VOLUME V, ISSUE 1
FORMER CHIEF JUSTICE WARREN E. BURGER’S DISPARAGEMENT OF THE
AMERICAN JUDICIAL SYSTEM AND SPONSORSHIP OF MEDIATION
Richard Calkins
AN IMPOSSIBLE RECONCILIATION? UNDERSTANDING CLASS-ACTION WAIVERS
AND ARBITRATION AFTER AMERICAN EXPRESS V. ITALIAN COLORS Kristine Bergman
SEATING ARRANGEMENTS IN MEDIATION
Samuel A. Bryant
THE POKER-LITIGATION GAME
F.E. Guerra-Pujol
i RESOLVED: Journal of Alternative Dispute Resolution
RESOLVED: JOURNAL OF ALTERNATIVE DISPUTE RESOLUTION is an EPublication founded in January 2010 by a group of Charleston School of Law
students and the Center for Dispute Resolution.
RESOLVED publishes two issues per year as well as a student works edition
each academic year.
Our vision is to promote research and writing in the areas of dispute resolution
theory, skills, techniques, and application.
The opinions and conclusions expressed in this publication are solely those of
the individual authors and do not necessarily reflect the opinions of RESOLVED
or The Charleston School of Law.
RESOLVED solicits submissions from its readers and the legal community at
large. If you would like to submit an article for potential publication, please
email the staff of RESOLVED at [email protected].
Readers who desire reprint permission or further information should contact the
Editor in Chief, RESOLVED, JOURNAL OF ALTERNATIVE DISPUTE RESOLUTION,
c/o The Charleston School of Law, 81 Mary Street, Charleston, South Carolina
29403.
Cite this law journal as RESOLVED J. ALTERNATIVE DISP. RESOL., Fall 2014,
(page number).
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 2
RESOLVED: JOURNAL OF ALTERNATIVE DISPUTE RESOLUTION
Volume V, Issue 1
2015
IVEY BLAIR
Editor-in-Chief
BRENT KAUFMAN
Associate Editor in Chief
AMY MCARDLE
Managing Editor
JENNIFER WHITE
Editor at Large
MARTI DENNIS
Symposium Editor
JORDAN SMITH
Senior Executive Editor
Executive Editors
EMILY ARP
ANDREW HEITMAN
TORI SPEARMAN
Editors
TARA BING
BRUCE BINNEY
NATALIE DALRYMPLE
SAYDE DANIELS
BRITTANY FERRIGNO
JOSHUA MASTERSON
SHANNON MORRIS
JOSEPH SHAKIBANASAH
TODD SILVIS
PETER WESSELS
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 3
FORMER CHIEF JUSTICE WARREN E. BURGER’S DISPARAGEMENT OF THE
AMERICAN JUDICIAL SYSTEM AND SPONSORSHIP OF MEDIATION1
Richard Calkins
I.
INTRODUCTION
Most American lawyers take great pride in the American judicial system, which has stood
the test of time for over 200 years.2 In spite of the pride we express, former Chief Justice
Warren E. Burger of the United States Supreme Court launched a strong criticism of the very
foundation of that system and the lawyers who thrive within it. In his 1984 Annual Report on
the State of the Judiciary, he castigated the court system in these words: “Our system is too
costly, too painful, too destructive, too inefficient for a truly civilized people."3 And to the
lawyers who thrive in it, he spoke these sharp words: "[t]he entire legal profession--lawyers,
judges, and law teachers--has become so mesmerized with the stimulation of the courtroom
contest that we tend to forget that we ought to be healers--healers of conflicts."4
A close examination of Chief Justice Burger’s pronouncements makes clear that his
words were not directed just against the inefficiencies of American courts, but at their very
underpinnings: the adversarial system itself. To that end, he championed a new approach to
resolution; he advocated for mediation.
1
In this Article there are a number of case studies set forth to illustrate points being made. These studies are actual
mediated cases. The names of the parties and, in some instances, other details are omitted to protect the
confidentiality of those settlements.
2
The system gives all citizens access to the courts, and in federal courts, trial by jury is constitutionally protected.
The Seventh Amendment to the U.S. Constitution provides:
In suits at common law, where the value in controversy shall exceed $20, the right to trial by jury shall
be preserved, and no fact tried by a jury shall be otherwise re-examined in a court of the United States,
then according to the rules of common law.
3
Warren E. Burger, Annual Report of The State of the Judiciary, 70 Justice, A.B.A.J. Apr. 1984, at 62, 66 (1984).
[hereinafter Burger, State of Justice].
4
Id.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 4
This article examines, first, Chief Justice Burger's criticism of the court system; second,
of the adversarial process itself; and third, his attempt to advocate mediation.
II.
CHIEF JUSTICE BURGER’S CRITICISM OF THE AMERICAN COURT SYSTEM
Chief Justice Burger’s criticism of our court system was two-pronged: one, its
inefficiencies; and, two, its destructive nature.
A. Inefficiencies of the Courtroom Trial
Chief Justice Burger first observed what he considered to be gross inefficiencies in the
courtroom trial. For starters, he noted that civil trials are "too costly" and "too lengthy" to often
provide real justice.5 The record would suggest there is some validity to the charge. Many
citizens today cannot afford to use the courts because of the costs incurred. One federal judge
observed:
While we have created the fairest system in the world for resolving civil disputes,
it is so expensive that very few people in America can afford to use it. The court
system serves the rich, those with insurance and those who shift the cost of
litigation to the rich and those with insurance. I cannot personally afford to use
the system that I treasure.6
Lawyers today are pricing themselves out of the market. Some trial lawyers are charging
over $1000 per hour and associates over $500 per hour.7 It has become commonplace for major
litigation to cost in the millions of dollars. One case incurred $80 million in pretrial discovery
5
Warren E Burger, Midyear Meeting of the American Bar Association, 52 U.S.L.W. 2461, 2471 (February 28,
1984).
6
John A. Jarvey, United States District Judge, Southern District of Iowa, letter on file, September 8, 2010.
7
Richard M. Calkins, Mediation: The Revolutionary Process That is Replacing the American Judicial System, 13
CARDOZO J. OF CONFLICT RESOL. 1, 5 (2011).
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 5
and trial.8 In this arena only the rich and those who can shift the burden to the rich can survive.9
Litigation costs can threaten the very existence of the small corporation or business entity.10
Similarly, the observation that the court process takes too long continues to have merit
today. In the 1980s and 1990s, it was not uncommon for cases to languish in the courts for 5, 10,
and even 20 years.11 The sheer volume of cases filed each year, over 18 million, brought some
court systems, particularly in industrialized areas of the nation, to virtual gridlock. Liberalized
discovery, introduction of novel causes of action,12 the promulgation of new statutory and
8
In one class action, a major corporation spent a reported $80 million in pretrial discovery. During the scheduled
nine-month trial, the corporation was spending $5 million per week supporting 20 lawyers and 30 support staff. The
case settled after three months of trial. See Combs v. Microsoft Corp., 646 N.W.2d 440 (Iowa 2002); 696 N.W.2d
318 (Iowa 2005); 709 N.W.2d 114 (Iowa 2006). Class actions were brought against Microsoft in other states as well
as by the federal government and states attorneys general. See United States v. Microsoft Corp., 84 F. Supp. 2d 9
(DDC 1994), 80 (D.D.C. 1999), 87 F. Supp. 2d 30, (D.D.C. 2000), aff’d in part, rev'd in part, 253 F.3d 34 (D.C. Cir.
2001), on remand, 231 F. Supp. 2d 144 (D.D.C. 2002). State actions were brought by the Atty. Gen.'s of California,
Connecticut, Florida, Iowa, Kansas, Minnesota, Utah, West Virginia, Massachusetts, District of Columbia, New
York, Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina and Wisconsin. See New York v.
Microsoft, 224 F. Supp. 2d 76 (D.D.C. 2002); Massachusetts v. Microsoft, 373 F.3d 1199 (D.C. Cir. 2004).
9
Case Study: In one case, a medium-sized manufacturer sued an international conglomerate for tortious interference
with contractual rights. The latter induced distributors of the former to breach their agreements and contract with it.
It sought $8 million in damages. The conglomerate counterclaimed for alleged violations of §§ 1 and 2 of the
Sherman Act, 15 U.S.C. §§ 1 and 2, and sought $150 million in damages for conspiracy to boycott it from the
market. The magnitude of the counterclaim, one-half billion dollars (under the antitrust laws damages are trebled
($450 million) and attorneys fees and costs are awarded ($50 million) threatened the very existence of the plaintiff.
There was no question that if the conglomerate won at trial, plaintiff could not survive. What started out as a simple
tortious interference claim became a struggle for survival. The case, however, was settled through mediation with
no money exchanging hands. See Richard M. Calkins, The ADR Revolution, 6 RUTGERS CONFLICT RESOL. L.J. 2
(Fall-Spring 2006) 2008, at 1, 2.
10
See generally, O.C. Hamilton, Jr. and J. Shelby Sharpe, Discovery Rule Proposals–Two Different Philosophies, 15
REV. LITIG.LITIGREV. LITIG. 341 (1996) (noting "The CRC perceives that the escalating costs of litigation and in
discovery was a factor considered primarily caused by the State Bar of Texas Court Rules Committee when it
proposed changes to the Texas discovery rules; disputes as opposed to the amount of discovery."); Daniel A. Fulco,
Note, Delaware’s Response To Inefficient, Costly Court Systems and a Compromise Comparison to Federal Reform,
20 DEL. J. CORP. L. 937, 939 (1995) (asserting that “The extreme cost of litigation is largely due to the discovery
process.”)
11
One lawsuit, In re Midwest Milk Monopolies Monopolization Litigation, involved 24 related pretrial rulings and
three appeals to the Eighth Circuit Court of Appeals. In its 21st year it was remanded to the Federal District Court
for hearing on damages with another three years anticipated to conclude. At this point, it was successfully mediated.
See In re Midwest Milk Monopolization Litig, 510 F. Supp. 381 (W.D. Mo. 1981), aff’d in part, rev’d in part, 687
F.2d 1173 (8th Cir. 1982), on remand, Alexander v. Nat’l Farmers Org., 614 F. Supp. 745 (W. D. Mo. 1985), aff’d
in part, rev’d in part sub nom Nat’l Farmers Org. v. Assoc. Milk Producers, 850 F.2d 1286 (8th Cir. 1988), as
modified, 878 F.2d 1118 (8th Cir. 1989).
12
Chief Justice Burger stated:
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 6
regulatory claims,13 the backlog of criminal cases, particularly drug-related, which further
delayed civil trials, all added to the mix.14
The Chief Justice recognized that the individual and small business concern, answering
an ever- increasing array of legal claims and responding to extended pretrial discovery, could no
longer withstand the onslaught the system imposes.15
However, of greatest concern to the Chief Justice was the destructive nature of the system
itself--it is "too painful, too destructive,” for civilized people. And the Chief Justice was not
alone in this conclusion. Former Judge Learned Hand of United States Court of Appeals for the
Second Circuit observed: "I must say that as a litigant I should dread a lawsuit beyond almost
anything in life short of sickness and death."16 And Associate Justice Antonin Scalia of the
One reason our courts have become overburdened is that Americans are increasingly turning to the
courts for relief from a range of personal distresses and anxieties. Remedies for personal wrongs
that once were considered the responsibility of institutions other than the courts are now boldly
asserted as legal “entitlements.” The courts have been expected to fill the void created by the
decline of church, family, and neighborhood unity.
Warren E. Burger, Isn’t There a Better Way? 68 A.B.A.J., Mar. 1982, at 274, 275 (1982). [hereinafter Burger, A
Better Way].
13
The Civil Rights Act of 1964 generated literally thousands of new cases filed each year.
14
See Keith C. Owens, Comment: California’s “Three Strikes” Debacle: A Volatile Mixture of Fear, Vengeance
and Demagoguery Will Unravel the Criminal Justice System and Bring California to its Knees, 20 S.W. U. L. REV.
129, 151 (1995) (noting that many predict in California that the courts, “and prisons, which are already
overburdened, will come to a near standstill because of the increased caseload due to the three strikes rule").
15
Case Study: A father and son distributorship was sued by its manufacturer to terminate its franchise. The
distributor counterclaimed for violation of § 1 of the Sherman Act. Ten years of litigation ensued without
resolution. The distributorship put all its profits into the litigation and went heavily into debt. With another two
years of litigation looming on the horizon and $300,000 already spent in litigation, it gave up and pleaded with the
manufacturer to mediate. The latter agreed if the distributorship paid all costs of mediation. Although the
distributorship had a good counterclaim, it settled for $150,000 and went out of business. The inability to resolve
the dispute in a reasonable period of time and at a reasonable cost, left the distributorship at the mercy of its
manufacturer.
16
Learned Hand, The Deficiencies of Trials to Reach the Heart of the Matter, (Nov. 17, 1921), in 3 ASSOC. OF THE
BAR OF THE CITY OF NEW YORK, LECTURES ON LEGAL TOPICS 89, 105 (1926).
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 7
United States Supreme Court added, that Americans "are too ready to seek vindication or
vengeance through adversarial proceedings rather than peace through mediation."17
For all the above reasons, the Chief Justice found necessity for change.
B. Mediation: The Elixir of Change
In medieval times, disputes were resolved in the King’s court by battle and blood. As
man entered the modern age, disputes were transferred to the more civilized courtroom;
however, although there was no longer the clanging of lances against armor, the battle can be just
as intense. Recognizing this, the Chief Justice admonished the profession to make a second
major transfer from the courtroom to, what he considered to be, the more civilized conference
table. He advocated for mediation at a time when most lawyers did not know the difference
between mediation and arbitration. In doing so, he redefined the lawyer’s ethical responsibility
to the client and the meaning of "justice." He said:
To fulfill our traditional obligation means that we should provide mechanisms
that can produce an acceptable result in the shortest possible time, with the least
possible expense, and with a minimum of stress on the participants. That is what
justice is all about.18
Indeed, he mirrored the words of another great lawyer, Abraham Lincoln, who said in
1850:
Persuade your neighbors to compromise whenever you can. Point out to them how the
nominal winner is often the real loser--in fees, expenses, and waste of time. As a
peacemaker the lawyer has a superior opportunity of being a good man. There will still
be business enough.19
17
Antonin Scalia, Teaching About the Law, CHRISTIAN LEGAL SOC. Q. (Fall 1987) at 6, 8. (The author has witnessed
two fatal heart attacks and one suicide directly related to litigation.)
18
Warren E. Burger, Isn’t There A Better Way? 68 A.B.A.J., supra note 12, at 274 (1982).
19
Abraham Lincoln, Notes for Law Lecture (July 1, 1850), in 2 COLLECTED WORKS OF ABRAHAM LINCOLN 82
(Roy P. Basler ed., 1953).
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 8
Mediation meets each criteria outlined by Chief Justice Burger and Attorney Lincoln.
First, the parties reach an acceptable result because they voluntarily agreed to it as being in their
best interest.
Second, the costs of mediation are diminimus compared to litigation. There are no
mediations costing $1 million or even $100,000. Indeed, a case costing $100,000 to litigate may
cost only a few thousand dollars to mediate.
Third, there need be no long delays to reach resolution in mediation. Discovery does not
have to be completed with depositions taken of all witnesses to lock in their testimony. The case
can be mediated even before it is filed. More important, the parties control how long it will take
and not the courts. They decide whether to settle immediately or transfer it back to the courts.
Fourth, most mediators consider themselves peacemakers and at least attempt to keep the
process low-key and user friendly. Many seek more than just resolution; they seek conciliation,
peace, and even healing.
So confident was Chief Justice Burger that the profession would take up the staff of
mediation that his prognosis was that resort to the courtroom would in time become archaic, a
last resort, when all else fails. He said, "for many [claims], trials by the adversary contest must .
. . go the way of the ancient trial by battle and blood."20 And, indeed, the prognosis is coming to
pass: mediation is often winning out in the marketplace over the courtroom trial.
C. The Dispute Resolution Market Place
Professor Marc Galanter in his survey of the decline in cases terminated by trial in
American courts, noted the 60% decline in absolute number of cases tried in federal courts from
20
See Burger, supra note 3, at 66.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 9
the mid-1980s to 2002, despite the increase in filings of 40% during the same period. More
startling is the fact that less cases were tried in 2002 (4,569) then in 1962 (some 5,802), although
five times more cases were filed in 2002. And the decline in state courts is even more
precipitous. 21 One federal magistrate stated: "Civil trials in the federal courts are disappearing.
That is a statistical fact. Most cases that previously were tried now are settled, many with the aid
of mediation."22 One federal judge observed: "There is now a dispute resolution marketplace
and mediation seems to be prevailing in that market."23
III.
CHIEF JUSTICE BURGER’S CRITICISM OF THE ADVERSARIAL SYSTEM
Perhaps more challenging than his criticism of the court system was that of its
underpinnings, the adversarial system itself, the very foundation of civil justice in America. As
noted, he declared that it was the "adversarial contest" that would go the way of ancient trial by
“battle and blood." And, it was this "contest" that "mesmerized" and "stimulated" the profession
to distraction, so much so that it had generally lost sight of its real mission to be "healers-not the
cause -of conflict."
This broad criticism of the adversarial system was radical when made and resulted in
great umbrage being heaped upon the Chief Justice, and, thirty years later it is still considered
21
See Marc Galanter, The Vanishing Trial: An Examination of Trials and Related Matters in Federal and State
Courts, 1 J. EMPIRICAL LEGAL STUD. 459 (2004).
22
Letter from Paul Zoss, United States District Court Magistrate for the Northern District of Iowa (August 23, 2010)
(on file with author).
23
Letter from John A. Jarvey, United States District Judge for the Southern District of Iowa, letter on file,
September 8, 2010. Judge Jarvey further stated: “Mediation took Iowa by storm for several reasons. First, while
courts are loathe to sponsor settlement conferences until the eve of trial, mediation is now conducted earlier and
often prior to filing. Second, the process typically takes 4 to 6 hours and facilitates a more rapid exchange of
proposals. Third, people are naturally attracted to a process that gives them more control over the outcome of the
dispute. Finally, compared to the jury trial, mediation is significantly less expensive.”
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 10
extreme. For this reason alone it deserves close scrutiny. This section examines the points the
Chief Justice made in discounting the use of the adversarial system in civil disputes. He
contended, (A) the system is geared to a win/loss dichotomy--someone must be defeated for it to
work; (B) the adversarial system is handcuffed as to the relief it can provide; (C) the system is
fixed, static, and inflexible and permits no deviation or creativity; (D) trial in the courtroom is
often all out war; (E) lawyers are required to make life affecting decisions for their clients; (F)
the adversarial system encourages parties to engage in vindictive conduct; (F) the adversarial
system negatively impacts the lawyers participating in it.
A. The Foundation of the Adversarial System is the Win/Loss Dichotomy
The fundamental premise of the adversarial system is that there cannot be a resolution
unless someone is defeated. All tools of the advocate are geared to this end--cross-examination,
impeachment, discrediting, undermining, and defeating. It is use of these tools that makes the
process so painful and destructive to all who participate in it, party and attorney alike. And, it is
these tools with which the profession is identified and held in such disdain.
In many instances the system cannot even achieve its goal of declaring a winner. All can
lose in litigation. As Abraham Lincoln stated, as noted above, "the nominal winner is often the
real loser--in fees, expenses and waste of time."
Chief Justice Burger disdained the win/loss dichotomy of the courtroom, and the lawyer’s
role in it as the avenue to resolution. He felt lawyers could do much better than being mere
victors in the adversarial skirmish. He courageously admonished lawyers to use their talents and
genius, their creative juices, to find a resolution both parties could accept. He stated that lawyers
“must be legal architects, engineers, builders, and from time to time inventors as well. We have
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 11
served, and must continue to see our role as problem-solvers, harmonizers, and peacemakers, the
healers--not the promoters--of conflict.” 24
Chief Justice Burger espoused the fundamental principle of mediation that there can be
no losers, only winners. There is no dichotomy. The concept of "loser" is an anathema to the
process. The words "defeat" and "loser" are not in its lexicon. Unless all concerned are winners
there can be no resolution.
Because mediation can succeed only when there is a win/win resolution, the tools of the
mediator and lawyers participating therein are quite the opposite of the trail advocate. They seek
to build rapport and trust between the parties, not to defeat one. They seek common ground
between them, not to impeach or discredit either. They seek to bind the wounds not deepen
them. Most important, the lawyers’ intellect, energy, and talent are on the highest plane to bring
healing, not hurt.
In this setting, lawyers work together to achieve common ground and not battle for single
gain. When all is said and done, the public can see the lawyer as being engaged in a noble
profession.
B. The Adversarial System is Handcuffed as to the Relief it Can Provide
Another weakness to the adversarial system is that a court of law is handcuffed as to the
relief it can provide--a dollar award. The judge and jury cannot ask: are there other
considerations that might be weighed to conclude the matter? On the other hand, mediators can
ask this question and should ask it. And they are admonished by Chief Justice Burger to ask it,
for their role requires they be "problem-solvers."
24
Warren E. Burger, The Role of the Law School in Teaching Legal Ethics and Professional Responsibility, 29
CLEV. ST. L. REV. 377, 378 (1980).
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 12
Unlike the judge and jury in the adversarial system, the mediator is given free reign to
innovate and create, to craft a resolution the parties can accept. He or she can include in a
settlement matters unrelated to the dispute itself if the parties find need and agree. The mediator
and parties are not shackled with the win/loss strictures of the courtroom. They can include in
the settlement an apology,25 a letter of commendation or recommendation,26 name a conference
room after a deceased party, spread out defendant’s payments over a period of months or years,27
and provide sexual abuse and safe touch training for church members victimized by pedophile
clerics.28 The possibilities are virtually unlimited.
25
Case Study: Decedent was fired from his employment after 28 years of faithful service. He was the chief
accountant and when the company was purchased, new owners had a computer system installed. As he was unable
to adjust to the system, two young women were hired at lower salaries to run the department. He sued for age
discrimination under Title VII of the Civil Rights Act of 1964. Six months later he died of other causes. His
widow, who represented the estate, felt that he died from a broken heart.
At the mediation, she demanded $200,000 and the company offered $50,000. At the end of the day, she
lowered her demand to $125,000 and the company offered $100,000 and neither would move further. With what
looked like a failed mediation, the mediator asked if an apology would help. She answered in the affirmative and
added that it would also help if the new owners would take sensitivity training so that they would not treat other
employees the same way. The new owners readily agreed and the case settled for $100,000. As it turned out, she
would have settled for even less for her real goal was recognition of the fine work her husband had done.
26
Case Study: Plaintiff, who on occasion had epileptic seizures, worked at a bank. The bank was aware of her
condition but accommodated her for it. At a company picnic she had a seizure, which frightened many in
attendance. She was later released from employment and she sued under the Americans with Disability Act. She
made unreasonable demands for settlement. During the course of the mediation, the mediator asked her what she
really wanted. She explained she wanted a letter of recommendation so that she could show her friends and fellow
employees that she was just as competent and professional as anyone else working at the bank. With the bank
agreeing to this condition, the matter quickly settled to the satisfaction of both parties.
27
Case Study: Defendants, husband and wife, lived in a large home in a wealthy part of the city. They hired
plaintiff contractor to make changes in their home for which they agreed to pay $65,000. Because of alleged addons and travel and hotel expenses, the contractor added an additional $25,000 to the bill. Although defendants could
easily afford to pay the additional $25,000, they decided to stand for principle and not pay anything over the contract
amounts. They paid $50,000 and held back $15,000. Plaintiff then sued to recover $40,000, and mediation ensued.
During the course of the mediation, defendants agreed to pay only $15,000 more. This was rejected. Then
defendant wife proposed a unique solution. She explained that plaintiff had done excellent work in their home. She
was willing to recommend him to her friends. Defendant would agree to pay $15,000 cash up front and then over a
two-year period refer plaintiff to her friends generating an additional $25,000 in business. If this target was not met,
defendants would then pay the difference. The case was settled.
28
Case Study: In a cleric sexual abuse case, 13 victims requested more than money. They asked the church to
provide a safe environment for children both at school and in church. They set forth 12 non-economic conditions to
settle: 1) the pastor would be reported to criminal authorities; 2) the bishop would write a letter of apology to the
families involved; 3) the bishop would make a public apology to the church congregation and public; 4) outside
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 13
C. The Adversarial System is Fixed, Static, and Inflexible
Another major difficulty Chief Justice Burger had with the adversarial system is that it is
fixed, static, and inflexible. There is no room for accommodation or modification. Parties and
counsel must respect strict rules of evidence and procedure, and follow certain protocol. They
are straitjacketed, and any deviation on their part can invite error and even sanctions.
Mediation, on the other hand, has no such bounds; quite the opposite. The Chief Justice
admonished lawyers to be creative, to be "legal architects and engineers." The genius of
mediation is that it is by contract: the parties can agree to engineer any format they wish, even
craft new ones to meet the exigencies of the particular case. They can change the format in
midstream and utilize something quite different if there should be a need.
1.
Inventing new mediation formats
Responding to Chief Justice Burger’s admonition to be inventors, the profession has
engineered five new mediation formats, which have become, in recent years, standards in the
industry. In addition to the messenger format, which has a history going back to the time of
Confucius,29 the profession has added a trial format, conference format, caucus format,
counseling would be provided to victims requesting such help; 5) several of the victims would be chosen to meet
with the bishop on a periodic basis to discuss concerns; 6) any time an accusation was made, the cleric would be
suspended from duties and an independent investigation would be conducted; 7) church officials and employees
would receive training to identify potential abusers; 8) children would be given “safe touch” instructions; 9) a
hotline would be set up so that complaints could be received expeditiously; 10) the offending cleric would be
defrocked and denied financial assistance from the diocese; 11) a cleric would not be permitted to travel alone with
children under the age of 18; 12) a pastor would not be permitted to have overnights with children under the age 18
without chaperones present. These conditions were agreed to and implemented. With the noneconomic conditions
in place, the economic portion of the settlement was more easily resolved.
29
Mediation has been practiced in China for over 2000 years. See Jerome A. Cohen, Chinese Mediation on the Eve
of Modernization, 54 CAL.L. REV. 1201, 1205 (1966).
