INNOVATIONS IN RESOLVING COMPLEX BUSINESS DISPUTES:
A PROCESS AND FORUM OVERVIEW, AND SOME THOUGHTS ON
QUALITIES IMPORTANT IN ANY VENUE
By
LEE APPLEBAUM
Our starting point is either a dispute between businesses (“commercial dispute”) or an internal
business dispute, e.g., an intra-corporate or partnership dispute (“business dispute”). We next assume that
the disputants themselves could not work out their differences, and have hired lawyers. A long, though
not exhaustive, list of means and processes to resolve these disputes once lawyers are involved includes1:
(1)
Negotiations between the lawyers (which may be further broken down into negotiations
by email, mail, telephone, in person, or some mix of these);
(2)
Negotiations between lawyers with their clients present (in person or by teleconference);
(3)
Involving a third party in the negotiations which may include:
(i) informal mediation,2 where, e.g., the mediator is a “friend” of each disputant and is
willing to help them try and work it out;
(ii) informal neutral valuation3;
This paper is being presented at the American Bar Association Section of Business Law’s Spring
Meeting, April 11, 2014, for the program “Innovations in Resolving Complex Business Disputes,” cosponsored by the Ad Hoc Committee on Judges Initiative and presented by the Section’s Business and
Corporate Litigation Committee.
1
For discussions of various means used to resolve disputes, see, e.g., Donna Shestowsky, The Psychology
of Procedural Preference: How Litigants Evaluate Legal Procedures Ex Ante, 99 Iowa L. Rev. 637
(2014) (hereinafter “Shestowsky”), available at http://www.uiowa.edu/~ilr/issues/ILR_992_Shestowsky.pdf; Benjamin F. Tennille, Lee Applebaum, & Anne Tucker Nees, Getting to Yes in
Specialized Courts: The Unique Role of ADR in Business Court Cases, 11 Pepperdine Dispute Res. Law
J. 35 (2010) (hereinafter “ADR in Business Cases”), available at
http://law.pepperdine.edu/dispute-resolution-law-journal/issues/volume-eleven/8%20Tennille.pdf. Other
forms of dispute resolution not listed include, among others, the use of mock juries as a means to give the
parties a neutral valuation; summary trials; mini-trials; and dispute review/resolution boards, independent
decision makers, and project neutrals in construction cases.
2
There are various theories of, and approaches to, mediation, which are not addressed or evaluated in this
paper. The fundamental idea here is that a mediator is a facilitator who assists parties toward their
reaching a resolution. The process is driven by the parties’ desires, intentions and goals, rather than the
mediator imposing his or her judgments or opinions upon the parties in creating an outcome. A mediator
is, however, going to be a guide at times and will be exerting considerable, but controlled, energy
throughout the process; and facilitation in no way implies vacuity or passivity.
1
(iii) formal mediation, i.e., where a neutral mediator is hired by the parties at a fee, or
appointed by the court;
(iv) formal neutral valuation where a neutral is hired by the parties at a fee, or appointed
by the court;
(4)
(5)
(6)
(v) “early litigation assessment” by a neutral on legal issues only4;
(vi) settlement conferences with a magistrate judge or special master appointed by the
court;
(vii) judicial settlement conferences;
(viii) med-arb5;
Non-binding arbitration:
(i) court annexed, mandated, and arbitrators chosen by court system;
(ii) process and arbitrators chosen by the parties;
Binding arbitration:
(i) arbitration process is party designed by written agreement, either before or after
dispute arises;
(ii) arbitrator(s) selected by parties’ agreement either before or after dispute arises;
(iii) agreement by parties’ to use an established arbitration provider, e.g., AAA, JAMS,
CPR, and parties are bound by that organization’s rules and procedures, and arbitrator(s)
selection is determined in accord with the organization’s rules and procedures and may
be limited to the organization’s arbitrator panel;
(iv) designated arbitration forum selected by parties’ in advance through participation in
a convention, parties are bound by forum’s procedures, and arbitrator(s) selected as part
of that process;
(v) arbitration before a single arbitrator or multi-arbitrator panels;
Trial before special masters or magistrates who perform as the equivalent of judges;
3
Neutral evaluation, or neutral valuation, is meant here as a mostly non-facilitative process, where parties
make summary presentations of their cases to a non-judge neutral third party, who puts a value on the
case or gives a sense of how a judge or jury will decide on key issues, as a means to bring the parties to
settlement.
4
Don J. DeBenedictis, ‘Early legal assessment’ program gives cases innovative push toward resolution,
Daily Journal, Los Angeles Daily Journal (January 28, 2014). In a pilot project developed by Orange
County California Superior Court Judge Gail Andler, the parties use a neutral early in the case to give
them an opinion on the outcome of specific legal issues in dispute. “The idea is that early in the litigation
process, attorneys present short briefs and arguments to a retired judge or appellate justice about ‘a pivotal
legal issue’ in their case, according to [Judge] Andler’s October memo about the project. In the right case,
the neutral’s analysis could foreshadow the ultimate winner and loser and thus allow the parties to avoid
costly discovery and summary judgment motions.”
5
ADR in Business Court Cases, footnote 1 above, at 52 n.61 (the parties agree to mediate, but if that does
not lead to resolution, they also have agreed in advance that the mediation becomes arbitration, and the
mediator becomes an arbitrator).
2
(7)
(8)
Trial before a judge:
(i) in a generalist state court;
(ii) in a specialized state business or complex litigation court;
(iii) in a federal bankruptcy court;
(iv) in a federal district court;
(v) in a state or federal administrative forum; and
Trial before a jury (with potential variations in the number of jurors).
Within these processes and venues there are important timing variations, e.g., some courts may
provide early neutral valuation, and others may only require neutral valuation at the end of discovery and
motions, but before trial. As we know, direct negotiations or mediation occurring before litigation has
started can be very different experiences, with different exigencies, from those same processes taking
place after litigation has started. Further, these processes may have significantly different dynamics even
after litigation starts, depending on how close to trial they occur.
Since we are addressing specific subject areas, commercial and business disputes, the parties and
their lawyers must consider whether the non-disputant decision makers or facilitators should have some
expertise in those subjects, as well as in the decision making or facilitation process. It seems a fair
assumption that a client wants a lawyer with experience in contract law to handle its contract disputes; or
a lawyer who understands the law of business entities to handle its shareholder or partnership disputes.
On this premise, that experience leads to better results, the same client-disputant should want to use
neutrals, or put their case before judges, with experience and expertise in the same areas of law that are at
issue in the dispute. However, this belief is not universally held, with some judges and scholars finding
process specialization sufficient6; and some parties and lawyers seeking juries with no expertise in either
6
Judge Richard A. Posner has identified two types of specialization in connection with judging: (i)
specialization of function, i.e., judges are experts at judging; and (ii) specialization of subject matter. He
has expressed doubt in the need for subject matter specialization, at least in federal appellate courts. The
Honorable Richard A. Posner, Will the Federal Courts of Appeals Survive Until 1984? An Essay on
Delegation and Specialization of the Judicial Function, 56 S. Cal. L. Rev. 761, 778-780 & n.44 (1983).
One author frames Judge Posner as further taking the position “that generalist appellate judges have
greater knowledge of particular areas of the law than do lawyers or legal academics who focus on those
areas because the latter must spend a considerable portion of their time doing things besides thinking
about the law in the specific area. … To the extent that judging is an intellectual process of reasoning,
rather than akin to assembly line work, Posner’s view seems more persuasive.” Andrew Morriss,
Specialized Labor and Employment Law Institutions in New Zealand and the United States, 28 Cal. W.
Int’l L.J. 145, 157 n.55 (Fall 1997). Additional critiques of judicial specialization can be found, e.g., in
the Honorable Jed S. Rakoff’s lecture, ARE FEDERAL JUDGES COMPETENT? Dilettantes in an Age
of Economic Expertise, given at the Eleventh Annual Albert A. DeStefano Lecture on Corporate,
3
substance or procedure. Thus, in considering where to bring business or commercial disputes for
resolution, seeking a neutral or judge with well-developed reasoning and process skills, who may not be
immersed or experienced in the particular subject matter, remains on the table; as does bringing a case to
a jury.
That being said, specialization is a reality in numerous courts and most ADR forums, along with
the belief among many that a judge or neutral with knowledge and experience in a dispute’s subject
matter is more likely to understand not only the basic issues, but important nuances and sub-issues as to
which a less experienced person may be wholly unaware.7
Securities, and Financial Law at the Fordham Corporate Law Center in 2011, and published at 17
Fordham J. Corp. & Fin. L. 1 (2012) (“Judge Rakoff”).
