Mediation in USA

Rodney L. Lewis | Polsinelli | September 24, 2019

Law and policy

Definitions

Is there any legal definition in your jurisdiction of the terms ‘ADR’, ‘conciliation’ and ‘mediation’?

Alternative dispute resolution (ADR) is a programme that encourages settlements outside the traditional enforcement process. ADR’s purpose is to help parties find mutually satisfactory solutions to their problem at a reduced cost (https://www.fec.gov/legal-resources/enforcement/alternative-dispute-resolution/).

Conciliation is an ADR method whereby the parties to a dispute use a conciliator, who meets with the parties both separately and together to resolve any differences between the parties. In this process, after meeting with both parties the conciliator prepares a compromise that he or she feels is a fair disposition of the matter in dispute. Conciliation is used to avoid taking a case to trial. (https://definitions.uslegal.com/c/conciliation/).

Mediation is an informal negotiation assisted by an impartial third party (the mediator) that encourages disputing parties to craft their own solutions (https://www.adr.org/Mediation).Mediation models

What is the history of commercial mediation in your jurisdiction? And which mediation models are practised?

In the United States, forms of mediation may be traced back to the country’s earliest history dating back to the dispute resolution methods used in Native American society. The concept of court-sponsored mediation was brought by the early settlers from England.

In the early 20th century, mediation expanded in response to disruptive labour disputes. Mediation was used as an attempt to avoid strikes and the disruption that ensued when talks between labour and management broke down. The earliest attempts at legislation relating to mediation occurred in the late 1970s and early 1980s.

Today, mediation is common in civil and administrative agency matters. Mediation is widely relied upon to ease the burden on the courts and as a means to more cost-effectively resolve disputes between the parties than litigation. The public policy benefits of reducing the backlog of cases on the courts’ dockets are substantial. Similarly, mediation reduces the cost of resolving a dispute because mediation is less expensive than the high cost of litigation.

Data on mediation is limited in some respects, specifically success rates, etc, because most mediations are confidential and results are generally not reported. The Office of Dispute Resolution of The United States Department of Justice on the Use and Benefits of Alternative Dispute Resolution in its Fiscal Year 2016 Report found a 75 per cent and 52 per cent resolution rate in voluntary ADR proceedings and court-ordered proceedings, respectively (see www.justice.gov/olp/alternative-dispute-resolution-department-justice).

Domestic mediation law

Are there any domestic laws specifically governing mediation and its practice?

In the United States there is no governing or regulatory body for mediation. Associations such as the American Bar Association and the American Arbitration Association provide standards that are well respected in the practice of mediation. Most states have individual laws governing mediation, which have evolved over time. There have been several attempts to develop uniform domestic mediation laws in the United States. Two notable statutes are described below.

In 1998, the United States Congress adopted the Alternative Dispute Resolution Act (www.adr.gov/pdf/adra.pdf), requiring all federal trial courts to implement ADR and granting judges authority to send a case to mandatory ADR procedures, including mediation.

Several states have attempted to coordinate their legislation by adopting the Uniform Mediation Act (UMA, www.uniformlaws.org/Act.aspx?title=Mediation%20Act) or adopting the state’s own mediation statute with similar provisions.

Singapore Convention

Is your state expected to sign and ratify the UN Convention on International Settlement Agreements Resulting from Mediation when it comes into force?

The United Nations General Assembly adopted the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Convention) on 20 December 2018. The Convention is an important step towards ensuring an efficient and harmonised framework for cross-border enforcement of settlement agreements resulting from mediation. A signing ceremony for the Convention was held in Singapore on 7 August 2019, and the Convention will come into force once it is ratified by at least three member states. It remains to be seen which member states will sign the Convention.

Incentives to mediate

To what extent, and how, is mediation encouraged in your jurisdiction?

Public policy in the United States favours mediation. Mediation encourages communities to settle disputes, maintains parties’ relationships after their disputes, and it allows for more appropriate remedies than adjudication. Some states require mediation of certain disputes, requiring mediation through state statutes or before a party request assistance from state institutions. Courts further encourage mediation by enacting statutes to protect the confidentiality of mediation procedures.

See Sarah R Cole at al, Mediation: Law, Policy & Practice app. A (2013-2014 ed. 2013) (cataloguing statutes from all US jurisdictions that contain ‘mediation’).

Sanctions for failure to mediate

Are there any sanctions if a party to a dispute proposes mediation and the other ignores the proposal, refuses to mediate or frustrates the mediation process?

Mediation is an effective method to resolve disputes but to be effective, all parties must participate in good faith. Generally, sanctions are not imposed for failure to participate in good faith in voluntary mediation, but the requirement of good faith participation in voluntary mediation is trending. Most court-mandated mediation requires parties to attend with settlement authority, submit a pre-mediation memorandum on their position, and participate in good faith. Although court-ordered mediation does not require settlement, sanctions may be imposed if a court concludes that the mediation was not conducted in good faith.

Federal Rule of Civil Procedure 16 includes a provision detailing possible sanctions for failure to participate in good faith in settlement conferences. A large percentage of states also have statutory requirements of good faith. For example, under California’s Fire and Marine Insurance Mediation Code Chapter 8.9 – section 10089.81, parties to a mediation proceeding are required to negotiate in good faith and ‘have the authority to immediately settle claims’. Many federal district courts and state courts have local rules that require good faith participation in mediation. Generally, failing to appear at the mediation, and blatant disregard for court orders is defined as bad faith participation. See Edward F Sherman, Court-Mandated Alternative Dispute Resolution: What Form of Participation Should Be Required? SMU L. Rev. 2079, 2090-91 (1993). If a party feels the opposing party to court-ordered mediation has failed to participate in good faith, that party should file a motion with the court seeking sanctions.

Prevalence of mediation

How common is commercial mediation compared with litigation?

Owing to the confidential nature of mediation, there is a small sample size of reports comparing commercial mediation to litigation. Nevertheless, commercial mediation has grown due to an increase in state and federal laws that promote mediation through regulations. There has also been an increase in the use of mandatory mediation clauses in private contracts. Courts have encouraged mediation to decrease their dockets and because mediation is cost-effective, more efficient, and it allows parties to develop unique resolutions to their dispute. Accordingly, states such as Florida require most parties to mediate their disputes before a court will allow them to be put on their docket.

Mediators

Accreditation

Is there a professional body for mediators, and is it necessary to be accredited to describe oneself as a ‘mediator’? What are the key requirements to gain accreditation? Is continuing professional development compulsory, and what requirements are laid down?

There are several professional bodies for mediators in the United States. These groups include the American Arbitration Association, the Federal Mediation and Conciliation Service, the Nation Mediation Board, the Civil Mediation Council, the Chartered Institute of Arbitrators, the US Institute of Peace, the United Nations Department of Political Affairs and the Judicial Arbitration and Mediation Services. States have created their own recommendations and qualifications for candidates pursuing a career in mediation. Additionally, a mediator can practise in private settings in any state without being licensed, certified or listed. Mediator certification can also be obtained online through programs such as the National Association of Certified Mediators. Consequently, a person may pursue a career in mediation with a high school diploma and through successfully completing a mediation course.

There are also court-appointed mediators who must achieve a higher standard to pursue a career in mediation. Some states require mediator candidates to receive a JD from an accredited law school and pass their state’s bar exam. Others accept mediators with degrees in their specialisation, such as a master’s degree in social work for mediators pursuing a career in family mediation. Some states accept relevant work experience to serve as a substitute to degree requirements.

Various states require court-appointed mediators to participate in continuing professional development. For example, court-appointed mediators in Idaho are required to complete five hours of continuing mediation training every three years; Maryland requires mediators to complete four hours of continuing mediation education per year; Minnesota requires mediators to complete 18 hours of continuing mediation education every three years; Mississippi requires mediators to complete six hours of meditation-related training every two years; and New Jersey requires its mediators to complete four hours of continuing mediation training every year.

States also have implemented court rules or case law creating immunity for mediators. This immunity insulates mediators from most civil liability for wrongdoing during a mediation proceeding. For example, the Southern District of Indiana Alternative Dispute Resolution, Rule 1.3 provides, ‘To the extent permitted under applicable law, each Mediator shall have immunity in the performance of his or her duties under these Rules, in the same manner, and to the same extent, as would a duly appointed Judge.’ Additionally, several state mediation statutes and court rules have allowed for mediator privileges. The range of the privilege varies based on jurisdiction.

Liability

What immunities or potential liabilities does a mediator have? Is professional liability insurance available or required?

