Employees and Employers

Following are two interesting and recent federal court rulings related to arbitration.

Future Disputes are beyond Arbitral Authority
Minnesota Nurses Association v. North Memorial Health Care

After completing 30 years of service, Nurse Lynette Drake asked to be relieved of the obligation to work weekends. When her supervisor required her to report under a “needed-nurses” exception, Drake filed a grievance.

The arbitrator concluded that the exception was properly invoked. However, in order to ensure that Drake not be treated unfairly in the future, the arbitral award required that “from the date of this award, if the Employer invokes the “exception” proviso to compel qualifying nurses to work on weekends, the number of required weekends shall be equally shared (divided) among those qualifying nurses.”

The district court vacated the portion of the arbitrator’s award requiring that weekend shifts filled by qualifying nurses be divided equally among them. North Memorial appealed.

The United States Court of Appeals for the Eighth Circuit affirmed. Finding that the arbitrator exceeded his authority, the Court wrote, “The CBA has not delegated the arbitrator authority to resolve disputes not presented to him by the parties, and the extent of the dispute the parties have referred to arbitration is determined by the submission, not the CBA.” As the parties only submitted a single dispute about a past act, the arbitrator had no authority to fashion a remedy for hypothetical future disputes.

Employer Waived Right to Arbitrate
Messina v. North Central Distributing

Richard Messina sued North Central Distributing for terminating his employment contract after six months. Messina argued that the contract was for two years.

NCD removed the case to federal court. After several months, the parties filed a report with the court that mentioned negotiation and mediation, but not arbitration. Several months later, NCD moved to transfer venue. The lawyers for the parties were in frequent contact and arbitration was never mentioned.

Eight months after the filing of the case, NCD moved to compel arbitration pursuant to a clause in Messina’s employment contract. The district court denied the motion and NCD appealed.

The United States Court of Appeals for the Eighth Circuit affirmed. It found that NCD knew of its right to arbitrate, had acted inconsistently with that right (“substantially invoking the litigation machinery by…removing the case to federal court, filing an answer, participating in a pretrial hearing, filing a scheduling report which recommended a trial date and discovery deadlines, and filing a motion to transfer venue.”), and that these actions had caused prejudice to Messina who “spent considerable time and money obtaining new counsel, partaking in pretrial hearings, and responding to the transfer motion.”

JAMS Announces Collaboration with Shanghai Commercial Mediation Center

We are pleased to celebrate the signing of an agreement between JAMS and the Shanghai Commercial Mediation Center. Although JAMS is a global organization, this is the only agreement of its kind in China.JAMS & SCMC 2

The primary reason for the success of ADR in the U.S. is that it allows parties to achieve resolution quickly and with less expense. The availability and use of skilled, highly trained and experienced mediators and arbitrators allows businesses to efficiently move beyond disputes so they can focus on their primary mission. Litigation can be extremely expensive and it uses resources that could be put to use in far more productive ways.

It is clear that China presents an even larger opportunity for mediation. It has a vibrant economy, an increasing number of commercial transactions and growing free trade zones. It is a perfect environment in which to establish and encourage mediation as part of business practices. The growing pace of cross-border commerce also presents a growing demand for mediation and arbitration.

JAMS has seen a rapid expansion in the number of cross-border disputes that it handles – a 30 percent increase last year alone. But we have limited expertise in cultures and legal systems outside of our core markets, and that is why it is important to have high-quality organizations like the SCMC to be our partner.
JAMS & SCMC 1

SCMC Director Madame Zhang and her team have expressed a desire to build the premier mediation company in China and our two organizations will work closely together to further that goal. SCMC has already put together a respected panel of experts in mediation and we will work together to ensure that the systems and procedures that SCMC puts in place are among the best in the world.

We are looking forward to a successful relationship with SCMC and hope that these efforts will ensure that ADR becomes as accepted here as it has in the United States so that businesses involved in both domestic and cross-border commerce can thrive.

Diversity Matters

A casual look around the room at any major mediation conference will quickly confirm that women and minorities are still significantly under represented. It may be a long slow journey to create more representative panels worldwide, but one that is well worth taking.

According to the ABA in April 2016, nearly half of all law degrees issued in the United States in the previous academic year were to women. However, if you look at elite law firms, only 18 percent of the partners at the top 200 firms are women. Within that same environment the numbers of Black, Latino and Asian partners represent an even smaller percentage  Few statistics are available to identify how many mediators in the U.S. are women or from an individual ethnic group, but it is safe to assume that they likely parallel the statistics in the elite law firms.