Learned Hand was another judicial voice against specialist courts. Hand was often called on to
address maritime and patent cases, subjects which most lawyers and judges find “particularly arcane.”
Gerald Gunther, Learned Hand The Man and The Judge 307 (1994). Most of these cases were handled
by a specialized bar, as they are today. “[W]hen Congress periodically considered establishing specialized
courts to decide patent cases, [Hand] steadfastly opposed those proposals; he believed that it was healthy,
for the judges and for the law, that generalists decide disputes even in specialized areas; he feared that
specialized tribunals would produce unduly narrow judges.” Id.
One noticeable pattern here is that these particular judges favoring generalist jurisdictions run to
the brilliant end of the spectrum. A legitimate question arises that their belief in cross-pollinating ideas
from different areas of the law finding a home in one mind as the best means to improve the law, and of
avoiding the myopia of specialization, may be based on these particular individuals’ ability to grasp, and
master, difficult and diverse subjects more quickly than most human beings. If posed the question “Do
you see what I see?” from a Hand, Posner, or Rakoff, most of us might answer, “Actually no; you see a
lot more broadly and deeply than I do.” As Hand’s biographer states in the same paragraph on Hand’s
argument against specialization: “And maritime and patent lawyers would have little reason for worry
about generalist judges if all incumbents had matched Learned Hand.” Id. Even among the gifted, the
generalist position is not uniform. Judge Henry J. Friendly, whom Judge Posner describes as “the greatest
judge of the last half century,” The Honorable Richard A. Posner, Reflections on Judging 165 (2013)
(“Reflections on Judging”), did advocate for specialist courts and specialist judges, attempting both to
allay concerns and demonstrate benefits. The Honorable Henry J. Friendly, Federal Jurisdiction: A
General View 153-171 (1973) (addressing tax and patent law in federal courts).
For instant purposes, the point is that using non-subject matter specialized neutrals and judges to
resolve business and commercial disputes remains within the realm of choice, and certainly within the
realm of reality. In some jurisdictions, it will in fact be the only option if adjudication in the courts is the
parties’ chosen path for dispute resolution. At the appellate level, generalist jurisdiction remains the prime
reality for most business and commercial disputes initiated in any court.
7
See, e.g., The Honorable Stuart A. Nudelman and Jann Johnson, Premediation Preparation A Key
Component to Successful Dispute Resolution 11, The Brief (Winter 2014) (“Complex cases often require
the mediator to have a good understanding of sophisticated, cutting-edge information specific to the
business or industry involved. In some cases, this may also require a strong grasp of a specialized or
esoteric legal subject matter, or a good basis in mathematics, statistics, or economics. It is crucial to
4
It has been over 20 years since the first modern specialized state business and commercial court
dockets were established in New York, Chicago, and New Jersey. The hallmarks of these specialized
divisions, programs, or dockets within a state civil trial court system are: (1) identifying and selecting case
types to be placed on the business and commercial docket, always with some subject matter component
and sometimes with a complexity requirement8; and (2) providing a specific judge or set of judges to
choose a mediator who possesses some depth of knowledge in the subject matter involved, and who is
also able and willing to supplement this knowledge with independent research and analysis.”). Some
Business Courts with court-annexed ADR require that their neutrals both have training and some
expertise in subject matter. ADR in Business Courts, footnote 1 above, at 54-56.
8
For a detailed history and description of business courts’ jurisdiction over the last 21 years, see Mitchell
L. Bach and Lee Applebaum, A History of the Creation and Jurisdiction of Business Courts in the Last
Decade, 60 Bus. L. 147 (2004) (“Business Court History”), and the annual update on business and
complex commercial court developments in the United States from 2004 through 2014, provided in the
Business Courts Chapter of the Section of Business Law’s Business and Corporate Litigation Committee
publication, Annual Review of Developments in Business and Corporate Litigation (“Annual Review”).
By way of one jurisdictional example, New York’s Commercial Division began as a pilot
program in 1993, and was formalized in 1995. In ensuing years, the number of New York courts with
Commercial Divisions expanded across the state in New York’s Supreme Courts, with somewhat varying
rules among those different courts. Eventually, statewide uniform rules for all Commercial Division
courts were promulgated. These uniform rules now provide the following mandatory subject matter
jurisdiction for New York’s ten Supreme Court venues with Commercial Divisions,
http://www.nycourts.gov/rules/trialcourts/202.shtml#70:
Commercial cases
Actions in which the principal claims involve or consist of the following will be
heard in the Commercial Division provided that the monetary threshold is met
or equitable or declaratory relief is sought:
(1) Breach of contract or fiduciary duty, fraud, misrepresentation, business tort
(e.g., unfair competition), or statutory and/or common law violation where the
breach or violation is alleged to arise out of business dealings (e.g., sales of
assets or securities; corporate restructuring; partnership, shareholder, joint
venture, and other business agreements; trade secrets; restrictive covenants; and
employment agreements not including claims that principally involve alleged
discriminatory practices);
(2) Transactions governed by the Uniform Commercial Code (exclusive of
those concerning individual cooperative or condominium units);
(3) Transactions involving commercial real property, including Yellowstone
injunctions and excluding actions for the payment of rent only;
(4) Shareholder derivative actions -- without consideration of the monetary
threshold;
(5) Commercial class actions -- without consideration of the monetary
threshold;
5
handle these cases individually from start to finish.9 This movement towards specialized business and
commercial courts has sustained itself for two decades, and has progressively grown and expanded over
that time.10 When considered with the parallel creation of specialized complex litigation dockets, most
(6) Business transactions involving or arising out of dealings with commercial
banks
and other
financial
institutions;
(7) Internal
affairs
of business
organizations;
(8) Malpractice by accountants or actuaries, and legal malpractice arising out of
representation in commercial matters;
(9) Environmental insurance coverage;
(10) Commercial insurance coverage (e.g. directors and officers, errors and
omissions, and business interruption coverage);
(11) Dissolution of corporations, partnerships, limited liability companies,
limited liability partnerships and joint ventures -- without consideration of the
monetary threshold; and
(12) Applications to stay or compel arbitration and affirm or disaffirm
arbitration awards and related injunctive relief pursuant to CPLR Article 75
involving any of the foregoing enumerated commercial issues -- without
consideration of the monetary threshold.
New York has also included jurisdictional minimum amounts in controversy, depending on the
particular Supreme Court venue, ranging from $25,000 to $500,000. The $500,000 applies only in New
York County. This sum was only recently raised from $150,000 to $500,000, as a gate keeping
mechanism on the number of cases that can be heard, and managed, in Manhattan’s Commercial
Division. http://www.nycourts.gov/courts/comdiv/PDFs/JPrudentiAO13014.pdf.
North Carolina’s seminal business court, established in 1995, has a somewhat different
jurisdictional model. North Carolina has (1) a more limited list of disputes falling within the Business
Court’s mandatory jurisdiction, see N.C. Gen. Stat. § 7A-45.4 (which includes 7 specific areas, corporate
governance and internal corporate affairs, securities law, antitrust law, state trademark or unfair
competition claims (with some exceptions to the later), intellectual property, internet/electric
commerce/biotechnology, and tax law); and, unlike New York, (2) a subjective component, permitting
North Carolina’s Chief Justice to assign complex business cases or exceptional cases to the Business
Court, with various Superior Court Judges designated to make recommendations to the Chief Justice for
such assignments. See North Carolina Rule of Practice and Procedure for the Superior and District Courts
2.1. Nationally, Business Courts are roughly split in applying these two basic models. See generally
Business Court History and Annual Review (2004 to 2014).
9
In some jurisdictions, where it was not otherwise the case, assignment of a single judge to hear a case
from start to finish was a critical process point in creating business and complex courts; with judicial
subject matter specialization being a separate factor.
In another step exemplifying specialization of decision makers, New York County’s Commercial
Division recently assigned a specific Commercial Division Judge, the Honorable Charles E. Ramos, to
handle all international commercial arbitration cases before the New York County Commercial Division.
http://www.nycourts.gov/COURTS/1jd/supctmanh/AO-CIAM-caj.pdf.