There is no governing or regulatory body for mediation nor is there a uniform regulatory scheme in the United States governing the practice of mediation. Mediators are not state-licensed and there is no one formal certification process, although mediators may be trained and certified by any number of educational or court-annexed bodies, and there is no legal restriction on using the title ‘mediator’ as there is protecting the title of doctor and lawyer. There are, however, standards of conduct for mediators promulgated by the American Bar Association, the American Arbitration Association and the Society of Professionals in Dispute Resolution (see www.mediate.com/articles/model_standards_of_conflict.cfm). These standards include avoiding the appearance of conflicts of interest. The federal government has developed a Mediator Code of Professional Conduct (http://admin.fmcs.gov/assets/files/OGC/MediatorCodeofConduct.doc) for mediators employed by the Federal Mediation and Conciliation Service (FMCS). The FMCS is a federal agency that provides mediation services primarily in the area of collective bargaining.

Independent claims or causes of action against mediators for malfeasance is rare. Mediators do not need to maintain a professional liability insurance policy. Many mediation institutions include a waiver of liability clause for the organisation and its mediators in their contract with the parties. The conduct of a mediator is not under the same scrutiny as the conduct of an arbitrator, because the mediator may not make any binding decisions, unlike an arbitrator.

Mediation agreements

Is it required, or customary, for a written mediation agreement to be entered into by the parties and the mediator? What would be the main terms?

A written agreement is not required for parties to enter mediation. However, it is wise to secure it in writing. A mediation agreement can be any document that evidences the intent on both sides to enter into mediation and to make a good faith effort to reach a settlement. A standardised mediation agreement form may not always be effective because different circumstances call for different expectations (https://www.mediate.com/articles/tsur.cfm; https://lawshelf.com/courseware/entry/mediation-structure).

Appointment

How are mediators appointed?

When mediation is deemed appropriate and parties agree to mediate, courts will refer the parties to an approved mediator. Courts often provide the parties with a roster of mediators who meet basic standards and requirements. The parties then choose a mediator they deem is best fit to mediate their matter (https://legalstudiesms.com/learning/court-certified-mediator-qualification-requirements/).

Conflicts of interest

Must mediators disclose possible conflicts of interest? What would be considered a conflict of interest? What are the consequences of failure to disclose a conflict?

Mediators are often required to abide by the Model Standards of Conduct for Mediators. The Standards require mediators to decline a mediation opportunity if they cannot conduct it in an impartial manner. Mediators are also obligated to disclose both actual and potential conflicts of interest that are reasonably known to the mediator and could raise a question about the mediator’s impartiality. Some conflicts of interests include when a mediator is asked to mediate a dispute between parties, where they have an interest in or an influential relationship with one of the parties participating in the mediation, or if the mediator was previously an agent or representative of one of the parties. Mediators are required to disclose all circumstances likely to create a presumption of bias. Upon receipt of such disclosures, the parties may choose to waive such conflicts and proceed with the mediation. If a party disagrees as to whether the mediator shall serve or if the mediator’s conflicts of interest might reasonably be viewed as undermining the integrity of the mediation, the mediator shall be replaced. Failure to disclose conflicts of interests may result in sanctions and penalties. (https://www.adr.org/sites/default/files/CommercialRules_Web_FINAL_1.pdf).Fees

Are mediators’ fees regulated, or are they negotiable? What is the usual range of fees?

Mediation is usually charged by the hour. The cost of mediation fluctuates around the country, but the rates are minute in comparison to the costs associated with litigation. Rates typically reflect mediator’s background, training, education and experience. Some mediators decrease their rates as they book more hours, while others choose to charge a flat fee. Private mediators also offer sliding-scale services, the method of fee charging used by most court-appointed mediators. Under the sliding-scale method the fees are based on client income. (https://settlethedispute.com/cost-of-mediation-lawsuit; https://www.thumbtack.com/p/cost-of-mediation).

Procedure

Counsel and witnesses

Are the parties typically represented by lawyers in commercial mediation? Are fact- and expert witnesses commonly used?

It is not uncommon for parties to be represented by lawyers in commercial mediations, but often parties represent themselves while accompanied by their lawyers.

In some instances, parties may choose to seek out or otherwise agree on a respected expert in the subject area of dispute to provide a more informed settlement (https://www.barlowrobbins.com/resources/what-is-commercial-mediation).

Procedural rules

Are there rules governing the mediation procedure? If not, what is the typical procedure before and during the hearing?

Organisations such as the American Arbitration Association and the American Bar Association publish guidelines for mediation procedures. These procedures are subject to modifications by the parties. A typical mediation hearing begins with the parties making a mutual agreement to mediate. Parties may also provide brief statements on the nature of their dispute and include comments on the relief they wish to seek. Before the mediation, parties also negotiate their expectations of the mediator involved. Parties will also negotiate and inform one another on who will be representing their side of the matter whether it be themselves, counsel or another representative. After the parties agree on a mediator, they wait for the mediator to clear himself or herself of any conflicts. The parties also exchange any and all materials they deem relevant and necessary for the purpose of finding a resolution to the issues at hand. Once the mediator and the parties are in mediation, the mediator is often authorised to conduct separate meetings and other communications with the parties or their representatives at any time. However, the mediator may not impose a solution on the parties, he or she may only attempt to help the parties reach a satisfactory resolution to their dispute. When the mediator and the parties have caucuses and plenary sessions, the goal is to get as much information for a resolution to come into fruition.T

olling effect on limitation periods

Does commencement of mediation interrupt the limitation period for a court or arbitration claim?

Commencement of mediation does not interrupt or toll the limitation period for a court or arbitration claim. A request for mediation may be made concurrently with the filing of a complaint (https://www.constructionrisk.com/2019/02/filing-a-mediation-demand-does-not-toll-statute-of-limitations-for-filing-suit/).

Enforceability of mediation clauses

Is a dispute resolution clause providing for mediation enforceable? What is the legal basis for enforceability?

Dispute resolution clauses providing for mediation are enforceable. In many instances, the subject matter of a contract is governed by a state statute, which automatically mandates parties to mediate a dispute. For example, federal or state labour laws may require parties to mediate their dispute if they have issues over their labour contracts. In private contracts, where there is no overriding federal or state law governing the contract, the dispute resolution clause will be subject to ordinary contract principles. Accordingly, parties will have to produce sufficient evidence to show that there was a contract according to their state law, which may include showing that there was an agreement and that the terms of the mediation clause were mutually agreed upon. Basic contract defences apply to dispute resolution clauses. Thus, a court will not enforce an unconscionable mediation clause in an agreement. In Garrett v Hooters-Toledo, the Northern District of Ohio applied Ohio law on unconscionability and found that a mediation clause in an agreement was unconscionable because it required an employee to travel from Ohio to Kentucky to participate in a mediation. Garrett v Hooters-Toledo, 295 F. Supp. 2d 774 (N.D. Ohio 2003).

Courts may order various remedies to a breach of mediation clause in an agreement. Parties seeking specific performance of a mediation clause will need to show the predicates for specific performance, such as an absence of an adequate remedy of law. Courts may also enforce a mediation clause under the Federal Arbitration Act, allowing parties to bypass proving the elements necessary to achieve relief through specific performance. Like any breach of contract claim, a party may seek damages if the other party breaches a contractual duty to mediate. The damages can include attorney’s fees and costs for having to compel arbitration. Additionally, parties may waive the mediation clause in an agreement if they file for relief in court concerning a topic that would have been subject to mediation under the governing agreement. Courts have struggled with determining whether there is harm when a party breaches a contractual duty to mediate because mediation may not always lead to a resolution.

Confidentiality of proceedings

Are mediation proceedings strictly private and confidential?

In the United States, mediation proceedings are meant to be strictly private and confidential. Confidentiality is the cornerstone of mediation because it enables parties to discuss openly the elements of their case without consequence. Confidentiality of mediation proceedings have been assured by operation of law and by agreement. Specifically, most states have statutes mandating the confidentiality of mediation proceedings. Some states’ statutes are more expansive than others. For example, Indiana Code, §4-21.5-3.5-27 provides that mediations are confidential and privileged, and the confidentiality of the procedure cannot be waived by the parties. However, Nebraska Revised Statutes, §25-2914 allow parties to agree in writing to waive confidentiality.

Moreover, many states have legislation that recognises a qualified mediation privilege modelled after the Uniform Mediation Act (UMA). The UMA provides that mediation communication is not privileged if a party seeking discovery can show that ‘the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality, and that the mediation communication is sought or offered in a criminal proceeding . . . or in a proceeding to prove a claim to rescind or reform or a defense to avoid liability on a contract arising out of the mediation’ Unif. Med. Act §6(b). Additionally, some states have adopted the UMA with modifications, while other states have created their own mediation privileges that are either absolute or qualified. For example, Indiana’s Alternative Dispute Resolution Rule 2.11 provides for an absolute mediation privilege. On the other hand, the Central District of California has not extended its mediation privilege to documents that were going to be offered for a purpose other than to prove a claim or defence (Milhouse v Travelers Com Ins Co. 982 F.Supp.2d 1088, 1105 n. 10 (C.D. Cal. 2013)).

