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I, Mediator

Are ADR Practitioners at risk of losing their jobs to artificial intelligence? David Allen Larson's article explores the possible (or eventual) convergence of modern technology and alternative dispute resolution.

Abstract:
As technology has advanced, many have wondered whether (or simply when) artificial intelligent devices will replace the humans who perform complex, interactive, interpersonal tasks such as dispute resolution. Has science now progressed to the point that artificial intelligence devices can replace human mediators, arbitrators, dispute resolvers and problem solvers? Can humanoid robots, attractive avatars and other relational agents create the requisite level of trust and elicit the truthful, perhaps intimate or painful, disclosures often necessary to resolve a dispute or solve a problem? This article will explore these questions. Regardless of whether the reader is convinced that the demise of the human mediator or arbitrator is imminent, one cannot deny that artificial intelligence now has the capability to assume many of the responsibilities currently being performed by alternative dispute resolution (ADR) practitioners. It is fascinating (and perhaps unsettling) to realize the complexity and seriousness of tasks currently delegated to avatars and robots. This article will review some of those delegations and suggest how the artificial intelligence developed to complete those assignments may be relevant to dispute resolution and problem solving. “Relational Agents,” which can have a physical presence such as a robot, be embodied in an avatar, or have no detectable form whatsoever and exist only as software, are able to create long term socio-economic relationships with users built on trust, rapport and therapeutic goals. Relational agents are interacting with humans in circumstances that have significant consequences in the physical world. These interactions provide insights as to how robots and avatars can participate productively in dispute resolution processes. Can human mediators and arbitrators be replaced by robots and avatars that not only physically resemble humans, but also act, think, and reason like humans? And to raise a particularly interesting question, can robots, avatars and other relational agents look, move, act, think, and reason even “better” than humans?
(http://ssrn.com/abstract=1461712)

Professor Larson raises some interesting questions throughout the article, but one I find fascinating is the role the younger, more tech-savy generation will play in the AI/ADR game. Will legal-binding settlements be as easy an an iPhone application in the near future? Would the convenience of such a program out-weigh the utter lack of a human element? Read more!

Lions and Tigers and Collective Bargaining, Oh My!

Author Michael N. Widener's interesting article which advocates for collective bargaining as a way for acitivists to try to prevent animal exploitation.

In the wake of the Michael Vick dog-fighting situation, could this sort of process be a valid way of protecting the safety of animals? Read more!

If George Bush is “the decider,” is he an arbitrator?

Recently, the 11th Circuit expressly distinguished mediation from arbitration. OK, so mediation and arbitration are different (duh), but another question has been raised and the waters muddied.
In Advanced Bodycare Solutions, LLC v Thione International, Inc., 524 F.3d 1235 (11th Cir. (Fla) 2008), the Court decided §3 of the FAA cannot be used to enforce a dispute resolution clause that provides for either mediation or non-binding arbitration prior to litigation. Advanced Bodycare sued Thione for breach of contract. Thione moved to stay the suit pending arbitration pursuant to §3 of the FAA. The district court denied the motion, and the 11th Circuit granted interlocutory appeal. Here’s the dispute resolution provision of the contract:

A. The parties recognize that disputes as to certain matters may from time to time arise which relate to either party’s rights and/or obligations hereunder. It is the objective of the parties to establish procedures to facilitate the resolution of such disputes in an expedient manner by mutual cooperation and without resort to litigation. To accomplish that objective, the parties agree to follow the procedures set forth below if and when such a dispute arises between the parties.

B. If any dispute arises between the parties relating to the interpretation, breach[,] or performance of this Agreement or the grounds for the termination thereof, and the parties cannot resolve the dispute within thirty (30) days of a written request by either party to the other party, the parties agree to hold a meeting, attended by the Chief Executive Officer or President of each party, to attempt in good faith to negotiate a resolution of the dispute prior to pursuing other available remedies. If within sixty (60) days after such written request, the parties have not succeeded in negotiating a resolution of the dispute, such dispute shall be submitted to non-binding arbitration or mediation with a mutually agreed upon, independent arbitrator or mediator. The arbitration or mediation shall be held in Atlanta, Georgia. Each party shall bear its own costs and legal fees associated with such arbitration or mediation. If no resolution acceptable to both parties is reached through arbitration or mediation, either party may resort to instituting legal action against the other in court and all rights and remedies of the party shall be preserved in such action. This Agreement shall be interpreted in accordance with the laws of the state of Georgia.