10
See, e.g., Lee Applebaum, The Steady Growth of Business Courts, Future Trends in State Courts 2011,
National Center for State Courts, available at
6
prominently in California, there are now 26 states that have some form of specialized business or
complex docket statewide, in multiple jurisdictions within a state, or in larger individual cities or counties
within a state.11
Looked at in functional terms, there are venues of general jurisdiction that regularly hear
commercial and/or business disputes, and may be considered de facto business courts, e.g., Bankruptcy
Courts12 and the United States Court of Appeals for the Federal Circuit; or even individual courts whose
venue coincides with a locus of business or commercial disputes, such as the Delaware Court of
Chancery or the U.S. District Court for the Southern District of New York.13
http://www.ncsc.org/sitecore/content/microsites/future-trends-2011/home/Specialized-CourtsServices/~/media/Microsites/Files/Future%20Trends/Author%20PDFs/Applebaum.ashx.
11
There currently are functioning Business Courts or Complex Litigation Court of some type in cities,
counties, regions, or statewide in: (1) Alabama; (2) Colorado (4rth District); (3) Delaware; (4) Florida; (5)
Georgia; (6) Illinois; (7) Maine; (8) Maryland; (9) Massachusetts; (10) Nevada; (11) New Hampshire;
(12) New Jersey; (13) New York; (14) North Carolina; (15) Ohio; (16) Pennsylvania (Philadelphia and
Pittsburgh); (17) Rhode Island; (18) South Carolina; (19) Michigan; (20) West Virginia; (21) Iowa; (22)
Arizona; (23) California; (24) Connecticut; (25) Oregon; and (26) Minnesota. This does not include
specialized tracks within a court system, where the subset of business or complex cases are not assigned
to a particular subset of judges, but are put on different case management tracks. See generally ABA
Section of Business Law’s Subcommittee on Business Court’s website, available at
http://apps.americanbar.org/dch/committee.cfm?com=CL150011.
12
Judge Posner describes the bankruptcy courts as the only specialized federal court or court-like
administrative agency that, as a whole, has not been a “flop.” Reflections on Judging, footnote 6 above,
at 94. On the evolution of these non-Article III courts, which at times are very much like Article III courts,
see, e.g., Ronald S. Gellert, The Untold Story of the Bankruptcy Courts A Positive Resource For Business,
Business
Law
Today,
Vol.
17,
No.
4
(March/April 2008),
available
at
http://apps.americanbar.org/buslaw/blt/2008-03-04/gellert.shtml. Modern Bankruptcy Courts, established
in 1984, are forums for a wide range of business and commercial disputes. “[B]ankruptcy judges must
possess a significant amount of business judgment and knowledge to be able to look at issues from both
the debtor’s and creditors’ point of view. …. [and] bankruptcy courts are presented with practically every
issue that a business entity may encounter, from toxic tort cases to intellectual property issues….” Id. The
Bankruptcy judge must be adept at dealing with issues concerning, e.g., secured lenders, shareholders,
bondholders, landlords, equipment lessors, insurers, subcontractors. Id.
13
In observing that the Southern District encompasses Wall Street and a higher than usual rate of
commercial litigation, Judge Rakoff, footnote 6 above, makes the observation that the Delaware Court of
Chancery, like the Southern District, is actually a court of general jurisdiction that hears an outsized
number of business cases because of its location. See also Business Court History, footnote 8 above, at
216-218 & nn. 596-597 (observing the expanse of the Court of Chancery’s jurisdiction, and the high
number of business cases that result in its being deemed the pre-eminent business court; but noting that
Chancery’s proudest accomplishment, per Chief Justice Rehnquist, was Chancellor Colin Seitz’s 1952
opinion holding that the African American children of Delaware suffered from state-imposed segregation
7
ADR forums express even greater specialization, given greater flexibility, both in terms of subject
matter and process. As to the former, the American Arbitration Association (“AAA”) identifies five
different areas of expertise for its arbitration and mediation services, including “Commercial” and
“Construction, Real Estate and Environmental” as two of these areas of its ADR specialization.14 Within
“Commercial,” sixteen additional areas of sub-specialization are identified. The AAA’s National Roster
of Arbitrators and Mediators “consists of highly accomplished and respected experts from the legal and
business communities who offer diverse experiences across a wide range of fields. Former federal and
state judges, attorneys with exceptional subject-matter expertise, and business owners who understand the
essence of the dispute are trained in a comprehensive program by the AAA to manage the dispute
resolution process with fairness and skill, and an eye towards time- and cost-efficiency.”15 Under its
Business/Commercial areas of expertise, JAMS includes 15 identifiable sub-areas of specialization.16
The International Institute for Conflict Prevention & Resolution (“CPR”) has “specialty panels of
neutrals” in more than 20 practice areas,17 including, among others, a Banking, Accounting & Financial
Services Panel, comprised of “neutrals with experience in resolving complex disputes arising between
in schools, being the only opinion in the group of cases heard in Brown v. Board of Education to be
affirmed).
On the other hand, at least one author asserts the Delaware Court of Chancery is so highly
specialized in business disputes that the creation of competing business and commercial courts will
reduce the overall level of specialization for those cases. “A recent empirical study suggests that Delaware
has been finding it more difficult to maintain its role as the primary forum for public corporate law cases.
If this trend persists, the long-term result might be a decline in judicial specialization. To be sure, there is
an opposing complementary trend as well. Over the past decade, other states have been rushing to
establish special commerce courts or commercial divisions. However, having many business courts, each
of which hears some fraction of the United States’ major corporate law cases, still means a decline in
specialization if the alternative is one court that hears all (or almost all) of the major cases. Thus, if the
Chancery Court keeps losing litigants to courts in other states, the overall result is likely to be a decrease
in judicial specialization.” Jens Dammann, The Mandatory Law Puzzle: Redefining American
Exceptionalism in Corporate Law, 65 Hastings L.J. 441, 449-450 (2014) (footnotes omitted).
14
American Arbitration Association,
http://www.adr.org/aaa/faces/aoe?_afrLoop=3209601956124504&_afrWindowMode=0&_afrWindowId
=xclp1yafs_292#%40%3F_afrWindowId%3Dxclp1yafs_292%26_afrLoop%3D3209601956124504%2
6_afrWindowMode%3D0%26_adf.ctrl-state%3Dxclp1yafs_332.
15
Id.,
http://www.adr.org/aaa/faces/arbitratorsmediators?_afrLoop=3209799158187344&_afrWindowMode=0
&_afrWindowId=xclp1yafs_329#%40%3F_afrWindowId%3Dxclp1yafs_329%26_afrLoop%3D32097
99158187344%26_afrWindowMode%3D0%26_adf.ctrl-state%3Dxclp1yafs_369.
16
JAMS, http://www.jamsadr.com/files/Uploads/Documents/Expertise-Areas.pdf.
17
CPR, http://www.cpradr.org/FileaCase/CPRsNeutrals/SpecialtyPanelsofNeutrals.aspx.
8
banking, accounting and financial services institutions[, includ[ing] attorneys with extensive financial
background and expertise in resolving disputes which arise in the context of real estate, accounting,
mergers & acquisitions, hedge funds and other types of corporate deals”; a BioTech Panel, that “consists
of neutrals expert in biotechnology matters,” and “includes neutrals with experience in intellectual
property related to biotechnology and related fields”; a Certified Public Accountants Panel comprised of
“US certified public accountants with experience in complex commercial matters”; a Construction Panel
that “includes attorneys and other construction professionals available to resolve construction disputes
through arbitration, mediation and dispute review boards”; an E-Discovery Panel comprised of “attorneys
and e-discovery professionals who have significant experience in e-discovery matters, including
knowledge of data retention and retrieval systems, corporate retention policies and case law in the field”;
an Insurance Panel with neutrals “uniquely qualified to handle all types of complex insurance and
reinsurance disputes among insurers and/or reinsurers”; and an Insurer-Policy Holder Coverage Panel
with “panelists are expert in resolving coverage disputes which can arise between insurers and corporate
policy holders.”18
CPR also provides specialty panels for Arbitration Appeals consisting of “U.S. federal and state
appellate or senior judges who are available to decide appeals in accordance with contractual provisions
providing for appellate arbitral review of arbitral awards such as CPR’s Appellate Arbitration Procedure”;
a General Counsel Panel made up of current or former General Counsel at Fortune 500 Companies; and a
Judicial Panel consisting entirely of “former U.S. federal judges or judges from State courts or foreign
country
jurisdictions
with
years
of
experience
18
adjudicating
all
kinds
of
disputes.”19
Id. This last panel offers just one example of common subject matter specialization with Business
Courts, as a number of business courts, e.g. Philadelphia, Florida’s Ninth Judicial Circuit, and New York
likewise identify disputes over commercial insurance policies as within their specialized jurisdiction.
