Alternative Dispute Resolution. Association of Corporate Counsel October 27, 2016
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1 Alternative Dispute Resolution Association of Corporate Counsel October 27, 2016
2 Heather Anderson Sr. Corporate Counsel, Best Buy Joshua Heinlein Partner, Dinsmore & Shohl Commercial Litigation Adriana Cara Partner, Dinsmore & Shohl Labor & Employment 2
3 Overview What is Alternative Dispute Resolution? Mediation Arbitration Judicial Reference Recent Case Law 3
4 Alternative Dispute Resolution Less expensive, less formal, less time-consuming means to resolve dispute Types Mediation Arbitration Judicial Reference Others Neutral Evaluation Settlement Conference Dispute Resolution Board 4
5 Presentation Title MEDIATION 5
6 Mediation Pros Negotiation with aid of third party mediator Confidential Cal. Evid. Code 1119 FRE 408 Preview of other side s case You are in charge of outcome Creative solutions Can have multiple sessions 6
7 Mediation Cons Costs: $2,000 - $5,000 per side for good mediator Other side gets preview of your case Can take time to get good mediator May not settle 7
8 Presentation Title ARBITRATION 8
9 Arbitration Pros Private, third party neutral decides case Quicker timeline Private arbitrators have few cases No formal motions Smaller damages awards and settlements 2011 Cornell study: An Empirical Study of Employment Arbitration: Case Outcomes and Processes Discovery may be less broad Not public Prevent class actions 9
10 Arbitration Cons Expensive (arbitrator s fees and filing fees) No rules of evidence Arbitrator need not follow law Limited or no appellate rights Possibly encourages more individual claims 10
11 Presentation Title JUDICIAL REFERENCE 11
12 Judicial Reference Pros Private, third party neutral decides case/issue typically retired judge Scope may be limited (e.g., discovery referee) May be by agreement or motion (CCP 639) Quicker timeline Discovery rights same as in typical litigation unless contract says otherwise Required to follow rules of evidence Required to follow law 12
13 Judicial Reference Cons Expensive (referee s fees) Open to public (CRC 3.931) Full appellate rights (CCP 645) 13
14 Judicial Reference Clauses Cite CCP 638 and state scope of issues to be decided by referee Specify how referee is to be chosen and qualifications Consider limiting discovery rights Right to seek provisional remedies in court Specify how fees to be paid Make conspicuous (bold, separately initialed/signed) 14
15 Presentation Title ARBITRATION AGREEMENTS 15
16 Arbitration Agreements California Arbitration Act (C.C.P. 1280, et seq.) Federal Arbitration Act (9 U.S.C. 1, et seq.) Both have strong public policy in favor of enforcing arbitration agreements Defenses to enforcement are same as those applicable to contracts in general (fraud, unconscionability, etc.) Class Action Waivers Benefits of Arbitration Program 16
17 Unconscionability Procedural Unconscionability Concerned with oppression and surprise Adhesion contracts Employment Agreements Consumer Contracts Substantive Unconscionability Concerned with fairness and mutuality Carve-outs for injunctive relief in certain circumstances Discovery limits Damages limits Shortened SOL s 17
18 Unconscionability Cont d Employment & Consumer Agreements Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83: 5 Requirements Neutral arbitrator More than minimal discovery Need not be full discovery, but must provide access to documents and witnesses Written award Provides for all types of relief that would be available in court Company cover costs in employment arbitrations In consumer arbitrations, indigent consumers eligible for fee waiver (CCP ) 18
19 Unconscionability Cont d Employment Agreements Baltazar v. Forever 21 (2016) 62 Cal.4th 1237 Arbitration agreement at end of employment application Failure to attach arbitration rules does not add to procedural unconscionability Injunctions to preserve effectiveness of arbitration not substantively unconscionable (CCP ) Armendariz requirements must be met 19
20 Unconscionability Cont d Consumer Agreements Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899 Arbitration agreement in contract to purchase used Mercedes Allow party to appeal awards of $0 or over $100k or when injunctive relief awarded; party appealing had to front appeal costs Preserved right to go to small claims court and/or self-help remedies (repossession) Class action waiver Arbitration agreement not substantively unconscionable 20
21 Fraud Distinguish between entire contract or arbitration provision itself Courts deem arbitration provisions separate from rest of contract If claim is entire contract void for fraud arbitrable (Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 319) If claim is arbitration provision void for fraud court (Engalla v. Permanente Med. Group, Inc. (1997) 15 Cal.4th 951, 973) 21
22 Class Action Waivers FAA CAA Class action waivers valid in agreements governed by FAA; state rules to contrary are preempted AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333 DirecTV v. Imburgia (2015) 136 S.Ct. 463 Open question Discover Bank v. Superior Court (2005) 36 Cal.4th 148 Gentry v. Superior Court (2007) 42 Cal.4th 443 Caveat: Morris v. Ernst & Young, LLP, F.3d (9th Cir. Aug. 22, 2016) 22
23 Recommendations Specify that arbitration agreement is governed by FAA Be as explicit as possible when specifying rules Make arbitration agreement separate from other agreements/handbook Include class action waiver Satisfy Armendariz requirements 23
24 Presentation Title Josh Heinlein (619) Adriana Cara (619) Heather Anderson (858)
25
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