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 14
transformative format, and collaborative format.30 Each serves a different purpose and fills a
specific need.
30
[1] Messenger Format: This format found its origin at the time of Confucius. With parties in separate rooms, the
mediator shuttles back and forth, conveying new demands and offers. The messenger, however, is not permitted to
interject himself or herself into the process, even if asked. It is up to the parties to take the lead in resolving the
matter. For this reason the process is little used today, at least in Western legal systems. See RICHARD M.
CALKINS & FRED LANE, LANE AND CALKINS MEDIATION PRACTICE GUIDE § 4.02 (Aspen 2006).
[2] Trial Format: This format is conducted with the mediator acting as a hearing officer. After hearing
evidence and/or argument of counsel, he or she will make a nonbinding award, which the parties can accept or
reject. The parties always reserve the right to go to trial. However, if they do, they generally must improve their
position by a certain percentage or be penalized. The actual hearing can be evidentiary or in summary form. The
panel hearing the matter may be a single person or a panel of three.
The State of Michigan previously utilized a trial format whereby a panel of three mediators, lawyers, acted
as hearing officers. After listening to oral arguments of counsel presented in summary form, they made a
nonbinding award as to the value of the case. MICH. Ct. R. 2.403[B]. If a party or parties rejected the award and
chose to go to trial, the person had to improve his or her position by 10% or pay a penalty – they were required to
pay attorney’s fees and costs of the opposing party. MICH. Ct. R. 2.403[D]. See James McNally, letter to the
editor, Mediation in Michigan is Really a Form of Case Evaluation, DISPUTE RESOLUTION MAGAZINE, DISP. RES.
MAG. Winter 1988 at 2.
[3] Conference Format: Here the mediator keeps parties together in joint session throughout the entire
mediation. It is preferred in family law where parties will continue to have contact with each other at weddings,
funerals, family gatherings, and so on. One of the goals of the mediator is to help the parties learn to communicate.
It is also favored in employment cases where employees seek to continue employment. See Leonard L. Riskin,
Teaching and Learning from Mediators In Barry Werth’s Damages, 2004 J. DISP. RESOL.DISP. RES. 119, 134. See
also, Tristin K. Green, Work, Culture Discrimination, 93 CALIF.CAL. L. REV. 623 (2005).
[4] Caucus Format: Here the mediator commences with all parties together for introductory remarks of the
mediator and opening statements of counsel. Thereafter, the parties are placed in separate rooms and the mediator
shuttles back and forth with new demands and offers. Generally, the mediator is facilitative and actively participates
in the process to help find accommodation. At the conclusion of the mediation, the parties meet again in joint
session at which time the mediator announces the results--settlement, no settlement, to be continued. If the latter,
dates and locations are set.
Scholars have debated whether the conference mediation is preferable over caucus mediation. Those
advocating the former are primarily engaged in divorce and employment law, and perhaps have not had exposure to
the great expanse of law where caucus mediation is favored. See Riskin, supra, at 133-34; Nancy A. Welsh,
Stepping Back Through the Looking Glass: Real Conversations with Real Disputants About Institutionalized
Mediation and Its Value, 19 OHIO ST. J. OF DISP. RESOL., 573 647 (2004). Most authorities agree that caucus
mediation plays an important role in the mediation process. See, e.g., Jennifer Gerards Brown & Ian Ayers,
Economic Rationales for Mediation, 80 VA. L. REV. 323, 325-29 (1994) (“Sequential caucusing is particularly
adept at responding to informational problems because it is a uniquely meditative way to elicit and channel private
information”); Emily M. Calhoun, Workplace Mediation: The First-Phase, Private Caucus In Individual
Discrimination Disputes, 9 HARV. NEGOT. L. REV. 187, 189 (2004) (recommending a private caucus between the
mediator and the complainant in a discrimination case); Christopher W. Moore, The Caucus: Private Meetings that
Promote Settlement, 16 MEDIATION Q. 787, 88-90 (1987); Jeffrey S. Rosen & F. Alex Orudjuv, “Come Now, Let
us Reason Together:” Mediating Investment-Related Disputes, in Securities Arbitration 2003: Simplifying
Complexity (444 Practicing Law Institute 2003) (indicating that National Association of Securities Dealers
Mediation Rule 10406(e) allows the mediator discretion to meet and communicate separately with each party.).
[5] Transformative Format: This is a more recent format used primarily in divorce. It utilizes the
conference model. It places more responsibility for settlement in the hands of the parties, and the mediator has less
of a presence. For a detailed discussion of transformative mediation, see, Joseph P. Folger & Robert A. Baruch,
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 15
And, in addition to the six standard formats, parties have also invented boutique formats
to meet particularized needs. For example, when Southwest Airlines first came on line, it had a
trademark quite similar to one used by a regional southeastern airlines, so much so, that
trademark litigation, costing in excess of $1 million each and 3 to 4 years to complete was
anticipated. The two CEOs decided that was not the road to travel since the cost of designing a
new trademark would be no more than $30,000. Instead, they agreed to arm wrestle, two out of
three. For the cost of a party, the matter was immediately resolved.31
2.
Providing a reality check.
Mediation, however, is far more flexible than simply engineering new formats. It
provides alternatives when parties are having difficulty reaching agreement. When the parties
are unrealistic, mediators have engineered several vehicles to provide a reality check. They
include (1) summary jury trial, (2) focus study, and (3) mock trial.32
Transformative Mediation and Third-Party Intervention: Ten Hallmarks of the Transformative Approach to
Practice, 13 MEDIATION Q. 263 (1996).
[6] Collaborative Format: This is a newer format used primarily in divorce and family matters. A number
of professionals are involved: each party is represented by counsel; a professional psychologist also works with the
parties to help them cope with the stress of divorce; another professional works with the children to help them
through this difficult time; and a financial planning consultant helps the parties work through the intricacies of their
finances. One of the key elements of the process is that counsel must withdraw from the process if a settlement is
not reached. They are not, by agreement, permitted to proceed with the divorce.
31
See Exec’s “Plane” Fun Avoid Lawsuit, PITTS. PRESS, March 21, 1992, at 4.
32
See Thomas Lambrose, The Summary Jury Trial – An Alternative Method for Resolving Disputes, 69
JUDICATURE 286 (1986). (The Summary Jury Trial, which normally takes one day to complete, permits the parties
to present their cases in summary form to an impaneled jury. The jurors may be selected from the jury pool if the
court will permit, or selected from the community for the purpose. After presentation of each side’s case in
summary form, the jury is instructed and retires to deliberate. Normally, a set period of time is allowed for
deliberations. The jury then returns a verdict, which is not binding on the parties. Thereafter each party and counsel
separately confer with the jurors to learn how they reached their verdict, thereby giving the parties a better sense of
the value of the case. The parties can also review a videotape if one is made of jury deliberations.)
Case Study: Plaintiff exited an interstate highway into a local southbound street. She was traveling in the right lane.
A bus was ahead of her in the middle lane. Without notice the bus made a right-hand turn in front of the plaintiff
and she bumped into the rear right tire hitting her head on the door window. She complained of migraine headaches
which continued down the time of mediation. She demanded $150,000. The insurance carrier for the bus company
offered her $65,000. She rejected the offer as an insult. With the mediation failing, the mediator suggested the
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 16
3.
Interrupting the mediation to take a different approach.
parties engage in summary jury trial as a reality check. Both agreed and a one-day trial was conducted. The jury
returned a verdict of $35,000. When questioned by plaintiff’s attorney, the jurors explained that they felt plaintiff
was exaggerating her pain and indisposition. Within 48 hours allowed by the bus company, plaintiff accepted the
$65,000 offered and the case settled.
Focus Study is another vehicle for providing a reality check. Although both parties can participate, it is generally
conducted by one of the parties for its own benefit. A psychologist generally conducts the process that takes one
day. Jurors are carefully selected from a cross-section of the venue as to age, sex, ethnicity, economic status, and
education. The entire proceeding is videotaped. The psychologist presents the case to the jurors in summary form
based on pleadings, depositions, documents, and expert reports. Jurors are asked to give their opinion as to what
jurors in the venue would do, best case-worse case, and what they would do if selected in the actual case. See
Richard M. Calkins, Mediation: The Radical Change from Courtroom to the Conference Table, 58 DRAKE L. REV.
369, 370 (2010).
Case Study: Plaintiff met his wife for dinner in town. Afterwards, they started driving back to their home in
separate cars. Defendant was intoxicated and was speeding at 104 mph and hit plaintiff’s wife head on and killed
her instantly. Plaintiff was following and witnessed the tragedy. He sued on behalf of his wife’s estate and for
himself as a bystander, demanding $2.5 million. The venue was the most conservative county in a rural state, which
had never entered a million-dollar verdict.
To convince the insurance company to pay more than $1 million, plaintiff’s counsel had a focus study
conducted, and at the mediation presented a video of the conclusion of the study, when jurors discussed what they
felt jurors in the county would award. One of the 10 jurors would have given $500,000, the next lowest, $1.3
million, the rest up to $10 million. The insurance carrier was prepared to offer $750,000 total before the mediation.
The carrier asked to review the entire eight hours of video and to interview the psychologist. This was done and it
offered $1.5 million to settle, which was accepted.
Mock Trial can also be used as a reality check. Normally only one party conducts it for its own benefit. The jury is
selected from the community and the case presented with live testimony and arguments of counsel. The law office
conducting the process supplies counsel and parties and witnesses for the other side to complete the trial. The jury
deliberates and returns a verdict, which gives the party a better idea as to value of the case. See Richard M. Calkins
& Fred Lane, Lane & Calkins Mediation Practice Guide § 1.02(C)(5) (Aspen 2006).
Case Study: Plaintiff farmer visited another’s farm to examine cows he had just purchased. Defendant seller took
him to the pasture, driving an ATV vehicle. Plaintiff followed in a second ATV vehicle. After viewing the cows,
the two returned to the farmhouse; however, driving back they took the scenic route through some woods and up a
steep hill. The defendant, familiar with the ATV, easily negotiated the hill. Plaintiff did not, and his ATV flipped
over landing him on his back. Plaintiff broke his back and asserted he had to give up farming.
Plaintiff sued the farmer and the manufacturer of the ATV for failure to have signage which instructed
drivers on how to ride the ATV up a hill. The claim against the farmer was settled, and the claim against the ATV
manufacturer was mediated. Plaintiff demanded $600,000 and defendant offered $300,000 and the mediation failed.
Plaintiff’s counsel then arranged to have a mock trial conducted. A jury was selected and lawyers in counsel’s law
firm were assigned various roles. The two-day trial was conducted and the jury returned a verdict of $120,000, a
definite reality check for the plaintiff. When the jurors were questioned, it was learned that they felt plaintiff was
exaggerating his injuries. Plaintiff quickly realized that a jury of farmers were not favorably disposed to award a
fellow farmer with a large verdict. Thereafter, the case settled for $350,000. The mock trial served its function to
provide a reality check.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 17
Once a trial commences in court, its course is fixed to conclusion. Not so with
mediation. The great flexibility of mediation is that once commenced it can be interrupted to
conduct further investigation,33 research legal points,34 conference potential witnesses, who have
not yet been deposed,35 or, after one day, continue the mediation to another day, or by
33
Case Study: Plaintiff celebrated his 21st birthday by driving to town to purchase five wine coolers. He parked at
the town square. Defendant, a 16-year-old boy, parked his car next to the plaintiff and the two started talking.
Three girls, also teenagers and below the legal age, pulled in next to the boys and the five conversed. They decided
to go the old gravel pit to skinny-dip. Arriving there, they found the water too cold so they partied, drinking beer
defendant had in the trunk of his car. They then decided to drive to another town to see if there was any action. One
of the girls, who had been drinking heavily, insisted on driving. Arriving at the second town, a black pick-up truck
with K.C. lights started following them. At this point, one of the girls said she had a curfew and had to get home by
midnight. Driving back, the five were followed by the black pick-up truck. Trying to lose it, the young lady driving
turned down a gravel road and sped up to 84 m.p.h. She lost control, and the car left the road and rolled over several
times. All exited the car with minor injuries except for plaintiff, who was now a paraplegic.
Plaintiff sued the 16-year-old who owned the car for allowing the inebriated girl to drive it. At the
mediation, the three girls and defendant did not attend; only the insurance adjuster attended. The defense raised was
the plaintiff purchased the beer consumed by the underage teenagers. Plaintiff vehemently denied it and made a
demand for $1 million. Defendant offered $300,000 and the mediation came to a halt. Rather than terminate the
mediation, the mediator was given leave to interview the three girls and defendant in as much as they had not yet
been deposed. This was done. The girls did not know who purchased the beer. Defendant insisted plaintiff had.
Because defendant was underage and his parents had no liquor in their home, there was nowhere he could have
gotten the beer.
The mediator then met again with plaintiff and pressed him for the truth. He finally admitted that although
Saturday night he purchased the wine coolers for himself, he did purchase the beer Friday night and put it in the
trunk of the defendant’s car. The case quickly settled for $320,000.
34
Case Study: Plaintiff, in mid-forties, was sexually abused by a cleric in Ohio when he was an altar boy. Suit was
threatened and the matter was mediated in Chicago, Illinois. Plaintiff demanded $950,000. During the course of the
mediation, the mediator inquired of defense counsel what the statute of limitations was in Ohio for such actions. To
his surprise, counsel was not certain. He quickly had an associate research the question, and in 30 minutes handed
the mediator a decision of the Ohio Supreme Court: Pratt v. Stewart, 929 N.E.2d 415 (Ohio 2010). It stated that a
child has 12 years after reaching majority to file his action. More than 12 years had elapsed in the instant case;
therefore, plaintiff faced the prospect of having his case dismissed. With this established, counsel for the plaintiff
recommended compromise and the case settled quickly.
35
Case Study: Plaintiff entered a nightclub and was talking to friends when he was hit in the jaw by a fire
extinguisher thrown by the bartender. The latter got into an argument with a patron standing at the bar and tore a
fire extinguisher from the wall and threw it at him. He ducked and plaintiff was hit fracturing his jaw.
Before suit was filed, the matter was mediated. The insurance carrier denied coverage on the ground that
intentional torts were excluded from coverage. The mediator inquired whether the bartender had previously
engaged in such conduct. Plaintiff stated that a friend witnessed the same bartender arguing with a patron on a prior
occasion. He believes the friend mentioned this to the owner, who took no action. Recognizing that failure of the
supervisor to act was negligence, which was covered under the policy, the mediator inquired whether the friend
would come to the mediation and speak to the adjuster. The friend arrived during the lunch hour and affirmed the
above, including the fact that he spoke to the owner. The case quickly settled for a fair figure.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 18
telephone.36 More important, the mediator can be sensitive to the emotional needs of the parties
and orchestrate the mediation accordingly. If the mediator senses the parties are becoming tired,
frustrated, or stressed out, he or she can continue the process to another day to allow the parties
opportunity to reflect on the matter.37 In the family setting, this is called "pillow talk." If
members of a family are concerned that a family member, a parent for example, is being
36
When a mediation does not settle in one day, mediators are encouraged to keep the process going by telephone
thereafter, or even caucus separately at the party’s or attorney’s offices. Experience shows that when mediation is
continued by telephone, for example, time works for the process, not against it. In other words, parties are more apt
than not to soften their positions if given quiet time to think about it. Also events may occur which will further
settlement possibilities.
Case Study: Plaintiff owned two large grain bins in which to store corn. When they were empty, they were cleaned
out by an independent contractor. For some reason, he used the wrong cleaning agents and the new grain placed in
the bins became contaminated and could not pass FDA federal standards. After disposing of the corn, plaintiff sued
the contractor for $750,000.
At the mediation, the insurance carrier offered $250,000, and at the end of the day raised the offer to
$450,000. Plaintiff went from $750,000 to $650,000 and would move no further. The mediator informed both
parties that in the next few days he would contact them by telephone. His hope was that given a chance to think
more about the matter both would compromise further. The next day he called the adjuster, who agreed to move to
$550,000 and not one penny more. He waited a day to call plaintiff, knowing that the following day was his golf
day. Being a golfer, the mediator hoped plaintiff would have a good round which would definitely loosen him up.
He did and he agreed to the $550,000. And the matter settled.
As outlandish as this case was, it does illustrate that changed circumstances can change the dynamics of
settlement possibilities. The following case also illustrates this.
Case Study: Plaintiff, a woman, graduated at the top of her law school class and was editor-in-chief of the law
review. Any number of law firms wanted to hire her. She selected a large firm with offices in several cities. She
was assigned to one of the satellite offices. As it turned out, the managing partner took a liking to her and harassed
her on repeated occasions. She insisted he stop, but he persisted. She then reported the matter to the home office.
A senior partner, a female, investigated the matter and concluded that “boys will be boys. Just ignore him,” was her
advice. The plaintiff then resigned her job, taking a constructive discharge. She hired an attorney and threatened to
sue under Title VII of the Civil Rights Act of 1964 for sexual harassment. She demanded $800,000, even though
she was hired by another firm within a month at a slightly higher salary and better tenure-track opportunities. The
defendant firm offered $300,000 to settle.
At the mediation there was little progress, and it was continued. The mediator kept in touch with all
concerned by telephone, inquiring whether any progress was being made. Almost a year later he was called in for
another try. This time the case settled and he quickly learned why. The next day the case had to be filed. Once it
was, it had no value to either party. Plaintiff really had no damages, emotional or otherwise. And the law firm,
which sought a confidential resolution, would have suffered the bad publicity it sought to avoid. The case settled for
$350,000.
37
There is a difference of opinion as to whether the mediator should hold parties until late at night while the “iron is
hot,” rather than release them when they become tired and frustrated. It is the author’s opinion to put it over to
another day. The worse that will happen is the parties will not change their positions; however, they will not make
them worse. More times than not they will improve their positions. Time works for the mediator, not against.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 19
emotionally crippled by the lawsuit, they can be given time over a few days to talk to the person
in a quiet setting. More times than not, this time out will lead to resolution, for they will
convince the party of the need to settle.38 A judge, in a similar setting, has neither the time nor
capacity to take such action once a trial commences. He or she cannot be concerned whether the
parties are emotionally stressed or need to consult in a quiet setting. Judges are not wired to be
concerned about the stress level of the parties.
Mediators, as legal architects and inventors, have engineered other aids to settlement. An
example is the polygraph test. They are, of course, inadmissible in civil and criminal trials
because of their questionable reliability. Yet they are used in any number of nonlegal settings,
such as clearing individuals for sensitive industrial and governmental positions. And they can be
used effectively in mediation as part of the settlement process.39
38
Case Study: At birth a healthy baby girl was given a diphtheria, pertussis, tetanus shot which crippled the child
for life. The parents sued the doctor administering the shot and the matter was resolved for $80,000, which netted
the family $34,000. Later, it was learned that the child was eligible to receive $2 million under the National Vaccine
Injury Compensation Act. They then sued the lawyer for legal malpractice for not pointing this out.
At the mediation, the parents were present on behalf of the child (she was 17 years old and had the
mentality of a six month old baby). The attorney’s malpractice coverage was $1 million. Ultimately, the family
demanded $1.5 million and the carrier offered policy limits. The father rejected the offer out-of-hand stating, “No
amount of money can cover what they did to my baby.” The mother remained silent; however, the mediator sensed
she wanted to get the ordeal over. With the consent of the adjuster, the family was given over a weekend to consider
the matter. The adjuster said that the mother and father will pillow talk the matter, that is talk about it even at night,
and she will win out. The next Monday morning the father called and accepted the offer and the matter was
resolved.
It should be noted it does not matter if the one seeking settlement is male or female; that person will win
out most every time.
39
There are two scenarios when the test can be effectively used: one, the parties are saying opposite things and one
must be prevaricating; and two, where a party is attempting to establish credibility.
In the first scenario, the test is rarely given because the person lying will refuse to take it; whereas, the one
telling the truth will readily agree. Reasons given for not taking it are the person is sick or nervous, or the test is
unreliable, or in any event, it is not admissible in evidence.
The second scenario is where a party wishes to establish his or her credibility. In this instance the test is
given and the results can impact directly on settlement discussions.
In either scenario counsel must agree to permit the test. Most attorneys will agree to it for they want to
know if the client is telling the truth. No attorney in a civil case will knowingly allow his or her client to perjure
himself or herself on the witness stand.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 20
4. Mediation permits ex parte confidential communications.
One of the most innovative processes engineered by mediators is the caucus mediation
format. It places the parties in separate rooms with the mediator shuttling back and forth
between them. Because the parties are separated, it permits the mediator to speak to each side in
a confidential setting, to conduct ex parte communications: such would invite reversible error
and even sanctions if conducted in the courtroom trial.
The confidential caucus with each side opens new avenues of settlement opportunities
never envisioned nor contemplated in the past. The importance of the confidential caucus and ex
parte communications are: (a) the mediator can more easily build rapport and trust with the
Case Study: Plaintiff was hired as chief financial officer of a small but prosperous corporation. She claimed that the
CEO insisted on having an affair when they went on business trips together. She consented, she alleged, to keep her
job. She finally called a halt to the affair because it was affecting her marriage. He persisted, so she quit her
employment and sued for constructive discharge under Title VII of the Civil Rights Act of 1964.
Mediation was attempted. In the opening session, plaintiff’s counsel made his opening statement,
explaining plaintiff’s position, adding that liability was quite clear; only damages were an issue.
Defense counsel then responded contending their relationship was consensual and began long before she
was hired. With this statement, plaintiff’s counsel jumped up and said he would not listen to such lies. He left the
mediation with his client much to the shock of the others. Fortunately, the mediation was being held in his office so
he did not have far to go.
The mediator then suggested a polygraph test be offered to the parties. He assured counsel the person lying
would not take it. When offered, both agreed to take the test. A single operator was selected and the test scheduled,
one in the morning and the other in the afternoon. However, the night before, one of the parties backed down stating
she was sick, nervous, and the tests were not admissible in any event.
The lawyers were then satisfied after the CEO passed the test that the plaintiff was lying. The case quickly
settled for a satisfactory amount. Later, plaintiff’s counsel called the mediator to tell him how shocked he was. He
was certain his client was telling the truth. He told her she had to settle or she would have to find another attorney.
He would not allow his client to perjure herself on the witness stand.
Case Study: In this case, the test was used to establish if the victims of sexual abuse were telling the truth. The
mother of an African-American family alleged that her six children, three boys and three girls, were raped by a
white cleric. One of the girls, 14 years old at the time, became pregnant and gave birth to a boy who had Caucasian
features. Everyone assumed the cleric was the father. Three days before the mediation, a DNA test was performed,
which established that the cleric was not the father. The defending church then assumed all the allegations of abuse
by the family were contrived. It offered $950,000 for the entire family. The mediator suggested that plaintiffs’
counsel arrange for the six siblings, now adults, to take polygraph tests. This was done as to two of the boys and
two of the girls--the oldest son was in the penitentiary and the one daughter was bipolar. The tests were given and
three passed, one son and two daughters. They established that the pastor had raped each and induced them to have
sex with each other while the cleric watched. The youngest boy’s test came out inconclusive; he did not pass. This
actually gave more credibility to the others who did pass. The family accepted $3 million settlement offer.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 21
parties and further the healing process; (b) he or she can inquire about weaknesses in each
party’s case and what might be expected from a jury, best case/worst case; (c) the party is given
an opportunity to vent and tell his or her story without offending the other side; (d) the private
caucus enables the mediator more effectively to uncover hidden agendas or special interests
which can further settlement possibilities; and (e) the mediator can more freely help a party and
counsel evaluate their case.
(a) Build rapport and trust
In admonishing lawyers to be "healers of conflict,” one of their primary tools is to build
rapport and trust with each side. This, to say the least, cannot occur in the courtroom where the
parties are doing battle. Unquestionably, parties in conflict are angry, frustrated, and even often
hating each other. In the adversarial setting the judge could not be less concerned about such
emotions. The mediator is concerned and wants to find a basis for healing them. The private
caucus gives him or her a vehicle to reach each party and begin the process.
Rapport and trust can be established in several ways: First, the mediator can inquire into
the background of a party-- their interests, hobbies, activities, children, and grandchildren. Such
an inquiry shows the mediator is interested in the party as a person and not just as another
plaintiff or defendant. Where common ground is established between mediator and party,
rapport begins. As the parties recognize that the mediator is a concerned friend, they begin to
relax and place more trust in what the mediator is doing. Essentially, parties want to like and
trust their mediator and the latter needs to give them valid reasons for doing so.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 22
Second, rapport and trust can be developed by the mediator inquiring into the strengths of
the party’s case and what a jury might do. Showing such interest helps the mediator bond with
the party, demonstrating he or she cares. 40
Third, rapport and trust must also be established with counsel. If the mediator has not
worked with the attorney before, an initial credibility gap might exist. Counsel needs to be
confident the mediator is truly impartial and not advocating for the other side. This can be
established when counsel is given an opportunity to talk about the case from his client’s
perspective and the mediator listens with interest. It can also be furthered if the mediator can
find reasons to compliment the attorney in front of the client for obvious reasons. Attorneys
always appreciate support from an independent source.
Establishing rapport and trust gives the mediator credibility. The parties know the
mediator has integrity, is honest, and is maintaining the highest standards of professionalism.
When the mediator explains there is no more money available, he or she is believed. The parties
know he is not advocating for the other side.
(b) The ex parte caucus assists the mediator in learning about the case
In the adversarial setting of the courtroom, the judge or jurors learn about the case
through direct and cross examination of witnesses and the admission of documents. In
mediation, the mediator has a much more direct source of inquiry. He or she can directly ask
40
Case Study: Plaintiff was injured when broadsided by a delivery truck. The insurance adjuster was not very
cooperative and offered only a modest amount. In caucus with the plaintiff, the mediator inquired as to whether
there was any evidence the driver had been drinking before the accident. Up to that time drinking had not been an
issue. Plaintiff’s counsel was surprised when plaintiff answered that the driver had been seen at Sally’s Bar just 20
minutes before the accident. Although this would not establish that he was intoxicated, it might indicate why he was
inattentive and slow to react. Plaintiff was able to produce at the mediation a friend who would verify that the driver
had been at Sally’s Bar on the afternoon in question, and that he did so every afternoon at the end of his deliveries.