Federal courts have also implemented local rules to protect the confidentiality of mediation proceedings. The Alternative Dispute Resolution Act, section 652(d) states that ‘each district court shall, by local rule . . . , provide for the confidentiality of the alternative dispute resolution processes and to prohibit disclosure of confidential dispute resolution communications’. Federal courts with diversity jurisdiction (28 U.S.C. §1332) may disregard the local rules implemented by the federal courts, and instead may apply the state law statutes pursuant to Federal Rules of Evidence Rule 501. For example, in the unpublished decision of Pac Marine Ctr, Inc v Philadelphia Indem Ins Co, 2015 WL 1565362, Case No. 1:13-CV-00992-AWI (E.D. Cal. Apr. 8, 2015), the district court relied on California law to rule on mediation confidentiality. In addition to state statutes or court rules that expressly rule that mediation communications are confidential, pre-written rules and the parties’ own contractual mediation provisions can ensure the confidentiality of a mediation proceeding. For example, the Judicial Arbitration and Mediation Services adopted its Rule 11 to guarantee the confidentiality of mediation proceedings.

Accordingly, the confidentiality of mediation proceedings is not implied, in the absence of an express rule or agreement. Parties should expressly agree that the mediation proceeding is confidential, prior to the mediation, if they want to warrant the confidentiality of the mediation proceeding. Nevertheless, in certain circumstances courts may disregard confidentiality provisions and permit confidential information to be disclosed. For example, the US District Court for the Southern District of New York Rule 83.8(d) states that ‘Documents and information otherwise discoverable under the Federal Rules of Civil Procedure shall not be shielded from discovery merely because they are submitted or referred to in the mediation.’ Additionally, courts may allow confidential mediation communication if there is:

waiver; consent; finding that the process was not mediation; finding that the provider of evidence was not a mediator; finding that confidential information was not actually disclosed or that there was insufficient evidence to establish whether confidential information was disclosed; concluding the evidence was offered for a permissible purpose; or concluding the evidence was not material or its introduction constituted harmless error.

James R Coben, Peter N Thompson, ‘Disputing Irony: A Systematic Look at Litigation About Mediation’, 11 Harv. Negot. L. Rev. 43, 66-67 (2006).

The UMA also carved out exceptions to confidentially that include communications concerning ongoing criminal activity or plans to commission a crime, proving or disproving a claim of professional conduct against a mediator, plans to inflict bodily injury, and a waiver of the privilege by the parties (UMA §6(a)). While courts may allow confidential mediation communications in hearings, many jurisdictions have established rules sanctioning parties for breaching confidentiality. For example, the District Court of Appeals in Florida found that a trial court was proper in imposing sanctions on a plaintiff who knowingly and wilfully violated an agreement and pertinent statute and rule (Paranzino v Barnett Bank of S Fla, NA, 690 So. 2d 725 (Fla. Dist. Ct. App. 1997)).

Success rate

What is the likelihood of a commercial mediation being successful?

Although statistics are not made public owing to the confidential nature of mediation proceedings, the general consensus on behalf of many respected entities is that mediation has a high success rate overall because parties participate in an environment where they can freely and confidently resolve their legal and factual disputes in front of a neutral third party. Some entities, such as the Department of Justice, have created a statistical summary of case reports across the United States of cases in which a private mediator conducted an ADR process. The results of the data show that in 2017, voluntary ADR proceedings had a success rate of 75 per cent. Court-ordered proceedings, on the other hand, had a success rate of 55 per cent. Additionally, the Financial Industry Regulatory Authority reported that 242 (89 per cent) of its mediated cases were settled (https://www.finra.org/arbitration-and-mediation/dispute-resolution-statistics#mediationstats; https://www.justice.gov/olp/alternative-dispute-resolution-department-justice).

Settlement agreements

Formalities

Must a settlement agreement be in writing to be enforceable? Are there other formalities?

Mediation settlement agreements do not need to be in writing to be enforceable. However, the rules for settlement agreements vary from jurisdiction to jurisdiction and may require settlement agreements to be in writing to be enforceable. A rule requiring settlement agreements to be in writing works in tandem with the rules providing mediation confidentiality. An executed agreement allows courts to use its powers to enforce the written terms of an agreement or to determine whether the written terms of an agreement have been violated, without requiring the court to inquire into the confidential communications leading to the written agreement. Mediation privilege rules also preclude the enforcement of oral settlement agreements by effectively excluding evidence of conversations that created the oral agreement. For example, the UMA does not address oral mediation settlement agreements, but it addresses qualified privilege, which makes oral agreements impossible since mediation conversations that lead to an oral settlement agreement are privileged (UMA § 6(a)(1)). In addition to a written requirement, some jurisdictions require settlement agreements to be signed by the parties and sometimes their attorneys, and the settlement agreement may have to be read on the record.

Challenging settlements

In what circumstances can the mediation settlement agreement be challenged in court? Can the mediator be called to give evidence regarding the mediation or the alleged settlement?

Meditation settlement agreements are subject to the same rules as contracts. Accordingly, mediation settlement agreements may be challenged through traditional contract defences that include no meeting of the minds, mistake, fraud or misrepresentation, duress, undue influence and unconscionability. Settlement agreements may also be subject to technicalities unique to mediation, including issues arising as to whether the agreement was signed by the proper parties, whether the agreement was in writing, or whether the written agreement was the final agreement. For example, California Evidence Code, §1123 requires that a settlement agreement include language stating that the agreement is admissible or that it is enforceable to be admitted into court. Other challenges include standard issues of interpretation or performance, claims of unfair process or public policy concerns, and the impact on third parties.

A mediator can be called to give evidence regarding a mediation or an alleged settlement. A mediator may be called to give testimony in cases where parties are trying to enforce an oral agreement arrived at during mediation. In a study conducted by James R Coben, a professor and senior fellow at Mitchelle Hamline’s Dispute Resolution Institute, researchers found that a significant number of hearings alluded to testimony or affidavits from mediators. The substance of the mediators’ evidence included testimonies regarding the parties’ attendance, the quality of the parties’ participation, the parties’ factual admissions, the issues that were or were not discussed, the mediators’ factual assertions, the mediators’ valuation of their cases, the mediators’ proposals, the mediators’ understanding of settlement terms, the parties’ understanding of settlement terms, and coercion and duress allegations (James R Coben, Peter N Thompson, ‘Disputing Irony: A Systematic Look at Litigation About Mediation’, 11 Harv. Negot. L. Rev. 43, 59-61 (2006)).

Federal courts have implemented local rules that vary in terms of a mediator’s obligations towards confidentiality. For example, Missouri Annotated Statutes, §435.014 states no person who serves as arbitrator, conciliator or mediator, nor any agent or employee of that person, shall be subpoenaed or otherwise compelled to disclose any matter disclosed in the process of setting up or conducting the arbitration, conciliation or mediation. Similarly, the US District Court for the Southern District of New York Procedures of the Mediation Program, 1(a) and (d) state that mediators do not have to take part in related disputes in which the mediator served, but the mediator is also not required to produce documents used during the mediation.

Enforceability of settlements

Are there rules regarding enforcement of mediation settlement agreements? And on what basis is the mediation settlement agreement enforceable?

The rules for enforcing mediated settlement agreements vary based on jurisdiction. Generally, mediated settlement agreements are enforced under the same rules as general contracts and can be enforced in a court of general jurisdiction by beginning a lawsuit. Some states may expedite enforcement of mediated settlement agreements by treating the agreements as arbitral awards in summary proceedings. Other states may impede enforcement proceedings of settlement agreements by implementing rules created by legislatures and rule makers who have crafted specialised rules governing the enforcement of settlement agreements. For example, some jurisdictions may require formalities as a precondition for enforcing mediated settlements. In Minnesota, a mediated settlement, if in writing, must explicitly state that the agreement is binding, that the parties were advised in writing that the mediator has no duty to protect the parties’ interests or to inform them about their legal rights, that signing the settlement agreement might adversely affect their rights, and that they should consult with an attorney before signing or if the parties are uncertain of their rights. Similarly, Colorado Revised States §13-22-308 provides that a mediated agreement is not enforceable unless it is reduced to writing and approved by the parties and their attorneys, presented to the court as a stipulation and approved by the court.