In an area of law where nuance and creativity are most highly valued, including more women and more people from different cultural backgrounds can only enhance the success of mediations.  Creative problem solving, the ability to leverage different types of communications styles and a real sensitivity to important cultural issues are among the most important skill sets a mediator or arbitrator bring to a case.

The pool of neutrals available to hear cases should more closely reflect the demographics of the population they serve; this is one of the most important ways to ensure successful resolution of cases and the ongoing growth of mediation as a dispute resolution tool.  Training and developing a younger, more diverse group of mediators is one of the best ways to ensure that mediation continues to grow as a conflict resolution tool.

ADR providers like JAMS and others recognize the importance of increased diversity among ADR practitioners. They have challenged law firms, corporations and legal organizations to consider women and ethnically diverse neutrals, track their firms’ neutral selection process to measure progress and provide resources to diverse professionals on preparing for a successful career in ADR. Finally they encourage their clients to consider diversity in their selection of ADR professionals.

Early Mediation of Insurance Coverage Disputes

Bruce A. Friedman, Esq.

Bruce A. Friedman, Esq.

Mediation of insurance coverage disputes prior to the filing of a lawsuit is becoming more common.  In part, this trend is the result of ADR provisions in insurance policies that require that the policyholder and insurer mediate coverage disputes prior to engaging in litigation.  Some of these provisions provide that the mediation shall continue until the mediator declares an impasse.  Others have a cooling-off period after the mediation that preclude either party from filing suit for a period of time (90 days) from the date of a failed mediation.

While early mediation and resolution of disputes is a laudable goal, saving the parties the time and expense of protracted litigation, the question is whether early mediation can result in a resolution of the dispute.  There are a number of things that the parties can and should do prior to the mediation to enhance the possibility of success, which include the following:

  1. At least a month before the mediation, counsel for parties should discuss what they need to know in order to enhance the possibility of settlement. This may require an information exchange phase of the mediation.  Once you have set up your mediation, the parties can exchange documents and information under the mediation privilege with an agreement to return the documents at the conclusion of the mediation.  The information could include the production of the underwriting and claim file if the coverage dispute arises in the third-party liability insurance context; documentation of the extent of the loss; documentation of the financial condition of policyholder if the issue of collectability is raised by the dispute.  These examples are only illustrative to spark your thinking on what you may need to see in order to evaluate the risk and value of the case.  In some cases, early consultation with experts and an expert report may be very helpful and persuasive.
  1. Mediation briefs must be exchanged as early as possible in order for each side to evaluate the positions of the other. It is too late to wait for the mediation to learn all of the arguments of the other side in order to give the issues the proper consideration.  Exchange of briefs also enhances the meditation process by allowing the parties to directly address each other rather than relying on the mediator to be the sole interpreter and communicator of the positions of the parties.  It educates the opposing side to the issues raised by the case.  Exchange briefs at least a week before the mediation to allow time for counsel to discuss the issues with their clients and to hopefully arrive at some objective evaluation of the prospective lawsuit.
  1. Assuming that the parties are serious about the early mediation and want to attempt to settle the matter, then each side needs to come to the mediation with settlement authority. By that I mean taking off your advocacy hat in the preparation for the mediation and analyzing the likelihood of success.  I suggest that counsel discuss the issues with a colleague in the office who is not involved in the case who may provide a more objective view.  After all, while the mediator is not going to decide the case, a settlement is going to reflect the strengths and weaknesses of each sides positions and an objective evaluation of the issues is crucial to arriving at a settlement.  Other factors in early resolution such as the cost of money, the saving of litigation expenses, and business reasons for resolving the dispute are all fair game for discussion and evaluation of the settlement value of the case, but they are not substitutes for objective risk assessment and the money necessary to get the matter resolved.

One more issue that needs to be considered in connection with the early mediation of insurance coverage disputes arising in the third-party liability insurance context is whether the insurance coverage issues can be resolved without the resolution of the underlying lawsuit against the policyholder.  If the early mediation addresses the duty to defend the underlying suit, then there is no reason to delay in mediating the issue.  However, if the intent of the insurance mediation is to resolve indemnity for loss arising out of the underlying litigation, then it is highly unlikely that the parties will be in a position to resolve the coverage issues without knowing the extent of that loss.  Under these circumstances, I strongly suggest that the mediation of both the coverage issues and the underlying case occur simultaneously.  The coverage issue may be a tool in the resolution of the underlying case and the cost of the third-party settlement will have a significant effect on the resolution of the coverage dispute.

Bruce A. Friedman, Esq. is a JAMS neutral, based in Southern California. He is an accomplished dispute resolution professional who has mediated and arbitrated a wide range of disputes, including insurance, class action, professional liability, business, real estate and entertainment and copyright matters. He can be reached at bfriedman@jamsadr.com.