19
Id. The AAA similarly has Optional Appellate Arbitration Rules, for “high-level review of arbitral
awards while remaining consistent with the objective of an expedited, cost effective and just appellate
arbitral process.” http://go.adr.org/AppellateRules.
As will be discussed below, the idea of arbitration appeals seemingly runs into conflict with the
fundamental concept that arbitration is to be a one shot deal, where efficiency and finality are the reigning
principles. Further, the availability of a specialty panel made up of judges raises some interesting points.
It comports with Professor Shestowsky’s recent research, also discussed below, that litigants may place
greater trust in judges than in arbitrators. Further, it is consistent with Judge Posner’s position, discussed
in footnote 6 above, that the ability to judge is a specialty in itself.
I clerked for Judge Bernard Balick, who then served on the Superior Court of Delaware (later
becoming a Vice-Chancellor on the Court of Chancery). He sometimes told me that a judge needed
“seykhel,” a Yiddish word which I understood to mean good judgment; and it was obvious to me and
9
Internationally, there is similar specialization of courts and ADR processes, and competition to
attract litigation.20 London has made itself a central venue, with specialized business and commercial
courts of all kinds, even constructing a modern building to house these services; as well as providing a
rich ADR environment.21 The London Courts include, among others, the Admiralty, Commercial and
London Mercantile Court,22 the Technology and Construction Court,23 the Intellectual Property
others around him that he had a greater portion of seykhel than most. I never took his point as some sort
of tautology -- that “of course a judge had to have judgment” -- but the way he said it meant that this was
the quality that really made a judge a judge. There is no doubt that the ability to exercise seykhel as a
judge, or as a neutral, lawyer, or litigant, is very special indeed.
For a short but interesting discussion of seykhel, see George E. Johnson, The (Jewish) Sixth
Sense, http://www.momentmag.com/jewish-word-sechel/. For some thoughts on applied seykhel in
judges and mediators, see Lee Applebaum, Solomon and the Baby: Lessons in Mediation. This short
article was included in materials for Judge Pro Tempore training for the Court of Common Pleas of
Philadelphia’s Commerce Case Management Program, presented by the Pennsylvania Bar Institute and
the Philadelphia Bar Association’s Business Litigation Committee on September 20, 2013,
http://www.finemanlawfirm.com/tasks/sites/fineman/assets/image/article%20(00696897).PDF.
20
Laura Philomin, Singapore to remake itself as Asia’s legal hub with new commercial court, Reuters
(February 12, 2014), http://in.reuters.com/article/2014/02/11/singapore-law-idINDEEA1A0JC20140211
(“Singapore’s ambitious plans for an international commercial court are set to expand upon its success in
arbitration, helping it siphon away more legal business from rivals like London and Hong Kong.”).
21
https://www.justice.gov.uk/courts/rcj-rolls-building. London’s attraction includes the availability of
interim remedies, less onerous discovery, active case management, and that trials are before judges and
not juries, where English judges have “extensive experience dealing with complex issues of fact or law in
the commercial context[, and] are familiar with the jargon of the business world, the principles of freedom
to contract, and the general makeup of commercial transactions[, and] [t]he English legal system benefits
from the experience of centuries of international commercial transactions, and has evolved, in a stable
manner over time, adapting case law to the needs of the businesses community.” Ben Holland, Why
London Courts are So Popular with Foreign Parties, Law360 (Feb. 28, 2014),
http://www.law360.com/articles/511434/why-london-courts-are-so-popular-with-foreign-parties.
As to ADR, “[t]he concentration of legal professionals means that London is also home to a range
of experienced mediators and adjudicators for alternative dispute resolution, as well as arbitrators. It is
also home to the Chartered Institute of Arbitrators with 12,000 members worldwide and to the London
Court of International Arbitration. The abundance of legal talent contributes to London’s reputation not
only as a premier litigation forum, but also as a premier arbitration and ADR forum.” Id. However, as
with complaints in America, cost has been an issue. “Fighting a case in London comes at a cost. Indeed,
London has been called the most expensive forum in the world. In April 2013, the government introduced
measures to stem this. The aim of the so-called ‘Jackson reforms’ is to ensure better cost management and
to reduce overall costs. To meet this aim, lawyers are now required to submit detailed cost budgets at the
outset of a matter.” Id.
22
https://www.justice.gov.uk/courts/rcj-rolls-building/admiralty-commercial-mercantile-courts.
23
https://www.justice.gov.uk/courts/rcj-rolls-building/technology-and-construction-court.
10
Enterprise Court,24 and the Bankruptcy and Companies Court.25 Hong Kong has a Construction and
Arbitration List, that “was established to facilitate the disposal of specialized classes of civil action,”26 and
a Commercial List.27 Well beyond these two examples, there are a considerable number of other
specialized commercial courts and ADR forums across the world that have increased in number over
recent years.28
SELECTING A DISPUTE RESOLUTION PROCESS-VENUE
Many factors go into choosing a venue for dispute resolution, e.g.: Cost. Efficiency. Timeliness.
Desire for confidentiality. Desire to send a public message. Reliability of outcome. The degree of control
that the parties wish to retain in the decision making process. The reputation of the forum, and the judges
or neutrals in that forum.
These are factors chiefly taken from the disputants’ perspective. Ideally, the lawyers and the
dispute resolution systems, whether private mediators, arbitrators, or the courts, all serve the parties and/or
the general public interest in resolving disputes with the least savagery possible. Of course, lawyers, court
systems, and ADR providers have a tremendous stake in, interest in, and input into what form of dispute
resolution the parties pursue. A court system may, e.g., have an overwhelming case load that drives
judges occasionally to move cases in a manner that may not seem to benefit the individual litigants in a
particular case, but which allows the system to survive and function so that it can provide those same
litigants with reasonable services to resolve their disputes at all. Still, lawyers, neutrals, and judges work
in service to the parties, the system of dispute resolution should give great consideration to what is best for
the parties, and the dispute resolution venue chosen should be chosen by the disputants themselves, with
the best advice counsel can give them.
24
https://www.justice.gov.uk/courts/rcj-rolls-building/intellectual-property-enterprise-court.
https://www.justice.gov.uk/courts/rcj-rolls-building/bankruptcy-and-companies-court.
26
http://legalref.judiciary.gov.hk/lrs/common/pd/pdcontent.jsp?pdn=PD6.1.htm&lang=EN.
27
http://legalref.judiciary.gov.hk/doc/prac_dir/html/PD.htm.
28
See, e.g., Ralph Peeples and Hanne Nyheim, Beyond the Board, An International Perspective on
Business Courts, Business Law Today (March/April 2008), available at
http://apps.americanbar.org/buslaw/blt/2008-03-04/nyheim.shtml; Lee Applebaum and Cory Manning,
Specialized Business and Commercial Courts Around the Globe, A Summary World View (Business Law
Section Spring Meeting 2009), available at
http://apps.americanbar.org/abanet/common/login/securedarea.cfm?areaType=premium&role=cl&url=/b
uslaw/mo/premium-cl/programs/spr09/1311/1311.pdf.
25
11
In that regard, Professor Donna Shestowsky’s recent article, The Psychology of Procedural
Preference: How Litigants Evaluate Legal Procedures Ex Ante,29 generally concludes that the litigants
(including individuals, companies, groups, and organizations)30 show preferences for judge trials,
mediation, and negotiations with lawyers and clients present,31 at about the same level of preference.32
Binding arbitration is among the lesser preferred procedures,33 as is non-binding arbitration.34 That
litigants seem to prefer mediation more than non-binding arbitration leads to the suggestion that courts reevaluate their mandatory ADR programs, if those programs solely involve mandatory non-binding
arbitration or a mix of mandatory non-binding arbitration and some form of mediation.35 Lawyers
negotiating without the parties present also fell into the lesser preferred spectrum, but businesses are more
likely to prefer allowing lawyers to negotiate without clients.36
29
99 Iowa L. Rev. 637 (January 2014) (“Shestowsky”). As her title suggests, Professor Shestowsky’s
study is based on information provided by civil litigants shortly after their cases have been filed. Id. at
642.
30
The litigants surveyed were persons who were involved as individuals or were representing a company,
organization, or group. Id. at 655, 659. Professor Shestowsky uses the word “litigants” for those
surveyed, and that will be followed when discussing her work.
31
The litigants were surveyed as to how attractive they found 8 potential legal procedures: “(1) Attorneys
Negotiate without Clients, (2) Attorneys Negotiate with Clients Present, (3) Mediation, (4) Judge Decides
without Trial, (5) Jury Trial, (6) Judge Trial, (7) Binding Arbitration, and (8) Non-Binding Arbitration.”