Stays in favour of mediation

Duty to stay proceedings

Must courts stay their proceedings in favour of mediation?

Parties engaging in mediation may petition the court for a stay of the proceedings. The court has discretion on whether to grant a stay and the grant of stay is highly dependent on the circumstances of the case. A court may be reluctant to grant a stay if, in the court’s view, a delay would have an effect on its schedule. Consequently, courts may reason that maintaining its pretrial schedule is the best way to incentivise settlement from the parties. In situations where the court grants a stay, the stays are typically only long enough to give the parties a reasonable opportunity to complete the mediation process. This situation is different from enforcing an arbitration agreement, where the Federal Arbitration Act requires a court to stay its proceedings in favour of arbitration.

Miscellaneous

Other distinctive features

Are there any distinctive features of commercial mediation in your jurisdiction not covered above?

We are not sure beyond what is already covered.

Update and trendsOpportunities and challenges

What are the key opportunities, challenges and developments which you anticipate relating to mediation in your jurisdiction?Opportunities and challenges 25 What are the key opportunities, challenges and developments which you anticipate relating to mediation in your jurisdiction?

The trend in commercial, administrative and consumer disputes is towards more mediation and less full-bore litigation. This is due to a focus on reduction of risk and an increased focus on early and efficient resolution of disputes. While trial takes months or years to adjudicate an issue, mediation can allow for an immediate resolution. As the costs to prosecute or defend lawsuits to judgment continue to increase, mediation will continue to become a more attractive method of dispute resolution.

Courts are also recognising this trend. By the end of this year, New York state courts are set to have a system in place to require that civil litigants participate in presumptive or required mediation, as part of an effort to continue reducing backlogs in the judiciary. Although such systems already exist in some state courts in New York, the new initiative will mandate presumptive mediation and ADR statewide. The purpose of the initiative is partly to provide an avenue for litigants to resolve legal matters more efficiently and at a lower cost.

Techniques for Resolving Construction Disputes

Jason Lambert | Construction Executive | June 23, 2019

With most construction projects involving dozens, if not hundreds, of companies and individuals, it is no surprise that conflicts arise that are not always able to be resolved on the jobsite. But these conflicts need not always reach the court room or cost thousands (or much more) to resolve. With some planning, contractors can build faster and less expensive dispute resolution options into their project so they can spend more time keeping the project moving and less time arguing over who is right. 

Even for modest-sized projects, a multi-tiered approached to dispute resolution can be helpful. As a first level of dispute resolution, consider requiring the relevant parties to attend informal or formal mediation. The benefits of even an informal mediation is that it can get stalemated parties to the table to talk again. Formal mediation adds the benefit of a neutral third-party who can help get talks moving or help antagonistic parties communicate. 

Further, mediation allows each side an opportunity to hear what the other side is looking for to resolve the dispute. Not only is this valuable in reaching a compromise, but it also gives each side an idea of what the other will bring to the table in any subsequent litigation. Finally, there are many ways to implement these procedures. General contractors can require pre-suit mediation with their subcontractors to resolve one-on-one disputes but should also consider requiring subcontractors to use pre-suit mediation to resolve disputes between subcontractors or between subcontractors and sub-subcontractors or material suppliers if the dispute threatens the progress at the project. 

Another alternative (or addition) to mediation can be to appoint a specific person to resolve certain kinds of dispute. For example, assume that a drywall contractor begins to do his work, but stops because he claims that a trade contractor’s work interferes with the drywall or is deficient and cannot be covered up. The trade contractor disagrees and refuses to correct the issue raised by the drywall contractor. If the contract calls for it, this disagreement could be resolved by an appointed engineer, architect, construction manager or almost any other third party. That is much more efficient solution than terminating a subcontractor from the project or bringing in a new subcontractor to perform work. 

Assuming these methods of resolution fail, there remain two traditional means of dispute resolution—binding arbitration and litigation. While arbitration is touted as less costly than litigation, this is not always the case. Arbitration filing fees can be more expensive than court filing fees and in most arbitration cases the parties will still be able to conduct depositions and discovery to aid the arbitrator in reaching a final decision. The key benefits to arbitration are that it can be done in a much more condensed time frame and it is largely private. Thus, the discovery, evidence and any other items that might normally become part of the public record in litigation are kept private in arbitration. Only the final outcome will generally become part of any public record, and that is assuming that the prevailing party uses a court to affirm or enforce the arbitration award. 

Litigation, like arbitration, results in a final resolution of a dispute and an enforceable judgment for the prevailing party. Unlike arbitration, though, the timelines can be stretched out by crowded court dockets and nearly ever occurrence in litigation becomes a public record. One of the primary benefits to litigation though are that there are actions that a court can take that an arbitrator cannot. For example, an arbitrator cannot enter an order foreclosing a construction lien; only a court can. Thus, the claims a contractor plans to file can play an important role in deciding whether to arbitrate or litigate. 

Moreover, these dispute resolution options do not exist independently of each other. Many contracts nowadays contain pieces of each. One way to do this is to require mediation of all disputes, litigation of claims that must be heard by a court (such as lien foreclosure) and arbitration of any remaining issues. By using a layered approach, the benefits of several types of dispute resolution are preserved while providing opportunities to use them that hopefully result in resolution. 

Further, technology adds a new twist on dispute resolution, particularly informal mediation or arbitration. Witnesses, evidence and information can be shared electronically or over video, making the use of specialized experts or testing more accessible. This can be another critical consideration in determining what forms of dispute resolution to require in the contract with another party and the disputes to which that resolution mechanism will apply. 

Above all it is critical to include dispute resolution mechanisms in the contract at the beginning. Without, there is no way to require anything other than litigation which could set a contractor up for costly legal fights that could have been avoided through another form of dispute resolution. Think these issues through can result in projects that run more smoothly and that are not delayed when the inevitable conflict arises. 

What is an Alternative Dispute Resolution?

Bremer Whyte Brown and O’Meara | August 19, 2019

Alternative Dispute Resolution (“ADR”) is a term that refers to a number of processes that can be used to resolve a conflict, dispute, or claim. ADR processes are alternatives to having a court decide the dispute in trial.

ADR processes can be used to resolve any type of dispute including but not limited those related to families, neighborhoods, employment, businesses, housing, personal injury, consumers, and the environment.  ADR is usually less formal, less expensive, and less time-consuming than a trial. 

Most Common Types of Alternative Dispute Resolutions

Mediation 

In mediation, an impartial person called a “mediator” helps the parties try to reach a mutually acceptable resolution of the dispute. The mediator does not decide the dispute but helps the parties communicate so they can try to settle the dispute themselves. Mediation leaves control of the outcome with the parties. 

There are a number of different ways that a mediation can proceed. Most mediations start with the parties together in a joint session. The mediator will describe how the process works, explain the mediator’s role, and help establish ground rules and an agenda for the session. 

Mediation may be particularly useful when parties have a relationship they must preserve. Thus, when family members, neighbors, or business partners have a dispute, mediation may be the ADR process to use. An effective mediator can hear the parties out and help them communicate with each other in an effective and nondestructive manner. 

Arbitration 

In arbitration, a neutral person called an “arbitrator” hears arguments and evidence from each side and then decides the outcome of the dispute. Arbitration is different from mediation because the neutral arbitrator has the authority to make a decision about the dispute. The arbitration process is similar to a trial in that the parties make opening statements and present evidence to the arbitrator. After the hearing, the arbitrator issues an award. 

Arbitration may be either “binding” or “nonbinding.” Binding arbitration means that the parties waive their right to a trial and agree to accept the arbitrator’s decision as final. When arbitration is binding, the decision is final, can enforced by the court, and can only be appealed on very narrow grounds. When arbitration is non-binding, the arbitrator’s award is advisory and can only be final if accepted by the parties. 

Arbitration is best for cases where the parties want another person to decide the outcome of their dispute for them but would like to avoid the formality, time, and expense of trial. It may also be appropriate for complex matters where the parties want a decision-maker who has training or experience in the subject matter of the dispute. 

Settlement Conferences

Settlement conferences may be either mandatory or voluntary. In both mandatory and voluntary settlement conferences, the parties and their attorneys meet with a judge or neutral person called a “settlement officer” to discuss possible settlement of their dispute. The judge or settlement officer does not make a decision in the case but assists the parties in evaluating the strengths and weaknesses of the case and in negotiating a settlement. Settlement conferences are appropriate in any case where settlement is an option. 

While Alternative Dispute Resolution is intended to reduce the costs, stress, and formality associated with going to court, many parties still hire an attorney to represent them at ADR proceedings to ensure that they receive the most favorable outcome possible. If you are involved in a legal issue that you would like to see resolved through ADR, contact an experienced attorney at Bremer Whyte Brown & O’Meara, LLP to explore your legal options. 