Concerned that this evidence might be admitted, the insurance company increased its offer and the case settled.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 23
counsel in private caucus what the case is about. He can ask questions never before asked of a
party in American jurisprudence. The mediator can ask counsel what he feels are weaknesses in
his client’s case and what he feels is the worst case before a jury.41 Clearly, a judge, jury,
opposing counsel, even an arbitrator could not make such inquiry. With this information
garnered on both sides, the mediator has an understanding of the case untainted by rhetoric or the
advocacy of attorneys.
(c) The private caucus permits venting
Parties often need an opportunity to vent, to tell their stories to someone who will listen.
They need their day in court. They often think of the mediator as a judge, someone who will
listen.
Parties vent for several reasons: one, it helps them to relieve some of the anger, anguish,
and frustration building up inside; two, they vent for therapeutic reasons, to tell someone how
much they are hurting; and, three, they need to explain why they are right and their opponent
wrong.
41
Case Study: Decedent, an 18-year-old graduating senior from high school, was valedictorian of her high school
class, president of the student body, head cheerleader and a model student and person. She received a full ride
scholarship to an eastern women’s college. She was killed when she made a left-hand turn and was hit by a semitruck entering the intersection. Defendant claimed decedent turned on a red light and he entered the intersection on
a yellow light. Decedent’s counsel contended the truck was running a red light and decedent was turning on a green
arrow.
In caucus with decedent’s counsel, the mediator inquired in confidence what the weaknesses in the case
were from plaintiff’s estate’s perspective. Counsel responded that there was a witness that was in the lane next to
the turn lane who would testify that he stopped and was looking at the light to proceed west, which was red. Out of
the corner of his eye he saw decedent begin her turn. She had to be turning on a red light because the green turn
signal did not come on until the light going west turned green. It was still red, thus, she was comparatively at fault.
Counsel at some point would have to disclose the witnesses to the defense.
On the defense side of the case, when inquiry was made, counsel explained that all semi-trucks have black
boxes, which record their speed at all times. The tape showed that that 30 seconds before the accident, the truck was
traveling east 50 mph in a 40 mph speed zone. It showed the truck slowing down 42 mph and then speeding up. At
this point the crash occurred. Further, when the light going west was red, it was also red going east. When the light
going west turned green, the turn signal came on; however, the light going east remained red. The truck had to be
running a red light.
With these facts established, the case quickly settled favorably for the decedent’s estate.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 24
Venting is easily accommodated in private caucus. In the courtroom such an outburst
would put a party in jeopardy of being held in contempt of court. The mediator is trained to
listen with compassion, sympathy, and understanding. Most often, when accomplished, the party
is prepared to move forward with meaningful discussions.42
There is another aspect of venting that needs to be considered. There are times when the
party needs to blame someone for all their troubles. Most times they blame the party opponent.
Sometimes, however, they want to blame their attorney, or even the mediator. In such
circumstances, the mediator needs to act as a lightning rod and deflect as much of the attack as
he can. The mediator is trained to ground any such abuse with calmness and professionalism and
help the party move forward.43
42
Case Study: Plaintiff appeared at the mediation site wearing a coat and tie. He flew in from an eastern state to
participate in a mediation. He was suing a church for harboring a pedophile cleric who sexually abused him when
he was a child. A bishop attended the caucus. Plaintiff presented well and was calm and articulate. He asked the
bishop if he would like to know how angry he still was. Before the bishop could answer, he opened his briefcase
and took out a 12 inch plastic tube. He then attached a shorter tube at the bottom making an upside down “T.” He
then took the tape off the other end, and he was holding the dagger, which he pointed at the bishop. The mediator
was ready to grab him, but quickly realized he was not threatening the bishop, only making a point. After this
display, the mediation was successfully resolved. Several days later, plaintiff’s counsel received a call from
claimant’s wife. She thanked counsel for getting the matter settled; however, the real reason for the call was to
thank him for allowing her husband to speak about his hurt. She explained they were not out of the woods yet;
however, her husband was definitely doing better controlling his anger and the way he treated her and their two
daughters.
43
Case Study: In the In re Midwest Milk Monopolization Litigation, supra n. 10, the mediators proposed that this
21 year old case settle for $21 million. Representatives from both sides were skeptical it would work and several
declined to present it to their respective co-op boards because of the anger and frustration such a proposal would
generate. The mediators agreed to make the presentation to the various co-op boards to shield the representatives
from any abuse.
The mediators met with the various boards. There was considerable anger directed at them built up over 20
years of litigation. Acting as lightning rods, the mediators answered the participants’ concerns, which had a calming
effect. The case later was resolved for the $21 million, a published figure.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 25
(d) The confidential caucus facilitates uncovering special needs
In the courtroom, it is totally irrelevant if parties have special needs or interests, so-called
hidden agendas. Within the parameters of mediation such elements can be all-important. Often
they will dictate a settlement. Certainly, Chief Justice Burger considered such hidden agendas
all-important to the mediator who is a "problem solver." They can be the catalyst to a resolution.
The ex parte confidential caucus permits the mediator to search out hidden agendas.
Sometimes parties are not even aware they exist, or that special needs might be satisfied.44
Being able to talk to a party privately, one on one, in caucus, enables the mediator to begin
identifying these needs.45 For example, the hidden agenda or need might be as mundane as
settling immediately in a teenage death case to have funds to move the family to a better school
44
Case Study: Plaintiff worked as a cleaning lady at a local hospital. She had taken leave from her job because of
complications in her pregnancy. She was a single woman and had a little boy six years old. She was involved in a
fender bender accident and suffered soft tissue injuries, which did not impact on her pregnancy. Her attorney
demanded $20,000 and the insurance carrier offered $8,000. Finally, the demand was reduced to $15,000 and offer
increased to $10,000. The mediator suggested they split the difference; however defendant declined. During a
lunch break the mediator encouraged the plaintiff to go and get something to eat. He then learned she had no
money. In fact, she had no money for dinner that night or the next day for her and her son and had to wait until
Friday to get some food stamps. Talking to her further, the mediator learned she was three months in arrears on her
mortgage payments, which was of concern.
The mediator gave plaintiff $20 for lunch. When the adjuster returned, the mediator explained the
plaintiff’s plight. He noted she was not complaining and it took some effort to learn the difficult time she was
having. He then asked the adjuster to increase his offer to $13,000 because this would give her funds to buy food
for herself and child, bring the mortgage up-do-date, and take care of her until she could get back to work. He
emphasized that the plaintiff was a very worthy person and the adjuster had a golden opportunity to help someone
find a little comfort. The adjuster agreed and immediately wrote a check for the full amount and the papers were
signed.
45
Case Study: Plaintiff was injured in a car accident. At the mediation he made unreasonable demands contrary to
counsel’s advice. He was angry and wanted to punish the defendant even though it was the insurance carrier
negotiating the settlement.
The mediation appeared to be failing when the mediator asked counsel if discovery had been completed.
He answered that the plaintiff’s wife had yet to be deposed. Plaintiff interrupted and said he would not permit his
wife to be deposed because she was struggling with depression. Counsel pointed out that the defendant had the right
to depose her because she had a loss of consortium claim. Plaintiff then instructed counsel to settle the case; he
didn’t care what he received. He would not allow his wife to be deposed. The case then settled for a fair figure.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 26
district to benefit the surviving children.46 Police officers, abused as altar boys, might accept less
to assure settlement, rather than file a complaint and disclosing the abuse, which might impact on
their status on the force and promotions.47 The agenda might even be the need for a person twice
convicted of felony charges (possession of narcotics) to obtain immediate funds for psychiatric
treatment to avoid a third conviction and mandatory life term. 48
On the defense side, the agenda may be for insurance company to avoid a possible
"runaway" jury verdict as occurred in a prior case raising the same issues. 49 Or it might be the
46
Case Study: Decedent, a 17-year old male, had a heart attack on the football field and was rushed to the hospital
where it was determined he had to have a heart transplant. He was hooked up to a defibrillator and kept in the
hospital waiting for a heart to become available. At one point, a nurse changed the defibrillator reattaching the lines
improperly and decedent died. His mother, a single parent with six other children, sued on behalf of his estate. She
demanded $2 million. The insurance carrier offered $500,000. The mediator suggested the parties settle for $1
million.
In private caucus, the mediator learned the hidden agenda of the hospital. It was trying to build a reputation
as a regional heart transplant center and also wanted to end a criminal investigation that was being conducted. The
agenda of the mother was more complex. She wanted to settle immediately so that she could benefit the remaining
children by moving to a better part of town and a better school district. She might receive more if she litigated, but
this would take four years to complete, and three of the children would already be out of high school and would not
benefit from the settlement school-wise. However, plaintiff’s counsel also had a hidden agenda. He wanted the
family to move into his son’s school district so that the next two sons of high school age could play on his son’s
high school basketball team. He felt they were so good that the school could win the city championship and
possibly the state title. Thereafter, the case settled for $1 million.
47
Case Study: Two police officers were sexually abused when children. They compromised significantly to avoid
filing a lawsuit, which might have impacted on their status on the police force and their promotions.
48
Case Study: Plaintiff had been twice convicted of drug possession and sent to the state penitentiary. He had been
released and he mediated his claim that he had been sexually abused as a child. He felt his drug problems were an
outgrowth of the abuse. At the mediation, he insisted on settling in order to receive immediate funds for psychiatric
counseling. He was very concerned that without help he would receive a third felony conviction and be sent to the
penitentiary for life under the mandatory guidelines. Taking less than he might have gotten at trial, the case settled.
49
Case Study: Plaintiff purchased a $750,000 insurance policy from proceeds she received in a medical malpractice
action brought against the doctor for the death of her husband. An insurance agent examined her portfolio and
advised her to purchase a policy from him, which had a higher rate of return. She did not know that the sale and
purchase triggered federal income taxes, which more than offset the gain on the newly purchased policy.
She went to an attorney who told her she might recover $1 million as was recovered in a Texas action
against the same company for the same practice. When the case was mediated, the mediator inquired what was the
most she could recover from a jury. Counsel responded $150,000. When plaintiff heard this, she was visibly upset
at her attorney. Counsel tried to explain that in Texas the agent knew of the tax consequence, but did not disclose
them. In the instant case, the agent did not know; he was merely negligent and therefore no punitive damages could
be awarded.
Very unhappy, plaintiff lowered her demand to $500,000 and the defendant offered $75,000. Ultimately,
plaintiff reduced her demand to $300,000 and would not move further. And defendant accepted. What plaintiff did
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 27
need for a company going public to avoid reporting in its prospectus a pending $8 million
lawsuit, which might negatively impact on the price of the initial stock offering. 50
5. If mediation fails, “invent” other ADR mechanisms to assist in the process
Once trial commences, no one can stop the train going down the tracks until it runs out of
steam or reaches its destination; not so with mediation. If mediation appears to be failing, its
flexibility permits the parties and attorneys to switch to another format that might prove more
productive. They can even "invent" a new procedure on the spot to meet the needs of the parties.
Consider the following scenarios:
a. Mediation-arbitration
A mediator was asked to mediate a dispute between partners, who wished to separate and
divide up the business. Recognizing that the parties could agree on nothing to date, and that
failure to separate amicably at this time could cost both their business and possibly force them
into bankruptcy, the mediator suggested mediation/arbitration. He would first attempt to mediate
the matter, and if that failed, he would decide the matter as arbitrator. This assured finality and
not know was that the home office of the carrier had instructed the representative to pay whatever it took to settle. It
did not want to risk another Texas.
50
Case Study: Plaintiff retained a computer company to install a computer system to handle its new credit card
business. At the completion of the three-year contract, plaintiff threatened to sue for parts of the system that did not
work or were not completed. It sought $8 million.
In the course of the mediation, the bank lowered its demand from $8 million to $2 million and would not
move further. The computer company went from $500,000 to $800,000 and it would move no further.
Through the mediation, the mediator learned that defendant was going public. He knew the company had
to settle because it could not allow an $8 million claim to remain on its books. This would have had a serious
impact on the value of its initial stock offering. Defendant finally raised its offer to $1 million and then $1.3 million
and plaintiff accepted. Plaintiff also learned of the stock offering and, therefore, patiently waited until defendant
made a reasonable offer.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 28
avoided the parties going to court. They agreed, at the urging of their attorneys, and the matter
was resolved.51
b. Summary arbitration
A mediator attempted to mediate an antitrust dispute between two business entities, but
failed. The parties had already spent $500,000 each in discovery and anticipated spending
another $1 million to complete discovery and try the case. Trial was expected to take two
months, with an appeal to the federal Ninth Circuit Court of Appeals assured. Defendant was
prepared to bear these costs; the plaintiff was not in a position financially to do so.
Counsel for the parties met with the mediator and a summary arbitration process was
worked out to save both sides money and time in resolving the dispute. The partners allocated
six days to resolve the matter with no appeal, and the case was set for hearing two months of the
original mediation and not four years, and at minimal cost.52
51
Case Study: Partners originally operated a single repair shop, but later expanded to two shops. As the business
grew, so did their disagreements until they could no longer talk civilly to each other. They finally agreed to
separate, but could not agree on a basis for dividing the business. They agreed to mediate.
At the commencement of the mediation, the mediator determined the dispute had to be resolved inasmuch
as the parties did not have resources to litigate the matter. Both would become insolvent. He asked for authority to
decide the matter as an arbitrator if the mediation failed. With the encouragement of counsel, the parties agreed and
an agreement was signed. The mediator then placed the partners in separate rooms. He then met with counsel and
asked them to work together with him in resolving the matter, rather than advocating. He assured them that their
discussions with him would be kept confidential and not discussed with the parties. In this way counsel could act in
the best interest of both parties in resolving the matter.
Counsel and the mediator, using the conference format, discussed each issue that had to be decided. When
they reached agreement, it was presented to their respective clients for approval and then they addressed the next
issue. Only one issue did he, acting as arbitrator, have to decide. The attorneys accepted the arbitrator’s ruling and
went on to the next issue. In eight hours the matter was concluded and the business divided between the partners.
The key to resolution was getting the lawyers to work together for the good of both parties, rather than advocating
for their respective clients.
52
Case Study: Defendant, a large regional telephone company, sold its Yellow Pages on a regional basis. Plaintiff
initiated a Yellow Pages for local communities. Defendant liked the concept and did the same, driving plaintiff out
of business. Plaintiff then sued under §§ 1 and 2 of the Sherman Act seeking treble damages and costs and attorneys
fees, as provided by statute. The mediation failed, plaintiff turned down a $1.2 million offer. Because of the great
costs that would be incurred and the time necessary to prepare and try the case over a two month period and appeal
to the Ninth Circuit Court of Appeals, the parties sat down with the mediator to craft a more streamlined summary
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 29
c. Breakup of a law partnership--European arbitration
A contingency fee lawyer, a partner in a law firm that billed primarily by the hour,
decided to separate from the firm. A dispute arose as to how much he owed in costs and
expenses advanced by the firm to prosecute his contingency fee cases. Just before leaving the
firm, he received a large settlement in one of his cases, which he deposited in his personal
account rather than the firm account. For this, the firm reported him to the ethics committee of
the State Bar Association. Rather than permit the break-up to become a public record, defendant
requested mediation; however, defendant rejected this but agreed it would arbitrate the matter.
An arbitrator was selected.
Recognizing that formal arbitration could be costly, the arbitrator proposed a European
format, whereby he would do his own discovery, questioning, interviewing of witnesses, and
examination of documents. He also suggested he would work at the convenience of the parties
so that they would not have to retain outside counsel to represent them. The parties agreed and
the procedure outlined below was adopted.53
process. The intent was to stop costly discovery and resolve the matter in days, rather than months or years. A
format was established as follows:
1. Parties agreed to use three arbitrators both approved and who were experts in antitrust law.
2. No further discovery would be permitted. Depositions already taken would be submitted to the panel.
Expert opinions were to be submitted without objection.
3. There was to be no live testimony, only summary argument of counsel.
4. The hearing on liability was to take six days. Monday, all motions were to be heard. Tuesday and
Wednesday, plaintiff was to present his case in summary form. Thursday and Friday, the defense was to do
the same. Saturday, the panel was to reach its decision and announce it. No written opinion.
5. If liability was found, the date was to be set for hearing on damages, including attorneys fees and costs.
This procedure was followed and the panel ruled for the defendant. The matter resolved within two months of the
original mediation hearing and not four years later, and at minimal cost.
53
The arbitrator first resolved the ethical question and the complaint was dismissed. Thereafter, the arbitrator did
the following:
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 30
d. After hearing, the parties are given a second chance to negotiate
One arbitrator took advantage of the flexibility permitted in arbitration. Rather than
entering an award after hearing, he adopted a process whereby he reviewed the evidence with the
parties and counsel and indicated how he was reacting to it. He suggested how he might rule on
defenses raised and the damages pleaded. He withheld the final result. His goal was to clear the
air of some of the obstacles obstructing a settlement. At this point he gave the case back to the
parties for further negotiations.
If the parties reached a settlement, it was entered as the arbitrator’s award. If no
settlement was reached, he entered his own award and the matter was concluded. In conducting
arbitrations in this manner, fifty percent of the time parties are able to reach agreement.54
1. Rather than have each side hire a CPA to examine the books, the arbitrator got the parties to agree on a
single CPA and share the costs.
2. The arbitrator then set up a discovery process whereby he personally questioned witnesses and
examined documents. He permitted both sides to be present at all depositions and feed him additional
questions they felt relevant. The parties also produced documents he requested, as well as additional
documents they wished him to review.
3. At the conclusion of discovery, the arbitrator wrote up findings of fact, which he submitted to the parties
and asked them to make any changes, corrections, or additions they wished so long as they agreed. Those
findings for which there was no agreement, he decided.
4. The parties then made closing arguments and the arbitrator made his award. They scheduled monthly
payments as agreed to between the parties and the matter was concluded.
The process had several advantages: First, it was considerably less contentious and stressful on the parties. Second,
the parties saved a great deal in costs and expenses because they handled the matter themselves. Third, because the
parties directly participated in the process, they were able to accept the final result more graciously. Fourth, the
matter was resolved much more quickly than formal arbitration or a courtroom trial. Fifth, the matter was resolved
in a confidential setting so that outsiders did not even know there was a dispute. Further, none of the firm’s records,
including partner’s salaries, became public. An important consideration.
54
The arbitrator found that when parties took advantage of the second opportunity, both were relatively satisfied if
the case settled. He also found that if they did not settle and he entered an award for the same amount, both were
generally unhappy.
Case Study: Defendant, a newly licensed medical doctor, was heavily in debt with medical school expenses.
Working seven days a week to pay off his debts, he neglected his wife and children. She finally insisted they get
away to celebrate their upcoming wedding anniversary. He agreed and they arranged to spend the weekend in the
big city. Arriving on a Saturday, they visited the sites and concluded the day with a 2 ½ hour dinner at an upscale
restaurant. Probably drinking too much, they returned to their hotel and went to the bar for a nightcap. When the
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 31
e. Fixed high-low arbitrations
Using their engineering skills, arbitrators have come up with an offshoot of high-low
arbitration called fixed high-low arbitration.55 This is used primarily when damages are
substantial and identifiable, but liability is in question. Rather than spend considerable amounts
of money in pretrial discovery on damages, they are negotiated and fixed, a high and low. In
other words, if liability is found the high is entered as the award, and if no liability, the low. The
only issue tried is liability.56
Advantages of the process are, first, the case can be bifurcated and only the issue of
liability tried. Second, because no further discovery is required on damages, considerable costs
bartender brought defendant his drink, it was not what he ordered. When defendant objected, the bartender said it
was what he had been drinking all night. Defendant responded that he had just arrived.
Defendant’s wife insisted he pay the bill and they could retire. He resisted and the bartender signaled an
off duty police officer, who was in uniform, to remove him. As the officer approached, defendant swung and hit
him in the jaw, fracturing it. He was maced to the ground and taken to police headquarters where he was booked.
Later he pleaded guilty and got a suspended sentence. The local paper carried the story on the front page, and the
medical board required him to take counseling for six months for alcoholism. The officer sued demanding $200,000
in compensatory and punitive damages. The parties agreed to arbitrate.
At the conclusion of the hearing, the arbitrator reviewed the evidence with the parties. First, he concluded
there was clear liability; however, he was not going to award punitive damages because defendant had been
punished enough by the criminal proceedings, the adverse publicity, and action taken by the medical board. Also he
noted, the bartender took some responsibility for inflaming the situation in the first place.
At this point, the arbitrator gave the case back to the parties to negotiate further. After an hour, they settled
for $45,000. The arbitrator inquired as to reasons for the results, inasmuch as he would have awarded $100,000,
which was not disclosed. The parties explained that because defendant was heavily in debt, the most he could raise
to pay any judgment was $45,000 – second mortgage on his house. Any amount above that would have put him into
bankruptcy. Because a number of creditors were secured, the police officer would have recovered nothing.
55
High-Low arbitration is a process whereby the parties place a cap and floor on any award. Thus, if the parties
negotiate a high of $100,000 and a low of $20,000, any award above the $100,000 will be reduced to that figure and
any below $20,000, raised to that figure. The mediator is not informed of the high and low until after he makes the
award.
56
Case Study: Plaintiff was involved in a head-on collision, when she drove her car the wrong way on a one-way
highway. She had pulled into a restaurant on an island with the southbound traffic going on the west side and
northbound on the east side. After refreshing herself, she exited the parking area going south in the northbound
lane. She did not see the DOT arrow, which was blocked by traffic. She had a head-on collision with a car going
north. The collision litigation was resolved and plaintiff sued the restaurant and motel, which shared the parking
area, for failing to have proper signage indicating the direction of traffic.
The parties anticipated spending considerable amounts of money pre-trying the issue of damages. To avoid
this, they agreed to fix the damages with a high and low. They agreed to a high $450,000 if liability was
established, and a low of $35,000 if no liability. The matter was submitted to an arbitrator on liability who found for
the defendant. The award of $35,000 was entered.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 32
are saved, particularly in expert testimony. Third, the issue of liability can be tried by an
arbitrator or sent back to the judge for trial if the parties so desire. Most judges welcome the
opportunity to limit the issues to be tried.57
f. Baseball arbitration
Another creative mechanism that has been devised when mediation fails is "baseball
arbitration." The format was taken from the major leagues when there is a salary dispute
between a player and his ball club. Each sets the figure they wish: the player, what he wants to
receive, and the club, what it is willing to pay. The arbitrator, after hearing, must select one
figure or the other and cannot make an independent determination, as in straight arbitration.58
This format has been incorporated into mediation. When the parties go this route, each
side will set what they want to receive or are willing to pay. The arbitrator, then, must choose
one or the other and cannot make an independent determination; however, he can recommend
57
There is a second format that has been engineered. Plaintiff and defendant set any figure they wish. In this
instance, the mediator is not informed as to the high and low. After hearing, he makes a preliminary award. If it is
above the midpoint, it is raised to the high. If below, it is lowered to the low. Thus, if plaintiff sets a high at
$100,000 and defendant a low of $20,000, the midpoint is $60,000. If the arbitrator’s award is one dollar more, the
final award is raised to $100,000. If one dollar less, it is lowered to $20,000. As often happens, one party or both
may conclude the demand or offer is out of line and they need to change it. Plaintiff, for example, may decide to
lower the demand to $80,000, which lowers the midpoint of $50,000. Defendant may then decide to raise its offer to
$30,000, thereby raising the midpoint to $55,000. Parties, using this bidding process, might get close enough to
settle on their own.
58
Case Study: The Federal Telecommunications Act of 1996 required local telephone monopolies to make their
switching equipment available to competitors wishing to enter the market. The parties were required to enter
interconnection agreements making the existing monopolies switching equipment available until the competitor
could set up its own equipment. If the parties were unable to agree on terms for the interconnection agreement, they
were required to arbitrate.
Instead of extensive hearings with live testimony, cross-examination, findings of fact and conclusions of
law, which could take months or even years to complete, the arbitrator was limited to choosing one side or the
other’s position on each issue to be decided. He could not make independent findings and conclusions.
In one interconnection arbitration, there were in excess of 50 issues to be decided. By the time hearing was
held, it was down to 16 issues. During the course of the hearing the parties resolved ten more and six were left for
decision. The parties briefed the issues, submitted their final positions, and the arbitrator selected one party’s
position or the other on each issue. This was then reviewed by the Public Utilities Commission and the matter
resolved. The matter was resolved in weeks rather than months or years and at considerably less cost.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 33
splitting the difference if that is approved by the parties. Each side can change their figure until
the time a decision is made. The plaintiff, for example, may feel after hearing that his demand is
too high and lower it, or the defendant may raise his offer. The intent of the process is to push
the parties closer together so that they might just amicably settle the matter. 59
D. The Adversarial System Abused by Attorneys
Chief Justice Burger was quite concerned with lawyers who were the causes of conflict,
not its healers. The adversarial system spawns such lawyers. There are lawyers who become so
"mesmerized" by the process that settlement to them becomes a cop-out and only a courtroom
trial can satisfy their craving. As one trial lawyer, opposed to mediation, stated:
Trying cases is hard. It ruins lots of weekends and destroys lots of
marriages. It is emotionally exhausting. It causes you to drink too much,
smoke cigarettes, and sleep too little. So why do it? Because it's what we
do. It's fun. It's rewarding. It's important. And hearing a jury pronounce
a good verdict for your client is magical.60
59
Case Study: The parents of a 6-year old boy sued a concrete mixer truck company for hitting the child and
causing serious injuries. The child walked down an alley and, when he reached the street, darted out into the street
without looking for traffic. A driver behind the truck saw the child run into the street, but the defendant did not.
Because he was driving 26 mph in the 30 mph speed zone, he might have avoided the accident altogether if he had
been more alert.
At the time of the mediation, the child had had several operations on his left leg and had made a fairly good
recovery. Another surgery would be required when he was fully grown. At the mediation, plaintiff’s counsel
demanded $1 million. The insurance carrier offered $300,000. At the end of the day, the carrier offered $500,000
and the parents wished to accept it. Counsel insisted they continue to prepare for trial. At trial plaintiff’s counsel
lowered the demand to $800,000, but the carrier held firm. Plaintiff’s counsel then raised the demand back to $1
million.
