Alternative Dispute Resolution

Anshu Srivastava

Graduate Student

Masters in Engineering Management

Lamar University

Beaumont, TX 77710, USA

Spring 2002

1. Introduction

Negotiations between two parties can often breakdown for any of the reasons- breakdown in communication, escalation of anger and mistrust, polarization of positions and refusal to compromise, or simply the inability to invert options that are satisfactory to both sides. [1]. When the “heat of battle” overwhelms negotiators, when mistrust and suspicion are high, or when parties cannot take actions towards defusing conflict without those actions being misinterpreted and mistrusted by others, third party involvement may become necessary.[1] In the pages that follow, we discuss the alternative dispute resolution methods available when two-party negotiations breakdown.

2. Literature

2.1 The Dispute Pyramid

The dispute pyramid (Figure 1) is an inverted pyramid.

Figure 1- The dispute pyramid

Perceived injurious experience

Grievance

Claim

Dispute

At the top of the pyramid is perceived injurious experiences (PIES); a person feels hurt about something. The next level of the pyramid is the identification of the culprit, the person who is responsible for the injury. There is now a grievance against someone. As you move down the inverted pyramid, the injured party would make a claim against the culprit. However, not all people make claims. It depends on what alternative you have, what your best alternative to a negotiated argument (BATNA) is. Not everybody who has voiced a grievance will make a claim. If a claim is made, it will likely become a dispute. But not all claims become disputes because some culprits believe that the injured party is correct and agree to compensate them. [2]

2.1 The Process Spectrum

Another useful tool for examining the dispute resolution process is the process spectrum (Figure 2). As one moves along the spectrum from right to left, third-party involvement increases. At the extreme right-end there is avoidance, which is comparable with the level of dispute pyramid at which a person decides not to voice a claim. Once a claim becomes a dispute, several processes can be used to resolve it. The most common form of dispute resolution is bargaining or negotiation. There is increased third party involvement in the resolution as you move along the spectrum from negotiation to mediation and finally to adjudication. There are essentially three types of adjudication: adjudication in courts, arbitration and that in administrative agencies. [2]

A dividing line exists between negotiation and mediation. To one side of the line people handle disputes on their own, either by not voicing a claim or by negotiating. The processes to the left of the line-mediation and adjudication-involve third parties. However, a really important dividing line exists between mediation and adjudication because mediation, although a third party process, is really more akin to negotiation than to adjudication. In mediation, the disputants feel much more in control of the process.

Figure 2- The process spectrum

________________________________________________________________________

Adjudication Mediation Negotiation Avoidance

Courts

Arbitration

Administration agencies

Hybrids

Ombudsman

Fact Finder

Final offer arbitration

Mediation-arbitration

Minitrial

Summary jury trial

________________________________________________________________________

They come up with and therefore own the result; the mediator does not tell them what the answer is. The mediator is simply a catalyst. In adjudication, the disputants have to be very careful no to alienate the adjudicator, because she or he can impose a solution on them. Their whole argument is entirely different. They play up to the adjudicator, which is what happens in most courts between the lawyers and the judge.

3. Third –Party Interventions

In third party processes, typically, negotiators give up their control over either the disputed process (the how) of negotiation or the dispute outcome (the what) of negotiation. Surrender of neither is a one-on –one negotiation, while surrender of both constitutes a complete withdrawal from negotiation. (Figure 3)

Figure 3- Categories of third party intervention

________________________________________________________________________

Level of negotiator control over outcome

Level of negotiator control over procedure

Low

High

Low

Autocracy

Mediation

High

Arbitration

Negotiation

________________________________________________________________________

3.1 Mediation

Integral to the success of mediation is the timing of the mediation efforts based on the readiness of the parties. Because mediation is a voluntary process, it cannot be effective if the parties do not choose to cooperate. If they believe they have more to gain by holding out or by protracting the dispute, then mediation cannot work. Secondly, the mediator must be acceptable to the parties. A neutral individual whom parties recognize as impartial, experienced, and potentially helpful. [1]