Dispute Review Boards for Real-Time Dispute Avoidance and Resolution

Neal J. Sweeney | ConsensusDocs | July 19, 2019

The use of dispute tribunals generally referred to as Dispute Review Boards or DRBs on major projects has matured. Use of a DRB cannot guarantee elimination of post-project litigation, but when used properly, a DRB can be an enormously effective tool to avoid and resolve disputes rapidly and during construction.

The modest out-of-pocket costs of a DRB can pay big dividends. DRBs offer the opportunity to shorten the life cycle of a dispute by requiring the principals to confront and address the merits of their dispute, rather than simply hunkering down and focusing on posturing and preparing for arbitration or litigation. Even when a DRB cannot immediately resolve a dispute, the process can still facilitate subsequent settlement and cost-effectively prepare both parties for formal adjudication. DRBs can also enhance communications and help the parties avoid and resolve problems before they spiral into disputes.

DRBs were first and are most widely used on big civil and infrastructure projects, but the benefits of a DRB extend equally to major building projects, particularly hospitals, and industrial projects and should be used in those sectors.

Key Details – The DRB Specifications
DRBs are a creature of contract; the scope and authority of the DRB as well as DRB procedures are established in the construction contract, generally incorporated through the specifications and other attachments (“DRB specifications”). It is important to review the DRB specifications on each project before submitting a bid or proposal. Although there is a fair amount of standardization, details may be customized, and those details can have considerable practical, legal and risk implications. Examples of standard DRB specifications are provided by the DRB Foundation and ConsensusDocs . Some of the key details are the DRB member selection process, the scope of the DRBs authority, who can directly participate in the DRB process, and the impact of a DRB decision.

Regular DRB Participation on the Project to Avoid Disputes
Although focus is often placed on DRBs rendering formal decisions on disputes, the role of a DRB can and should be broader. The DRB should be part of the communication structure of the project, with regular project visits and meetings so the DRB members are generally aware of the nature and progress of the work and become familiar with the principals for the parties.

The DRB members are most often experienced industry professionals or construction attorneys. DRBs are most effective when the DRB members know the project and the people on a retail level. The DRB should not be trotted out only when a problem has degenerated into a polarizing dispute that the DRB is asked to decide.

These regular site visits and meetings provide an informal and non-adversarial forum in which the principals are called on to identify and discuss potential problems before they become disputes. These group interactions with the DRB help enhance communication and preserve relationships between the parties as they address issues in a non-contentious setting. In this way, problems are more likely to be addressed and disputes avoided or at least mitigated before moving down the trail to a formal disposition with a DRB hearing and decision.

Formal DRB Hearings and Recommendations
When the DRB is asked to formally resolve a dispute by rendering a formal decision the principals have less control than they do in bilateral negotiations. With the DRB, the dispute will be “judged” and a decision will be rendered. Although that DRB decision is generally nonbinding, the DRB decision and the process required to get to a decision can be tremendously valuable to both parties. Far more often than not the DRB recommendation leads directly or indirectly to the resolution of the dispute and avoidance of litigation or arbitration. The written submissions and hearings that are part of the process for the DRB to decide a dispute are more formal than the regular site visits and meetings, but far more informal than a court or arbitration proceeding.

Attorney participation in DRB hearings is a recurring issue, and should be addressed in the DRB specifications. Based on extensive experience with DRB hearings, this author believes DRBs are most effective with minimal to no direct attorney participation in presentations. Even in DRB hearings in which the parties make detailed and extensive presentations, it appears to be more effective to limit the presenters to project personnel, even if attorneys are permitted to attend the hearing and assist in the preparation for the hearings and of written submissions to the DRB. Limiting attorney participation does appear to lower adversarial tensions, reduce formality and allows the DRB and both parties to hear directly from first hand participants.

There is no need to restrict a formal DRB hearing to multi-million dollar claims. On the contrary, when there is a dispute on a recurring issue that can be presented before the costs mount, it may be possible to have the DRB decide entitlement quickly on a single occurrence that provides guidance to the parties about how the DRB will view all the other similar occurrences. The parties may still disagree over the issue and the DRB recommendation, but with that guidance, the parties have the opportunity to react and adjust during construction rather than waiting until all the costs are incurred.

Impact of the DRB Recommendation
A DRB decision is generally called a recommendation, and it is just that — a recommendation. It is not binding on either party unless both parties accept the recommendation. It is not like an arbitration award that either party can unilaterally enforce.

An important consideration is whether the recommendation is admissible in a subsequent litigation or arbitration if the parties do not settle. The issue of the admissibility of the DRB recommendation must be addressed in the DRB specification, such as the ConsensusDocs 200.4. Even if the DRB recommendation is not binding, a judge, jury or arbitrator will likely give a lot of weight to a detailed recommendation by three industry professionals who were selected by the parties and were familiar with the project. Those in favor of the admissibility of DRB recommendations seem to recognize the heavy weight the recommendation will carry if admissible, but believe that by knowing that weight, the parties will be more likely to fully invest in and make the most of the DRB process.

In some international standard forms contracts, such as the FIDIC documents, the decision of the tribunal, called a dispute adjudication board, is binding on an interim basis. The decision can immediately provide financial or schedule release to the prevailing party, but the distinction is still subject to general challenge in any subsequent court or arbitration proceeding.

Activate the DRB at the Beginning of the Project
If your contract calls for a DRB, do not wait for a dispute before you activate the DRB. The DRB should be set up immediately. The ConsensusDocs 200 Standard Agreement Between Owner and Constructor requires, at section 12.3.1, that if a DRB is selected that the parties select a DRB “as soon as practicable after the execution of this Agreement Once there is a serious dispute, it is tough to agree on anything, including setting up a DRB. In addition, by waiting, you lose the potential benefit of the DRB as a dispute avoidance tool.

Do not wait to use the DRB process to air out potential problems that may become disputes. That does not mean dump every problem on the DRB to solve. On the contrary, use the regular DRB site visits and meetings to enhance communication with the other side to help limit lack of communication, misunderstanding, or a party sticking its head in the sand. More open communications help the parties address problems and mitigate disputes.

When a formal DRB hearing and decision is sought, do not wait and see for the outcome before digging into the issue and investing serious effort into evaluating and supporting your position. At that point it will be too late. If you get an adverse DRB recommendation, the DRB is unlikely to give you a “do-over”, especially if the problem was lack of preparation. The consequences of not properly preparing for a DRB hearing are compounded when the adverse DRB recommendation is admissible in court or arbitration.

DRBs when properly understood and employed are a tremendous benefit and value on any major project to help avoid, mitigate and resolve disputes in an expeditious and cost effective manner.

Dispute Resolution in USA

Robert J. Ward and Robert M. Abrahams | Schulte Roth & Zabel | August 1, 2019

Litigation

Court system

What is the structure of the civil court system?

The United States Supreme Court is the highest federal court and is provided for

in Article III of the United States Constitution. The Supreme Court consists of the Chief Justice of the United States and eight associate justices. With discretion and within certain guidelines, the Supreme Court reviews a limited number of the cases it is asked to decide. Those cases may begin in state or federal courts, and they usually involve important constitutional or federal law questions.

The Constitution also grants Congress the authority to establish additional federal courts. To date, Congress has established trial and appellate courts below the Supreme Court.

The district courts are the general trial courts of the federal system. Within the limits set by the Constitution and Congress, district courts have jurisdiction over civil and criminal matters arising under federal law. There are 94 district courts throughout the United States with about 3,200 judges. There is at least one district court in each state, the District of Columbia and Puerto Rico. Each district also includes a bankruptcy court.

There are also two special trial courts in the federal system: the Court of International Trade and the Court of Federal Claims. The Court of International Trade has nationwide jurisdiction over cases involving international trade and customs issues. The Court of Federal Claims has nationwide jurisdiction over most claims for monetary damages against the United States, disputes over federal contracts claims, including unlawful ‘taking’ of private property by the federal government, and a variety of claims against the United States.

Above the trial courts are 12 regional circuits, which each have an appellate court, a United States Court of Appeals. Each such circuit court hears appeals from the district courts located within its circuit, as well as appeals from decisions of federal administrative agencies. The Federal Circuit Court of Appeals has specialised jurisdiction to hear appeals from the Court of International Trade, the Court of Federal Claims and other specific types of cases, such as those involving patent laws.