A jury returned a defense verdict, which severely impacted on the family, because they had little resources
to care properly for their son. For the lawyer it was just another trial, and he was ready to go on to his next case.
60
One Illinois lawyer stated:
[Mediation] is public enemy #1 for trial by jury.
How can a person call himself a lawyer if he doesn’t try lawsuits? Well, they don’t. Now they call
themselves “litigators.” Litigators litigate, which means engaging in long, protracted expensive discovery
with the aim of settling the case at mediation. Litigators are pretty easy to identify. Just check and see how
many times they’ve been to verdict. Trust me, if you are a plaintiff’s lawyer, and you know the case is
being defended by a litigator, your client will do just fine --at mediation. The converse is equally true.
Plaintiff lawyers who don’t try cases consistently settle short.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 34
Behind the mask of acting in the interest of their clients, such lawyers not infrequently
push their clients to litigation when it is not in their best interest to do so, or push them to trial
when there is a settlement offer on the table they might wish to accept, because the lawyer
contends it is not enough.61 In any settlement discussions, they are controlling and often will not
let the clients speak. They're quick to terminate settlement discussions unless the other side
capitulates.
When successful, these trial lawyers are prone to hold press conferences to further their
reputations and garner more business, and they circulate among the profession the number of
multi-million dollar verdicts received each year. For many, it is big business and not a healing
profession. The adversarial system, as noted by Chief Justice Burger, gives these trial lawyers
the tools to further their "magical" needs. Two such tools are of particular interest because they
can become vehicles of abuse: the contingency fee arrangement and consumer class actions.
1.
Contingency fee cases.
Leaving the value of cases up to “ADR neutrals,” many of whom have never tried a case, is a perversion of
the Seventh Amendment and a disservice to at least one of the parties, if not both.
See Thomas Q. Keefe, Jr., Trial Lawyers Should “Get Back in the Saddle.”
61
Case Study: Plaintiff sued on behalf of his deceased wife’s estate for medical malpractice. The anesthesiologist
failed to monitor her properly when giving birth to her first baby. The baby survived and was a healthy girl.
Plaintiff did not attend the mediation and the mediator was not permitted by counsel to even speak to him
on the phone. The insurance carrier offered $700,000 to settle the matter and plaintiff’s counsel demanded
$800,000, and said this was as far as he would go, “read my lips.” The insurance carrier offered to split the
difference, but counsel without conferring with his client, refused and instead raised his demand to $1million. The
case went to trial and the jury returned a verdict of $650,000. Costs of litigation for the plaintiff was another
$30,000. Although plaintiff received less than offered, the real tragedy was that the carrier was prepared to place a
portion of the settlement into a structured annuity, which would have provided ongoing income to plaintiff and the
child for an indefinite period of time. Instead, he spent the entire recovery in two years, purchasing new cars for
himself and girlfriend, and taking her on a trip to Paris. Counsel would not even consider a structured annuity,
although he recognized plaintiff was a good candidate for such.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 35
Although contingency fee cases open the courts to many who would otherwise be denied
justice, still, they have also opened the courts to serious abuse. Only in the United States have
contingency fee cases thrived. No other court systems in the world, including Great Britain and
Canada, permit contingency fee arrangements. Because a contingency fee can be as high as fifty
percent, attorneys gain a substantial proprietary interest in the outcome. It is the attorney that
invests the time and advances the costs and expenses. For these reasons, any settlement must
accommodate his interests, as well as the client’s. In advising the client, there is a strong
incentive to protect his investment first.62
The contingency fee arrangement thrives in the adversarial environment in other ways. It
facilitates attorneys in filing high-risk cases with the hope of making a substantial recovery. The
client consents because the entire risk is borne by the attorney.63 However, such cases can place
62
Case Study: Plaintiff sued her husband for divorce. They reconciled and signed a postnuptial agreement which
provided that if they should later divorce he would pay her $4 million and give her the house. Her attorney urged
her not to sign but she did. Thereafter, she sued for divorce a second time and filed a declaratory judgment action to
set aside the postnuptial agreement. She sought one-third of her husband’s $100 million estate. Again, they
reconciled and the declaratory judgment action was by consent dismissed with prejudice. No appeal was taken.
Eighteen months later, she filed again for divorce and this time it was granted. Getting new attorneys, she sued to
have the postnuptial agreement set aside on the grounds that it was procured by fraud. The court ruled against her,
but she declined to take an appeal because counsel told her she would have to pay her husband’s attorney’s fees,
over $1 million, as provided in the postnuptial agreement. They were in error in that as a matter of law she would
not have to pay her husband’s attorney’s fees. However, dismissal of the original declaratory judgment action with
prejudice made the issue of fraud moot because of res judicata or claim preclusion.
At this point she hired a high-risk plaintiff’s attorney to sue her prior attorneys for legal malpractice. He
took the case on a contingency fee basis. He ran up the fees the defendants incurred to seven figures. With little
likelihood of success he filed numerous motions and appealed the trial court’s decision to dismiss the claim.
When a substantial six-figure offer was made, counsel rejected it as an insult and demanded $3 million. As
he explained it to the mediator, he had nothing to lose because it had been a good year, and he could easily finance
the case. He was not concerned because if he won, the rewards would be great. He lost and the state supreme court
affirmed the dismissal.
63
Case Study: Plaintiff, a food distributor, sued a competing distributor and the purchasing agent for a number of
school districts. The complaint alleged that defendant food distributor conspired with the purchasing agent to rig the
bidding process so that it would receive the contract to supply food products to school cafeterias. It alleged
violations of § 1 of the Sherman Act, which provided treble damages and costs and attorneys fees.
At the mediation, the mediator, with a background in antitrust law, pointed out that there was little
likelihood of success on the merits because the conspiracy was vertical and the impact on the market insufficient to
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 36
a heavy financial burden on the defendant, who must defend. Even if they win on the merits, they
have lost in terms of time, costs, and emotional stress. The strategy of such attorneys is to run
costs as high as possible thereby forcing capitulation in what might otherwise be a meritless
case.64
Contingency fee lawyers take great pride in the number of multi-million dollar cases they
have won, and often publicize the fact to the public. Indeed, contingency fee arrangements
combined with the jury factor, are a major drain on the American economy and place a heavy
financial burden on the business community and insurance industry. The adversarial system
nurtures both.65
trigger an antitrust violation. However, the case still settled for $1.65 million because of the costs that would be
incurred going forward.
The defendant food distributor paid $1 million even though liability was highly questionable. Defense
counsel told its client it would cost $2 million to $3 million to defend. Therefore, $1 million seemed like a bargain.
The purchasing agent’s insurance carrier paid $650,000 because it would spend at least $750,000 or more
to defend. The purchasing agent had a million-dollar insurance policy. It was a withering policy in that attorneys
fee and costs incurred reduced the coverage amount. At the time of the mediation, $250,000 had been spent,
reducing coverage to $750,000. Because the entire amount and more would be spent defending, the carrier agreed to
pay $650,000 to settle the claim. This at least saved $100,000 that would have otherwise been spent if there had not
been a settlement.
64
Case Study: The abuse that can occur in the adversarial system caused by the contingency fee arrangement is
illustrated in a case filed by a workman who lost his hand in an industrial accident. He sued the manufacturer of the
machine he was working on. As he was working, a problem arose involving the inner workings of the machine. A
plate in the front of the machine was to be opened to reach the interior. When the plate was opened, it automatically
shut down the machine. Instead of using this means to reach the source of the problem, he went to the rear of the
machine and removed a plate that had been bolted on, which did not shut off the machine. He then reached inside in
an effort to correct the problem and lost his hand.
At the mediation, it was established that his supervisor had warned the plaintiff about removing the bolts
that held plates, which he ignored. The insurance company, recognizing that the case was filed in a liberal venue,
paid $300,000 to settle the matter. It was concerned that a jury would award much more in spite of the comparative
fault of the plaintiff.
65
The amount of attorney’s fee awarded is dependent upon the complexity of the matter, the different court steps
taken to resolve the matter, the amount of money involved, and, in some cases the conduct of the parties.
See, http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/168_2009_05;
http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/169_2009_05;
http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/168_2009_06.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 37
As long as lawyers have no accountability in contingency fee cases, they will prosecute
even minimally viable actions with the hope of succeeding before a jury. It is here suggested
that the Canadian model might be considered to curb these abuses. The rule is that costs follow
the event: thus, if plaintiff wins, he or she is entitled to taxable costs and disbursements from the
defendant. If defendant succeeds and plaintiff’s case is dismissed, defendant is entitled to its
costs and disbursements paid by the plaintiff. Under this system taxable costs include between
one-third to one-half of the actual legal expenses.66 There is, however, a further check on
plaintiffs pursuing frivolous lawsuits. A defendant can make a formal offer to settle and if not
accepted and the result at trial is less than the offer to settle, the court can award taxable costs
against the plaintiff, even if the latter is successful at trial.
2.
Consumer class action.
Another area of abuse is the filing of consumer class actions, which are always taken on a
contingency fee basis. This is a lawsuit that belongs entirely to the lawyer inasmuch as the
complaining party has a minimal stake in the outcome. However, the costs of defense can be
excessive because of the potential size of the class. Even litigating the issue of class certification
can be costly. Therefore, great pressure is placed on the defendant to settle if the opportunity
arises, regardless of the merits of the claim.
66
Case Study: In the federal court action referred to in footnote 63, separate attorneys filed a class action in state
court seeking to represent the parents of children purchasing the food products in question in their respective schools
cafeterias. They filed in state court for two reasons: one, the case could not then be combined with the case in chief
filed in federal court; and, two, state rules concerning class certification were considerably more liberal than the
federal rules.
Counsel did very little while motions to dismiss and summary judgment were litigated in the primary
action. They then relied on several favorable rulings. When the federal action was settled, counsel went forward
with its motions for class certification. They took some discovery and briefing for an interlocutory appeal, which
ran up the cost of defending. Recognizing that defense costs would only escalate, defendant offered to settle for
$500,000. The attorneys rejected this as an insult and demanded $17 million. Counsel observed they had had a
good year and therefore could afford to bear the time, risks, and costs of proceeding ahead. The possibility of a
large return made the gamble worthwhile. Ultimately, defendant settled for $1,750,000 to avoid further costs.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 38
What makes consumer class action so imposing is that the defendant can never be certain
as to the size of the class. Under Rule 23 of the Federal Rules of Civil Procedure, if the class
action is certified the best notice possible under circumstances is made to identify the class. All
potential class members remain in the class unless they affirmatively opt out. Many receiving
such notice do nothing, feeling they do not want to be involved, and yet such inaction makes
them viable class members.
A defendant in a consumer class action is faced with a Hopkins choice. It either
succumbs to the pressure to settle for a substantial amount to satisfy class status, or spend
inordinate amounts of money defending and facing that one in ten chance of losing all. A losing
defendant not only faces substantial damages but the costs of notice to the class, a substantial
cost in itself. Plaintiff’s counsel, on the other hand, risks nothing but their time and costs
incurred to prosecute the action.
There is, however, an even greater potential for abuse. There are lawyers who shop for
class actions, reviewing cases that have already been filed. If the plaintiff in such a case has not
made a claim for class action status, their modus operandi is to "piggyback" the action and file a
separate class action. They then sit back and permit counsel in the primary action to prosecute
the case and then assert their class-action status. They even delay seeking class certification as
long as they can. They generally file in state court, which in many states has more liberal classaction rules than federal court. Such plaintiffs’ counsel risk little except their time and costs and
yet they put defendants to great expense in defending.
E. Trial in the Courtroom is All-Out War
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 39
Under the adversarial system, the filing of an action in the courtroom signals all-out war.
67
It immediately is taken as a threat to the other side and puts them on the defensive. Just the
pleadings can have a serious emotional impact, particularly when they plead fraud, RICCO, and
antitrust violations. Protected by privilege, lawyers can plead most anything they wish just to get
the other side’s attention. When such pleadings prove frivolous, there is little room for sanctions
or other measures to curb such excesses. And, in any event, the emotional damage is done.
Additionally, in discovery the adversarial system permits the lawyer to engage in such excesses
as seeking contempt orders or sanctions, which further embroils the parties in battle.
There is another side to the courtroom battle, and that is the impact it has on the
attorneys. Many attorneys preparing for trial will prime themselves by finding reasons to dislike
opposing counsel, or convince themselves the party opponent is prevaricating. The system turns
lawyer against lawyer, the plaintiffs’ bar against the defense bar.
F. Lawyers Required to Make Life Decisions for Their Clients
Another concern Chief Justice Burger had with the adversarial system is that it cannot
accommodate attorneys who mistakenly advise their clients to file suit, or reject an offer to settle
when it is in their best interest to do so. Wrong advice can have dire consequences for the client
because the system does not accommodate losers.68 The system is a difficult taskmaster to those
who fail.
67
Case Study: Husband and wife agreed to get divorced. Before lawyers were retained, they amicably resolved
many differences. After the lawyers were retained and depositions taken, the husband said he gained a hatred for his
wife and her attorney he did not think possible. And the wife, after deposition, explained that her husband’s
attorney made her feel like an alcoholic, harlot, a person of no value and not worthy of consideration. She ended up
in the hospital with clinical depression.
68
Supra, n. 8. In the case study discussed at note 9, supra, counsel examining the case recommended that it be filed
against an international conglomerate, which was interfering with the contractual rights plaintiff had with its
established distributors. The plaintiff sought $8 million in damages. Counsel could not have anticipated that the
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 40
Mediation does not have such dire consequences. First, the decision to settle is placed
squarely in the hands of the parties. It is their decision alone as to whether they should resolve
their differences or send the case back to the courts. And they make their decision after hours of
careful negotiations.
Second, in making the decision to settle, the parties have the benefit of the third-party
mediator, who is impartial in the matter and can provide a fresh look at the proposals and their
consequences.
Third, the mediator is often in a better position than counsel to assist the parties because
the albatross of advocacy does not burden him or her. The mediator sees the case through a
different prism than counsel and can often identify problems counsel may be overlooking or not
evaluating properly.69 Additionally, the mediator is not just another attorney, but a person
trained in the art of settlement.
conglomerate would file an antitrust counterclaim, claiming a total of $500 million in damages. The mere filing of
the counterclaim threatened the very viability of the plaintiff. Its stocks went down and future plans were put on
hold pending the outcome of the case.
To respond to the counterclaim, high-priced antitrust trial lawyers were retained, as well as experts in the
law, and a real battle ensued. When pretrial discovery was completed, plaintiff had spent many times the $8 million
it was seeking by way of damages. Although it settled the second week of trial through mediation with no money
being exchanged, the case was an expensive disaster for the plaintiff.
More revealing was the fact that the federal district judge, on the eve of trial, indicated to the mediator that
he was close to dismissing both the claim and counterclaim on the grounds that neither was viable.
69
Case Study: Plaintiff, a first officer flying international routes, was in a car accident driving home from the
airport. She was concerned about the accident in that it might interfere with her goal of reaching captain, which few
women had so far achieved.
At the mediation, she made unrealistic demands and the mediator was having difficulty getting her to
compromise. In one caucus, her attorney produced a number of documents, which were about to be turned over to
the defendant. The mediator discovered one which entirely changed the complexion of the case. In fact it seriously
jeopardized her continuing employment with the airlines.
The document, the mediator noted, which counsel had overlooked, was the semiannual medical report
pilots must file to fly. It was filled out shortly after the accident. In various boxes, plaintiff checked “no” to such
questions as, “frequent or severe headaches,” “neurological disorder,” “other illness, disability, or surgery,”
“significant medical history,” “abnormal physical findings.” She also checked “normal” for the following: “head,
face, neck and scalp,” “upper and lower extremities (strength and range of motion).” What she marked contradicted
what she was alleging in her lawsuit. If her medical report was correct, she had no lawsuit. If it was false, she was
subject to felony charges and loss of her pilot’s license. A notice appeared on the first page of the report. It stated:
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 41
For the lawyer, a wrong decision means he or she will simply go on to the next case. For
the client, it could have lifelong consequences.
G. The Adversarial System Facilitates Vindictive Conduct
Associate United States Supreme Court Justice Antonin Scalia expressed grave concern,
as noted above, that the American system of justice permits Americans to seek "vindication or
vengeance through adversarial proceedings rather than peace through mediation."70 By the very
nature of the system, it facilitates parties and counsel to engage in vindictive conduct. The large
business entity with unlimited resources has a decided advantage over its small competitor,
which may have limited means to finance litigation. With extended and expensive discovery, the
smaller entity may be forced to capitulate for lack of funds, regardless of the merits. For
example, a manufacturer may commence a declaratory judgment action to terminate a
distributor. It may then use the lawsuit not only to terminate the distributor, but also run it out of
business and make it an example to other distributors.71
And in family law matters, lawyers not infrequently allow themselves to be used by
clients, particularly in divorce, to brutalize the opposing spouse. Because the system places
“NOTICE – Whoever in any matter within any jurisdiction of any department or agency of the United States
knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or devise a material fact, or who
makes any false, fictitious, or fraudulent statements or representations, or entry, may be fined up to $250,000 or
imprisoned not more than five years or both.” (18 U.S. Code §§ 1001-3571) When this was pointed out, the case
quickly settled. Filing the complaint, a public record, risked the FAA picking it up and taking action.
70
See, Learned Hand, supra note 16.
Case Study: A large manufacturer commenced a declaratory judgment action terminating a distributor, which was
seeking damages for breach of its distributor agreement. The distributor’s claim was meritorious. After 10 years of
costly litigation, the distributorship simply ran out of money and faced bankruptcy. All it’s savings and profits were
put in to the litigation. It then offered to settle its claim for a fair figure and agreed to terminate its distributorship,
which the manufacturer was asking in the first place. The latter would not accede to its request. It wanted to
bankrupt the distributorship to make it an example to other distributors that might have views contrary to the best
interests of the manufacturer. Out of emotional and financial exhaustion, the distributorship capitulated all grounds
and went out of business. The adversarial system accommodates such motives.
71
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 42
divorce and family issues in the hands of the adversarial system, it subtly accommodates such
abuse.
Certainly, the U.S. Government has a decided advantage over most entities it might sue.
The mere threat of extensive discovery and other litigation costs may thwart any attempt to
defend. The only option is to capitulate on government terms. Only the Microsofts of the nation
can adequately defend and even then at a heavy price.
H. The Adversarial System Negatively Impacts on Lawyers Participating in It
A final concern Chief Justice Burger had with the adversarial system was how it
impacted lawyers engaged in it. Students graduating from law schools do so with the highest
expectations and motives to fulfill the inspiring admonition of the Chief Justice: "The obligation
of your profession is to serve as healers of human conflict."72 However, something happens
when they actually enter law practice. They quickly learn that the system is a difficult
taskmaster, that billings are the measure of their worth, that to make the tenure track they must
work evenings and weekends, and that in large firms their greatest competition for partner are
those who were hired at the same time. They are praised for their slavish work habits and
instilled with the win-at-all-costs mentality.
Seasoned trial lawyers, conditioned to the adversarial system, find it mesmerizing,
addictive, and all absorbing. They become servants rather than masters. Alcoholism, drug
addiction, and health problems become a way of life. Certainly, they must become more
72
Warren E. Burger, Declining of Professionalism, 61 TENN. L. REV. 5 (1993), quoting Warren E. Burger, The Role
of the Law School and Teaching of Legal Ethics and Professional Responsibility, 29 CLEV. ST. L. REV. 377, 378
(1980).
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 43
aggressive and less concerned with the adverse impact they are having on the lives of others.
This is required just to survive.
In mediation, the lawyer’s role and lifestyle are quite different. As the Chief Justice
stated, lawyers must be "problem solvers" rather than adversaries, "harmonizers" rather than
victors, "peacemakers" rather than in impeachers, and "healers" rather than those who burden
others. Indeed, lawyers are required to work with each other in mediation and not against. Their
goal is collective not singular. The challenge is to be creative for the common good. They must
work in harmony with the mediator to find a resolution that can lift the albatross burdening their
clients. When all is said and done, they must have a very different mindset from the advocate.73
This may seem a harsh assessment of the adversarial system and the advocate’s role in it.
Yet, this is the system Chief Justice Burger was bringing to task because he was critically
concerned with what the system was spawning. He espoused mediation and the many benefits
derived therefrom, not the least of which is the benefit to the practitioner personally. "Victory"
has a very different definition in mediation. It spells peace and conciliation for the client, and a
sense of satisfaction and accomplishment for the lawyer. As Abraham Lincoln stated: "As
peacemaker, the lawyer has a superior opportunity of being a good man;" indeed, mediation has
made the legal profession a noble one.
This is not to imply that Chief Justice Burger was suggesting we abandon the adversarial
system. It clearly serves an important function when all else fails. More important, the court can
73
Warren E. Burger, Isn’t There A Better Way? 68 A.B.A.J. 274, 275 (1982).
It should be noted that not all mediators are peacemakers. Some, particularly ex judges, prefer to play
“devil’s advocate” and confront parties and counsel and put them on the defensive. This limits their capacity to be
problem-solvers, harmonizers, and healers. Certainly, Chief Justice Burger was espousing the highest level of
lawyering that redefines the practice of law as a noble profession.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 44
play an adjunct role in mediation, supervising discovery and clearing the air of legal issues
through summary judgments and interlocutory repeals.
IV.
CRITICS OF CHIEF JUSTICE BURGER’S CALL TO MEDIATION
Of course, many arguments have been raised attacking Chief Justice Burger’s clarion call
to mediation. With the dramatic decline in courtroom trials, particularly in federal courts,
detractors have tried to make mediation the whipping post for the court’s failings in the dispute
resolution marketplace.74 It should first be noted that mediation is not the only reason for the
decline in courtroom trials. There are a number of factors coming into play, including action
taken by the courts themselves, disposing of cases by summary judgment, resolving disputes by
arbitration, and actions taken by Congress and state legislatures to implement mediation. 75
However, detractors raise a number of concerns with cases being resolved outside the courtroom.
74
Mediation has been described as a process designed to bypass the courts and undermine our jury system. See, e.g.
Owen M. Fiss, Against Settlement, 93 YALE L. J. 1073 (1984); Eric K. Yamamoto, ADR: Where Have the Critics
Gone? 36 SANTA CLARA L. REV. 1055 (1996). There have been expressions of concern that mediation undermines
the rights of women in family law disputes. See, Trina Grillo, The Mediation Alternative Process Dangerous For
Women, YALE L. J. 1545 (1991). Others have expressed concern that the informality of ADR fosters racial and
ethnic prejudices. See, Richard Delicado, Fairness and Formality: Minimizing the Risk of Prejudice in Alternative
Dispute Resolution, 1985 WISC. L. REV. 1359 (1985).
One federal judge stated:
I’m quite surprised that an organization composed of lawyers [Iowa Bar Association] would be pleased that
the primary tool used to resolve disputes since the founding of our country is declining and furthermore the
decline is “impressive.” In fact it is a compelling matter that all people who care about our country and its
laws should be shocked about. It is important to remember that the Seventh Amendment to the U.S.
Constitution and the entitlement amendment to the Iowa Constitution are binding on all branches of the
government.
United States District Judge Robert W. Pratt, Southern District of Iowa, editorial in the Des Moines Register, August
15, 2003.
75
The courts themselves have contributed significantly to the decline in courtroom trials. First, judges have long
encouraged parties to settle before trial, and a large percentage do settle at the negotiation stage. More recently
judges and magistrates have provided settlement conferences and even mediation services. Also, through pretrial
procedures, courts are playing an adjunct role to mediation by ruling on various motions and streamlining the
pleadings. Professor John Lande stated: “Court have taken on the role of case managers in addition to adjudicating
the odd cases that do not settle before trial, ruling on pretrial motions and providing substantive and procedural rules
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 45
1.
Undermining the jury system.
A primary argument is that mediation undermines our jury system which, according to
one federal judge, "is the purest form of democracy known to our land." 76 It should first be
noted that Chief Justice Burger expressed no concern that mediation might impact on jury trials.
to help parties settle.” See, John Lande, Shifting the Focus from the Myth of the “Vanishing Trial” to Complex
Conflict Management Systems or I Learned Almost Everything I Need to Know About Conflict Resolution from Mark
Gallanter, 6 CARDOZO J. of CONFLICT RESOL. 191, 202 (2006). According to Professor Lande, a major
function of courts today is not to try cases, but to help parties “bargain in the shadow of the law.” See, also, Robert
H. Mnookin and Lewis Kornhauser, Bargaining in the Shadow of the Law: The Case of Divorce, 88 YALE L. J.
950, 968-69 (1979).
Second, both federal and state courts have become far less reluctant to dispose of cases by summary
judgment and motions to dismiss. In federal courts, for example, disposition of cases by summary judgment just 25
years ago was only a fraction of cases going to trial, whereas today it “is a magnitude several times greater than the
number by trial” See, Marc Gallanter, The Vanishing Trial: An Examination of Trials and Related Matters in
Federal and State Courts, 1 J. EMPIRICAL STUD. 459, 484 (2004).
This liberalization in the granting of summary judgments is due to a trilogy of United States Supreme Court
decisions: Matsushita Electric Indus. Co. v. Zenith Radio Corporation, 475 U.S. 574 (1986); Anderson v. Liberty
Lobby, Inc., 477 U.S. 242 (1986); Celotex Corp. v. Catrett, 477 U.S. 317 (1986). But see, Stephen Burbank,
DriftingToward Bethlehem or Gomorrah? Vanishing Trials and Summary Judgment in Federal Civil Cases, 1 J.
EMPIRCAL STUD. 643 (2004). See also, Arthur Molter, The Pretrial Rush to Judgment: Are the “Litigation
Explosion,” “Liability Crisis,” and Efficiency Clichés Eroding our Day in Court and Jury Trial Commitments?” 78
N.Y.U. L. REV. 782 (2003).
Third, a major cause for the decline in courtroom trials is the fact that certain areas of dispute have been
removed from the courts entirely and resolved through arbitration. Disputes in the brokerage industry are now
resolved primarily through arbitration as required by agreements between broker and customer. Likewise, credit
card issuers and their customers and utility companies and the rate payers are required to arbitrate pursuant to
agreement. See, Gilmer v. Interstate/Johnson Ln. Corp., 500 U.S. 20 (1991).