In concluding that the FAA cannot be used to enforce this agreement, the Court used this reasoning: 1) if, in a dispute resolution agreement, a party has an unconditional right to choose between two or more ADR processes, and 2) one of them is not arbitration, then 3) the FAA cannot be used to enforce the provision. From there, it would appear pretty easy—the agreement provides for a choice of either mediation or non-binding arbitration, and mediation is not arbitration; therefore, no FAA. Courts may be able to stay litigation pending mediation on the basis of authority other than the FAA, such as the inherent authority to control dockets, etc., and mediation agreements may be enforced as conditions precedent under contract or other law. Id. at 1240. The Court expressly left open the question of whether or not §3 of the FAA could be used to enforce non-binding arbitration agreements, Id. at 1241; however, its effort to clarify the distinction between mediation and arbitration may have inadvertently undermined the enforceability of non-binding arbitration under the FAA.

Until now, the 11th Circuit had not enunciated a test for determining if a procedure is FAA arbitration. The leading case is still probably AMF Inc. v. Brunswick Corp., 621 F. Supp. 456 (D.C.N.Y., 1985), in which the court determined that the FAA applies to non-binding arbitration. In that case, the non-binding process used wasn’t even called “arbitration,” and it lacked any adversarial hearing element; nevertheless, the court determined that the FAA applied. Citing AMF for the proposition that one test of whether a procedure is arbitration is merely the submission to a third party to decide, the Court noted other possible tests, procedural resemblance to “classic arbitration, and whether enforcement serves the Congressional purposes of the FAA. It could have simply stopped with the distinction of the parties empowering someone else to make a decision; however, it went further by deciding that the existence of an award was controlling leading to the following “bright line” rule: “If a dispute resolution procedure does not produce some type of award that can be meaningfully confirmed, modified, or vacated by a court upon proper motion, it is not arbitration within the scope of the FAA.” At 1239 (footnote omitted).

This test goes well beyond AMF, whose dispute resolution process would arguably fail to meet this criterion. A non-binding arbitration award cannot be meaningfully confirmed, modified, or vacated. A quick look at the language of the FAA provides no support for such a test. Nothing in the act expressly limits its coverage to binding arbitration agreements, and while I say this without delving into the legislative history, there does not appear to be a presumption in the FAA that the arbitration award is meant to be binding. Indeed, the opposite is indicated in §9, on confirmation, which begins with “If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to arbitration,” then they can seek confirmation. Thus, §9 alone is worded so as to be applicable if the parties agreed to use the courts to enforce a binding award. By inference, the preceding provisions of the act are applicable to any arbitration agreement, binding or not, and the subsequent provisions on vacatur and modification apply to binding awards.

Both courts rely on the purposes of the FAA to support their conclusions, and this is where they seem to diverge. In AMF, the court focuses on the underlying purpose of the FAA to reverse judicial hostility to arbitration and allow the parties contractual control over their dispute resolution process and the extent and effect of the award. It concludes:

Arbitration is a creature of contract, a device of the parties rather than the judicial process. If the parties have agreed to submit a dispute for a decision by a third party, they have agreed to arbitration. The arbitrator's decision need not be binding in the same sense that a judicial decision needs to be to satisfy the constitutional requirement of a justiciable case or controversy. 621 F. Supp. at 460 (cite omitted).

Although the 11th Circuit gives freedom to contract a nod (at 1239), it presumes that the primary purpose of the FAA is to reduce litigation by enforcing dispute resolution agreements that actually dispose of a controversy rather than possibly burdening the courts with it. A non-binding process does not impose settlement on the matter. I think the Court could have done this better by focusing more explicitly on the meaning of “to settle by arbitration” in FAA §2. Although it and the AMF court briefly used the §2 language, they seemed to have reached different conclusions about it (it will take several pages to parse that one).