Id. at 656.
32
Id. at 663-664, 676-677.
33
It is actually the least preferred in this study. Id. at 664, 677. However, “[t]his finding should be
interpreted in light of the fact that the sample composed of cases filed in court, and therefore presumably
not subject to pre-dispute arbitration agreements which normally direct disputes to this type of arbitration.
Thus, the data reflect litigants’ expectations regarding post-dispute election of Binding Arbitration, and
those expectations were not high.” Id. at 677. The study’s very methodology may have eliminated parties
favoring arbitration because those parties chose arbitration through pre-dispute arbitration agreements and
never hit the court system, thus falling outside the study’s survey pool. There is also the possibility,
however, that the litigants in the study hit the court system because they consciously chose against
arbitration, either in choosing not to enter a pre-dispute arbitration agreement, or in not agreeing to postdispute arbitration rather than going to court. It could also be that they simply did not think of using
arbitration. Absent further study, these questions remain unanswered.
34
Non-binding arbitration seemed to fare better than binding arbitration; however, parties who had been
involved in binding arbitration liked it more than those who had not; companies seemed not to favor it as
much as individuals; and litigants opposing companies preferred binding arbitration over litigants who
opposed individuals. Id. at 680.
35
Id. at 675.
36
Id. at 670.
12
The more litigants have a positive attitude about the court where the case is filed, the more they
preferred judge trials or decisions by judges without trial.37 The less favorably they viewed the court, the
less they liked these options. Professor Shestowsky adduced prior research showing that perception of
institutional legitimacy is tied to both “preference for, and acceptance of, court decisions.”38 As discussed
below, lack of familiarity or information about arbitration may have some impact on a similar level of
acceptance; but anything affecting institutional trust in arbitration is something parties will weigh in
choosing an arbitral or court for dispute resolution by means of litigation.
Professor Shestowsky’s results were treated with more subtlety, explanation, critique, and
qualification than I am giving them here; and they are not uniform throughout the populations studied.
However, it provides interesting points for reflection to consider that of the three seemingly most
preferred processes, two involve the highest level of control by the parties in the ultimate decision making
(mediation and negotiation with lawyers and clients present); and the other puts the parties’ fate entirely in
another’s hands, but only if that “other” is a judge, rather than an arbitrator or juror.
Assuming that the parties want a favorable outcome for themselves, this indicates that some
parties believe that a judge can create outcomes that provide a similar degree of trust and comfort as can
be found in the most favored facilitative processes, where the parties can exert some direct control on the
outcome. Thus, some parties are willing to accept an outcome over which they have no direct control
(including the ability to walk away), if that outcome will be based upon qualities a judge is believed to
possess, and the kind of venue in which the judge exercises those qualities. These judicial qualities and/or
court forum appear to create a sense of reliability and trust which allows for surrender of control.
The following are likely among these qualities and confidence building factors: that a judge will
base his or her decision on a set of legal standards, and is constrained by oath of office to do so; that a
judge will use reason (judgment) in coming to a resolution, and will not rely upon less rational forms of
thought that other types of decision makers may use; that a judge will have experience in the law and in
making reasoned judgments based on existing legal standards and guidelines; that the judge may have
expertise or experience in the subject matter of the dispute (an obvious consideration, e.g., in Delaware’s
Chancery Court in business disputes); and possibly that the judge will have to explain the decision
publicly, via a written opinion, which may further constrain the judge’s adherence to precedent and
37
38
Id. at 686.
Id.
13
rational decision making in itself, and because of the potential for appellate review if the judge goes
astray.
To the extent that arbitration was not perceived in the same way as judicial decision making
among the same populations, then there is still work to be done in that process.39 One factor that may
undermine the perception of arbitration, for those who have not participated, is that it is a private process
and lacks familiarity. Judges and courts are part of our history, and are familiar in daily life via the news
media, literature, television, and the movies. Arbitrators and arbitration are simply not as familiar in
public awareness, or as part of accepted culture. The Shestowsky study did appear to show that arbitration
was more acceptable to those who had previously used, and possibly demystified, the process; with a
significant caveat being that companies did not like binding arbitration as much as individuals, possibly
because larger commercial arbitrations became more like litigation in courts.40
That being said, one of the original reasons for the creation of specialized business courts was to
meet competition from commercial arbitration.41 The idea was that master dockets, assigning a
multiplicity of judges to a single case over a period of years for different purposes, could provide neither
39
There is considerable criticism of arbitration for taking on the accoutrements and expenses of litigation,
and that it remains an unfulfilled promise on these grounds. ADR in Business Courts, footnote 1 above, at
49-51 (citing and quoting, e.g., Thomas J. Stipanowich, Arbitration and Choice: Taking Charge of the
“New Litigation,” 7 DePaul Bus. & Com. L.J. 383 (2009)). Arbitration providers are certainly aware of
the issue, and recognize the issue must be addressed. For example, CPR’s home page, as visited on
March 1, 2014, states front and center, under “Major Initiatives”:
“NEW Administered Arbitration Rules
CPR’s Administered Arbitration Rules offer the greatest degree of flexibility and
control available, while minimizing overall costs.
21st Century Pledge - The Future of ADR
Join Members of Fortune 500's elite who have pledged to create sustainable dispute
management resolution systems to reduce costs and boost their global competitive
edge. Become a founding signatory today!
CPR, http://www.cpradr.org/default.aspx. These cost and efficiency issues are consideration for litigants
who must choose where to resolve their disputes. The present issue, however, is the parties’ perception of,
and trust in, arbitrators as people who will make fair and informed decisions, whatever the arbitration
mechanics.
40
Professor Shestowsky observes that “Binding Arbitration was the only procedure for which attraction
was significantly related to past litigation experience.” Shestowsky, footnote 1 above, at 680. Her surveys
found that “companies did not like Binding Arbitration as much as individual litigants did,” citing the
possibility that big commercial case litigation in arbitration diminishes satisfaction with arbitration, and
the desire to use arbitration as a means of dispute resolution. Id. See footnote 38 above.
41
Business Courts History, footnote 8 above, at 152, 184.
14
the efficiency needed to resolve commercial cases promptly, nor a body of informed decision makers
who understood these kinds of disputes. Commercial arbitration provided an alternative to previously
disgruntled litigants; more so, if those parties could not get into federal court. Thus, per this argument,
state trial courts were the dark mysteries to business litigants, filled with volatile and unpredictable risks.
Current complaints that arbitration is becoming too much like court based litigation may arguably
undermine the efficiency factor favoring the concept of arbitration,42 but this should not affect the trust in
the arbitrator’s expertise or decision making among those disputants looking for expert decision makers.
Thus, if businesses have greater concerns with arbitrators as decision makers in business to business
disputes, as compared to judges, these are issues that arbitration forums need to identify and address, if
possible.43 Two potential issues with an arbitrator’s decision making, include an arbitration award’s lack
of explanation and the absence of any meaningful review.
Despite the express, or presumed, desire for speed and less formality, business arbitration litigants
may be troubled by doubt in the absence of any requirement for a reasoned opinion upon the arbitrator’s
making an award; especially after the fact, if they believe they should have won. The parties can agree to
provide for arbitrators to write opinions, and eliminate that concern. In some cases, however, that is not
the solution to curing doubt. A disgruntled party may only find itself more upset after getting the
arbitrator’s explanation, if it believes that the decision is grossly incorrect, but realizes that there is no
meaningful avenue to challenge the opinion because there was no manifest disregard of the law or other
transgression under 9 U.S.C. § 10 of the Federal Arbitration Act (“FAA”). Adding to this potential
dismay, at least three federal circuits have concluded the Supreme Court has eliminated even the
“manifest disregard of the law” challenge from the disgruntled party’s limited arsenal to challenge
arbitration awards.44
This creates a tension for the parties choosing arbitration. An arbitration award may be
objectively incorrect or unreasonable; the result of a clear error of law or a misinterpretation of the facts.
The loser may have a legitimate beef with the quality of the award. Yet, there could be no legitimate basis
42
See footnote 39 above.
See footnote 19 above.
44
See Bellantuono v. ICAP Secs. USA, LLC, No. 12-4253, 2014 U.S. App. LEXIS 1859, *12 n.3 (3d Cir.
Jan. 30, 2014) (“The Second, Fourth and Ninth Circuits have held that manifest disregard of the law
survived Hall Street [Assocs. LLC v. Mattel, Inc., 552 U.S. 576, 586-87 (2008)] because an arbitrator
exceeds his powers under 9 U.S.C. § 10(a)(4) by manifestly disregarding the law. … Conversely, the
Fifth, Eighth and Eleventh Circuits have held that manifest disregard of the law is no longer a valid
ground for vacatur in light of Hall Street.”).