Fourth, even Congress and state legislatures have impacted on the decrease in courtroom trials. In federal
courts, the Alternative Dispute Resolution Act of 1998, mandates that each federal district adopt local rules,
implementing its own ADR program. See, 28 U.S.C. § 651(b) (2001). A number of federal Courts of Appeals
require pending appeals to go to mediation before they will be heard. See, Robert J. Niemi, Mediation And
Conference Programs In The Federal Courts Of Appeals, 61-77 Fed. Judicial Ctr. 2d (2006).
Hundreds of state statutes establish mediation programs in a wide variety of contexts. See Sarah R.
Cole, Craig A. Mcewen & Nancy H. Rogers, Mediation: Law, Policy & Practice, app. B (2d ed. 2005). Many
states have created state offices to encourage greater use of mediation. See, e.g., ARK. CODE ANN. §§ 16-7-101 to 207 (1999 & Supp. 2005); HAW. REV. STAT. §§ 613-1 to -3 (1993 & Supp. 2004); KAN. STAT. ANN. § 5-501 to -504
(2001); MASS. GEN. LAWS ANN. ch. 7, § 51 (West 2002); NEB. REV. STAT. ANN. §§ 25-2901 to -2942 (LexisNexis
2004); N.J. STAT. ANN. § 52:27E-73 (West 2001); OHIO REV. CODE ANN. §§ 179.01–.04 (LexisNexis 2001 & Supp.
2005); OKLA. STAT. ANN. tit. 12, §§ 1801–1813 (West 1993 & Supp. 2006); OR. REV. STAT. ANN. §§ 36.100–.270
(West 2003 & Supp. 2005); W. VA. CODE ANN. §§ 55-15-1 to -6 (LexisNexis 2000). See generally Suzanne J.
Schmitz, A Critique of the Illinois Circuit Rules Concerning Court-Ordered Mediation, 36 LOY. U. CHI. L.J. 783
(2005) (discussing the function of court-ordered mediation in Illinois circuit courts). See, Peter L. Muray, The
Privatization of civil Justice, 91 JUDICATURE 272 (2008).
76
Mark A. Bennett, United States District Court Judge, Northern District of Iowa, letter on file, July 20, 2010.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 46
In fact, he did not even address the question, although he must have been aware of its
implications.
Although a jury trial was important during the early years of our Republic, it is not so
sacrosanct today that it cannot be challenged. 77 For the most part the jury trial has been
abandoned throughout the world except in the United States, Louisiana being the exception. One
federal judge, lamenting the decline in jury trials, suggests that, "Judges gain their legitimacy as
decision-makers from juries, not the other way around." 78
It is contended that juries give predictability for future guidance and assurance that an
outcome will be fair. However, on both counts juries have failed to live up to their billings: they
neither forecast a result for future reference, nor give parties any assurance whatever that a fair
and objective result will be reached. On the contrary, they have become an unknown factor, a
roll of the dice with no great predictability or reliability, which undermines the credibility of the
adversarial system itself. In fact, mediators use this unpredictability to encourage parties to
compromise and settle.
The reason juries today are unpredictable and uncertain is because they are vulnerable to
many outside influences never envisioned by the framers of the United States Constitution. First,
lawyers and a judge screen jurors through voir dire. Parties even retain professional jury experts
77
The Founding Fathers looked to England for including trial by jury in the Bill of Rights (Sixth Amendment –
criminal cases, Seventh Amendment – civil cases) to the U.S. Constitution. It was a protection against the
arbitrariness of judges appointed by the crown. The English experience was that the jury acted as an essential
countervailing force against tyranny of the Crown. William Blackstone wrote, that it was “the most transcendental
privilege which any subject can enjoy, or wish for, that he cannot be affected either by his property, his liberty, or
his person, but with the unanimous consent of 12 of his neighbors and equals.” See, 3 William Blackstone,
Commentaries on the Law of England 379 (1765) (By 1936, jury trials in England and Wales were for the most part
abandoned entirely with the enactment of the Administration of Justice (Miscellaneous Provision) Act. Confidence
in the impartiality of judges made them unnecessary.)
78
Robert W. Pratt, United States District Judge, Southern District of Iowa, letter on file, August 18, 2010.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 47
to help in profiling jurors to assure the party has a favorable panel. Many times the outcome of
the case may hinge on who did the better profiling, and not the merits of the case.
Second, campaigns by insurance companies, threatening to raise insurance rates if
"frivolous" lawsuits continue to be filed, impact jury decisions. High profile cases such as the
McDonald’s case, where the plaintiff was awarded $3 million for spilling a cup of hot coffee
while driving, likewise influences juries to be more conservative.
Third, the media has also impacted juries and their decision-making function. Most
jurors have watched television shows, such as Judge Judy, and feel they have a good
understanding of what to expect.
Fourth, it has been demonstrated that jurors are prone to decide cases based on people,
those they like and dislike, rather than the facts or law. 79 They will help those they like and
punish those they dislike, regardless of the merits.
79
See H. Case Ellis, Whose Peers Are These? Attorney H. Case Ellis has made a twelve-year study of jury verdicts
and the reasons that motivate jurors. See H. Case Ellis, The Docket, The Official Publication of the Lake County
Bar Association, Sept. 2007, Vol. XIV, no. 9, pp. 23-33. His conclusions are revealing. First, jurors are more
concerned about the parties than the issues being tried. To jurors, “this is a contest between two or more PEOPLE.
What matters most to them are whom they like and whom they dislike! The really tough deliberations occurred
when they liked everybody and they had to rationalize hurting one of them or struggle to compromise enough that
they upset neither.”
Second, jurors are prone to help a party when they feel counsel is incompetent, especially when they like
the party. In one case the jury “felt sorry for this clearly negligent defendant because he was remorseful and his
attorney had been so incompetent that the defendant must have been worried throughout the trial by his defense
lawyer’s conduct.”
In another case, the jury helped a woman whose attorney, the jury determined, was unqualified to handle
the trial. “They took it upon themselves to protect the woman and awarded her more than her lawyer had
requested.”
Third, juries are subject to agenda jurors, that is, a juror who has ulterior motives and seeks to steer the jury
to a specific result, which will make a statement of some sort that transcends the specific case being presented.
Fourth, the jury system is prone to the occasional case where the jury awards an excessive amount that
surpasses anything that is reasonable, the so-called “run-away jury.”
Fifth, the influence of lawyer or judge television, such as “Judge Judy,” should not be underestimated. Mr.
Ellis noted, “I never bring up the subject of television in my interviews, but more than half of the interviewees will
reference either a law serial or a ‘judge’ show as proof that they have some experience with ‘what’s going on in the
courtroom.’”
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 48
Fifth, jurors are greatly influenced by the attorneys appearing before them. To a degree,
trial lawyers must be actors. Considerable continuing legal education classes address how best
to influence the jury. And much time is spent learning how to be an effective attorney.
Taking the above into consideration, it is difficult to support the proposition, as one
federal judge stated, "the true value of cases is best set by peer juries.” 80 It is belied by the fact
that no one can predict what a jury will do. Lawyers recognize they lose cases they should win,
and win cases they should lose. Indeed, it is the unpredictability of jurors that lawyers and
parties must weigh in deciding whether to settle at mediation. Mediators use this as one of their
settlement arrows to encourage parties to settle.81
2. Lack of trials undermines the appellate process.
Detractors contend that mediation is undermining the development and evolution of law,
which a vibrant society requires. With fewer cases going to trial, fewer are candidates for
appeal. Thus, one of the court’s main functions, to meet the changing needs of society, is
abrogated. As one scholar stated: "Ultimately, the paucity of contemporary judicial decisions
Sixth, one of the most serious concerns with jurors is their use of the internet to bring in matters outside the
courtroom. In the very public trial of Governor Ryan of Illinois, for example, one of the jurors actually printed out
Illinois case decisions from the internet and threatened another juror by citing those cases.
Seventh, the adverse publicity issuing from insurance companies and big business has impacted jurors. Mr.
Ellis stated, that in “the last three years . . . it is rare that I speak to a juror who does not at least mention that ‘I am
aware of all the frivolous lawsuits,’ at some time during our interview. I believe the anti-litigation message of big
business and the insurance industry is finally starting to get to the jury pool. . . . This may be today’s greatest
challenge for plaintiffs’ attorneys.”
80
Mark A. Bennett, United States District Judge, Northern District of Iowa, letter on file, July 20, 2010.
81
Case Study: An insurance claims office mediated a number of cases successfully over several years. It saved its
carrier significant amounts of money. When a medical malpractice case came across its desk, which could have
been settled for $250,000, the office decided to defend. The jury returned a verdict of $4.5 million, to the utter
consternation of the office. The consequences to the office were serious. The office manager was transferred to a
lower paying job, and the adjuster in question was released for “other causes.”
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 49
supplying and enforcing the norms of law may lead to a blurring and weakening of the authority
of law itself."82
It is true that the more parties turn to mediation, the greater could be the impact on the
law. Certainly, Chief Judge Burger appreciated this, and yet his prognosis was still severe. It was
that the adversarial system would no longer be adequate; it will go the way of ancient trial by
"battle and blood." In making his prognosis he did not express concern about the possible impact
this would have on appeals. He advocated for what he considered to be in the best interest of the
citizenry. He balanced the need for appeals with the benefits to society.
However, upon closer examination, the consequences of mediation may not be as severe
as naysayers might contend. Consider the following: First, many appeals will continue to be
generated by motions to dismiss and summary judgment. Generally, when interlocutory appeals
are certified at both the federal and state levels, they involve significant questions of law.
Mediation should not significantly deter such appeals and, in fact, should work hand-in-hand
with judges considering them. Many times parties will not seriously consider mediation until
avenues of appeal have been exhausted or questioned areas of law clarified.
Second, there will always be certain cases that cannot be settled and will have to be tried.
Those involving important legal questions will likely reach the appellate courts. Cases involving
class actions and novel causes of action, for example, are fertile grounds for appeal.
Third, there will still be actions in equity that call for relief other than the money
damages. Appeals from lower court rulings will remain a source of review by higher courts.
82
See, Owen M. Fess, Against Settlement, 93 YALE L.JL.J. 1073 (1984).
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 50
Although mediation can address questions of equitable relief, most mediations rise out of actions
of law.
Fourth, parties will still resort to three-judge federal district courts to resolve important
questions of federal constitutional law.
Fifth, most family law matters must be submitted to courts for review and approval even
when there has been a successful mediation. Thus, they also can trigger appeals.
Six, appeals in criminal cases are not impacted by civil mediation. Thus, they provide a
rich source of evolving law and will continue to do so.
3. Mediation is the tool of big business and insurance carriers.
It is next contended that mediation is the tool of big business and insurance carriers. It is
true that initially insurance carriers pushed mediation to save money, and that plaintiff’s counsel
were concerned that big business was pushing plaintiffs to settlements counsel felt were
inadequate or not what a jury would award. However, as plaintiffs’ counsel became familiar
with the process, they realized it benefited them in several ways: one, they many times settled
their cases even before filing, which saved them time and money; two, settlements were often
higher than what they might expect if they went to trial; 83 third, mediation was more
expeditious, often settling in one day and not months or years after filing; and, fourth, they found
that the clients were happier with the process.
83
One venue, Polk County, Iowa, kept a record of all verdicts for a ten-year period. What it found was that 40% of
the cases tried were defense verdicts, and 70% were $25,000 or less (including the defense verdicts). The author has
mediated over 2000 cases and kept track of those cases that were not settled and went to trial. He found that the
defense verdicts were about the same percentage as the Polk County experience, 40%. However, in each case that
went to trial, and resulted in a defense verdict a substantial offer had been made by the defendant. See, Diane Cox,
Polk County Jury Verdicts: Jury Verdicts from August 1993 to June 2002 (2002), available at,
http://www.drake.law.edu/library/docs.polkcountyjuryverdicts.pdf.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 51
Opposition today to mediate comes from the defense bar. It is a problem of raw
economics. If a case can be settled before it is filed and pretrial discovery commenced, the
losers are defense attorneys, who are deprived of their customary hourly billings. For some
defense firms, this has caused great dislocation and even implosion. Like the courts, they must
adjust.
4. Eroding lawyer trial skills.
Another criticism of detractors is that mediation has the effect of eroding lawyer skills.
Graduates from law schools now have less opportunity to gain trial skills before taking over from
retiring trial lawyers. This has double-barreled implications: one, they are ill-prepared when
required to go to trial, and, two, they have little practical experience to advise clients on the
settlement values of cases. There is another concern and that is lawyers "are now afraid to try
cases so they mediate." 84 Many times they will exhaust pretrial discovery and collect their fees
and then depend on a mediator to resolve their cases. In other words, mediation is prostituting
the practice of law.
Again, Chief Justice Burger seemed little concerned with this issue. The competency of
lawyers engaged in the adversarial system was of little moment to him. He was redefining the
lawyer’s role entirely, in very different non-adversarial terms. As noted he was directing lawyers
to be problem-solvers, harmonizers and peacemakers, the healers--not the promoters--of conflict.
5. Mediators lack legal training to mediate effectively.
Detractors not only note the declining skill of trial lawyers but express concern of the
competency of mediators to settle cases. One federal judge stated, that
84
Mark A. Bennett, United States District Judge, Northern District of Iowa, letter on file, July 20, 2010.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 52
I do not believe mediators who have not tried 50 or more jury trials know the true
value of a good settlement which was okay when we had a generation of lawyers
who did try cases and know their value but used mediators to help the parties
reach a mutually satisfactory resolution. Good mediators today only know the
value of a good "mediated" settlement, which is a very different measure. Now
we have "litigators" who never even tried a case or haven't tried one in 20 years
mediating cases with mediators who have never tried a case.85
Although this concern has some merit at first blush, still it perhaps misunderstands the
true role of the mediator. If the mediator has been asked to be evaluative, that is to determine
what value of the case is based on the facts and law, comments are appropriate. Such a mediator
must have extensive trial experience as a litigator or judge. However, if the mediator is asked to
be facilitative, that is, help the parties reach a resolution they can accept, their trial skills are of
little moment. What is required are skills to bring the parties together to find common ground,
including skills that suggest creative ways to resolve impediments to resolution.
The mediator who is facilitative, which most mediators are, is only marginally concerned
with the value of the case before the trier of fact. He or she seeks a resolution both parties can
accept for whatever reasons. It is a needs-based and not result-driven. If a party is insolvent and
needs cash now and cannot wait the two or three years required to litigate, that person will
compromise and take less to satisfy this need. Or if a defendant is facing insolvency, it might
agree to a settlement unrelated to the value of the case, if payments can be spread out over a
period of months or years. The mediator can meet these needs, and his or her litigation skills are
irrelevant.
Chief Justice Burger made clear that the skills of a mediator are not litigation oriented.
They are peacemaker oriented.
85
Id.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 53
6. Mediators vulnerable to repeat players.
Detractors point out that mediators are vulnerable to repeat players, big business and
insurance companies, who can provide a stream of business. The argument is that mediators will
favor them in order to assure a continuing flow of income. One scholar states:
Mediators are under the same pressure as arbitrators to produce results that are
acceptable to the repeat players. Mediators know the large repeat players such as
insurance companies will not refer cases to mediators who failed to produce
acceptable settlements. By the same token, mediators who are able to convince
individual claimants to reach agreements favorable to the repeat players can
expect repeat business.86
This line of argument is belied by the following: first, ethics of the mediator require he
remain neutral and impartial. Model Standards of Conduct for mediators provide:
STANDARD II. IMPARTIALITY
A. A mediator shall decline mediation if the mediator cannot conduct it in an impartial
manner. Impartiality means freedom from favoritism, bias, or prejudice.87
Any departure from the standard is an ethical violation. Like all lawyers, mediators must
abide by the code of their profession.
Second, in most mediations, parties are represented by counsel. Counsel has the
responsibility of checking any overreaching by the mediator in the interest of the client. If there
86
Peter L. Murray, The Privatization of Civil Justice, 91 JUDICATURE 272, 276 (2008). Professor Murray also
states:
The problem with private ADR services is that they are private. Private actors will always act to maximize
their well-being under whatever system they function The private ADR system under which decisionmakers are paid on a case-by-case basis eventually tends to reward those who satisfy the repeat players to
the detriment of objective merit.
87
Model Standards of Conduct of Mediators, Standard II. IMPARTIALITY.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 54
has been overreaching, a party can reject the proposed settlement and go to trial. There's always
an out.88
Third, probably the most important check on mediators is that if they get the reputation of
being insurance industry mediators. For example, they will be blackballed by the plaintiff bar.
Because all parties must approve the mediator, the objection of either party will foreclose the
mediator from participating.
7. Confidentiality in mediation shields mediator abuse.
Finally, detractors contend that because mediations are settlement conferences that are
conducted in a confidential setting, they thereby lose the benefit and transparency of a public
trial. This makes parties vulnerable to overreaching of the attorneys and mediator. Further, there
can be no review as to whether a settlement is fair or in the best interests of the parties
It is true mediations are conducted in a confidential setting. And in caucus format
mediation, ex parte communications are the hallmark of the process. However, this is what
makes mediation so successful because the mediator is positioned to craft a settlement to meet
immediate and sometimes confidential needs of the parties. It is the element of confidentiality
that assists in uncovering hidden agendas of the parties. It is confidentiality that permits the
88
Pressure to produce results favorable to the repeat player is more aptly directed to arbitration. Here, the party
losing has no outlet. He or she is bound by the award. And the arbitrator knows that an adverse decision given to a
repeat player will result in few arbitrations, if any.
As Professor Murray states:
An arbitrator considering a case with one party who will likely never have further arbitration, and another,
who will likely have future cases to refer, is subject to a direct economic inducement to decide the case in a
manner so as not to drive potential future business away.
Parties whose business activities are likely to generate future referrals inevitably and invisibly, without
saying a word, influence our arbitral organizations and individual arbitrators to render decisions that will
encourage them to refer this future business.
See Murray, supra note 86 at 273.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 55
mediator to explore the weaknesses and concerns on both sides so that a compromise resolution
can be developed. Confidentiality is that which permits parties to vent without offending the
other, thereby beginning the healing process.
The fact that a settlement cannot be reviewed by a higher court is a non sequitur. Parties
often settle for reasons other than objective merit, such as financial weakness, delay, or risk
aversion. But these same considerations play in any negotiated settlement. If a party must
compromise for whatever reason, it makes no difference if postured as a pending lawsuit or
mediation; they will settle.
To argue that mediation denies the right to review is to misunderstand the process.
Parties are not compelled to settle but do so because it is in their best interest. What is "fair"
measured by courtroom standards is not the measure of “fairness” in a settlement. The latter
considers so many other factors that are irrelevant to the courtroom contest. What may be "fair"
in the courtroom may be unfair in mediation, because needs and interests of the parties are not
met. And what is fair in mediation may not track with what the facts and law dictate.
Review of settlement agreements, except as required in family matters, is impractical, for
how can you measure nonmonetary considerations, often driven by emotion and a need for
resolution? Review would require an appellate court to measure the motivation and needs of the
parties as well as the dollar amount. This makes any review process unmanageable and
unrealistic.
CONCLUSION
This assessment of the adversarial system is not to suggest it should be abandoned. It
does suggest that lawyers should use every means possible to resolve differences short of trial
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 56
because that is the kinder and gentler way to resolve differences. If a sincere effort has been
made and resolution is unobtainable, then the courts become a last resort, the last alternative.
Even within the mediation spectrum, courts play a major function. Many times legal
questions must be tested before the air is cleared to discuss settlement possibilities. Courts
through motions to dismiss and summary judgment and interlocutory and final appeals provide
this avenue.
Modern day mediation is new and has taken the nation’s courts by storm. It needs time to
shed its newness and find equilibrium with the courts. One thing is clear; it has raised the
public’s perception of the legal profession to new heights. It has given it the aura of nobility
reserved for the healing professions. It is identifying the legal profession as a noble calling.
_____________________________________________________________________________________ Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 57
An Impossible Reconciliation? Understanding Class-Action Waivers and Arbitration after
American Express v. Italian Colors
Kristine Bergman*
* B.A. 2010, Amherst College; J.D. Candidate 2015, Loyola University Chicago School of Law. Special Thanks
to Professor Spencer Weber Waller for providing a topic idea; Tim Bode for being the perfect SAE; and to Dayna
LaPlante for encouraging me to submit my article.
58 I.
II.
III.
IV.
V.
VI.
INTRODUCTION
BACKGROUND
A.
Arbitration: History, Attitudes and Applicability
1.
A Brief History of Arbitration
2.
Attitudes towards Arbitration: Weighing the Pros and Cons
3.
Severance of the Arbitration Clause
B.
The Effective Vindication Doctrine
C.
A Recent History on Class Actions
D.
An Overview of Class Arbitration
1.
The Rise of Class Arbitration
2.
Recent Opinions on Class Arbitration Waivers
DISCUSSION
A.
Factual Background
B.
Procedural History: The Amex’s
C.
The Opinions in American Express v. Italian Colors
1.
The Arguments
2.
The Majority Opinion
3.
The Concurring Opinion
4.
The Dissenting Opinion
ANALYSIS
A.
Evaluation of the Majority Opinion: Inapplicability of the Effective Vindication
Doctrine
1.
Alternatives and Severance
2.
Distinction between Class Actions and Arbitration
B.
Evaluation of the Majority Opinion: Support in Stolt-Nielsen and Concepcion
C.
Evaluation of the Majority Opinion: Adverse Effects of Class Actions
D.
Evaluation of Dissent
IMPACT
A.
Immediate Response
B.
Unanswered Questions
1.
Will Italian Colors Cause Restored Hostility towards the FAA?
2.
Will Italian Colors Bring Forth the End of Class Actions?
C.
Recommended Congressional Efforts to Reform
1.
Prior Case Law Supporting Congressional Reform
2.
Some Recent Attempts at Reform
3.
Suggestion: A Balance of Interests
D.
Exploration of Some Suggestions
CONCLUSION
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 59
I. INTRODUCTION
Increased litigation in recent decades has created a need for alternative and more efficient
dispute resolution.1 Procedural methods like class actions and arbitration intend to decrease
litigation’s drain on judicial resources.2 Nevertheless, efficiency comes with a price, and both
class actions and arbitration have proved to be controversial procedural methods.3 Additionally,
as litigation can be costly,4 corporations will explore every possible avenue to avoid the
inconvenience of litigation.5 Some corporations have begun including a binding arbitration
clause coupled with a class action waiver in their standard-form contracts, which can threaten to
deprive consumers of their legal rights.6 Making matters more complex are the parallel trends in
1
See Larry J. Pittman, The Federal Arbitration Act: The Supreme Court’s Erroneous Statutory Interpretation, Stare
Decisis, and A Proposal for Change, 53 ALA. L. REV. 789, 790 (2002) (“For the past thirty or more years, there has
been a general movement in America supporting different types of alternative dispute resolution (ADR)
processes.”).
2
See Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809, 812 (4th Cir. 1989) (noting the public
need for speedy and efficient decisions); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
631 (1985) (emphasizing the “strong belief in the efficacy of arbitral procedures.”).
3
For a summary of negative attitudes towards arbitration and class actions, see infra Part II.A.2. (evaluating the pros
and cons of arbitration); infra Part.IV.C. (arguing how class actions may be problematic for both consumers and
corporations).
4
Exact litigation costs are difficult to measure because data samples rely in part on attorney responses, to which
attorneys often will not respond because of attorney-client confidentiality. See COURT STATISTICS PROJECT, 20–1
CASELOAD HIGHLIGHTS 1 (2013), available at
http://www.courtstatistics.org/~/media/microsites/files/csp/data%20pdf/csph_online2.ashx. The Court Statistics
Project estimates the median cost for civil contract disputes to be $91,000. Id. at 7. Additionally, for all civil cases,
the study by the Project found the trial and discovery processes are the first and second most time-intensive aspects
of litigation, respectively, and therefore the most costly. Id.
5
See The Corporate Counsel Section of the New York State Bar Association, Report on Cost-Effective Management
of Corporate Litigation, 59 ALB. L. REV. 263, 272 (1995) (suggesting corporations used mandatory arbitration
clauses to achieve cheaper and faster results than litigation); Jennifer W. Reynolds, Foreword: ADR for the Masses,
90 OR. L. REV. 691, 695 (2012) (summarizing corporate enthusiasm over arbitration which promises quick and
inexpensive results and preemptive case management).
6
Donald R. Philbin, Jr., Litigators Needed to Advise Transaction Lawyers on Litigation Prenups, 56 ADVOC. (TEX.)
36 (2011) (noting commentators fear that all lawyers will instruct their corporate clients to include class-action
waiver arbitration clauses in their standard-form contracts); see generally Catherine Cronin-Harris, Mainstreaming:
Systematizing Corporate Use of ADR, 59 ALB. L. REV. 847 (1996) (detailing the corporate use of systematized
ADR, including arbitration).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 60
court decisions that broaden arbitration while restricting class actions.7 In the last thirty years,
court decisions have tended to favor the enforcement of arbitration agreements;8 simultaneously,
courts have taken steps to prevent class certification.9
In June 2013 in American Express v. Italian Colors, the Supreme Court of the United
States overruled a Second Circuit Court of Appeals decision applying the effective vindication
doctrine to a class-action waiver in an arbitration clause in a standard-form agreement between
American Express (“Amex”) and various California and New York small merchants.10 The
Supreme Court overruled the Second Circuit’s holding that the arbitration clause was invalid.11
The Court’s decision may allow corporations to make binding standard-form contracts with their
monopolistic powers that deprive other parties of all legal recourse to challenge these powers.12
Nevertheless, despite this apparent unfairness, this Note argues that the decision was justified in
light of classic legal principles and recent Supreme Court decisions on class arbitration clauses
7
See infra Part II.A.1. (detailing the expansive interpretation of the FAA and simultaneous limiting in the past three
decades); infra Part II.C. (summarizing recent case law limiting class actions at the certification stage).
8
See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983) (declaring a liberal
“federal policy favoring arbitration agreements.”); Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford
Junior Univ., 489 U.S. 468, 476 (1989) (“[T]he federal policy is simply to ensure the enforceability, according to
their terms, of private agreements to arbitrate.”); Tai Ping Ins. Co. v. M/V Warschau, 731 F.2d 1141, 1146 (5th Cir.