In short, the 11th Circuit left open the question of whether the FAA applies to non-binding arbitration, but it created a test under which I would have to conclude that it doesn’t. Whether it matters or not is another question. What do you think?

PS - Two additional issues to raise. What will this do to Med-Arb agreements? Why wasn’t the Georgia Arbitration Code applied? It appears to be the law applicable to the contract. The Court doesn’t address that issue, and perhaps the parties simply argued the FAA. But, unlike the FAA’s §2 which arguably enforces only agreements to “settle by arbitration a controversy,” the GAC enforces submissions to arbitration existing or future controversies without mention of the term “settle.”
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2008 First Quarter Case Law Review – U.S. Supreme Court

Several judicial decisions in the first few months of this year are worthy of some discussion. Three are from the U.S. Supreme Court.

In Preston v. Ferrer. 128 S.Ct. 978 (2008), Judge “Alex” of TV fame got into a bit of a tiff with his attorney, who, seeking recovery of fees allegedly owed, initiated arbitration under the terms of their contract. Judge Alex petitioned the California Labor Commissioner for a determination that the contract was invalid and unenforceable under California's Talent Agencies Act (TAA) because the attorney had acted as a talent agent without the required license. After the Labor Commissioner's hearing officer denied his motion to stay the arbitration, Judge Alex filed suit in state court seeking to enjoin arbitration. The attorney then moved to compel arbitration. The court denied the motion and enjoined him from proceeding before the arbitrator unless and until the Labor Commissioner determined she lacked jurisdiction over the dispute. While the attorney's appeal was pending, the U.S. Supreme Court held, in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 446, 126 S.Ct. 1204, 163 L.Ed.2d 1038, that challenges to the validity of a contract requiring arbitration of disputes ordinarily “should ... be considered by an arbitrator, not a court.” Nevertheless, the California Court of Appeal held that the TAA vested the Labor Commissioner with exclusive original jurisdiction over the dispute, and that Buckeye was inapposite because it did not involve an administrative agency with exclusive jurisdiction over a disputed issue. Reversing, the Supreme Court held that when parties agree to arbitrate all questions arising under contract, the Federal Arbitration Act (FAA) supersedes state laws lodging primary jurisdiction in another forum, whether judicial or administrative. Procedural prescriptions of the TAA thus conflict with the FAA's dispute resolution regime in two basic respects: First, the TAA, in s 1700.44(a), grants the Labor Commissioner exclusive jurisdiction to decide an issue that the parties agreed to arbitrate, see Buckeye, 546 U.S., at 446, 126 S.Ct. 1204; second, the TAA, in s 1700.45, imposes prerequisites to enforcement of an arbitration agreement that are not applicable to contracts generally, see Doctor's Associates, Inc., 517 U.S., at 687, 116 S.Ct. 1652. The Court distinguished EEOC and Waffle House because the EEOC had prosecutorial rather than adjudicative powers.

While we’re in California with the US Supreme Court, here’s a trend to watch: On March 31, the U.S. Supreme Court let stand a California Supreme Court decision that employment arbitration agreements prohibiting classwide relief are unenforceable if class arbitration would be a significantly more effective way of vindicating employees' rights than individual arbitrations (Circuit City Stores Inc. v. Gentry, U.S., No. 07-998, cert. denied 3/31/08).

In Hall Street Associates, L.L.C. v. Mattel, Inc. --- S.Ct. ----, 2008 WL 762537 (U.S. 2008), the Court resolved the split in the lower courts by holding that the FAA’s grounds for modification and vacatur under §10 and §11 are exclusive; therefore, parties cannot expand the scope of judicial review through their arbitration agreement. The federal courts had been split over this issue.

The Court noted that Amicus for one side argued that if the Court upheld expanded review, everyone would flee the courts. Perhaps. But if they did so because of the possibility of expanded review, the courts would then find themselves still dealing with the same cases at the end of the day. Likewise, if the Court denies expanded review and the reverse might be true as argued by Amicus for the other side, parties will flee arbitration, then all those cases end up in the courts. This all related to my long held belief that the courts consciously or not have favored arbitration as much for its ability to relieve the courts of what would have been by now a completely overwhelming caseload in employment and consumer cases among others as for any other virtues or rationales supporting the process.