Federal court jurisdiction

The jurisdiction of United States federal courts, unlike the jurisdiction of the state courts, is limited. The two most common types of civil cases arise under either federal question jurisdiction or diversity jurisdiction. Federal question jurisdiction includes claims involving disputes over federal constitutional issues or federal statutes. Diversity jurisdiction, rather than being based on the subject matter of the claim, depends on the citizenship of the parties. When citizens of different states (United States or foreign) are on opposite sides of the dispute, parties may seek to commence the case in federal court or to remove a case commenced in state court to federal court. To commence or remove a claim based on diversity, there must be complete diversity among the parties. Complete diversity only occurs if no plaintiff and no defendant is a citizen of the same state; this includes the citizenship of corporations that are parties to an action. The citizenship of a corporation for diversity purposes is both its state of incorporation and its principal place of business. For example, if the action includes one plaintiff from the state of Delaware and a corporation that is considered a citizen of Delaware is a defendant, complete diversity does not exist. On the other hand, if plaintiffs are residents of the United States and none of the defendants are citizens of the United States, such as foreign corporate entities, complete diversity will be satisfied. Diversity jurisdiction also requires that the matter in controversy exceed the sum or value of US$75,000.

Judges and juries

What is the role of the judge and the jury in civil proceedings?

In a civil action, the Seventh Amendment to the Constitution preserves the right to a jury trial for federal actions. In the absence of an express statutory provision, if the action can be fairly characterised as a legal claim that would have been triable by a jury at common law in England in the late eighteenth century, then such claim can be brought before a jury. A party seeking to invoke its right to jury trial must make a demand that is served on the other parties in the action within 14 days after service of the last pleading directed to the issue to be tried (Federal Rules of Civil Procedure (FRCP) rules 5(d) and 38(b)).

In a jury trial, the jury is responsible for deciding issues of fact. The judge decides issues of law.

Under Article III of the United States Constitution, all federal judges are nominated by the President of the United States and confirmed by the United States Senate. Nominees are typically recommended by the members of the United States Senate or House of Representatives, who are of the President’s political party.

As a result of concerted efforts in the nomination and confirmation processes, the federal bench has become increasingly more diverse in recent years.

Limitation issues

What are the time limits for bringing civil claims?

The time limits for bringing civil claims are referred to as statutes of limitation. The statutes of limitation depend on the type of claim. A federal court adjudicating state claims will apply the relevant statute of limitations prescribed by the state legislature or state common law. For federal claims, the court will apply the statute of limitations as prescribed by federal statute or federal law. Some common federal statutes of limitation are:

  • one year for private actions based on violations of the federal securities laws involving misrepresentations in public statements (eg, Securities Act of 1933 sections 11 and 12);
  • two years or five years for private actions based on violations of federal securities laws involving fraud or deceit (eg, Securities Exchange Act of 1934 section 10(b)) (the earlier of two years after the discovery or five years after the violation occurred); and
  • four years for private actions based on violations of federal antitrust laws.

Parties may also enter into tolling agreements to stay the running of the limitations period. This is often done while parties are discussing settlement.

Pre-action behaviour

Are there any pre-action considerations the parties should take into account?

There is only one pre-action consideration regarding discovery that parties should take into account. Parties may petition the court before an action is filed to ask the court for an order authorising the petitioner to depose certain persons to perpetuate testimony (FRCP rule 27). However, the petitioner bears the burden of demonstrating the following:

  • that the action is cognisable in federal court but the petitioner cannot presently bring it or cause it to be brought;
  • the subject matter of the expected action and the petitioner’s interest;
  • the facts the petitioner wants to establish by the proposed testimony and the reasons to perpetuate it;
  • the names or descriptions of persons whom the petitioner expects to be adverse parties; and
  • the names and expected substance of each deponent’s testimony.

Starting proceedings

How are civil proceedings commenced? How and when are the parties to the proceedings notified of their commencement? Do the courts have the capacity to handle their caseload?

A civil action is commenced by filing a complaint with the court. On or after filing the complaint, the plaintiff may present a summons to the clerk to obtain a signature or seal. Next, the summons and a copy of the complaint must be served on the defendants within 90 days after the complaint was filed. The method of service varies depending on the type and availability of the defendant. Unless service is waived, proof of service must be filed with the court. The court, upon motion or its own notice, will dismiss the action if service is not completed within 90 days after filing (FRCP rules 3 and 4).

After an action has commenced, the federal court system generally hears and resolves matters in a timely manner. The federal courts are well equipped with over 600 trial court judges and over 150 appellate court judges. Moreover, the limited jurisdiction of the federal courts greatly reduces the number of potential filings.

Timetable

What is the typical procedure and timetable for a civil claim?

After process has been served, defendants must serve an answer or motion to dismiss the complaint (a responsive pleading) within 21 days of personal service. If personal service was waived, the defendant has 60 days after the request for waiver to serve a responsive pleading. Under the compulsory counterclaim rule, a party must assert any counterclaim that it has against the opposing party if the claim arises out of the same transaction or occurrence that is the subject matter of the opposing party’s claim. Although not required, a defendant may also assert a cross-claim (a claim against another defendant) if the claim arises out of the same transaction or occurrence that is the subject matter of the original action or relates to any property that is the subject matter of the original action (FRCP rule 13). Either party may also join third parties to an action, who may be liable for a portion of the original claim or against whom a party may have additional claims related to the same transaction (FRCP rule 14).

In any action, the court may order the attorneys and unrepresented parties to appear for pretrial conferences to expedite the disposition of the action, encourage management, discourage wasteful pretrial activities and facilitate settlement. In most circumstances, parties must confer as soon as practicable – at least 21 days before a scheduling conference is to be held or a scheduling order is due. In accordance with local rules, the district judge or magistrate judge will issue a scheduling order that limits the time to join other parties, amend pleadings, complete discovery and file motions. The scheduling order will be issued within the earlier of 90 days of any defendant being served with a complaint or 60 days after any defendant has appeared in the action. The court may hold a final pretrial conference to formulate a trial plan (FRCP rule 16).

Case management

Can the parties control the procedure and the timetable?

Parties must submit discovery plans detailing the timing, form of disclosure and the subject matters to be discovered. The discovery plan should also address whether the parties require an expedited schedule. The court may or may not accept the parties’ discovery plan, and some federal courts require extraordinarily short deadlines for pretrial activity. In all cases, the court will issue a scheduling order addressing such matters. The court, upon request of the parties, may modify the schedule for good cause shown (FRCP rules 16 and 26(f)).

Evidence – documents

Is there a duty to preserve documents and other evidence pending trial? Must parties share relevant documents (including those unhelpful to their case)?

There is an affirmative duty to preserve documents and other evidence even before a trial has commenced. Once a party reasonably anticipates litigation, the party must suspend any routine document destruction or retention policies and put in place a process to ensure the preservation of relevant documents. During the course of discovery, parties will make requests detailing the types of documents to be produced by the other side. Before a discovery request is received, all parties must disclose certain information about the location and availability of potentially discoverable information (FRCP rule 26(a)(1)(A)). The scope of discovery is generally very broad, and includes relevant documents that would be unhelpful to a party’s case.

Evidence – privilege

Are any documents privileged? Would advice from an in-house lawyer (whether local or foreign) also be privileged?

The admission of evidence in federal courts is governed by the Federal Rules of Evidence (FRE). FRE 501 provides that for federal claims, federal common law governs an assertion of privilege unless the Constitution, federal statute or rules prescribed by the Supreme Court state otherwise. Federal common law recognises, inter alia, the attorney-client privilege and the spousal privilege.

The attorney-client privilege protects confidential communications between an attorney and his or her clients made for the purpose of rendering legal advice. This includes communications with in-house counsel, as long as counsel is acting in its capacity as an attorney. The federal common law also recognises the extensions of the attorney-client privilege, known as the joint defence and common defence privileges. These privileges protect attorney-client privileged information shared between parties and their attorneys with a common interest in an actual or potential litigation against a common adversary.

The federal rules also specifically recognise an attorney-work product protection. The FRCP restrict the discovery of documents prepared in anticipation of litigation. The work product protection, however, may be overcome if the party shows substantial need and cannot without undue hardship obtain the substantial equivalent by other means (FRCP rule 26(b)(3)).

For claims based on state law, state statutory or common law governs the application of privilege (FRE 501).

Evidence – pretrial

Do parties exchange written evidence from witnesses and experts prior to trial?

Typically, evidence is exchanged before trial in the form of deposition testimony. However, a party may, by written questions, depose any person, including a party (FRCP rule 31). In addition, unless otherwise stipulated by the parties or ordered by the court, any expert witness a party intends to call at trial must provide a written report containing:

  • a statement of all opinions and the basis and reasons for them;
  • the facts or data relied on to form such opinions;
  • any exhibits that will be used to summarise or support such opinions;
  • the witness’s qualifications, including any publications authored in the previous 10 years;
  • a list of cases in which the witness has testified as an expert during the previous four years; and
  • a statement of compensation for the study and testimony in the case (FRCP rule 26(a)(2)).

