVIRONMENT OF BUSINESS 6Arbitration Resolution of a dispute by a neutral third party set outside the judicial setting

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-7 THE LEGAL ENVIRONMENT OF BUSINESS 7 Alternative Dispute Resolution Arbitration-Award

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-8 THE LEGAL ENVIRONMENT OF BUSINESS 8 The Arbitration Process  Both sides submit briefs of facts and law to a neutral arbitrator  Proceedings are private, not public  No official record is made  Witnesses and evidence presented  Rules of evidence are relaxed  Decisions rendered within 30 days

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 4-9 THE LEGAL ENVIRONMENT OF BUSINESS 9 Arbitration  Arbitrator is selected by agreement of the parties  Arbitrator usually has familiarity with type of dispute.  Compromise resolution is expected  Results called Award in Arbitration  Arbitrator not required to follow precedent  Courts routinely enforce awards: Arbitrator has power to decide and the results are legally binding—few are challenged

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 10 Methods of Securing Arbitration  By Arbitration clause in agreement- Binding arbitration clause-A provision in a contract mandating that all disputes arising under the contract be settled by arbitration.  By Submission agreement- Separate agreement providing that a specific dispute be resolved through arbitration. Note: Concerns have been raised about employees waiver of statutory rights by accepting arbitration clauses

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 11 Selection of the Arbitrator  Lists of candidates for arbitrator provided to each party  Parties select arbitrator, time and place  Parties agree to follow the rules: AAA, ICC Who are they? Generally lawyers, retired judges, professors or other professionals in the field

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 12 Common Uses of Arbitration  Labor disputes  Business conflicts  Consumer complaints  Various matters typically found in civil litigation: tort, contract cases

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 13 Problems with Arbitration  Concerns with discrimination cases  Concerns with Arbitrators’ background  Absence of written opinions  Costs typically shared in arbitration— poses greater impact on employee than on employer—may have a ‘chilling effect’

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 14 Mediation Informal process where the two sides select a party to help resolve their differences

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 15 Mediation The mediator facilitates the parties themselves in reaching agreement. If the parties reach agreement, the matter is settled. If not, the parties can go on to arbitration or litigation. Note: The mediator is not empowered to impose a decision on the parties.

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 16 The Mediation Process  Mediator points out strengths and weaknesses of each sides’ case privately  Mediator shuttles between opposing parties conveying information  Offers and disclosures made in mediation cannot be used as evidence at trial  Very flexible and creative process  Mediators available via private ADR companies  Often, former judges serve as mediators

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 17 Common Uses of Mediation  Collective bargaining disputes  Insurance claim disputes  Commercial contract problems  Employment disputes  Environmental disputes

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 18 Advantages of Mediation  Applicable to almost all disputes  Useful for multi-party disputes  Potential for creative solutions  Non-adversarial  Avoids win-lose outcome  Allows for continuing relationship  Usually less expensive and time-consuming  Online dispute resolution providers

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 19 Criticisms of Mediation  Glosses over fundamental structural conflicts  Misleading impression of equality of parties  Subject to abuse by bad faith of one party

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 20Minitrials  Relatively new ADR method  Abbreviated trial arguments submitted to adviser  Adviser may render an opinion as to probable outcome at trial  Executives meet without attorneys to try and settle case Neutral adviser presides over the conflict and the senior executives of the disputing corporations have settlement authority.

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 21 Other ADR Methods  Early Neutral Case Evaluation  Similar to Minitrial  Private Trials  Like an actual trial, but tried before a referee selected and paid by the parties  Summary Jury Trials  Streamlined, 1-day, actual trials leading to 95% settlement rate

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 22 Court-Annexed ADR  Implemented by court rule  Many jurisdictions require ADR as a pre- condition to access to courtroom  Requirements vary from state to state, and in federal court  Usually, court-annexed ADR is NOT binding…the parties may go back to court

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 23 The Future of ADR Concerns:  Is it really ‘voluntary’?  Subject to bias?  Loss of rights? Continuing growth of ADR is expected

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 24 Global Dimensions of ADR  ADR is widely used in international contracts  Arbitration awards are easily enforceable in other countries due to UN Treaty  Only limited defenses to enforceability are allowed under the rules

© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS 25 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall