1. © 2006 Prentice Hall Ch. 4-1 THE LEGAL ENVIRONMENT OF BUSINESS A Critical Thinking Approach Fourth Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne Nancy K. Kubasek Bartley A. Brennan M. Neil Browne

2. © 2006 Prentice Hall Ch. 2-2 THE LEGAL ENVIRONMENT OF BUSINESS CHAPTER 6 Alternative Tools of Dispute Resolution

3. © 2006 Prentice Hall Ch. 4-3 THE LEGAL ENVIRONMENT OF BUSINESS Alternative Dispute Resolution Alternatives to Litigation Negotiation and Settlement ArbitrationMediationMinitrials Private Trials Summary Jury Trials Early Neutral Case Evaluation

4. © 2006 Prentice Hall Ch. 4-4 THE LEGAL ENVIRONMENT OF BUSINESS Alternative Dispute Resolution Reasons for increasing popularity: CostTime Uncertainty and risk Court-ordered ADR FlexibilityConfidentiality Preservation of business relationship

5. © 2006 Prentice Hall Ch. 4-5 THE LEGAL ENVIRONMENT OF BUSINESS Alternative Dispute Resolution Negotiation P1P2

6. © 2006 Prentice Hall Ch. 4-6 THE LEGAL ENVIRONMENT OF BUSINESS Alternative Dispute Resolution Arbitration P1 P2 A

7. © 2006 Prentice Hall Ch. 4-7 THE LEGAL ENVIRONMENT OF BUSINESS Alternative Dispute Resolution Arbitration-Award P1 P2 A

8. © 2006 Prentice Hall Ch. 4-8 THE LEGAL ENVIRONMENT OF BUSINESS The Arbitration Process Both sides submit briefs of facts and law Proceedings are private, not public No official record is made Witnesses and evidence presented Rules of evidence are relaxed Decisions rendered within 30 days

9. © 2006 Prentice Hall Ch. 4-9 THE LEGAL ENVIRONMENT OF BUSINESS Arbitration Parties submit their opposing positions to a neutral arbitrator Arbitrator has power to decide Arbitrator is selected by agreement of the parties Arbitrator usually has familiarity with type of dispute

10. © 2006 Prentice Hall Ch. 4-10 THE LEGAL ENVIRONMENT OF BUSINESS Arbitration Compromise resolution is expected Results called Award in Arbitration Arbitrator not required to follow precedent Courts routinely enforce awards: appeals not favored Results are legally binding—few are challenged

11. © 2006 Prentice Hall Ch. 4-11 THE LEGAL ENVIRONMENT OF BUSINESS Methods of Securing Arbitration By Arbitration clause in agreement By Submission agreement Concerns have been raised about employees waiver of statutory rights by accepting arbitration clauses See, Securities Industry Cases

12. © 2006 Prentice Hall Ch. 4-12 THE LEGAL ENVIRONMENT OF BUSINESS Selection of the Arbitrator Lists of candidates for arbitrator provided to each party Parties select arbitrator, and 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

13. © 2006 Prentice Hall Ch. 4-13 THE LEGAL ENVIRONMENT OF BUSINESS Common Uses of Arbitration Labor Disputes Business conflicts Consumer complaints Various matters typically found in civil litigation: tort, contract cases

14. © 2006 Prentice Hall Ch. 4-14 THE LEGAL ENVIRONMENT OF BUSINESS 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’

15. © 2006 Prentice Hall Ch. 4-15 THE LEGAL ENVIRONMENT OF BUSINESS Alternative Dispute Resolution Mediation P1P2M

16. © 2006 Prentice Hall Ch. 4-16 THE LEGAL ENVIRONMENT OF BUSINESS Mediation Instead, 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 Mediator is not empowered to impose a decision on the parties

17. © 2006 Prentice Hall Ch. 4-17 THE LEGAL ENVIRONMENT OF BUSINESS 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

18. © 2006 Prentice Hall Ch. 4-18 THE LEGAL ENVIRONMENT OF BUSINESS The Mediation Process Mediators available via private ADR companies Often, former judges serve as mediators PRO: They have legal knowledge. CON: Judges find it hard to stop being judge!

19. © 2006 Prentice Hall Ch. 4-19 THE LEGAL ENVIRONMENT OF BUSINESS Advantages of Mediation Applicable to almost all disputes Useful for multi-party disputes CreativeNon-adversarial Avoids win-lose outcome Allows for continuing relationship Usually less expensive and time- consuming

20. © 2006 Prentice Hall Ch. 4-20 THE LEGAL ENVIRONMENT OF BUSINESS Criticisms of Mediation Glosses over fundamental structural conflicts Misleading impression of equality of parties Subject to abuse by bad faith of one party

21. © 2006 Prentice Hall Ch. 4-21 THE LEGAL ENVIRONMENT OF BUSINESS Minitrials Relatively new ADR method Abbreviated trial arguments submitted to adviser Adviser renders opinion as to probable outcome at trial Executives meet without attorneys to try and settle case

22. © 2006 Prentice Hall Ch. 4-22 THE LEGAL ENVIRONMENT OF BUSINESS Other ADR Methods Early Neutral Case Evaluation Similar to minitrial Private Trials Like an actual trial, but tried to a private judge selected by agreement of the parties Summary Jury Trials Streamlined, 1-day, actual trials leading to 95% settlement rate

23. © 2006 Prentice Hall Ch. 4-23 THE LEGAL ENVIRONMENT OF BUSINESS 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

24. © 2006 Prentice Hall Ch. 4-24 THE LEGAL ENVIRONMENT OF BUSINESS The Future of ADR Concerns include: Is it really ‘voluntary’? Subject to bias? Loss of rights? Continuing growth of ADR is expected

25. © 2006 Prentice Hall Ch. 4-25 THE LEGAL ENVIRONMENT OF BUSINESS 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