Evidence – trial

How is evidence presented at trial? Do witnesses and experts give oral evidence?

At trial, evidence is typically presented through oral testimony. Both lay and expert witnesses testify. Both plaintiffs and defendants are allowed to ask any witness questions. The party calling a witness will conduct a direct examination of the witness. The opposing party may then conduct a cross-examination of the witness. If a witness is unavailable for trial, deposition testimony may be admitted in certain circumstances. Objects and written evidence may also be presented at trial.

Interim remedies

What interim remedies are available?

Except to the extent that federal rules apply, federal district courts can utilise provisional remedies available in the state in which the district court is located (FRCP rule 64). Additionally, district courts under the federal rules may order preliminary injunctions. A party seeking a preliminary injunction must demonstrate substantial likelihood of success on the merits, a threat of irreparable harm or injury, that the balance of equities tips in its favour and that the grant of an injunction would serve the public interest. If a party fears that immediate and irreparable injury will occur before a hearing on a preliminary injunction will occur, the party can seek a temporary restraining order either on notice or ex parte (without written notice to the adverse party or its attorney). A temporary restraining order is an extraordinary remedy and is usually only granted in an emergency. For both a preliminary injunction and a temporary restraining order, a moving party must provide the court with security in the amount the court determines is proper to cover the cost and damages sustained by any party if found to have been wrongfully enjoined or restrained (FRCP rule 65).

Remedies

What substantive remedies are available?

The federal courts have the power to grant the same legal and equitable remedies as the state courts, such as money damages, injunctions and specific performance. A federal court reviewing state claims under diversity jurisdiction can award the same remedies available for such claims under state law. Federal claims are usually based upon federal statutes and regulations, which in many cases provide the specific remedies available for such claims. Most statutes provide for legal and equitable remedies similar to those available under state law.

Interest is typically payable on money judgments. The interest rate is not fixed. Instead, the rate allowed on most judgments for civil actions in a federal court can be calculated based on government securities rates as published by the board governors of the Federal Reserve System, for the calendar week preceding the date of the judgment (28 USC section 1961).

Enforcement

What means of enforcement are available?

Once a judgment is entered, enforcement is sought through supplementary proceedings. Unless specific federal statutes apply, federal courts will apply the procedure of the state where the court is located for supplementary proceedings. For example, federal courts will follow the local state court rules providing for discovery about a judgment creditor’s assets. A money judgment will be enforced through a writ of execution: a court order directing an officer of the court to seize the property of judgment debtor and transfer proceeds to a judgment creditor (FRCP rule 69). The federal courts may also order the performance of specific acts, and if a party fails to comply within the established time the court may, inter alia, order that the act be done by some other person, issue a judgment divesting a party of title in real or personal property, issue a writ of attachment or sequestration, or hold the disobedient party in contempt (FRCP rule 70).

Public access

Are court hearings held in public? Are court documents available to the public?

Except occasionally, all steps of the federal judicial process are open to the public. The public can usually observe the court sessions, review court calendars, watch a proceeding, and access dockets and case files and records. At certain times, access to court records and proceedings may be limited; for example, in a high-profile trial for which courtroom space is not sufficient to accommodate everyone, the court may restrict access. In addition, the court may restrict access for privacy or security reasons, including actions involving juveniles or confidential informants. Finally, the court may seal certain documents that contain confidential business records (including trade secrets), certain law enforcement reports and juvenile records.

Costs

Does the court have power to order costs?

Unless otherwise provided by federal statute, the court may, with discretion, order costs – other than attorneys’ fees – to the prevailing party (FRCP rule 54(d)). The court may also award reasonable attorneys’ fees and other non-taxable costs in a certified class action (FRCP 23(h)). Costs are not synonymous with expenses. Costs are typically limited to court fees and witness fees. However, the court may review requests for unusual costs. In addition, under FRCP rule 11, the court may sanction an attorney, and require a monetary payment to help defray the opposing party’s legal expenses if the court finds that rule 11 was violated. Under rule 11, attorneys must certify that the claims were brought in good faith, and the court may sanction an attorney for failure to do so.

A claimant may be required to provide security for defendant’s costs when plaintiffs are residents of a foreign country or if provided by federal statute.

Funding arrangements

Are ‘no win, no fee’ agreements, or other types of contingency or conditional fee arrangements between lawyers and their clients, available to parties? May parties bring proceedings using third-party funding? If so, may the third party take a share of any proceeds of the claim? May a party to litigation share its risk with a third party?

In most districts, attorney conduct including fee arrangements will be governed consistently with local state rules, but some district courts and courts of appeal have not adopted any rules governing attorney conduct and others may apply federal common law rules. However, under the prevailing state ethics rules that govern attorneys in most districts, attorneys may contract for contingency fee arrangements and recover a percentage of the final award, except in criminal and domestic relations matters. Attorneys may not share fees received with any third parties.

There is no prohibition against legal financing. Investors may provide funding to litigants in return for a percentage of the final award. A party to a litigation may also share its risk through an insurance or indemnification agreement.

Insurance

Is insurance available to cover all or part of a party’s legal costs?

Individuals or corporations may obtain insurance to cover both liability and legal costs. However, as a matter of public policy, intentional and criminal acts may not be covered by insurance.

Class action

May litigants with similar claims bring a form of collective redress? In what circumstances is this permitted?

Litigants with similar claims may pursue a class action in federal courts. Litigants may only sue or be sued as representative parties on behalf of all members if:

  • the class is so numerous that joinder of all members is impracticable;
  • there are questions of law or fact common to the class;
  • the claims or defences of the representative parties are typical of the claims or defences of the class; and
  • the representative parties will fairly and adequately protect the interests of the class (FRCP rule 23).

Similarly, a shareholder of a corporation or a member of an unincorporated association may also bring a collective action (commonly known as a derivative action) on behalf of the corporation or association to enforce a right that the corporation or association may properly assert but has failed to enforce. The plaintiff must fairly and adequately represent the interest of shareholders or members who are similarly situated in enforcing the right of the corporation or association (FRCP rule 23.1).

Currently pending before the United States Senate is comprehensive class action reform legislation. If enacted, the new legislation would alter almost all aspects of class action litigation. For example, it would impose a stricter typicality requirement, the disclosure of class counsel’s conflicts of interest, a demonstration of a reliable and administratively feasible way to identify the class members, a limitation on class counsel’s recovery of attorneys’ fees, as well as other various procedural changes, including timing of discovery and appeals.

Appeal

On what grounds and in what circumstances can the parties appeal? Is there a right of further appeal?

Appeals in the federal system are limited, because the circuit courts generally may only review final judgments of the district courts and a few specific interlocutory orders. A district court decision is appealable if it is considered final (28 USC section 1291). There are no statutory definitions of ‘final’. The Supreme Court has stated that a final judgment is one that ‘ends the litigation on the merits and leaves nothing for the court to do but execute the judgment’ (Catlin v United States, 324 US 229 (1945)). Ultimately, whether a judgment is final will largely depend on the case.

The circuit courts may review certain interlocutory orders. Such appealable orders include orders granting, modifying, or refusing injunctions; orders appointing receivers or refusing to wind up receiverships; and decrees determining the rights and liabilities of the parties to admiralty cases (28 USC section 1292(a)). The district court may also certify for immediate appeal certain orders that involve a controlling question of law as to which there is substantial ground for difference of opinion. To appeal, after certification by the district court, a party must seek permission from the circuit court to bring such appeal (28 USC section 1292(b)).

Cases from the circuit courts may be reviewed by the Supreme Court pursuant to a writ of certiorari, granted based upon the petition of any party to a civil case or by certification from the Court of Appeals on any question of law (28 USC section 1254). A writ of certiorari is essentially an application to the Supreme Court requesting that the Court review the matter. The Supreme Court does not accept all applications; it typically chooses to hear a small number of cases involving important questions about the Constitution or federal law.

Foreign judgments

What procedures exist for recognition and enforcement of foreign judgments?

There is no general federal statute or treaty on foreign judgments. Under federal common law, foreign judgments may be recognised as long as the judgment appears to have been rendered by a ‘competent court, having jurisdiction of the cause and parties, and upon due allegations of proof, and an opportunity to defend against them, and its proceedings are according to a course of civilised jurisprudence, and are stated in a clear and formal record’ (Hilton v Guyot, 159 US 113, 205-06 (1895)). The requirement of a reciprocal agreement is not straightforward. Federal courts with diversity jurisdiction will typically apply the state law regarding recognition of foreign judgments, and some states have rejected the reciprocity requirement. Meanwhile, federal courts with federal question jurisdiction will apply the federal common law, which does require reciprocity. Until the Supreme Court or Congress provides further guidance, the requirements for the enforcement of foreign judgments will continue to vary across jurisdictions and types of matters.