1984) (“[O]nly the most exceptional circumstances will justify any action on the part of a federal court that serves to
impede arbitration of an arbitrable dispute.”). See also Myriam Gilles, Opting Out of Liability: The Forthcoming,
Near-Total Demise of the Modern Class Action, 104 MICH. L. REV. 373, 395 (2005) (describing court jurisprudence
as taking an “incredibly expansive” view of federal arbitration law).
9
See infra Part II.C. (summarizing recent Supreme Court opinions that imposed unanticipated limitations on class
certification).
10
Am. Express Co. v. Italian Colors Rest. (“Italian Colors”), 133 S. Ct. 2304 (2013). For more information on the
effective vindication doctrine, see infra Part II.B. (detailing the history of the effective vindication doctrine leading
up to the Italian Colors decision).
11
In re Am. Express Merchs. Litig. (“Amex I”), 554 F.3d 300 (2d. Cir 2009). This case visited the Second Circuit
three more times after Amex I, first for reconsideration in light of Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559
U.S. 662 (2010) in In re Am. Express Merchs. Litig. (“Amex II”), 634 F.3d 187 (2nd Cir. 2011). Second, for
reconsideration in light of AT&T Mobility L.L.C. v. Concepcion, 131 S. Ct. 1740 (2011) in In re Am. Express
Merchs. Litig., 667 F.3d 204 (2nd Cir. 2012) (“Amex III”). And last, for a rehearing that was denied en banc in In re
Am. Express Merchs. Litig., 681 F.3d 139 (2d Cir. 2012) (“Amex IV”).
12
Italian Colors, 133 S. Ct. at 2314 (Kagan, J., dissenting) (speculating on the numerous ways in which a
monopolist could devise ways to avoid antitrust liability in response to the Italian Colors ruling).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 61
and class actions.13 The opinion is further supported by the fact that class actions and arbitration
are two very distinct tools:14 the former is an available procedural mechanism outlined in federal
civil code;15 the latter is an alternative to litigation regulated by federal law.16
This Note supports the majority’s opinion and justifies its holding with further
considerations.17 It argues that the effective-vindication doctrine does not apply to class-action
waivers, even inside arbitration clauses.18 This is because the primary issue for the plaintiffs in
Italian Colors—the lack of economic incentive to bring suit in light of the cost to prove the
antitrust claim—was affected by the individuality aspect of bilateral arbitration, not the cost to
arbitrate itself.19 However, this Note acknowledges that Italian Colors poses a real threat to
consumer protection in adhesion contracts.20 Consumer interests must be safeguarded, but it must
be done through Congressional reform that balances the interests of consumers and
corporations.21
13
See infra Part IV.A.2. (arguing the Court’s decision was supported by recent decisions on class arbitration like
Stolt-Nielsen and Concepcion).
14
See infra Part IV.A.1. (describing the distinction between class actions and arbitration and how the Court was
correct to only assess the impact of class actions).
15
See Fed. R. Civ. Pro. 23(a) (“One or more members of a class may sue or be sued as representative parties on
behalf of all members . . .”) (emphasis added).
16
The enforcement of arbitration agreements is specifically encouraged in 9 U.S.C. § 2 (2006): “A written provision
in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter
arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable.”
17
See infra Part IV.A. (expanding on the majority opinion arguments such as the distinction between class actions
and arbitration, the opinions in Stolt-Nielsen and Concepcion and the practical realities of an alternative holding).
18
See infra Part IV.A.2. (arguing that the effective vindication doctrine does not apply because the effective
vindication problem for plaintiffs was because of the class action, not arbitration, aspect of the clause).
19
See infra Part IV.A.1. (applying the analysis in the severability doctrine to distinguish class actions and arbitration
within the clause).
20
See infra Part IV.B. (evaluating the dissenting opinion in Italian Colors and acknowledging the reality of the
threats to consumer protection it prophesizes).
21
See infra Part V.C.3. (encouraging congressional reform that incorporates the interests of both corporations and
consumers).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 62
Part II discusses the background of arbitration,22 class actions,23 class arbitration,24 and
the effective vindication doctrine.25 It also explores aggressive Court efforts to limit class
actions, especially in two recent Supreme Court cases on class-action waivers.26 Part III explains
the procedural history of American Express v. Italian Colors,27 the arguments for both sides28
and the majority29 and dissenting opinions.30 Part IV expands upon the Note’s thesis, analyzing
how the opinion was justified in light of prior case law and procedural and contract theories.31
Part V discusses the impact of the Court’s holding, such as how courts have responded and what
questions the case has left open.32 It also explores case law advising Congress to reform,33 which
congressional efforts have occurred so far,34 and how Congress must balance the interests of both
consumers and corporations in order to achieve progress in arbitration and class action policy.35
22
See infra Part II.A. (providing a brief history of arbitration as well as a summary of the attitudes towards
arbitration).
23
See infra Part II.C. (summarizing recent Court opinions on class actions and their limits on class actions at the
certification stage).
24
See infra Part II.D. (explaining the rise of class arbitration and summarizing recent decisions on this mechanism).
25
See infra Part II.B. (detailing the history of the effective vindication doctrine in cases prior to Italian Colors).
26
See infra Part II.C–D.2. (describing the impact of decisions on class actions and class arbitration).
27
See infra Part III.A–B. (recounting the facts and procedural background of the case, including the district court
opinion and the case’s review four times in the Second Circuit).
28
See infra Part III.C.1. (summarizing the arguments presented by both parties in their briefs for the various amici
curiae).
29
See infra Part III.C.2. (explaining the main points of majority opinion).
30
See infra Part III.C.4. (detailing the relevant portions of the dissenting opinion).
31
See infra Part IV.A.1–2. (applying the contractual severability doctrine and the opinions in Stolt-Nielsen and
Concepcion to support the majority’s decision in Italian Colors).
32
See infra Part V.A–B. (discussing the immediate impact of Italian Colors and evaluating any remaining questions
arising by the outcome of the decision).
33
See infra Part V.A. (summarizing cases immediately following the Italian Colors decision).
34
See infra Part V.B. (detailing some recent but futile attempts at congressional reform).
35
See infra Part V.D. (suggesting options for congressional reform including non-binding arbitration and a
categorical approach to class actions).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 63
II. BACKGROUND
Crucial to understanding the opinion in Italian Colors is a comprehension of the judicial
and social attitudes towards arbitration and class actions. First, this Part provides a brief history
of arbitration, from pre-FAA policy to case law developments in the last three decades.36 Next,
this Part describes the development of the effective vindication doctrine, from its introduction in
Mitsubishi Motors to its refinement in Randolph.37 This Part then focuses on the recent history of
class actions, particularly on the limiting efforts employed by the Supreme Court in recent
decisions.38 Lastly, this Part discusses class arbitration, with a focus on rulings over classarbitration waivers in two recent Supreme Court cases.39
A.
Arbitration: History, Attitudes and Applicability
1.
A Brief History of Arbitration
Although implemented by Congress almost ninety years ago,40 the Supreme Court only
began to significantly interpret and expand the FAA in the last three decades.41 Americans were
traditionally suspicious towards arbitration, inheriting skepticisms from English common law.42
36
See infra Part II.A.1. (detailing a brief history of attitudes towards arbitration since the enactment of the FAA in
1925).
37
See infra Part II.B. (summarizing case law in the Supreme Court on the effective vindication doctrine, and its
application in lower courts).
38
See infra Part II.C. (explaining how recent Supreme Court decisions demonstrate a Court suspicion towards class
actions).
39
See infra Part II.D. (discussing older class arbitration cases as well as the recent holdings in Concepcion and StoltNielson).
40
President Coolidge signed the final arbitration act in February of 1925. IAN R. MACNEIL, AMERICAN
ARBITRATION LAW: REFORMATION, NATIONALIZATION, INTERNATIONALIZATION 101 (1995).
41
See Ellen Meriwether, Class Action Waiver and the Effective Vindication Doctrine at the Antitrust/Arbitration
Crossroads, 26-SUM ANTITRUST 67, 67 (2012) (“The Supreme Court has shown growing attention to arbitration
issues and enforcement of arbitration agreements in the last thirty years . . . .”); see also David Horton, The Federal
Arbitration Act and Testamentary Instruments, 90 N.C. L. REV. 1027, 1028 (2012) (“[I]n the last three decades, the
Supreme Court has dramatically expanded the statute’s scope . . . .”).
42
See Horton, supra note 41, at 1034 (describing American inheritance of arbitration suspicions from common law
English courts); Christopher R. Drahozal, “Unfair” Arbitration Clauses, 2001 U. ILL. L. REV. 695, n.35 (2001)
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 64
Arbitration was opposed for two main public policy reasons: one, that arbitration could provide
an avenue for businesses to escape public regulation;43 and two, the process of creating
arbitration agreements is prone to one-sidedness.44 Despite these suspicions, commercial
arbitration expanded in the earlier twentieth century.45 Congress enacted the FAA to
accommodate commercial arbitration and harmonize it with judicial hostility towards
arbitration.46 However, judicial and academic skepticism towards arbitration persisted even after
the enactment of the FAA.47 For example, courts limited the scope of the FAA by holding that
the statute did not preempt state law and that it did not apply in certain types of cases.48
(attributing arbitration hostility at common law to the economic self-interest of the judges); but see MACNEIL, supra
note 40, at 19 (asserting that the “pre-modern statutory law on arbitration” and common law was, “contrary to
modern folklore,” supportive of arbitration).
43
See MACNEIL, supra note 40, at 59 (including the improper means by which businesses may escape public
regulation as a “macro countercurrent” against arbitration); see also Amy J. Schmitz, Curing Consumer Warranty
Woes Through Regulated Arbitration, 23 OHIO ST. J. ON DISP. RESOL. 627, 628 (2008) (arguing that contractual
liberty in arbitration agreements allows companies to “essentially privatize justice”).
44
See MACNEIL, supra note 40, at 59–60 (referring to “one-sidedness” in the making of the contract with an
arbitration clause the “micro countercurrent”); Drahozal, supra note 42, at 705 (describing how arbitration drafting
in a one-sided manner may favor the corporation at the expense of the individual). These two public policy
oppositions are still present in arbitration critiques today. Drahozal, supra note 42, at 705. There exist other
criticisms of arbitration as well, including that it is “mandatory,” i.e. contained in adhesive contracts, and that the
characteristics of an arbitration proceeding may unfairly disadvantage individuals. Id. For more information on
these oppositions, see infra note 62.
45
See Horton, supra note 41, at 1038 (“As the twentieth century began, commercial arbitration became more
common.”); Charles A. Sullivan & Timothy P. Glynn, Horton Hatches the Egg: Concerted Action Includes
Concerted Dispute Resolution, 64 ALA. L. REV. 1013, 1034 (2013) (noting how the FAA was originally used to
arbitrate commercial disputes).
46
See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991) (“The FAA was originally enacted in 1925 . .
. . [I]ts purpose was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English
common law and had been adopted by American courts . . . .”); Sullivan & Glynn, supra note 45, at 1034 (quoting
Gilmer, 500 U.S. at 24).
47
See, e.g., MACNEIL, supra note 40, at 61–62 (noting that New Deal liberalism launched an attack against
arbitration in academia); id. at 63–64 (citing Wilko v. Swan, 346 U.S. 427 (1953) (using Wilko as an example of
judicial response to arbitration critics, where the Court held an arbitration agreement unenforceable under the policy
concern of one-sidedness)); but cf. id. at 67 (asserting arbitration was subject to less criticism in the radical 1960s
and 1970s, although other forms of alternative dispute resolution were attacked).
48
See Horton, supra note 41, at 1039–40 (listing cases exempted from court-compelled arbitration under the “nonarbitrability doctrine,” including cases of antitrust, securities, pension and patent disputes). Judges also refused to
enforce arbitrators’ rulings on civil rights cases. See, e.g., McDonald v. City of W. Branch, Mich., 466 U.S. 284,
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 65
It wasn’t until the 1980s that courts began to substantially favor enforcement of
arbitration clauses.49 In Moses H. Cone Memorial Hospital v. Mercury Construction Corp.,50 the
Supreme Court announced a liberal “federal policy favoring arbitration.”51 The Court held that
this liberal policy was supported by the text of the FAA:52 “A written provision in any . . .
contract evidencing a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and
enforceable.”53
After Moses, case law continued to broaden the types of legal disputes subject to
arbitration.54 The only limitation on enforcing arbitration agreements remained in section 2 of the
FAA, which states that arbitration agreements are generally enforceable “save upon such
grounds as exist at law or in equity for the revocation of any contract.”55 In interpreting this
caveat, the Court has imposed two main limitations: one, that an arbitration clause is
292 (1984) (holding that “an arbitration proceeding cannot provide an adequate substitute for a judicial trial” in a
civil rights action); Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 223 (1985) (affirming McDonald).
49
See Horton, supra note 41, at 1040–41 (describing the revolution of federal arbitration law beginning in the
1980s). Slight headway is also seen in Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395
(1967), where the Court held arbitration agreements are severable from the main contract as a matter of law. See
Drahozal, supra note 42, at 702.
50
460 U.S. 1 (1983).
51
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 29 (1983); Meriwether, supra note 41, at 67
(quoting Moses, 460 U.S. at 29).
52
See e.g., Moses, 460 U.S. at 29 (describing section 2 as a “congressional declaration of a federal liberal policy
favoring arbitration agreements” (emphasis added)); Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S.
477, 483 (1989) (shifting the burden of proof to the party opposing arbitration to prove Congress intended a
preclusion of judicial waiver of remedies pursuant to Section 2).
53
9 U.S.C. § 2 (2006).
54
See e.g., Gilmer v. Interstate/Johnson Lane Corp., 500 US. 20 (1991) (extending the FAA to federal statutory
claims under the Age Discrimination Employment Act (ADEA)); Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, 473 U.S. 614 (1985) (extending the FAA to antitrust cases); Shearson/American Express Inc. v.
McMahon, 482 U.S. 220 (1987) (extending the FAA to disputes under the Racketeering Influenced and Corruption
Organizations Act (RICO)).
55
9 U.S.C. § 2 (2006).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 66
unenforceable if a party is unable to effectively vindicate his claim through arbitration;56 and
two, that an arbitration clause is unenforceable if it conflicts with another existing federal
statute.57
2.
Attitudes towards Arbitration: Weighing the Pros and Cons
Arbitration’s proponents claim it is generally cheaper, simpler, and faster than
litigation.58 Historically, arbitration’s speed and informality appealed to merchants.59 Upon
judicial expansion of the FAA in the 1980s, companies began frequently incorporating
mandatory arbitration clauses in consumer and employee contracts.60 Arbitration is still useful
56
Mitsubishi Motors, 473 U.S. at 637 (stating “so long as the prospective litigant effectively may vindicate its
statutory cause of action in the arbitral forum” the federal statute supporting a plaintiff’s claim will continue to serve
its intended function); Meriwether, supra note 41, at 67 (quoting Mitsubishi Motors, 473 U.S. at 637). For other
examples of limitations on arbitration taken by courts, see Drahozal, supra note 42, at 697–98 (including expensive
arbitration fees, one-sidedness of the arbitral mechanism, statute of limitations shortening and other examples as
instances when an arbitration clause may be invalidated by courts).
57
See Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987) (requiring a “contrary congressional
command” to override the FAA’s mandate); Horton, supra note 41, at 1034 (2012) (listing an “inherent conflict”
with a federal statute as an instance where arbitration could be denied).
58
H.R. Rep. 97-542, 128 Cong. Rec. 765, 777 (“The advantages of arbitration are many: it is usually cheaper and
faster than litigation; it can have simpler procedural . . . rules; it . . . is less disruptive of ongoing and future business
dealings . . . it is often more flexible . . .”). Further, as James Henry writes:
Taken together, the seven features that follow make the arbitration process, in theory at least, a
quicker, cheaper, and better alternative to adjudication: (1) priority of arbitration over lawsuits, (2)
enforcement of an arbitrator’s award as if a judgment of a court, (3) nonappealability, (4)
confidentiality, (5) time and place to suit the convenience of the parties, (6) informality of
procedure, and (7) parties’ choice of arbitrator.
JAMES F. HENRY, THE MANAGER’S GUIDE TO RESOLVING DISPUTES 71 (1985). See also Philbin, supra note 6, at 38
(2011) (“Proponents have long claimed that arbitration is faster . . . , simpler . . . , and cheaper . . . than litigation.”);
Cronin-Harris, supra note 6, 851 (1996) (discussing conversations at the Pound Convention, where ADR was
discussed as a method of achieving justice in the courts efficiently and inexpensively).
59
See Horton, supra note 41, at 1034 (2012) (describing arbitration’s “streamlined, informal” nature as useful for
the in personam interactions between merchants). Arbitration also proved useful in probate matters, where less
costly dispute resolution minimized collateral damage in will contests. Id. at 1036.
60
See e.g. Gerald Aksen, Assessing Arbitration Potential for Your Business, in CORPORATE DISPUTE MANAGEMENT
25 (1982) (encouraging businesses to introduce arbitration requirements in a commercial relationship at the early
stages, parties can lay the ground rules for dispute resolution).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 67
today, especially in consumer-corporation interactions that represent a short or one-time
transaction.61
However, arbitration has also evolved into something that can be detrimental: for
example, standard-form contracts can trap consumers in non-negotiable arbitration clauses.62
Furthermore, little-to-no choice is provided for consumers in deciding the type of dispute
resolution, arbitrators, or forums.63 Critics of arbitration express concerns about arbitrators’
impartiality, confidentiality, the secrecy of arbitration, and arbitration’s limitations on
discovery.64 Arbitration is “losing its luster”65 among corporations as well: increased litigation
over arbitration enforcement, the incorporation of trial-like procedures in arbitration, and
61
See e.g. Justin P. Green, The Consumer-Redistributive Stance: A Perspective on Restoring Balance to
Transactions Involving Consumer Standard-Form Contracts, 46 AKRON L. REV. 551, 556 (2013) (describing how
large businesses engage in high volumes of small transactions and thereby devote in-house legal counsel resources
to drafting the most economizing terms for the business). Some have argued that litigation can have adverse effects
on the consumer as well; expensive discovery processes and forced preemptive settlements can lead to higher output
costs on goods and services for consumers. See generally Stephen J. Ware, Paying the Price of Process: Judicial
Regulation of Consumer Arbitration Agreements, 2001 J. DISP. RESOL. 89, 91 (2001) (listing possible ways that
arbitration results in cost-saving for consumers). Ware warns, however, that these cost-savings are mere
speculations: there does not exist a publicly-available study proving that arbitration has in fact helped consumers in
the long run. Id. at 91. But see Andrew A. Schwartz, Consumer Contract Exchanges and the Problem of Adhesion,
28 YALE J. ON REG. 313, 330 (2011) (describing how standard-form contracts “help reduce the incidence of scarcity
and glut by providing insight into expected future market conditions.”).
62
Schmitz, supra note 43, at 628. Schmitz argues that these standard form contracts essentially allow companies to
“privatize justice.” Id. Additionally, Drahozal lists three primary criticisms of binding arbitration clauses in
consumer contracts: one, that they are mandatory; two, that arbitration is an unfair forum for consumers to vindicate
legal rights; and three, that arbitration clauses are unfair as they limit forum selection and preclude recovery for
damages and attorneys’ fees. Drahozal, supra note 42, at 697.
63
See HENRY, supra note 58, at 71–72 (asserting that professional arbitrators have an interest in being hired in the
future; therefore they may subtly favor the party more likely to require arbitration again).
64
NAT’L CONSUMER LAW CTR., CONSUMER ARBITRATION AGREEMENTS: ENFORCEABILITY AND OTHER TOPICS 5–8
(2004) [hereinafter CONSUMER ARBITRATION AGREEMENTS] (explaining the potential disadvantages to consumers
when forgoing their right to a jury trial for arbitration); see also Cronin-Harris, supra note 6, at 856 (describing the
lax rules of evidence and discovery in arbitration can make it a “trial by ambush”).
65
Arbitration Aggravation, BUS. WK., Apr. 30, 2007, available at http://www.businessweek.com/stories/2007-0429/arbitration-aggravation.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 68
skepticism of due process under arbitration proceedings are making arbitration less cost-efficient
for corporations. 66
66
See Schmitz, supra note 43, at 628 (describing businesses’ new skepticisms towards arbitration); see also
Emanwel J. Turnbull, Opting out of the Procedural Morass: A Solution to the Class Arbitration Problem,
Forthcoming, WIDENER L. REV. (forthcoming 2013), available at http://ssrn.com/abstract=2196921 (observing
businesses face a real threat to losing all of the advantages of arbitration under the present system).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 69
3.
Severance of the Arbitration Clause
The Supreme Court has emphasized that pursuant to the FAA, arbitration is a matter of
contract.67 Therefore, arbitration clauses should be enforced by courts upon their terms68 “save
upon such grounds as exist at law or in equity for the revocation of any contract.”69 In addition,
typical contract defenses have been applied to invalidate arbitration clauses, including
unconscionability, fraud, and duress.70 These defenses raise questions about what happens when
courts invalidate an arbitration clause: if the contract is unenforceable, is the arbitration clause
unenforceable as well; if a portion of an arbitration clause is unenforceable, does that apply to
the entire clause;71 and are courts permitted any severance?72
67
Rent-A-Ctr., W., Inc. v. Jackson, 130 S. Ct. 2772, 2776 (2010) (“The FAA reflects the fundamental principle that
arbitration is a matter of contract”); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)
(interpreting the FAA to put arbitration on “equal footing” with contracts).
68
Rent-A-Ctr., 130 S. Ct. at 2776 (2010) (citing Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ.,
489 U.S. 468, 478 (1989)) (identifying Congress’ “principle purpose” in enacting the FAA as ensuring arbitration
agreements are enforced according to their contractual terms). For more information on the “strict-enforcement”
interpretation of the FAA, see generally David Horton, Federal Arbitration Act Preemption, Purposivism, and State
Public Policy, 101 GEO. L.J. 1217, 1261–264 (2013).
69
9 U.S.C. § 2 (2006). This clause in Section 2 is typically called the “saving clause.” \ See e.g., AT&T Mobility
L.L.C. v. Concepcion, 131 S. Ct. 1740, 1746 (2011) (referring to the caveat in Section 2 as the “saving clause”);
Preston v. Ferrer, 552 U.S. 346, 361 (2008) (same); Southland Corp. v. Keating, 465 U.S. 1, 19 (1984) (Stevens, J.,
dissenting) (same).
70
Arthur Andersen L.L.P. v. Carlisle, 556 U.S. 624, 630 (2009) (asserting state law grounds are applicable in
determining whether contracts are enforceable under Section 2). See also Thomas J. Stipanowich, The Third
Arbitration Trilogy: Stolt-Nielsen, Rent-A-Center, Concepcion and the Future of American Arbitration, 22 AM. REV.
INT’L ARB. 323, 344 (2011) (clarifying that parties may raise standard contractual defenses in challenging the
validity of arbitration agreements); see generally, CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 47–87
(detailing case law rules applying contract law defenses to arbitration clauses).
71
See Buckeye, 546 U.S. at 444 (identifying the two types of validity challenges to an arbitration agreement: one, a
challenge to the contract as a whole; and two, specific challenge to the agreement to arbitrate).
72
For information on courts’ policies on severance in the instances of unconscionability prior to Rent-A-Center and
other cases in this Note, see generally CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 75–78 (2005)
(describing different federal courts policies on dealing with unconscionable aspects of arbitration clauses). Courts
have reasoned that because the “primary purpose” of the FAA is to ensure “that parties agreements to arbitration are
enforced according to their terms’ . . . . [I]f an agreement to arbitrate can not be enforced according to its terms, a
court should refuse to enforce it.” Id. at 75, quoting Volt Info., 489 U.S. at 479 (1989). Additionally, courts typically
disfavor corporations that draft unenforceable adhesion contracts, and will “refuse to aid a party who has taken
advantage of his dominant bargaining power.” Id.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 70
Courts are generally split on whether an entire arbitration clause should be thrown out
when it contains some “offending” parts:73 some courts throw out the entire clause,74 some sever
the offensive clause75 and others choose a middle ground.76 Recently, in Rent-A-Center v.
Jackson,77 the Supreme Court supported the availability of severance by holding that an
arbitration agreement is severable from an unconscionable employment agreement.78 The Court
sought support in Prima Paint, speculating that if the contractual challenge had been fraud in the
inducement of the arbitration agreement, the Court would have considered the validity of the
73
CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 77 (detailing case law on how interdependent aspects
of arbitration clauses are severed or not). Prima Paint is considered the cornerstone of the severability (or
separability) doctrine for arbitration clauses. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395
(1967) (holding that a claim of fraudulent inducement on the contract was for the arbitrators to decide unless it was a
direct challenge to a fraudulent arbitration agreement itself); see also Stipanowich, supra note 70, at 344–45
(discussing Prima Paint and its impact on seperability). The issue was further discussed in Buckeye. See 546 U.S.
at 447 (extending the severability doctrine to state courts); Stipanowich, supra note 70, at 346–47 (explaining
Buckeye’s furtherance of the severability doctrine).
74
See e.g. Graham Oil Co. v. ARCO Products Co., 43 F.3d 1244, 1248 (9th Cir. 1994) (eliminating an entire
arbitration clause that was “highly integrated” throughout three different legal provisions); Paladino v. Avnet
Computer Technologies, Inc., 134 F.3d 1054, 1059 (11th Cir. 1998) (determining invalidating entire arbitration
clause precludes invalidating an entire agreement, which is favorable to FAA policy); Torrance v. Aames Funding
Corp., 242 F. Supp. 2d 862, 876 (D. Or. 2002) (invalidating an entire arbitration agreement because the agreement
was deeply imbedded with unconscionability).
75
See e.g. Fuller v. Pep Boys—Manny, Moe & Jack of Del., Inc., 88 F.Supp.2d 1158, 1162 (D. Colo. 2000)
(permitting severance of a fee-splitting provision and ordering arbitration pursuant to the remaining contract); Jones
v. Fujitsu Network Communications, Inc., 81 F.Supp.2d 688, 693 (N.D. Tex. 1999) (enforcing the remaining
contract after severance of one clause); Booker v. Robert Half Int’l, Inc., 413 F.3d 77, 85 (D.C. Cir. 2005) (declining
to follow Graham Oil because removing arbitration clause from “discrete remedial provision” was appropriate).