43
15
under the FAA to challenge that arbitration award. Under the applicable law, it is the losing party that
must swallow the reality that its challenging the arbitrator’s incorrect decision is the conduct that could be
deemed meritless, not the poor decision; because the permissible bases for challenge only include
extraordinary circumstances which typically do not occur. This apparent inversion is justified, as
envisioned under the FAA, because arbitration is designed as a one shot deal where the parties have
agreed to risk an unfavorable, or even unreasonable, outcome because they want a fast and final
resolution. Thus, in agreeing to arbitration in the first instance, the parties knowingly took the risk of an
inequitable result and have to live with the consequences; both as a matter of personal responsibility and
public policy.
The number of appeals from arbitration decisions indicates that parties choosing arbitration are
not simply accepting the notion that the speed and finality of arbitration are ends in themselves, for better
or worse. A Lexis search, “arbitration /10 (award or decision) /10 (vacat! or appeal!) /75 "manifest!
disregard!" and date (aft 2003)” yielded 1,449 results in the federal and state court data bases.45 Further,
motions to vacate arbitration awards are sufficiently common that courts have taken notice. In B.L.
Harbert International, LLC v. Hercules Steel Co.,46 the Court stated: “The laudatory goals of the FAA
will be achieved only to the extent that courts ensure arbitration is an alternative to litigation, not an
additional layer in a protracted contest. If we permit parties who lose in arbitration to freely relitigate their
cases in court, arbitration will do nothing to reduce congestion in the judicial system; dispute resolution
will be slower instead of faster; and reaching a final decision will cost more instead of less. This case is a
good example of the poor loser problem and it provides us with an opportunity to discuss a potential
solution.”47
The solution offered: “Courts cannot prevent parties from trying to convert arbitration losses into
court victories, but it may be that we can and should insist that if a party on the short end of an arbitration
award attacks that award in court without any real legal basis for doing so, that party should pay
sanctions. A realistic threat of sanctions may discourage baseless litigation over arbitration awards and
help fulfill the purposes of the pro-arbitration policy contained in the FAA. It is an idea worth
45
I confess to not checking all of these citations, but did look at a sampling that indicates a significant
portion are likely on point. Further, a Lexis search will not include every instance in state and federal
courts over the last ten years where an arbitration award has been challenged.
46
441 F.3d 905 (11th Cir. 2006), abrogated on other grounds by Frazier v. CitiFinancial Corp., LLC, 604
F.3d 1313 (11th Cir. 2010).
47
Id. at 907.
16
considering.”48 The Tenth Circuit favorably quoted Harbert, in Lewis v. Circuit City Stores, Inc.49:
“When a party who loses an arbitration award assumes a never-say-die attitude and drags the dispute
through the court system without an objectively reasonable belief it will prevail, the promise of arbitration
is broken. Arbitration’s allure is dependent upon the arbitrator being the last decision maker in all but the
most unusual cases. The more cases there are, like this one, in which the arbitrator is only the first stop
along the way, the less arbitration there will be. If arbitration is to be a meaningful alternative to litigation,
the parties must be able to trust that the arbitrator’s decision will be honored sooner instead of later.”
That parties exist who have to be beaten away from the courts with the stick of sanctions, reveals
at least some dissatisfaction among a cognizable population of those using arbitration. These are parties
who do not “honor” the arbitrator’s decisions in a more fundamental sense. For them, the efficiency
benefits do not hold as much value at the end of the day, as does confidence in the decision making
process. Moreover, even though they agreed to accept the result as final, it is possible that these parties
will not likely want to run that risk again with future arbitrations; absent something that restores their
confidence in the process.50
For those who chose arbitration, but have buyer’s remorse and want an appeal, there is no cure
absent some sort of prior agreement to an appeal. This would have to occur before more arbitrators, as
judges will be constrained by the Federal Arbitration Act, 9 U.S.C. § 10 in reviewing arbitration awards.51
48
Id. at 913-914.
500 F.3d 1140, 1153 (10th Cir. 2007).
50
The 11th Circuit’s language appears to address situations where appeals are the result of sour grapes or
efforts to delay enforcement of awards. Sanctions for dilatory motives in seeking to vacate arbitration
awards are considered particularly appropriate by some courts. Universitas Educ., LLC v. Nova Group,
Inc., 11 Civ. 1590 (LTS)(HBP),11 Civ. 8726 (LTS)(HBP), 2013 U.S. Dist. LEXIS 142901, **34-36
(S.D.N.Y. May 21, 2013), Report and Recommendation of Magistrate Judge Adopted in, 2013 U.S. Dist.
LEXIS 142479 (S.D.N.Y. Sept. 30, 2013). The FAA principles recited do not expressly address the
scenario where there may have been a bad decision, and a frustrated party is trying to find some means to
right it. While a court may be sympathetic, if there is no legitimate basis under the FAA to challenge the
award, then it can still look at the loser’s motion to vacate as frivolous. On the other hand, the court may
not be sympathetic at all, and may see the challenge as merely dilatory because it is taken contrary to the
putative purposes and goals of arbitration; and hypocritical, because the losing party had agreed to accept
the arbitrator’s decision as final – until it lost.
51
See footnote 19 above. In describing its Optional Appellate Arbitration Rules, the AAA states:
“Traditionally, courts use narrowly-defined statutory grounds to set aside an arbitration award.
Alternatively, these new rules provide for an appeal within the arbitration process. The appellate arbitral
panel applies a standard of review more expansive than that allowed by existing federal and state statutes
to vacate an award. In this regard, the optional rules were developed for the types of large, complex cases
49
17
Such appeals would make arbitration even more “court-like”. This is not likely an adequate solution to
lack of confidence problem, and begins to take on the trappings of a true parallel court system.
Rather, at least for those parties who are not seeking to vacate fair awards solely to delay the
inevitable, the solution is to raise disputants’ confidence in the trustworthiness and reliability of the
original arbitrators’ decisions, so that the parties can live with the consequences and move on with their
business.52 As discussed below, no arbitrator, judge, or mediator will be removed from all doubt and
skepticism in all cases; and there is never going to be universal contentment and satisfaction with any
dispute resolution process. However, certain qualities and actions by judges, arbitrators, and other
neutrals, may create greater confidence in their decision making and facilitation.
THE QUALITIES OF A NEUTRAL OR JUDGE REMAIN A KEY FOR THE DISPUTANTS
Ten years ago, I wrote: “Ultimately, a successful business court depends in each instance on the
actual judge hearing business court cases. Judges presented daily with a field of law in which to cultivate
their understanding, knowledge, and ability are more likely to come to deeper understandings about the
inner workings of the legal principles they face; the patterns that may reveal themselves in the conduct of
business cases; and the patterns of thinking and behavior that may appear in parties and counsel. The
judge without that experience, faced with business disputes, typically may have to rely upon a less
developed understanding of these factors in rendering decisions.”53 As set forth above, not all judges,54
among others, would agree. However, whether, judge, mediator, arbitrator, or neutral of another kind,
there is likely agreement that certain qualities and actions make for better decision making or facilitating
dispute resolution; and for evoking the respect of disputants and their lawyers, with concomitant trust
where the parties think the ability to appeal is particularly important.” (Emphasis in original).
http://go.adr.org/AppellateRules.
52
Other issues affecting disputants’ perception of arbitrators may include, among other factors: a belief
that arbitrators are not hearing as many cases as judges in developing their “judging” expertise as well as
their subject matter expertise; high or unpredictable arbitrator fees coloring the party’s perception of the
arbitrator, whereas the judge is paid nothing by the parties, giving a sense of purer service to justice; or an
arbitration’s less dramatic, and less symbolic, setting where everyone sits around a table in a conference
room, dressed like lawyers or businesspersons, compared to the courtroom with a judge in black robe
seated behind a bench, on a chair which is larger and raised above everyone else’s chair, in a room with
the trappings of higher authority such as a staff serving the judge’s requests and directions, prominent
court seals, and flags.
53
Business Court History, footnote 8 above, at 228.
54
See footnote 6 above.
18
arising in the process as a result of that respect. The discussion below gives thoughts on some of these
qualities that can translate across all processes and venues.
Learned Hand, in his great eulogy of Cardozo, described the judicial ideal as: “A wise man ...
[who] can weigh the conflicting factors of his problem without always finding himself in one scale or the
other.”55 This is the kind of judge parties preferring judicial decision making want, and hope may exist.