The effectiveness of mediators comes from their ability to meet with the parties individually, secure an understanding of the issues in dispute, identify areas of potential compromise in the positions of each side, and encourage the parties to make concessions towards agreements. [1] The mediators must be able to separate rhetoric from true interest and identify each side’s priorities, manage exchange of proposals and counterproposals and ultimately bring the parties together to endorse a final agreement or to publicly announce their settlement. Mediation should be judged by whether they are fair, efficient, wise and stable. [3] Many argue that the primary criteria for judging a mediation is whether the parties are satisfied with the outcome; not whether the results are fair and well-reasoned and serve as a precedent for the future, criteria that would apply in judging a court decision. [2] Mediation has been found a successful in a highly charged dispute between a bankrupt debtor and its many claimants. [4] It has also been implemented in processing discrimination complaints by postal workers nationwide.[5]

3.2 Arbitration

Arbitration involves low levels of negotiator control (high third party control) over outcomes, but high levels of negotiator control over processes. It imposes a clear-cut resolution to the dispute, and thereby avoids the costs of prolonged, unresolved disputes. Arbitration is widely used in businesses and between businesses and their union-workers. It also appears to have several negative consequences. When parties anticipate a binding arbitrator’s intervention, they may avoid making compromises (chilling effect) [1] because they fear the arbitrator will split the difference between the last offers the negotiators have on the table. But a recent study by the American Arbitration Association says that arbitrators don’t “split-the –baby”[6]. Recurring use of arbitration makes parties lose interest in the process of negotiation. Negotiator passivity, loss of initiative and dependence on third party are common. (narcotic effect)[1] As the frequency of arbitration increases, disenchantment with the adequacy and fairness of the process develops, and the parties may resort to other means (half-life effect)[1]. Arbitrators must be careful of perceived patterns of partiality towards one party. It can jeopardize the arbitrator’s acceptability in future disputes (biasing effect)[1]. Lasting dispute resolution requires timely and effective implementation, and commitment to a decision derived from prior participation in making it. Arbitration is more likely to result in situations in which the disputants are less than fully committed to following through, especially if the feel dissatisfied with the arbitrator’s decision (decision-acceptance effect)[1].

3.3 Process Consultation

Process consultation is defined as a set of activities on the part of the consultant that help the client to perceive, understand, and act upon the process events that occur in the client’s environment in order to improve the situation defined by the client. [3] It is on the lines of theories on Parallel Informal Negotiation [7] and Supplemental Joint Brainstorming [8] where facilitators encourage the parties to create a template of options for dealing with the disputed issues.

Process consultants focus only on the procedures of managing conflict. The objective of process consultation is to defuse the emotional aspect of conflict and to improve communication between the parties, creating a foundation for a more productive dialogue and teaching the parties how to prevent conflicts from escalating destructively in the future. In the diagnostic phase, the consultant determines each side’s view of the other side, position and a history of the relationship and its conflicts. Next, meetings are scheduled to encourage parties to address the causes of past conflicts and each side’s perception of the other. By confronting and airing their differences, the parties can create a format for working on their substantiate differences in the future and can pursue this agenda without a recurrence of unproductive escalation. When sustained conflict has worn the parties out, making them want resolution more than continued warfare, or when the parties sincerely want to co exist but do not have the skills to do so, process consultation should be used. [1]

4. Litigotiation

Most cases are really disposed of through litigotiation, [2] a combination of litigation and negotiation. These hybrid processes include fact finder, mediation-arbitration, and final offer arbitration.

4.1 Fact Finder

A fact finder is similar to a mediator in that she or he is a disinterested third party who determines the facts but has no authority to impose a decision on the parties. However, a fact finder based on his or her conclusions from the case, can weigh in on the side of one of the disputants. The effect of such finding is similar to quasi-adjudication.[2]

4.2 Final Offer Arbitration

Each side comes up with its best offer. The third party must pick one of the offers but cannot select a compromise between the two. It encourages the disputants to compromise and come up with reasonable demands. Often called “Baseball arbitration” [9] . Also seen in public sector bargaining, particularly of the police and fire departments. [2]

4.3 Mediation-arbitration

Med-arb is a mechanism used in labor disputes. The process begins as mediation, but if parties cannot settle the mediator puts on the arbitration hat and imposes a solution. But parties in mediation often give information in confidence to the mediator and if the mediator becomes an arbitrator, he can impose a decision based on confidential information received from the parties.[2]