76
See, e.g., Armendariz v. Found. Health Pyschcare Services, Inc., 24 Cal.4th 83, 124 (2000) (allowing severance of
the unlawful portions but invalidating the arbitration agreement because there was an “unlawful purpose” to forming
the agreement); Little v. Auto Stiegler, Inc., 29 Cal.4th 1064, 1074–75 (Cal. 2003) (following Armendariz and
holding severance is not permitted when it would require court mandated reformation of the contract); Circuit City
Stores, Inc. v. Adams, 279 F.3d 889, 896 (9th Circ. 2002) (denying severance when the objectionable provisions
infiltrated the entire contract); Pitchford v. Oakwood Mobile Homes, 124 F.Supp.2d 958, 965–66 (W.D. Va. 2000)
(distinguishing between “severance” and “blue penciling”); Iberia Credit Bureau, Inc. v. Cingular Wireless LLC,
379 F.3d 159, 171 (5th Cir. 2004) (refusing to sever a clause from an agreement because the severance would
require substantial re-drafting).
77
130 S. Ct. 2772 (2010).
78
See id. at 2778, quoting Buckeye Check Cashing v. Cardegna, 546 U.S. at 445 (“[A]s a matter of substantive
federal arbitration law, an arbitration provision is severable from the remainder of the contract.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 71
arbitration agreement.79 Furthermore, Court held that the agreement to arbitrate would not be
invalidated solely because aspects unrelated to arbitration are found to be unconscionable or
invalid.80 If a party desires to challenge the validity of the arbitration clause, the challenges must
be specific to the arbitration clause itself.81 Therefore, the Court’s opinion indicates that the
validity of an arbitration agreement within a contract is evaluated separately and under the
guidance of the FAA.82
B.
The Effective Vindication Doctrine
Despite the Court’s policy strongly enforcing arbitration agreement upon their terms, the
Court created a narrow limitation to this policy in the effective vindication doctrine—or the
“Doctrine.”83 The Doctrine was first introduced in Mitsubishi Motors Corp. v. Soler Chrysler-
79
Id. at 2778 (citing Prima Paint, 388 U.S. at 403–04). See also Thomas Carbonnaeu, A Second, More
Circumstantial
Separability
Doctrine,
SCOTUSBLOG
(Sept.
22,
2011,
12:14
PM),
http://www.scotusblog.com/2011/09/a-second-more-circumstantial-separability-doctrine (explaining the Court’s
application of Prima Paint as establishing a separate jurisdictional immunity reserved for the arbitration clause
itself).
80
Rent-a-Ctr., 130 S. Ct. at 2778 (“a party’s challenge to another provision of the contract, or to the contract as a
whole, does not prevent a court from enforcing a specific agreement to arbitrate”).
81
Rent-A-Ctr., 130 S. Ct. at 2779 (holding that unless a plaintiff directly challenges the arbitration agreement, it will
be held valid under Section 2).
82
Id. at 2778 (interpreting Section 2’s saving clause to apply solely to the arbitration agreement, not the validity of
the contract itself). The relevance of this section is elaborated on in the Analysis section of this note. See infra Part
V.A.1. (arguing that the ability to sever the arbitration agreement from a contract makes it a distinct and separate
entity from the class-action waiver in Italian Colors).
83
The majority and dissenting opinions in the Italian Colors decision disagree over whether this is the effectivevindication “rule” or “doctrine.” See Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2310 (2013)
(referring to the Mitsubishi Motors statement as dicta); Brief for Petitioners at 18, Am. Express Co. v. Italian Colors
Rest., 133 S. Ct. 2304 (2013) (No. 12-133) (same) [hereinafter Brief for Petitioners]; cf. Italian Colors, 133 S. Ct. at
2313 (Kagan J., dissenting) (calling the mechanism for protecting plaintiffs against “choking” arbitration agreements
the “effective vindication rule”); David Garcia & Leo Casoria, Opinion Analysis: A Class Action Waiver in an
Arbitration Agreement will be Strictly Enforced under the Federal Arbitration Act, SCOTUSBLOG (Jun. 21, 2013,
10:45
AM),
http://www.scotusblog.com/2013/06/opinion-analysis-a-class-action-waiver-in-an-arbitrationagreement-will-be-strictly-enforced-under-the-federal-arbitration-act (noting the dissent’s use of the word “rule”
instead of “doctrine”). This Note will continue to refer to the Mitsubishi Motors statement as a “doctrine,” but from
a neutral standpoint, as the purpose of this Note is to argue the inapplicability of the Doctrine, not the (il)legitimacy
of the rule/doctrine.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 72
Plymouth, Inc.,84 where the Court held that “by agreeing to arbitrate a statutory claim, a party
does not forgo the substantive rights afforded by the statute.”85 The Doctrine was affirmed in
Gilmer v. Interstate/Johnson Lane Corp.,86 where the Court asserted that the only limitation for
arbitrating a federal statutory claim is that the party must be able to “effectively vindicate” the
claim.87
In Green Tree Financial Corp.-Alabama v. Randolph,88 the Court created an additional
hurdle for a party seeking to invalidate an arbitration clause under the effective vindication
doctrine.89 The United States Court of Appeals for the Eleventh Circuit decision held that
because there was a risk of barring vindication of the plaintiff’s federal claim, the contract was
unenforceable.90 The Supreme Court overruled this decision, and added a burden of proof that
must be met: a party seeking to invalidate an agreement on grounds that arbitration would be
prohibitively expensive bears the burden of proving the likelihood of incurring such costs.91 The
84
473 U.S. 614 (1985).
Id. at 628, 637; see also Meriwether, supra note 41, at 67 (“So long as the prospective litigant effectively may
vindicate its statutory cause of action in the arbitral forum, the statute will continue to service both its remedial and
deterrent function.”).
86
500 U.S. 20 (1991).
87
Id. at 28 (stating claims under the Age Discrimination in Employment Act are appropriate for the arbitral forum so
long as the parties can effectively vindicate their rights under the Mitsubishi Motors doctrine); see also Meriwether,
supra note 41, at n.5 (explaining Gilmer’s application of the Doctrine).
88
531 U.S. 79 (2000).
89
The holding in Randolph is generally considered a limitation on the effective vindication doctrine. See Brief for
Respondents, supra note 99, at 1–2 (describing the Randolph burden of proof as “daunting”); see Suzette M.
Malveaux, Arbitration and the Supreme Court: A Critique from Plaintiff’s Counsel in Green Tree v. Randolph, 25
ADVOC. (TEX.) 20, 21 (2003) (expressing concerns that Randolph’s endorsement of private arbitration will “permit
people to contract away certain procedural rights”). But cf. Rebecca Wolf, “To A Hammer Everything Looks Like A
Nail”: The Supreme Court’s Misapplication of the Vindication of Rights Doctrine, 21 AM. U. J. GENDER SOC. POL’Y
& L. 951, 959 (2013) (portraying Randolph in a positive light as “adding to” the effective vindication doctrine).
90
Randolph, 531 U.S. at 84 (detailing the Eleventh Circuit’s review and reversal of the district court’s decision
grating Green Tree’s motion to compel arbitration); see also Malveaux, supra note 89, at 21 (“The Eleventh Circuit .
. . conclude[ed] that the arbitration agreement was unenforceable because it failed to provide the minimum
guarantees that Ms. Randolph could vindicate her statutory rights.”).
91
Randolph, 531 U.S. at 92 (“[W]e believe that where, as here, a party seeks to invalidate an arbitration agreement
on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the
85
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 73
Court found that the Randolph plaintiff did not meet this burden because the record indicated
that the supposed inhibitive costs to arbitrate were merely speculative.92
Although the Court in Randolph enforced the arbitration clause under the effective
vindication doctrine,93 various appellate court decisions continued to apply the Randolph
standard to find such an arbitration clause invalid.94 For example, in Kristian v. Comcast Corp.,95
the First Circuit analyzed whether the parties could effectively vindicate their federal antitrust
claim under the arbitration agreement when the agreement contained certain restrictions,
including a class-arbitration waiver.96 The court invalidated the clause, holding that the classarbitration waiver would threaten arbitration’s purpose as a “fair and adequate mechanism for
enforcing statutory rights.”97
likelihood of incurring such costs”); see also Meriwether, supra note 41, at 69 (describing courts’ applications of the
Doctrine to require more than a mere speculation that arbitration costs would be prohibitively expensive).
92
Randolph, 531 U.S. at 92 (finding Randolph did not meet the required burden of proof demonstrating that
arbitration fees would be prohibitively expensive); see also Michael A. Rosenhouse, Construction and Application
of Federal Arbitration Act–Supreme Court Cases, 28 ALR FED. 2D 1 (2008) (“[The Court] said that the record did
not show that [Randolph] would bear such costs if she goes to arbitration.”).
93
Randolph, 531 U.S. at 92 (holding the court of appeals erred in deciding the arbitration agreement was
unenforceable); see also Rosenhouse, supra note 92 (“The court of appeals therefore erred in deciding that the
arbitration agreement’s silence with respect to costs and fees rendered it unenforceable.”).
94
Meriwether, supra note 41, at 69 (observing how Courts of Appeals have followed “similar logic” to Randolph
and found arbitration clauses invalid for practical reasons including cost). See, e.g., Blair v. Scott Specialty Gases,
283 F.3d 595, 607 (3d Cir. 2002) (remanding to allow claimant the opportunity to prove her inability to vindicate
her statutory rights due to the costs of arbitration); Murray v. United Food & Commercial Workers Int’l Union, 289
F.3d 297, 303–04 (4th Cir. 2002) (finding the arbitration clause in an employment contract invalid under Randolph
because the agreement’s “one-sidedness” prevented employees from effectively vindicating their statutory rights);
McCaskill v. SCI Mgmt. Corp., 298 F.3d 677, 680 (7th Cir. 2002) (invalidating an arbitration agreement denying the
plaintiff recovery of attorneys’ fees).
95
446 F.3d 25 (1st Cir. 2006).
96
Kristian, 446 F.3d at 37 (outlining plaintiffs’ five arguments on how the arbitration agreement prevents them from
effectively vindicating their rights); see generally James E. McGuire & Bette J. Roth, Class Action Arbitrations: A
First Circuit Update, 52-APR B. B.J. 17, 18 (outlining the Kristian analysis).
97
Id. at 54–55 (holding “because the denial of class arbitration in the pursuit of antitrust claims has the potential to
prevent Plaintiffs from vindicating their statutory rights” the arbitration agreement with a class-action ban was
unenforceable); see also Kenyon D. Harbison, Are Contingent-Fee Attorneys Deterred? How Courts Can More
Effectively Police Adhesive Arbitration Agreements, 7 APPALACHIAN J.L. 207, 285 (2008) (stating how Kristian
applied the statutory vindication analysis to invalidate a class action waiver).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 74
Courts presume that an arbitration forum will sufficiently serve the congressional purpose
behind a particular federal statute.98 Therefore, the effective vindication doctrine exists to ensure
that the purpose of a federal statute is upheld when an arbitration forum threatens to prevent a
plaintiff from effectively vindicating her rights.99
C.
A Recent History on Class Actions
Scholarly criticisms of class actions have exploded in recent decades.100 Judicial response
has created two major impediments to class actions: aggressive decertification that prevents class
actions from forming;101 and, most relevant to this Note, the enforcement of contractual classaction waivers that affect consumers and employment contracts.102
Recent Supreme Court cases are preventing class actions at the certification stages.103 For
example, in Wal-Mart Stores, Inc. v. Dukes,104 the Supreme Court overruled the Ninth Circuit’s
98
See CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 90 (stating federal claims will be subject to
mandatory arbitration “out of the belief that arbitration will serve the purposes of the particular statute as well as a
court proceeding.”).
99
Id. at 106. See also Brief for Respondents at 2, Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013)
(No. 12-133) (referencing Randolph as a basis for “harmonizing” the antitrust and FAA federal statutes) [hereinafter
Brief for Respondents].
100
See Gilles, supra note 8, at 373–75 (listing the types of class action oppositions, including the doctrinal, moralist
and law and economics standpoints); see, e.g., Drahozal, supra note 42, at 754 (“In practice, however, class actions
too often may not achieve their theoretical benefits.”).
101
Robert H. Klonoff, The Decline of Class Actions, 90 WASH. U.L. REV. 729, 746–47 (2013) (observing that
although Rule 23(a) and (b) have not changed substantially since 1966, case law indicates courts have become
“increasingly skeptical” to certify a class under its requirements). See, e.g., Castano v. Am. Tobacco Co., 84 F.3d
734, 740 (5th Cir. 1996) (emphasizing class certification requires a “rigorous” analysis of Rule 23); Livingston v.
Associates Fin., Inc., 339 F.3d 553, 558 (7th Cir. 2003) (“[C]lass certification requires a rigorous investigation into
the propriety of proceeding as a class . . .”); In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 307 (3d Cir.
2008) (requiring more than a mere “threshold showing” to certify a class).
102
Gilles, supra note 8, at 375 (prophesizing the extinction of class actions due in part to the rise of class-action
waivers).
103
See Klonoff, supra note 101, at 731 (arguing that aggressive certification prevention efforts have led courts to
evaluate certification at “virtually every element” of the process). Anderson & Trask describe the certification stage
in a class action as the “main event.” BRIAN ANDERSON & ANDREW TRASK, THE CLASS ACTION PLAYBOOK 148 (2d
ed., 2012); see also Klonoff, supra note 101, at 746 (calling class certification the “defining moment” in the class
action litigation). In order to certify a class, plaintiffs’ attorney must show: an adequate number of plaintiffs, a
common and typical injury among plaintiffs, that the attorney will be an adequate representative of the purported
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 75
decision permitting certification of a sex discrimination case brought by 1.5 million women
because the class did not satisfy Federal Rule of Civil Procedure (“Rule”) 23(a)’s commonality
requirement.105 Similarly, in Comcast Corp. v. Behrend,106 the Court held that the district court’s
class certification of over 2 million plaintiffs was improper because plaintiffs failed to show that
damages could be measured on a class-wide basis.107 The Behrend holding confirmed other
Supreme Court rulings requiring district courts to rigorously analyze the predominance
requirement of Rule 23(b)(3).108
The second bar to class actions, class-action waivers, was popularized in the 1990s when
trade-journal articles began to recommend that corporate contract drafters insert a class action
class, that the class action is the superior method of resolving the controversy, and most challengingly,
predominance, i.e. that the common issue among plaintiffs would predominantly be resolved by the suit. See FED R.
CIV. P. 23 (including the mentioned requirements for a class action certification, among others); ANDERSON &
TRASK, at 155–63 (detailing the burden of persuasion that must be met by the plaintiffs’ attorney in her brief
supporting class certification). Although Rule 23 does not require a hearing, courts will typically hold one, allowing
each side to address the certification concerns to the court. FED. R. CIV. P. 23; see generally ANDERSON & TRASK, at
180–81 (detailing the certification hearing process).
104
131 S. Ct. 2541 (2011).
105
Id. at 2552 (finding it would be impossible for all plaintiffs to commonly answer the crucial question of why they
were disfavored); see e.g., Mollie A. Murphy, Rule 23(b) After Wal-Mart: (Re) Considering A “Unitary” Standard,
64 BAYLOR L. REV. 721, 757 (2012) (noting that the bulk of the Court’s opinion focused on the commonality issue);
Klonoff, supra note 101, at 774 (describing the holding in Dukes as giving “new meaning to commonality” although
courts had infrequently scrutinized commonality before). Rule 23(a)’s commonality rule requires a plaintiff to
prove “there are questions of law or fact common to the class” for class certification. FED. R. CIV. P. 23(a)(2).
106
133 S. Ct. 1426 (2013).
107
Id. at 1432–433 (holding the plaintiffs’ claim was improperly certified under Rule 23(b)(3) because the plaintiffs’
expert was unable to measure damages on a classwide basis); see also Jason M. Halper & Ryan J. Andreoli, ClassAction Issues in the Supreme Court: Comcast Corp. v. Behrend, 34-4 CLASS ACTION REP. ART 1 (2013) (describing
the Court’s opinion as deciding the plaintiffs failed to establish that damages could be measured on a classwide
basis).
108
See FED. R. CIV. P. 23(b)(3) (“A class action may be maintained if … the court finds that the questions of law or
fact common to class members predominate over any questions affecting only individual members. . . .”); see, e.g.,
Halper & Andreoli, supra note 107 (speculating that the “rigorous analysis” affirmed by the Court in relation to the
predominance requirement could make it more expensive and difficult for plaintiffs to certify a class action);
Klonoff, supra note 101, at 753 (claiming Comcast sends a message to lower courts to be skeptical to class actions
and rigorous in evaluating expert testimony). The Court used its opinion in Dukes for guidance in making its
decision. Comcast, 133 S. Ct. at 1432 (citing Dukes, 131 S. Ct. at 2551–552).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 76
waiver or group arbitration waivers.109 In 1999, the waiver trend accelerated when the National
Arbitration Forum (“NAF”) released materials cautioning corporate lawyers to insulate their
clients from Y2K class action liability through class-action waivers.110 Since then, larger
corporations have expanded their use of arbitration clauses with class-action waiver provisions in
adhesion contracts with consumers.111
Despite these contract clauses, many of the companies imposing mandatory arbitration
agreements have found themselves in putative class actions.112 This is due to the fact that many
appellate courts and state supreme courts have found these waivers to be unconscionable,
determining that class actions waivers are substantially one-sided against consumers113 and
“would have the practical effect of providing Defendants immunity.”114 However, some courts
109
Gilles, supra note 8, at 396 (recounting the birth of the collective-action waiver and its origins in a trade-journal
article). However, class-action waivers may have been employed by businesses much earlier, see Laetitia L.
Cheltenham, The Consumer Financial Protection Bureau and Class Action Waivers After AT&T v. Concepcion, 16
N.C. BANKING INST. 273, 280 (2012) (indicating that businesses have been employing class-action waivers in
contracts since World War II).
110
Gilles, supra note 8, at 398 (2005) (detailing the “brain trust” development of class-action waivers by lawyers
and business executives in the credit card industry). Seemingly foreshadowing Italian Colors, Gilles specifically
references Amex as an immediate responder to this NAF pitch. Id. According to Gilles, Amex sent notice to
approximately two million small merchant Amex service providers requiring agreements to include arbitration
provisions with express class-action waivers. Id.; see Amex I, 554 F.3d 300, 306 (2nd Cir. 2009) (stating that since
1999 the Amex agreements have contained the mandatory arbitration clause).
111
See Klonoff, supra note 101, at 816 (describing how companies are now including arbitration clauses barring
class action litigation and arbitration in a “variety of contexts”). For an example of these types of clauses, see also
Sample Preventative Maintenance Services Agreement, at
https://www.ahspm.com/pm/pdf/All%20States%20Sample%20Preventative%20Maintenance%20Services%20Agre
ement%20012113.pdf (containing mandatory arbitration and class action waiver clauses in an agreement with
American Home Shield).
112
Gilles, supra note 8, at 399–406 (explaining how “first-wave” challenges to class-action waivers have resulted in
class actions against corporations employing the waivers in agreements).
113
See Ting. v. AT&T, 319 F.2d 1126, 1150 (9th Cir.) (discussing how because AT&T is unlikely to bring a class
action against its customers, the waiver does not meet the “bilateral” benefit required under California law); see also
CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 72 (summarizing Ting as turning on the fact that the
class-action waiver was one-sided and therefore substantially unconscionable and disfavored only consumers).
114
Jenkins v. First Am. Cash Advance of Ga., 313 F. Supp. 2d 1370, 1375 (S.D. Ga. 2003); CONSUMER
ARBITRATION AGREEMENTS, supra note 64, at 73 (quoting Jenkins, 313 F. Supp. 2d at 1375); see also Schmitz,
supra note 43, at 628 (discussing how arbitration clauses essentially allow corporations to “privatize justice”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 77
have also rejected the argument that a class-action waiver itself renders an arbitration agreement
unconscionable.115 This rejection is supported by many courts’ reluctance to recognize a right to
bring class actions.116 Generally, case law on class-action waivers prior to Italian Colors was
conflicting.117
D. Overview of Class Arbitration
1. The Rise of Class Arbitration
Southland Corp. v. Keating provides one of the earliest instances of the Supreme Court’s
review of class-action arbitration.118 Although the Supreme Court did not address the issue on
whether the FAA precludes class action arbitration,119 defendant Southland presented important
arguments to both the California Court of Appeals and the Supreme Court on how class
115
CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 73 (stating some courts have rejected the notion that a
class-action waiver alone renders the arbitration clause unconscionable). See e.g. Snowden v. CheckPoint Check
Cashing, 290 F.3d 631 (4th Cir. 2002) (rejecting the argument that parties’ Arbitration Agreement is unconscionable
because of there is no available class action vehicle because plaintiffs may recover attorneys’ fees under the RICO
statute and the Agreement); Taylor v. Citibank USA, 292 F. Supp. 2d 1333, 1345 (M.D. Ala. 2003) (determining
that because the class-action waiver does not limit plaintiffs’ rights to attorneys’ fees the clause is not
unconscionable); Edelist v. MBNA Am. Bank, 790 A.2d 1249, 1261 (Del. Super. Ct. 2001) (holding the surrender of
the class action “right” is not unconscionable alone when it was clearly articulated in the arbitration agreement).
116
CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 73–74 (observing courts’ general reluctance to
acknowledge a right to bring class actions, even when the statute the claims fall under expressly provides for class
actions). See, e.g., Johnson v. W. Suburban Bank, 225 F.3d 366 (3d Cir. 2000) (holding that although the Truth in
Lending Action (TLA) includes statutory provisions for class actions, this does not create a “right” to such
procedures); Bowen v. First Family Fin. Servs., Inc., 233 F.3d 1331, 1338 (11th Cir. 2000) (following Johnson and
extending its application to deny a “non-waivable right” to class actions). See also Livingston v. Associates Fin.,
Inc., 339 F.3d 553, 559 (7th Cir. 2003) (remanding the case on the issue of the class action waiver because “a
decision to certify a class should not be made based solely on the arguments of one party”).
117
See Stipanowich, supra note 70, at 336 (describing the case law on substantive unconscionability of class action
waivers to be “conflicting”).
118
465 U.S. 1 (1984). See S.I. Strong, Does Class Arbitration “Change the Nature” of Arbitration? Stolt-Nielsen,
AT&T, and A Return to First Principles, 17 HARV. NEGOT. L. REV. 201, 206, n.15 (2012) (stating the class
arbitration device has been in use since the 1980s and citing to Southland as the first Supreme Court decision on it).
119
Southland, 465 U.S. at 17 (declaring a decision on whether the FAA precludes class action arbitration would be
inappropriate in the instance of the case).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 78
arbitration violates due process.120 This argument was popular for businesses that argued
arbitration clauses in standard-form contracts automatically prevent consumers from asserting
class-action procedures in the arbitral forum.121
It wasn’t until Green Tree Financial Corp. v. Bazzle that the Supreme Court officially
addressed the arbitration-class proceedings relationship.122 In Bazzle, the plurality opinion held
that where a contract is silent on class wide arbitration, the arbitrator might decide whether class
arbitration was consented to by the parties and whether to certify the class.123 Despite Bazzle’s
fragmented opinion, the ruling solved an important outstanding issue: that the FAA does not
presumptively prohibit class proceedings in arbitration.124
2. Recent Opinions on Class Arbitration Waivers
Two recent Supreme Court cases addressed class arbitration waivers: Stolt-Nielsen v.
AnimalFeeds Int’l Corp.125 and AT&T Mobility v. Concepcion. 126 Stolt-Nielsen and Concepcion
120
Id. at 8–9 (summarizing Southland’s argument that neither case nor California state law authorized arbitrators to
govern class proceedings). Southland’s important impact was holding the FAA was applicable to state court
proceedings. See Pittman, supra note 1, at 799 (describing Southland as one of the leading cases examining Section
2’s scope).
121
CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 144 (explaining businesses’ “aggressive” argument
that binding arbitration automatically precludes class arbitration). This likely spurred the use of class-action waivers
in arbitration clauses.
122
Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003). See e.g., Jay W. Waks & Carlos L. Lopez, Stolt-Nielsen,
Silence and Class Arbitration: “Same As It Ever Was”, 29 ALTERNATIVES TO HIGH COST LITIG. 193, 193 (2011)
(stating the Bazzle Court was the first to address the class arbitration ambiguity CONSUMER ARBITRATION
AGREEMENTS); supra note 64, at 145 (summarizing the opinion in Bazzle as the seminal opinion addressing class
arbitration); Strong, supra note 118, at 206 (referring to Bazzle as the first case to provide Court approval of class
arbitration).
123
Bazzle, 539 U.S. at 451 (“Under the terms of the parties’ contracts, the question—whether the agreement forbids
class arbitration—is for the arbitrator to decide.”). See also Randall D. Quarles, Courts Disagree: Is Arbitration A
“Class” Act?, 68 ALA. L. REV. 476, 477 (2007) (explaining the Bazzle holding).
124
CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 145 (describing how the Bazzle opinion is helpful for
consumers, such as how it rejects corporations’ arguments that arbitration agreements presumptively prohibit class
proceedings).
125
559 U.S. 662 (2010).
126
131 S. Ct. 1740 (2011).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 79
are significant for three reasons: first, they further the body of substantive case law interpreting
the FAA in the recent decades;127 second, they further the Court’s apparent dislike for class
actions;128 and third, they set the stage for the Italian Colors opinion that followed shortly
thereafter.129
First, in Stolt-Nielsen, the Court analyzed whether an arbitration clause that was silent on
class arbitration indicated that the clause allowed class arbitration.130 In its analysis, the Supreme
Court emphasized that there is a “fundamental rule” that holds “arbitration is a matter of consent,
not coercion.”131 The Court held that a party cannot be compelled to participate in class
arbitration unless there is an express contractual basis demonstrating that the parties agreed to do
so.132 This is because “class-action arbitration changes the nature of arbitration to such a degree
that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes
127
See Stipanowich, supra note 70, at 333 (observing the majority opinion’s application of the “the body of
substantive law of arbitrability that has grown up around the FAA in the last quarter-century”).