Those choosing mediation would want a person with similar qualities, whose hands stay off the scales in
treating the parties with equal respect. Such a mediator can readily restrain himself or herself from
insinuating their biases and ego into the resolution process.
The lived reality, or perception thereof, may be far different at times. Shortly before his death,
after three decades on the Supreme Court, Chief Justice John Marshall wrote: “Though the hope of
deciding causes to the mutual satisfaction of the parties would be chimerical, that of convincing them that
the case has been fully and fairly considered, that due attention has been given to the arguments of
counsel, and that the best judgment of the Court has been exercised on the case, may be sometimes
indulged. Even this is not always attainable. In the excitement produced by ardent controversy, gentlemen
view the same object through such different media, that minds not unfrequently receive therefrom
precisely opposite impressions. The Court, however, must see with its own eyes, and exercise its own
judgment, guided by its own reason.”56 Marshall recognized the inevitability of at least some party
skepticism in outcomes, but suggested that a judge cannot be set off track by such doubts, and must
continue to rely on his or her own inner compass.
In discussing the skeptical public attitude, Oliver Wendell Holmes described his personal
experience on the Supreme Court in similar, but more strident, language: “Of course we [the Supreme
Court justices] are not excepted [from public skepticism] and have not escaped. Doubts are expressed that
go to our very being. Not only are we told that when [Chief Justice] Marshall pronounced an Act of
Congress unconstitutional he usurped a power that the Constitution did not give, but we are told that we
55
Learned Hand, The Spirit of Liberty 132 (1953). Hand’s eulogy of Cardozo was also published jointly,
under the title “Mr. Justice Cardozo,” in 39 Columbia L. Rev. 9 (1939), 12 Harvard L. Rev. 361 (1939);
48 Yale L. J. 379 (1939). As to policy laced cases, however, Hand, found the problem of judges inserting
their own political values into their legal opinions insurmountable. Late in his long life, after 49 years on
the bench, Hand gave a three day course of lectures, subsequently published as The Bill of Rights,
reiterating his lifelong concern that judges could not escape personal biases when forced to make value
judgments in legal areas that mixed with legislative decisions. In the context of such “political” decisions,
the fact that the judge was actually disinterested in a result would not make a difference.
56
Mitchel v. United States, 34 U.S. 711 (1835).
19
are the representatives of a class — a tool of the money power. I get letters, not always anonymous,
intimating that we are corrupt. Well gentlemen, I admit that it makes my heart ache. It is very painful,
when one spends all the energies of one’s soul in trying to do good work, with no thought but that of
solving a problem according to the rules by which one is bound, to know that many see sinister motives
and would be glad of evidence that one was consciously bad. But we must take such things
philosophically and try to see what we can learn from hatred and distrust and whether behind them there
may not be some germ of inarticulate truth.”57 Like Marshall, Holmes tells judges not to despair; but he
also recognizes a need to stretch himself, and to also consider the parties’ expressions of doubt as
potentially containing some lesson from which a judge might learn and evolve.
Holmes’ last two lines in the quoted passage are critical in a party (or lawyer) trying to evaluate a
judge’s decisions, or a neutral’s service. As Holmes suggests, we should strip the dirt off the media of
perception, and try to see if there is anything worthwhile that can advance our understanding. On the one
hand, can the judge learn to be a better judge; and on the other, is there a way for parties to understand,
and appreciate, judges that gets past skepticism and increases trust and respect? Holmes sets a standard:
He describes right action by a judge as reaching to the depths of his or her being, to exhaust his or her
energies in doing good work. While Holmes was not one to talk about the good in an absolute sense, he
believed a judge does good work when he or she has given everything to reach a solution within the rules
to which the judge has assented. Honoring the process with genuine effort, and broad intention, is good
work.
As a young man about to enter law school, Charles Wyzanski — later a judge of considerable
accomplishment — wrote to Holmes “asking the Justice ‘what he thought were the motives of the legal
profession.’ [Holmes’] reply letter closed with the sentence: ‘I hope that when your work seems to present
only mean details you may realize that every detail has the mastery of the universe behind it and may
keep up your heart with an undying faith.’”58 Combining the last line of Holmes’ earlier-quoted speech
with this advice to Judge Wyzanski provides a useful principle. Moving to comprehend what “mastery of
the universe” lays in some detail requires a commitment to “spend[] all the energies of one’s soul in trying
to do good work ....” For anyone looking at how to resolve a dispute, or at the actions and conduct of
others who are trying to resolve disputes, we must recognize that we need to dig deep if we expect to get
real value for our effort. This includes the parties and lawyers, as well as the neutrals. We must
57
58
The Essential Holmes 145 (Posner, ed. 1992).
Edward Levi, In Memorium: Charles E. Wyzanski, Jr., 100 Harv. L. Rev. 716, 717 (1987).
20
understand that our grasp is limited by our own capacity, effort, and breadth of vision. This effort is fatally
limited if we remain constricted by a mean spirit, lack of imagination, or, ultimately, a lack of respect; for
what Holmes describes is living with a profound level of respect for the work, and, in that, for those
appearing before the judge.
One person can dig deep in the earth and find gold; another can scratch the surface and find
worms. Both might say they have explored what is in the earth. The parties will often be able to tell the
difference in a judge or neutral.
WHAT IS IT “TO DO GOOD WORK?”
One of Holmes’ famous dissents is found in Lochner v. New York,59 which offers distinct versions
of what different judges believe it is to do good work (at least in Holmes’ eyes). In Lochner, the Supreme
Court’s majority thought that it was good work to use substantive due process to strike down New York’s
laws limiting bakers to a 10 hour work day or 60 hour work week. The majority saw itself as drawing a
line on the states’ exercise of police power concerning economic affairs between employers and
employees; a necessary limit beyond which the states could not regulate conduct. It emphasized the
liberty interest in the right to contract that should not be burdened absent some level of proper justification
for a state exercising its police power, e.g., over a matter of public health or welfare. The majority found,
as fact, that there was no genuine worker-related health issue at stake in the New York baker’s law;
contrasting the work of a baker with that of an underground miner. It denied substituting its views for that
of the legislature; rather, the Court was simply telling New York that it had no (police) power to do what
it did.60
Justice Harlan, joined by two other justices, dissented.61 He observed at some length
countervailing social policies, statistics, and European practices showing that New York’s law was, in
fact, based on legitimate health concerns. Harlan cited numerous cases as well, establishing the principle
that the Court should not interfere with state legislatures absent extreme sorts of circumstances. Laws
going to health measures do not fall into this exceptional category. Harlan’s citations to law and statistics
give the reader a sense of frustrated incredulity that the majority was not only usurping the legislature
59
Lochner v. New York, 198 U.S. 45 (1906).
Id. at 54-57, 64.
61
Id. at 65.
60
21
prerogative (and the voice of the public), but was doing so by pretending that the health issue did not even
exist; when anyone with a brain in their head could see that it did.
Holmes wrote a separate dissent.62 It is shorter and broader than Harlan’s. Rather than citing
statistics and numerous cases, in effect, he grabs the majority by the lapels, looks them in the eye, and tells
them that he knows what they are doing. They are making a decision based upon an economic theory that
they hold dear. This theory tethers them to an article of faith that will only let them circle so far from its
center. Since they do not really care about the abundant facts leaving no question about an employee
health issue, Holmes need not offer a body of facts in an effort to convince them otherwise. Instead, he
tells the majority that “[i]t does not need research to show that no such sweeping condemnation can be
passed upon the statute before us. A reasonable man might think it a proper measure on the score of
health.”
In the legal lore learned in law school, or at least when I was in law school, the Lochner majority
falls somewhere down that historic ladder of vilification where Justice Taney stands on the top rung. Does
Holmes’ dissent mean that the majority justices, as individual human beings, are anything worse than
wrong in his eyes? Holmes’ own belief was that the Constitution was “made for people of fundamentally
differing views, and the accident of our finding certain opinions natural and familiar or novel and even
shocking ought not to conclude our judgment upon the question whether statutes embodying them
conflict with the Constitution of the United States.”63 He observed that the majority followed their familiar
beliefs, rather than conducting the inquiry according to the rules required of judges in their position. To
the extent that the Lochner majority stubbornly refused to pursue the inquiry according to Holmes’ rules,
with the depth of effort, determination, and passion that Holmes required, then they failed as judges
WHAT IS IT THAT WILL EARN RESPECT?