5. The Courthouse

Why do people bring cases to court and why do cases not settle once they are file in court? The transaction costs, including lawyer’s fees and waiting time are so high in court cases that there is a strong incentive to settle without court intervention. Despite these incentives, there are at least five major reasons why cases do not settle out of court. One, the parties have different information and facts. Two, the parties may have different assessments if the same information. They may agree what the facts are, but each party believes that is the case is brought to court, it has a good chance of winning. Three, there are constituency problems between the lawyer and the client. One believes the issue should be settled outside the court while other will not agree to settle. Four, there is a different willing ness to settle between plaintiff and the defendant. Five, there are emotional considerations. Defendants and plaintiffs refuse to settle out of court as a matter of principle.

The overburdened court system uses some mechanisms to resolve these issues and reduce the number of cases being brought before it. These include categorical referral, individual referral, sanctions and incentives and the new concept of multidoor courthouse.[2]

5.1 Categorical Referral

Categorical referral is a mechanism by which the legislation takes certain categories of cases out of the courts and requires that an attempt be made to resolve them through other mechanisms. Once the court sets the general principle for the case, the rest of the claims were referred to arbitration. Using this simpler and more informal procedure avoided recourse to the federal court for a series of routine fact determinations.[2] As an example, all employment discrimination cases under Title VII have to be referred to the EEOC before they ever get a chance to appeal in the courts. These court-annexed arbitrations are most often mandated by statute but at times by court rule. These mechanisms are only conditional diversions from the court. There are always provisions that the cases can ultimately go to court because constitutional provisions usually require access to the courts. [2]

5.2 Individual Referral

Individual referral, whereby each case is looked at and referred to a particular mechanism, is used by the court in a number of states. It includes mediation by special masters, neutral experts, minitrials and summary jury trials. [2]

5.2.1 Special Master

In recent years, courts have appointed Special Masters to do three things. 1. To do fact finding in a complicated case. 2. To supervise the implementation of a decree. The special master would help implement the decision in a large-scale institutional litigation case. 3. To resolve a complex multiparty dispute and to be responsible for making recommendations to the judge. [2] Special masters are being used in cases like the holocaust victim asset litigation. [10]

5.2.2 Neutral Expert

A neutral expert is used when there is a technical question that is preventing the resolution of a case. Courts have power, under Federal Rule of Evidence 408, to bring in a neutral expert-even against the desires of the parties- to give evidence on the critical issue in the case.[2]

5.2.3 Minitrial

Structured information exchange in an informal process called minitrial can be effective to resolve a corporate dispute. The length of proceedings and the types of evidence allowed are determined at the outset. Top decision makers such as the presidents of the two opposing companies in a corporate dispute and their lawyers must be present at the proceedings. A retired judge usually acts as a presider, kind of master of ceremonies but nor the judge. When each side fully understands the strengths and weaknesses of each other’s case, the two settlement officials sit down together to try to resolve the issue, usually from a business rather than a legal approach. If the parties cannot come to an agreement, the minitrial presider will give an opinion concerning the likely court outcome based on his or her experience. The presider may say, “I think there is a 66% chance that the plaintiff will win and the likely damages will be between $2 and $3 million.” The parties then sit down with this additional information and try again to settle the case.[2]

5.2.4 Summary Jury Trial

A summary jury trial is similar to minitrial except that there is a mock six-person jury. The parties present their case as in a minitrial and the jury makes a judgment. The lawyers then have the opportunity to converse with the jury to learn how they assessed the cases, which can be very helpful to them in working out a settlement.[2]

5.2.5 Sanctions and Incentives

In cases where one party is dragging its feet and does not want to settle or wants to delay settlement of the case, the outside-the-court mechanisms may end up adding one more layer before the case eventually ends up in court. There are compulsory mechanisms and sanctions that can be used to prevent this from occurring. In many court-annexed arbitrations programs, the party that appeals an arbitration decision to court must improve his or her result by a certain factor (10% in Michigan State), or she or he will be responsible for either the cost of arbitration or at times the cost of the court proceedings.[2]