This case is particularly interesting for what wasn’t decided. The arbitration agreement was entered into during litigation, was submitted to the District Court as a request to deviate from the standard sequence of litigation procedure, and was adopted by the court as an order, leaving some question whether it should be treated as an exercise of the District Court's authority to manage its cases under Federal Rule of Civil Procedure 16. The Court hints at the possibility of expanded judicial review if the FAA isn’t implicated and remanded for consideration of independent issues. Interesting…
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2008 First Quarter Case Law Review (continued)

Although nothing Earth-shattering, there are some other decisions to note in no particular order:

The back story in Goldsmith v. Bagby Elevator Co., Inc., --- F.3d ----, 2008 WL 150585 (C.A.11 (Ala.), is an ugly example of on-going racism. Ultimately, Mr. Goldsmith refusal to sign an arbitration agreement that would have covered his existing charge of racial discrimination pending with the Equal Employment Opportunity Commission was Bagby’s excuse for firing him. In Weeks v. Harden Manufacturing Corp., 291 F.3d 1307 (11th Cir.2002), the court ruled that a refusal to sign an arbitration agreement was not a protected activity that could support a claim of retaliation, but it did not address an employee's refusal to sign an agreement that applied to a pending charge of discrimination. Goldsmith was willing to execute an amended dispute resolution agreement that would not have applied to his pending charge, but Bagby insisted that Goldsmith sign an agreement that applied to the pending charge and fired him immediately after he refused to do so. The court concluded that Bagby was not entitled to a judgment as a matter of law against Goldsmith's claim of retaliation because there was sufficient evidence of a causal relation between the filing of his pending charge and later termination.

In Ansley Marine Const., Inc. v. Swanberg. --- S.E.2d ----, 2008 WL 427778 (Ga.App. 2008), plaintiffs sued for breach of contract, fraud, and breach of fiduciary duty following the plaintiffs' sale of certain assets and equipment to the defendants. The transaction involved two contracts, each of which provided that “any controversy or claim arising out of or relating to this Contract or the breach thereof shall be settled by arbitration.” The trial court granted plaintiffs' motion to submit the controversy to arbitration. Although the plaintiffs sought to preserve the breach of fiduciary duty claim for trial rather than arbitration, the award in their favor provided that it was “in full settlement of all claims submitted to this Arbitration. All claims not expressly granted herein are hereby denied.” Unsatisfied with the award, the plaintiffs later moved to vacate. The trial court denied the plaintiffs' motion and entered judgment on the award. The judgment, consistent with the arbitration award, provided that it was in full settlement of all claims submitted to arbitration and that the claims not expressly granted were denied. The defendants moved to dismiss the complaint with prejudice on the grounds that no issues remained which required a trial. The trial court granted the motion and the Plaintiffs appealed.

The court noted that, as a general rule, arbitration under the Georgia Arbitration Code is limited to “all disputes in which the parties thereto have agreed in writing to arbitrate.” Here, the plaintiffs initially filed a “motion to submit controversy to arbitration” but also maintained that the fiduciary duty claims were not subject to arbitration because the claims were independent of the parties' agreement to arbitrate. The trial court granted the plaintiffs' motion. The plaintiffs also filed a demand for arbitration and submission of issues for dispute resolution with the American Arbitration Association requesting resolution of only the “fraud and contract claim.” At the arbitration hearing, however, the plaintiffs argued for and presented evidence related to the fiduciary duty claims raised by the complaint. Furthermore, in the complaint, the plaintiffs contended, among other things, that the defendants had breached their fiduciary duties to ADS Marine and Marine Equipment. In light of the foregoing, the court concluded that plaintiffs presented evidence touching on all the elements of a breach of fiduciary duty on the part of the defendants. The court also found it important that the plaintiffs represented to the arbitrator that they were pursuing fiduciary duty claims in the arbitration and plaintiffs' counsel agreed that plaintiffs were claiming a breach of fiduciary duty to the extent those claims arose from the sales contracts. The court concluded that the parties at least implicitly, if not expressly, agreed to submit the fiduciary duty claims to arbitration, and that they were denied by the award.