As one famous judge said, “there is nothing new under the sun.”64 Issues of what makes for a
good judge, and the public’s trust in judges, have existed as long as people have been sitting in the role of
judge. Practical and valuable insight and perspective on judging is found in an extraordinary person from
Islam’s early history who had to deal with the problem.
Id. at 75.
Id. at 76. Never the absolutist, Holmes next states that “General propositions do not decide concrete
cases. The decision will depend on a judgment or intuition more subtle than any articulate major premise.
But I think that the proposition just stated, if it is accepted, will carry us far toward the end. ” Id.
64
Ecclesiastes 1:9-10.
62
63
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Ali ibn Abu Talib, the Prophet Muhammad’s son-in-law, and a great person in his own right, was
one of Islam’s early leaders. One of his tasks as Caliph included sending a trusted lieutenant to become
Egypt’s governor. Ali wrote out a detailed and lengthy set of instructions to the new governor including,
among other things, insights about human nature, a balanced social order, the army, and politics.65 Some
of the themes running through this guidance are the need for the new governor to first master himself if he
is to be a good leader; and to be understanding, patient, and compassionate toward the people he would be
governing.
Ali’s letter includes a description of how to select a chief judge. This judge should be a person of
excellent character and proven merit. The volume of cases should not vex the person chosen; nor should
the complexity of a case or the parties’ disputations be a source of anger. Judges should be those least
likely to get disgusted at the litigants’ quarrel.
Judges should be people who can recognize their own mistakes, and correct those mistakes once
recognized. Judges should not try to justify an earlier decision that they later know to be mistaken. They
should accept that it is not below their dignity to correct a mistake.
The judge must be a thorough person. Inquiry into the case should not be cursory; rather, the
judge must go through each case scrupulously, with patience and perseverance, in examining the details
of each case. The judge should be ready to stop and ponder doubtful points and pay close regard to the
parties’ arguments. When there is doubt or ambiguity, the judge should examine each aspect of the
problem carefully, go through further details until reaching clarity, and only then proceed with a decision.
Judgment must be passed without fear, favor, or prejudice. If complimented or praised, they
should not be the sort of people likely to develop conceit and vanity. Flattery should not influence them.
The stated criteria are not mastery of scripture, legal traditions, or other legal principles.66 Nor is
intellectual greatness on this list. It was likely understood that the judge should of course be a master of
the precepts needed for decision making in Islamic society. However, while there are relatively many
who can learn and remember the words and text, and some who could then become adept in analytic
methods and legal reasoning, the people with the intentions and qualities Ali describes -- or even the
intentions for the qualities he describes -- are more rare. It is the people practicing these qualities who will
Instructions to Malik al-Ashtar an-Nakha’i, Nahj al-Balagha.
The emphasis is not because Ali was a secular man; just the opposite. His magnitude as a spiritual
leader and example is enormous. See generally Cyril Glasse, The Concise Encyclopedia of Islam at 33-34
(1989).
65
66
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be the best judges, because conduct consistent with such qualities is most likely to lead to results that
people can and will honor.
Whether Ali’s judge with exceptional qualities, Hand’s wise judge who does not tilt the scales,
Marshall’s understanding that doubt cannot be allowed to undermine the judge’s honest effort, or
Holmes’ belief that the judge’s pursuit requires the dedication of one’s whole being, with sufficient
humility to evolve within that effort, these are models for any judge, arbitrator, or mediator. These
qualities are rooted in self-respect, respect for more than oneself, and the fearlessness and faith to persist
in the effort and pursue the goal of acting within these qualities. Pursuing these qualities and actions will
not simply improve decision making and facilitation, but will likely engender greater trust and respect for
the processes in which they are exercised.
Finally, in the vein that these aspirations are at least worthy of our contemplation, the closing to
Hand’s eulogy of Cardozo is quoted at length. Hand not only remembers Cardozo, but effectively asks us
to reflect upon the value of the qualities he memorializes67:
In all this I have not told you what qualities made it possible for him to find
just that compromise between the letter and the spirit that so constantly guided
him to safety. I have not told you, because I do not know. It was wisdom: and
like most wisdom, his ran beyond the reasons which he gave for it. And what
is wisdom—that gift of God which the great prophets of his race exalted? I do
not know; like you, I know it when I see it, but I cannot tell of what it is
composed.
One ingredient I think I do know: the wise man is the detached man. By that
I mean more than detached from his grosser interests—his advancement and
his gain. Many of us can be that—I dare believe that most judges can be, and
are. I am thinking of something far more subtly interfused. Our convictions, our
outlook, the whole make-up of our thinking which we cannot help bringing to
the decision of every question, is the creature of our past; and into our past have
been woven all sorts of frustrated ambitions with their envies, and of hopes of
preferment with their corruptions, which, long since forgotten, still determine
our conclusions. A wise man is one exempt from the handicap of such a past;
67
See footnote 55 above. Cardozo was not an infallible saint, and was not the object of universal respect
even in his day or after. However, Hand’s words of love and admiration for a friend and judge should not
be discounted as merely the ingenuousness of grief, but can be understood as Hand’s effort to show
Cardozo’s best nature and what was most important to remember about Cardozo in how to do this work;
or, put another way, to reveal those aspects of Cardozo that should not be lost to time, and those qualities
that should never be overlooked or disregarded.
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he is a runner stripped for the race; he can weigh the conflicting factors of his
problem without always finding himself in one scale or the other.
Cardozo was such a man; his gentle nature had in it no acquisitiveness; he
did not use himself as a measure of value; the secret of his humor—a precious
gift that he did not wear upon his sleeve—lay in his ability to get outside of
himself, and look back. Yet from this self-effacement came a power greater
than the power of him who ruleth a city. He was wise because his spirit was
uncontaminated, because he knew no violence, or hatred, or envy, or jealousy,
or ill-will. I believe that it was this this purity that chiefly made him the judge
we so much revere; more than his learning, his acuteness, and his fabulous
industry.
In this America of ours where the passion for publicity is a disease, and
where swarms of foolish tawdry moths dash with rapture into its consuming
fire, it was a rare good fortune that brought to such eminence a man so
reserved, so unassuming, so retiring, so gracious to high and low, and so serene.
He is gone, and while the west is still lighted with his radiance, it is well for us
to pause and take court of our own coarser selves. He has a lesson to teach us if
we care to stop and learn; a lesson quite at variance with most that we practice,
and much that we profess.
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Lee Applebaum is a Litigation Partner at Fineman, Krekstein & Harris, P.C. in Philadelphia, practicing at
all levels of the state and federal courts in Pennsylvania and New Jersey for the last 25 years. He also has
experience in complex commercial and construction arbitration over that same time period. Lee is a
trained mediator and arbitrator, and has served as a Judge Pro Tempore in the Philadelphia Court of
Common Pleas’ Commerce Case Management Program since 2006. For seven years, Lee held leadership
positions with the Business and Corporate Litigation Committee’s Subcommittee on Business Courts,
and continues to manage its web page content. In September 2014, he will become Co-Chair of the
ABA’s Ad Hoc Committee on Judges Initiative. From 2004 through 2011, he was the coordinator, editor,
and co-author of the Business Courts chapter in the ABA’s Business and Corporate Litigation Committee
publication “Annual Review of Developments in Business and Corporate Litigation.”
Lee has authored or co-authored numerous articles on Business Courts. These articles include, among
others, “The Steady Growth of Business Courts,” Future Trends in State Courts 2011, National Center for
State Courts; “Getting to Yes in Specialized Courts: The Unique Role of ADR in Business Court Cases,”
11 Pepperdine Dispute Resolution Law Journal 35 (2010); “The ‘New’ Business Courts,” Business Law
Today (March/April 2008); and “A History of the Creation and Jurisdiction of Business Courts in the
Last Decade,” 60 Bus. Law. 147 (2004).
Lee has spoken on specialized business courts to a variety of audiences, including, among others, the
American College of Business Court Judges (of which he is an Honorary Charter Member), the Judicial
Institute of Maryland, the Conference of Chief Justices - Mid-Atlantic Region, the University of
Maryland School of Law, the Judiciary Committee of New Jersey’s General Assembly, government
sponsored study groups in Mississippi, Nevada, Oklahoma and South Carolina, the American Bar
Association’s Business Bar Leaders Conference, and to panel audiences for the American and
Philadelphia Bar Associations.
He was the 2010 Chair of the Philadelphia Bar Association’s Business Law Section, and the Chair of its
Business Litigation Committee in 2005 and 2006, which was the Business Law Section’s Committee of
the Year in both of those years. He has been an Advisor to the University of Maryland School of Law’s
Journal of Business and Technology Law since 2007.
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