5.3 Multidoor courthouse

The multidoor courthouse is a new concept. The basic idea is that each case that comes to the court will be analyzed by an intake person and referred to the mechanism or sequence of mechanisms that is most responsive and effective for that particular kind of case. The more this system is used the more we will learn about what kinds of mechanisms work for a particular kinds of cases. [2]

6. Online Dispute Resolution

What happens when mediation takes place in settings in which there is no face-to-face meeting, when mediation takes place not through the medium of talk but through the written word through e-mails taking advantage of the internet. ODR introduces and relies on a Fourth Party, a new presence , which is the technology that works with the mediator or arbitrator. In the “screen-to-screen” of ODR, the written word and the visual dimensions of the computer screen constitute these elements. ODR will be successful as long as it is capable of facilitating access and participation, it has legitimacy, and it offers value to users. [11]

7. Employee Perceptions about ADR

Strategies that were reported to be most realistic in workplace conflict were direct discussion between parties( interest based approach : attempt to reconcile their underlying interests) , followed by having a supervisor listen to both sides and determine the most appropriate action (right-based approach : determining who is right ) , and finally having someone with authority to re-assign people or restructure responsibilities to minimize inter-dependence between the parties (power-based approach : each side strives to force the other to concede). [12] But , lack of trust in the immediate supervisor or a human resource person , and a fear of jeopardizing their reputation or future with the organization prevented many from seeking third-party interventions. This suggests that an effective conflict management system must offer to its employees a neutral third party with conflict management expertise (Ombudsperson) .[12]

7. Conclusion

The essence of negotiations entails parties working face to face without the direct involvement of others. It is exactly this sort of direct, personal involvement that creates the understanding of the issues and the personal commitment necessary to manage conflict constructively. As long as this direct form of negotiation proves to be productive, it is best to allow it to proceed without the involvement of other parties. However, negotiations are often tense, difficult, and generate more heat than light. Negotiations over critical issues may reach an impasse; the parties are unable to move the process beyond a sticking point. At these points, third –party intervention is the only way to break deadlock and get negotiations back on track. [1]

There is a strong belief that mediation is one of the most effective mechanisms for resolving disputes involving parties who have long–term, interdependent relationships that will continue in the future, because mediation can help to strengthen the relationship. Both businesses and the judiciary are increasingly adapting the discussed alternative dispute resolution methods and are implementing systems and guidelines to maximize its use.

Bibliography

[1] Lewicki, Saunders, Minton. (1997). Essentials of Negotiation. Chicago: Irwin Publications. (pp. 199-213).

[2] Hall Lavinia. (1993). Negotiation Strategies for Mutual Gain. London: Sage Publications. (pp. 43-60).

[3] Schein, E.H. (1998). Process Consultation: VolumeI: Its role in organization development. (Second Ed.). Reading, MA: Addison/Wellesley Publishing Company.

[4] Mediation Helps Construction Debtor , American Arbitration Association, Punch List, November 2001-February 2002.

[5] The U.S. Equal Employment Opportunity Commission , Federal Agencies Launch Joint Mediation Initiative, Press Release , March 28,2002, www.eeoc.org

[6] Arbitrators Don’t “Split-the Baby”, American Arbitration Association, ADR Currents, December 2001-February 2002.

[7] Susskind Lawrence, Cruikshank Jeffrey(1987).Breaking The Impasse, consensual approaches to resolving public disputes. New York: Basic Books (pp.136-185).

[8] Shapiro Daniel L, Supplemental Joint Brainstorming: Navigating Past the Perils of Traditional Bargaining, Negotiation Journal Vol. 16 (4).(pp. 409-419), October 2000.

[9]Major League Play Ball Act, 104^th Congress, 1^st session, H.R. 397, Jan 4, 1995.

[10] Special Masters, About the Special Masters, www.specialmasters.org. Feb 5, 2001.

[11] Rifkin Janet, Online Dispute Resolution: Theory and Practice of the Fourth Party. Conflict Resolution Quarterly ,Vol. 19 No.1 : (pp. 117-124), Fall 2001.

[12] Jameson Jessica Katz , Employee Perceptions of the availability and use of Interest-Based, Right-Based, and Power-Based Conflict Management Strategies. Conflict Resolution Quarterly ,Vol. 19 No.2 .(pp. 163-193) , Winter 2001.