Foreign proceedings

Are there any procedures for obtaining oral or documentary evidence for use in civil proceedings in other jurisdictions?

The district courts may, with discretion, issue an order pursuant to a letter rogatory or request made by a foreign or international tribunal, and direct a resident of the district to give testimony, make a statement or produce a document or thing (28 USC section 1782).

Arbitration

UNCITRAL Model Law

Is the arbitration law based on the UNCITRAL Model Law?

Congress enacted the Federal Arbitration Act (FAA) in 1925 to validate agreements to arbitrate and to provide mechanisms for their enforcement. The Supreme Court has held that the FAA applies in both federal question and diversity jurisdiction matters, and in some cases pre-empts state statutes precluding arbitration. The FAA is not based on the UNCITRAL Model Law, and differs from it in several ways, including the basis for setting aside an award, the power to modify or correct an award, the procedure for the appointment of arbitrators and the arbitral tribunal’s power to rule on its own jurisdiction.

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

According to FAA section 2, an agreement will be valid, irrevocable and enforceable, except upon such grounds as exist at law or equity for the revocation of any contract, if there is a written provision or contract evidencing a transaction involving commerce to settle by arbitration a controversy arising thereafter, or a transaction or refusal to perform the whole or part thereof of such contract, or an agreement in writing to submit to arbitration an existing controversy arising out of such contract, transaction or refusal. Generally, courts will apply the ordinary state-law principles that govern the formation of contracts to determine the validity of an agreement. An agreement to arbitrate is considered a separate contractual undertaking; the validity of an arbitration clause does not depend on the validity of the underlying contract.

Choice of arbitrator

If the arbitration agreement and any relevant rules are silent on the matter, how many arbitrators will be appointed and how will they be appointed? Are there restrictions on the right to challenge the appointment of an arbitrator?

Typically, parties will specify the procedure for the appointment of arbitrators, or adopt procedural rules of an administering arbitral institution such as the American Arbitration Association (AAA), JAMS or the International Chamber of Commerce International Court of Arbitration, which provide default rules for the appointment of arbitrators. In the absence of a contractual provision regarding the procedure for the appointment of arbitrators or the adoption of the procedure of an administering arbitral association, the appointment of arbitrators shall be made upon application to the court. The court may designate and appoint any arbitrator or arbitrators as the case may require. If the contract is silent about the number of arbitrators, the court shall appoint a single arbitrator for the action (FAA section 5).

Arbitrator options

What are the options when choosing an arbitrator or arbitrators?

The available arbitrator options will depend on the chosen arbitral association or court. Generally, each arbitral association or court maintains a roster of available mediators and arbitrators. Eligibility for such rosters is based on each association or court’s own criteria and evaluation. For example, the JAMS roster is mainly composed of retired judges and other professional neutrals. The AAA roster tends to include arbitrators with more varied industry experience. Usually, the arbitral association or court can provide arbitrators with sufficient knowledge or experience to address the complexity of the issues presented.

Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

The domestic statutory law provides almost no requirements regarding the procedure to be followed. The arbitrators once appointed typically control the procedure, conducting the hearings, administering oaths and making awards. The FAA grants an arbitrator or arbitrators the power to summon the attendance of witnesses. The courts defer to the arbitrator on procedural matters.

If the parties have contractually adopted an administering arbitral association’s rules, those rules will bind the arbitrator or panel’s actions. The AAA provides different rules of procedure depending on the type of case (commercial, construction, labour, international, etc). Any procedural rules in the arbitration agreement will overrule the institutional rules.

Court intervention

On what grounds can the court intervene during an arbitration?

Federal courts have jurisdiction to hear arbitration-related issues for matters with federal question jurisdiction or diversity jurisdiction. Judicial intervention is commonly sought when the arbitration demand is made (to compel or stay a proceeding) or after the award (to enforce, modify or vacate). However, during an arbitration, parties may turn to the courts to enforce a subpoena issued by the arbitrator. If a person summoned to testify refuses or fails to appear, the parties may petition the district court in which the arbitrator (or a majority of the arbitrators) sits to compel attendance or punish said persons for contempt (9 USC section 7).

Interim relief

Do arbitrators have powers to grant interim relief?

The FAA does not provide for provisional remedies, but the majority view is that arbitrators can and should grant preliminary injunctive relief to preserve the status quo pending arbitration. Likewise, administering arbitral associations often give arbitrators the power to grant interim relief.Award

When and in what form must the award be delivered?

Under the FAA, there are no formal requirements regarding the delivery and form of the award. The rules of the administering arbitral association may require, or the parties may stipulate, that the award be in writing and signed by the majority of arbitrators. The timing of the award may also be governed by the administering arbitral association or the arbitration agreement.

Appeal

On what grounds can an award be appealed to the court?

An award can be appealed to the courts on limited grounds. The FAA lists the following grounds for vacating an award:

  • where the award was procured by corruption, fraud or undue means;
  • where there was evident partiality or corruption in the arbitrators, or any one of them;
  • where the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehaviour by which the rights of any party have been prejudiced; or
  • where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.

Once an action on the award is brought to the courts, the normal rules governing the appeal of a court decision or an order will attach.

Enforcement

What procedures exist for enforcement of foreign and domestic awards?

Foreign and domestic awards are enforced through the courts. Domestic awards may be enforced under FAA section 9. The party seeking enforcement need not commence a civil action, but rather can make an application to the appropriate federal district for an order confirming the award within one year after the award is issued. The party seeking confirmation must also serve the adverse party with notice of the application.

There are two methods under which foreign commercial arbitral awards may be recognised and enforced. First, as part of the FAA, the United States has adopted the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (9 USC section 201). A party seeking to enforce an award must establish a prima facie case for enforcement under the New York Convention, and provide an original or certified copy of both the award and arbitral agreement to the appropriate judicial forum. Enforcement may be challenged on five grounds:

  • absence of a valid arbitration agreement;
  • lack of fair opportunity to be heard;
  • the award exceeds the scope of the submission to arbitration;
  • improper composition of the arbitral tribunal or improper arbitral procedure; and
  • the award has not yet become binding or stayed.

The party opposing enforcement has the burden to prove the invalidity of the award.

Alternatively, the United States has also adopted the Inter-American Convention on International Commercial Arbitration. Foreign commercial arbitral awards will be recognised and enforced on the basis of reciprocity; if the foreign state has ratified or acceded to the Inter-American Convention, such award will be recognised and enforced (9 USC section 304). If both the requirements for the application of the New York Convention and the Inter-American Convention are met, unless expressly agreed otherwise, the Inter-American convention will apply if the majority of parties to the arbitration are citizens of a state or states that have ratified or acceded to the Inter-American Convention or are a member state of the Organization of Americans. In all other cases, the New York Convention will apply (9 USC section 305).

Costs

Can a successful party recover its costs?

In general, parties normally bear their own costs, unless otherwise agreed in the arbitration clause. The arbitrator may award administrative costs if the parties have contracted for such or the rules of the administering arbitral association so provide. Typically, costs do not include attorneys’ fees, but an arbitrator may award attorneys’ fees when allowed by the governing law, such as when authorised by a specific statute, when the applicable arbitration rules so provide or as a matter of contract as provided for by the parties.

Alternative dispute resolution

Types of ADR

What types of ADR process are commonly used? Is a particular ADR process popular?

According to a recent study, all of the federal courts authorise some form of ADR. The types of ADR procedures used in federal courts include mediation, arbitration, early neutral evaluation, summary jury trial and settlement week. The most commonly authorised form of ADR across the district courts is mediation. The next most common forms are arbitration and early neutral evaluation.

Requirements for ADR

Is there a requirement for the parties to litigation or arbitration to consider ADR before or during proceedings? Can the court or tribunal compel the parties to participate in an ADR process?

The requirement to consider ADR varies from court to court. Some district courts require litigants to consider the use of an alternative dispute resolution process. In addition, some district courts mandate that parties in certain cases utilise mediation, early neutral evaluation and, if the parties consent, arbitration. Judges in some districts are authorised to refer cases without party consent to mediation or early neutral evaluation.

Miscellaneous

Interesting features

Are there any particularly interesting features of the dispute resolution system not addressed in any of the previous questions?

No.

Update and trends

Recent developments

Are there any proposals for dispute resolution reform? When will any reforms take effect? (Please also mention any ground-breaking recent cases, etc.)

No updates at this time.