With regards to the motion to vacate the award the court pointed out that unless one of the statutory grounds for vacating an arbitration award applies, the trial court is bound to confirm the award. According to the court, the arbitrator's manifest disregard for the law is not a proper basis for the vacation of an arbitration award as it applies to this case, because that ground is applicable only to “civil actions” filed after July 1, 2003, the effective date of OCGA § 9-9-13(b)(5). Since plaintiff's motion to vacate was filed in a civil action commenced in 2002, the court found that trial court correctly recognized that it could not vacate the award on the basis of plaintiffs' claim of the arbitrator's manifest disregard of the law. Bet they didn’t see that coming.

In Hodges v. MedAssets Net Revenue Systems, LLC. Slip Copy, 2008 WL 476140 (N.D.Ga. 2008), “any dispute” with respect to a stock option bonus provision of an employment agreement was to be referred to an Independent Accounting Firm which “shall within sixty (60) days following its selection, deliver to the Buyer and the Seller a written report determining such disputed exceptions, and its determination will be conclusive and binding upon the parties…” Although the term “arbitration” was not mentioned anywhere in the provision, the court concluded that this was a valid form of final and binding arbitration for purposes of the FAA; however, it also concluded that this was a narrow arbitration clause under which only disputes over the calculations were arbitrable and breach of contract and fiduciary duty claims were not covered.

In STG Secure Trading Group, Inc. v. Solaris Opportunity Fund, LP. Slip Copy, 2008 WL 465516 (C.A.11 2008), the attorney for the co-defendants was forced to withdraw for conflict of interest when one client made a claim against the other just prior to the arbitration hearing. The arbitrators’ decision not to postpone was neither misconduct nor abuse of discretion.

Apparently, it’s a small world in Alabama. In McDonald v. H & S Homes, LLC. --- S.E.2d ----, 2008 WL 614815 (Ga.App. 2008), the arbitrator in this case turned out to be friends with McDonald’s counsel. Apparently, the relationship was not disclosed. Fortunately for McDonald, who won, the court found that the loser’s motion to vacate for reasons of partiality was untimely. The court noted that all the attorneys appeared to be well acquainted with each other and seemed to trade off in both serving as arbitrators and advocates in these cases. For all the critics of mandatory arbitration, please note that the consumer won this one and that any abuse of the process appeared to be on the consumer side rather than the lender/seller.
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Georgia Commission on Dispute Resolution responds to Wilson v. Wilson

At its March 22 meeting, the Commission on Dispute Resolution voted to make a change to the state's ethics rules in response to the Georgia Supreme Court’s ruling in Wilson v. Wilson.

The change adds a 10th element to a mediator's explanation of the mediation process: Appendix C, Chapter 1, Section A, Part 1A

“In order for parties to exercise self-determination they must understand the mediation process and be willing to participate in the process. A principal duty of the mediator is to fully explain the mediation process. This explanation should include:
. . .
10. An explanation that the parties, by their participation, affirm that they have the capacity to conduct good-faith negotiations and to make decisions for themselves, including a decision to terminate the mediation if necessary.”

This change addresses just one of the concerns raised by the Georgia Supreme Court's Wilson v. Wilson decision and emphasizes, both for the parties and the mediator, the importance of party capacity in mediation. The Ethics Committee is studying other possible rule changes in the wake of Wilson, including the issue of whether mediators have an ethical obligation to fight a subpoena. The Rules Committee is also studying proposed changes to the Model Mediation Rules. The updated ADR Rules, marked with a 3/28/08 date, are now posted on the GODR website .
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More news from GODR

Georgia Office of Dispute Resolution Director Shinji Morokuma distributed the latest approved parenting form. The Supreme Court has approved the new parenting plan form as a statewide uniform rule of the Superior Court. Read more!