128
Id. at 337 (describing Stolt-Nielsen as laying the “siege lines” against unconscionability and class-action
waivers). See also AT&T, 131 S. Ct. at 1752 (expressing concern that class actions pressure defendants into settling
questionable questions).
129
See infra Part IV.A.2. (explaining why the majority opinion was justified in light of Stolt-Nielsen and
Concepcion).
130
Stolt-Nielsen, 599 U.S. at 699. (Originally, plaintiffs filed a Consolidated Demand for Class Arbitration that was
submitted to arbitration.). See also Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 435 F. Supp. 2d 382, 383
(S.D.N.Y. 2006). The panel of “distinguished” arbitrators interpreted the contract to find the agreement permitted
class arbitration. Stolt-Nielsen appealed the arbitrators’ decision, and the district court vacated the decision. Id. at
384, 387. The Second Circuit reversed, determining that the arbitration panel did not incorrectly construct the
contract under federal maritime law. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85, 97 (2d Cir.
2008). The Supreme Court granted certiorari. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 557 U.S. 903
(2009).
131
Stolt-Nielsen, 599 U.S. at 681; see also Stipanowich, supra note 70, at 333 (explaining the Court’s reliance on the
“contractual foundation of arbitration”). For further support, the Court cited Volt Info. Scis., Ltd. v. Bd. of Trs. of
Stanford Leland Univ., 489 U.S. 468, 479 (1989) (“Arbitration under the Act is a matter of consent, not coercion,
and parties are generally free to structure their arbitration agreements as they see fit.”).
132
Stolt-Nielsen, 599 U.S. at 684 (finding the arbitrator’s decision that silence meant the parties did not agree to
preclude arbitration “fundamentally at war” with foundational FAA principles). See e.g., Stipanowich, supra note
70, at 333 (stating the majority opinion found, as a matter of federal law, that the dispute cannot be resolved under
class arbitration when there has been “no agreement” on the matter); Sullivan & Glynn, supra note 45, at 1037
(interpreting the holding in Stolt-Nielsen to mean the arbitrators who had imposed class arbitration on shipping
companies exceeded their power).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 80
to an arbitrator.”133 The striking differences between class arbitration and bilateral arbitration
supported the assertion that the parties could not be compelled to participate in class
arbitration.134
Subsequently, in AT&T Mobility v. Concepcion, the Supreme Court addressed whether
federal law preempts California case law finding class-action waivers unconscionable and
therefore invalid.135 The Court first held that when in conflict, the FAA displaces the state law.136
The Court thus proceeded to analyze the issue under federal law, not state law unconscionability
rules.137 Similar to Stolt-Nielsen, the Court reiterated that arbitration is a matter of contract, and
thus the discretion parties made in deciding arbitration procedures will be upheld.138 The Court
133
Stolt-Nielsen, 599 U.S. at 685; see Stipanowich, supra note 70, at 333 (quoting Stolt-Nielsen, 599 U.S. at 685).
Stolt-Nielsen, 599 U.S. at 687; see generally Stipanowich, supra note 70, at 333 (elaborating on the ways in
which class arbitration changes arbitration, including how the arbitrator must resolve many disputes, how the
presumption of privacy is lost, how the arbitrator’s award affects the rights of absent parties and how the
commercial stakes are particularly high and thus not suited for arbitration).
135
Concepcion, 131 S. Ct. at 1746 (examining California law on unconscionability and class action waiver policy).
The Ninth Circuit held that the FAA does not expressly or impliedly preempt California law. See generally Laster v.
AT&T Mobility LLC, 584 F.3d 849, 857–59 (9th Cir. 2009), rev’d sub nom. AT&T Mobility LLC v. Conception,
131 S. Ct. 1740 (U.S. 2011). The California law is referred to as the “Discover Bank rule”, which classifies
consumer class-action waivers as unconscionable. Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005). See
also Philip J. Loree Jr., More FAA: Why AT&T Mobility Makes Sense-and Why It Likely Isn’t the End of Class
Arbitration, 29 ALTERNATIVES TO HIGH COST LITIG. 145, 150 (2011) (explaining the issue in Concepcion and the
Court’s consideration of the Discover Bank rule).
136
Concepcion, 131 S. Ct. at 1747 (“When state law prohibits outright the arbitration of a particular type of claim,
the analysis is straightforward: The conflicting rule is displaced by the FAA”); Sullivan & Glynn, supra note 45, at
1037 (interpreting Concepcion as holding the FAA preempted California state law). See also Stipanowich, supra
note 70, at 375–76 (explaining the majority’s “sweeping” opinion “aimed straight at the head of the doctrine of
unconscionability,” and holding that any discriminatory state laws against arbitration agreements are preempted by
the FAA).
137
See Concepcion, 131 S. Ct. at 1748 (beginning an analysis of the FAA’s purpose and policy after determining
that the FAA preempts state law).
138
Id. (interpreting Section 2 to encourage rigorous enforcement of contracts to their terms to “facilitate streamlined
proceedings”); see also Stipanowich, supra note 70, at 376 (“Scalia portrays the central policy of the FAA as
enforcing the arbitration agreements as written.”).
134
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 81
reasoned, “requiring the availability of classwide arbitration interferes with fundamental
attributes of arbitration . . . inconsistent with the FAA.”139
Most notable in these cases are the Court’s commentaries on class arbitration.140 The
Court’s opinions demonstrate its view that class arbitration is complex and thus cannot be
compelled without express consent.141 The Court further affirms that because bilateral arbitration
is typically informal, class arbitration “sacrifices” the informal advantages of arbitration because
class procedures are inherently more costly and time consuming.142 Classwide arbitration also
requires heightened formalities because an arbitrator must determine class certification before
evaluating the merits of the claim.143
139
Concepcion, 131 S. Ct. at 1748; Stipanowich, supra note 70, at 376–77 (examining the majority opinion’s
critique of the Discover Bank rule and how it interferes with the fundamental attributes of arbitration law and
purpose).
140
See, e.g., Stolt-Nielsen, 599 U.S. at 685-86 (observing the potential benefits of class arbitration are “much less
assured”); Concepcion, 131 S. Ct. at 1752 (“Arbitration is poorly suited to the higher stakes of class litigation.”).
141
See Stolt-Nielsen, 599 U.S. at 685–86 (reasoning that since the benefits of class arbitration are much less assured,
a court cannot assume the existence of parties’ mutual consent to engage in class arbitration). Further:
Classwide arbitration includes absent parties, necessitating additional and different procedures and
involving higher stakes. Confidentiality becomes more difficult. And while it is theoretically
possible to select an arbitrator with some expertise relevant to the class-certification question,
arbitrators are not generally knowledgeable in the often-dominant procedural aspects of
certification, such as the protection of absent parties.
Concepcion, 131 S. Ct. at 1750. See also, Stipanowich, supra note 70, at 377 (describing Scalia’s application of
Stolt-Nielsen to Concepcion, where Stolt-Nielsen’s opinion was also supported by the fundamental differences
between bilateral and classwide arbitration).
142
See Stolt-Nielsen, 599 U.S. at 686 (observing how class arbitration requires the arbitral panel to undergo more
challenging dispute resolution, deciding cases involving hundreds or thousands of parties); Concepcion, 131 S. Ct. at
1751 (“the switch from bilateral to class arbitration sacrifices the principal advantage of arbitration—its
informality—and makes the process slower, more costly, and more likely to generate procedural morass than final
judgment.”); see Stipanowich, supra note 70, at 377 (listing Concepcion’s majority opinion’s three fundamental
differences between bilateral and classwide arbitration: one, that the classwide shift sacrifices the fundamental
advantages of arbitration as speedy and inexpensive dispute resolution; two, classwide arbitration requires additional
procedural formalities; and three, classwide arbitration potentially create enhanced risk to corporate defendants in
high-staked cases); Sullivan & Glynn, supra note 45, at 1036-37 (2013) (“[T]he Court emphasized that class
arbitration sacrifices the principal benefits of private dispute resolution.”).
143
See Concepcion, 131 S. Ct. at 1751 (arguing class procedures required heightened formality to justify binding
otherwise absent parties in the judgment); see also Stolt-Nielsen, 599 U.S. at 686, the Court fears that class
arbitration sacrifices the “presumption of privacy and formality” that is one of the intended purposes of arbitration.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 82
III. DISCUSSION
This Part details the factual background of Italian Colors, including the nature of and the
circumstances that gave rise to the plaintiffs’ claims.144 Next, this Part recounts a detailed
procedural history of the case before it reached the Supreme Court.145 Finally, this Part analyzes
the opinions in the final Italian Colors decision by discussing the arguments in the parties’ briefs
and the majority, concurring, and dissenting opinions.146
A.
Factual Background
The relevant events of Italian Colors began with an agreement between small business
merchants contracting with American Express for charge and credit card services.147 Defendant
Amex was one of the leading issuers of charge and credit cards for consumers.148 It also provided
144
See infra Part III.A. (explaining the circumstances that gave rise to the suit against Amex).
See infra Part III.B. (detailing the procedural history through the Amex’s in the Second Circuit leading up to the
final Supreme Court decision).
146
See infra Part III.C. (summarizing the arguments for both sides, the majority opinion, concurring opinion, and
dissenting opinion).
147
Thus far, this Note has addressed issues concerning “consumers” in arbitration and class action contexts. See
supra Part II. (providing brief summary of arbitration, the effective vindication doctrine, class actions, class-action
waivers and class arbitration, and their impact on consumer-corporation relationships). Although plaintiffs in Italian
Colors consist of business owners, the contrast between Amex’s status as a multinational corporation versus the
small business owners is comparable to a consumer-corporation relationship, and will be treated as such throughout
this Note. See also In re Am. Express Merchs. Litig. (Amex I), 554 F.3d 300, 321 (2d. Cir. 2009) (concluding that
the court’s decision does not rely on the fact that these are “small” merchants). The small business-consumer
distinction is only relevant in predicting further applications of the Italian Colors decision, see infra text
accompanying note 322 (suggesting that the Italian Colors decision may be distinguished in future cases because it
involved small businesses rather than regular consumers).
148
See Amex I, 554 F.3d at 305 (“The plaintiffs allege that Amex ‘is the leading issuer of general purpose and
corporate charge cards to consumers and businesses in the United States and throughout the world.’”); First
Amended Complaint at 8, In re Am. Express Merchs. Litig., 554 F.3d 300 (2d. Cir. 2009) (No. 03-CV-09592), 2009
WL 955691 (“Amex possesses a commanding market share in the U.S. markets for Personal Charge Card services,
Corporate Card services and Small Business Card services.”) [hereinafter Complaint]. Amex’s 2012 annual
shareholder report acclaims: over $31 billion in total revenue, over $888 billion in cardholder purchases and over
100 million “cards-in-force.” American Express Company, Annual Report 2012 1, 3 (Dec. 31, 2012), available at
http://ir.americanexpress.com/Cache/1500047485PDF?Y=&O=PDF&D=&FID=1500047485&T=&IID=102700.
145
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 83
charge or credit card services to merchants.149 The plaintiffs were small merchants incorporated
in California and New York (the “Merchants”) who contracted with Amex for charge or credit
card services.150
Traditionally, Amex offered charge cards151 only to affluent corporations and
consumers.152 Merchants offering these charge card services paid higher fees to Amex;153 but this
was offset by the fact that charge card users typically spent more money than other customers.154
In recent years, however, Amex had created new credit card products, expanding its market to
college students, young adults, and other purchasers less likely to conduct high per-transaction
spending typical of traditional Amex charge card holders.155 Despite the introduction of these
149
See Amex I, 554 F.3d at 305 (“[Amex] is also the leading provider of charge card services to merchants.”);
Complaint, supra note 148, at 1 (“[Amex] is also the leading provider of payment card transaction acquiring services
to merchants.”).
150
See Amex I, 554 F.3d at 305 (naming the parties as “California and New York corporations which operate
businesses which have contracted with Amex”); Samuel E. Buffaloe, Sweet Vindication: The Second Circuit Strikes
A Blow to Companies That Use Class-Action Waivers in Arbitration Agreements to Avoid the Law, 2010 J. DISP.
RESOL. 175, n.9 (2010) (“The plaintiffs in the suit included California and New York corporations that operated
businesses that have contracted with Amex.”).
151
In order to understand the Merchants’ allegations, the distinction between “charge cards” and “credit cards” must
be explained. Amex I, 554 F.3d at 307, citing In re American Express Merchants Litig., 2006 WL 662341, at *1 n. 6
(“A charge card requires its holder to pay the full outstanding balance at the end of a standard billing cycle. A credit
card, by contrast, allows the cardholder to pay a portion of the amount owing at the close of a billing cycle, subject
to interest charges. In plain terms the credit card is a means of financing purchases, the charge card is a method of
payment.”); see also Arbitration/antitrust, 25-10 BUS. TORTS REP. 282, 282 (2013).
152
See Amex I, 554 F.3d at 307 (stating Amex typically centered its business on accepting charge cards used by
affluent customers and corporate clients who were more likely to spend more per purchase); Buffaloe, supra note
150, at 176 (same).
153
When a customer uses an Amex card at one of the Merchants’ restaurants, Amex later reimburses the customer
but deducts a “merchant discount fee.” Complaint, supra note 148, 22. This same fee is charged across “all Amexbranded Personal Charge, Corporate, Small Business and personal credit cards.” Id. 34. Allegedly, this fee was
2.7% of the amount of each transaction for all types of Amex cards, whereas competing card companies Visa and
MasterCard have an average fee of 2%. Id. 22.
154
See Amex I, 554 F.3d at 307 (describing a holder of an Amex charge card an attractive customer because of his
affluent status); Buffaloe, supra note 150, at 176 (same). See also Complaint, supra note 148, 37 (indicating that
some merchants believed the cards attract “incremental customers” or generate “larger purchases”). The Second
Circuit acknowledged that Amex is “certainly not unaware of this attraction” which is what allowed Amex to get
away with charging higher fees for services. Amex I, 554 F.3d at 307.
155
Amex I, 554 F.3d at 308 (detailing Amex’s recent emergence in the credit card market); Buffaloe, supra note 150,
at 176 (describing plaintiffs’ resentment to Amex’s higher fees because cards were issued to those “who perhaps did
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 84
new products, the high rates of charge card services remained the same under the contract and, as
a result, merchants were burdened with heavy costs for offering Amex services.156 The
merchants had no option to limit the Amex services to only charge cards because the original
agreement with Amex required the merchants to “Honor All Cards.”157 Therefore, because the
merchants were required to accept credit cards not originally agreed to when they contracted
with Amex, the merchants alleged Amex created an illegal “tying arrangement” in violation of
the Sherman Act.158
not justify the higher fees charged by Amex.”). In the past couple of decades, Amex has shown signs of making its
cards more accessible. See Complaint, supra note 148, 28 (describing the launch of Blue and the Costco card as
Amex’s emergence in the standard consumer credit card market). In a recent instance as well, Amex partnered with
other banks to issue credit cards with Amex’s logo. See Wells Fargo and American Express Join Forces on Credit
Cards, WALL ST. J., Aug. 7, 2013, available at http://blogs.wsj.com/moneybeat/2013/08/07/wells-fargo-andamerican-express-join-forces-on-credit-cards. This action, however, allegedly furthers Amex’s tying arrangement.
See Brief and Special Appendix for Plaintiffs-Appellants at 5, In re Am. Express Merchs. Litig. 2006 WL 662341
(S.D.N.Y.) (No. 06-187-CV) 2006 WL 6198567 (“American Express has commenced soliciting banks to issue
Amex-branded revolving credit cards. . . . [And w]ooing the banks with fees that significantly exceed those paid to
issuing banks in connection with Visa and MasterCard transactions.”).
156
Amex I, 554 F.3d. at 308 (detailing the Merchants’ situation and how they were forced to pay the costly merchant
discount fee, or lose customers that are typical Amex card users, losing business and money regardless); Complaint,
supra note 148, 49 (stating the merchants are paying more for the bundled services than they do for the same
services of competitors). And these costs trickle down to harm to the consumers as well. See id. ¶ 50 (“As merchants
pass these costs along, prices rise and consumers are injured.”).
157
Amex I, 554 F.3d at 308 (describing the “Honor all Cards” provision as an element of Amex’s compulsion to
overcharge plaintiffs); Buffaloe, supra note 150, at 176 (“Due to the nature of the agreement between the merchants
and Amex, the plaintiffs were compelled to honor all cards issued by Amex and to pay the same high fees for each
purchase”); Complaint, supra note 148, 33 (stating the Agreement required merchants to accept all cards bearing
Amex’s trademarked logo); Zachary M. Sugarman, In Re American Express Merchants’ Litigation, 27 OHIO ST. J.
ON DISP. RESOL. 711, 712 (2012) (claiming the Merchants’ “substantive dispute” with Amex was over the “Honor
All Cards” provision).
158
15 U.S.C. § 1 (2004). A “tying arrangement” is when a seller of goods or services with more economic control
than the buyer supplies a good or service on the condition that the buyer purchase or lease an additional product. 2
CALLMANN ON UNFAIR COMP., TR. & MONO. § 10:18 (4th Ed.).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 85
The Card Acceptance Agreement (“Agreement”) between Amex and the merchants in
Italian Colors was a standard-form contract issued by Amex for merchants offering Amex
services.159 The text of the relevant portion of Agreement stated:
IF ARBITRATION IS CHOSEN BY ANY PARTY WITH RESPECT TO A
CLAIM, NEITHER YOU NOR WE WILL HAVE THE RIGHT TO LITIGATE
THAT CLAIM IN COURT OR HAVE A JURY TRIAL ON THAT CLAIM . . .
FURTHER, YOU WILL NOT HAVE THE RIGHT TO PARTICIPATE IN A
REPRESENTATIVE CAPACITY AS A MEMBER OR ANY CLASS OF
CLAIMANTS PERTAINING TO ANY CLAIM SUBJECT TO
ARBITRATION. THE ARBITRATOR’S DECISION WILL BE FINAL AND
BINDING . . . THERE SHALL BE NO RIGHT OR AUTHORITY FOR ANY
CLAIMS TO BE ARBITRATED ON A CLASS ACTION BASIS . . .
FURTHERMORE, CLAIMS BROUGHT BY OR AGAINST A SERVICE
ESTABLISHMENT MAY NOT BE JOINED OR CONSOLIDATED IN THE
ARBITRATION WITH CLAIMS BROUGHT BY OR AGAINST ANY
OTHER SERVICE ESTABLISHMENT(S), UNLESS OTHERWISE AGREED
TO IN WRITING BY ALL PARTIES.160
Problems of expensive arbitral discovery coupled with minimal potential recovery made
bilateral arbitration unrealistic for any one of the merchants trying to bring a claim for antitrust
violation against Amex under this Agreement.161 The plaintiffs collectively provided an affidavit
by an expert162 predicting about $38,549 in maximum damages for plaintiffs, even once trebled
159
Amex I, 554 F.3d at 305 (“The Card Acceptance Agreement is a standard form contract issued by Amex”);
Complaint, supra note 148, 33 (referring to the “Agreement For American Express Card Acceptance” as “standard
form”). It can be terminated or altered at any time by either party sending a written notice. Amex I, 554 F.3d at 305
(quoting the Agreement’s terms of termination).
160
Amex I, 554 F.3d. at 306–307 (including the above quoted portion of the Agreement); Gilles, supra note 8, at
n.127 (same).
161
In re Am. Express Merchs. Litig., 2006 WL 662341, at *4 (stating plaintiffs’ discovery costs would be hundred
thousands of dollars, with average recovery $5,000 in damages); Buffaloe, supra note 150, at 176–77 (“[T]he costs
associated with bringing a lawsuit would far outweigh the potential reward.”).
162
This expert is Dr. Gary L. French with Nathan Associates Inc., expert economist in litigation and regulatory
proceedings. Amex I, 554 F.3d at 316; see also Dr. French’s online biography, available at
http://www.nathaninc.com/company/staff/gary-l-french (last visited October 4, 2013).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 86
under the Clayton Act.163 According to the expert, proving the claim was so complex that it
required extensive expert work.164
163
Amex I, 554 F.3d. at 317 (quoting the expert Dr. French’s calculations from his affidavit); Buffaloe, supra note
150, at n.18 (referencing the expert’s range of costs from hundreds of thousands of dollars to one million dollars);
Arbitration/antitrust, supra note 151, at 283 (characterizing the experts report as describing litigation to be
“economically impossible”).
164
Amex I, 554 F.3d. at 316 (quoting the expert’s affidavit describing an antitrust economic study as “complex”
because it requires lengthy determinations of various complex issues), Buffaloe, supra note 150,at n.92 (quoting the
experts description of economic analytic “intensity” in an antitrust study). The expert declared “it would not be
worthwhile for an individual plaintiff . . . to pursue individual arbitration or litigation.” Amex I at 316. The opinion
in Amex I lists determinations of what an expert would make in proving plaintiffs’ claim, including evaluations of
the relevant tied market products, whether defendant exercises monopoly power in the tying product market and in
making the arrangement and what the merchants fees would have been but for the tying agreement. Id.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 87
B.
Procedural History: The Amex’s
Litigation began in the District Court for the Southern District of New York when Italian
Colors and other merchants from California and New York brought suit against Amex for the
tying arrangement.165 In response, Amex filed a motion to compel arbitration pursuant to the
Agreement.166 The district court, balancing the Court mandated favoring of arbitration and the
fact that the Agreement was “paradigmatically broad,” determined that the arbitration clause
should be upheld.167 The court further decided that plaintiffs did not present enough evidence to
demonstrate that litigation would be less costly than arbitration.168 As a result, the district court
granted Amex’s motion to compel arbitration.169
The merchants appealed to the Second Circuit Court of Appeals in Amex I.170 The court
addressed whether the class-action waiver was enforceable, beginning with a brief choice of law
analysis to determine that the issue fell under federal law.171 Then the court addressed the
165
In re Am. Express Merchs. Litig., 2006 WL 662341 (S.D.N.Y. Mar. 16, 2006) (listing the plaintiffs in the
consolidated case to include New York merchants, the National Supermarket Association and California merchants).
166
Id. at *1 (“American Express . . . move[s] to compel arbitration of plaintiffs’ claims and to dismiss these related
actions consolidated for pretrial purposes or stay them pending arbitration”).
167
Id. at *4 (“The arbitration provision in the merchant plaintiffs’ card acceptance agreements is also a
paradigmatically broad clause, thereby justifying a presumption of arbitrability.”); see also Sugarman, supra note
157, at 713 (interpreting the “paradigmatically broad” agreement to indicate the court found it applied to the dispute
between the parties).
168
In re Am. Express Merchs. Litig., 2006 WL 662341, at *4 (citing Ball v. SFX Broadcasting, 165 F.Supp.2d 230
(N.D.N.Y. 2001) and Bradford v. Rockwell Semiconductor, 238 F.3d 549 (4th Cir.2001) to assert the effective
vindication doctrine applies when the clause causes significant arbitrators’ fees that would not be incurred in the
regular course of litigation). In arguing that the costs of individual arbitration would exceed the amount of possible
recovery, the district court found plaintiffs ignored the statutory provision under the Clayton Act that would afford
treble damages for antitrust violations. Id. at *5.
169
In re Am. Express Merchs. Litig., 2006 WL 662341, at *10 (dismissing all claims in the case except for Amex’s
motion to compel arbitration); Klonoff, supra note 101, at 822 (2013) (summarizing the procedural history of Italian
Colors, including the district court’s decision).
170
Amex I, 554 F.3d 300 (2nd Cir. 2009).
171
Amex I, 554 F.3d. at 311 (beginning its analysis of the enforceability of the class action waiver through general
considerations). The court also applied Gay v. CreditInform, 511 F.3d 369, 396–95 (3d Cir. 2007). Amex I, 554
F.3d at 312. In Gay, the Third Circuit found the class action waiver to be unconscionable pursuant to state law, but
the court enforced it under the federal law of the FAA. Gay, at 395–96.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 88
effective vindication doctrine and its place as “part of the body of general substantive law of
arbitration.”172 Reversing the district court, the Second Circuit held the plaintiffs sufficiently met
the burden of proof required by the Supreme Court’s ruling in Randolph by demonstrating that
they had no means of bringing suit because of the cost of the expensive economics expert.173
Additionally, because there was no way to pursue the antitrust claims without a class action to
fund the expensive expert, the class action waiver had to be invalidated so that the plaintiffs
could effectively vindicate their federal claims.174
The opinion ended with two caveats: first, the decision was not based on the plaintiffs’
status as merchants, their size as merchants, or the size of recovery for the individual
plaintiffs;175 and second, class action waivers are not per se unenforceable, and not
unenforceable specifically in instances of antitrust actions.176
On May 3, 2010 the Supreme Court granted certiorari to petitioners Amex, but also
vacated and remanded the case for reconsideration in light of Stolt-Nielsen.177 The court in Amex
172
Amex I, 554 F.3d at 312.
Id. at 315 (finding the “record abundantly supports the plaintiffs’ argument that they would incur prohibitive
costs if compelled to arbitrate” sufficient to meet the requisite burden of proof). For more information on this
standard, see, generally Part II.B. (summarizing the effective vindication doctrine and its application in Supreme
Court case law).
174
Amex I, 554 F.3d at 315–319 (examining the expert report and the indications in the record that plaintiffs would
be unable to afford litigation); Klonoff, supra note 101, at 822 (summarizing the Second Circuit’s holding to find
the arbitration clause unenforceable because of the “practical effect” of enforcement that would preclude the
plaintiffs from vindicating their federal claims).
175
Amex I, 554 F.3d. at 320 (“our decision in no way rests upon the status of the plaintiffs as “small” merchants.”).
176
Id. at 321 (refusing to establish a per se rule and instead requiring each case be evaluated for enforceability on the
merits). The majority opinion in the Supreme Court for Italian Colors later rejected this notion of a case-by-case
inquiry. See Am. Express v. Italian Colors Rest., 133 S. Ct. 2304, 2309 (2013); Klonoff, supra note 101, at 822
(noting the majority opinion’s rejection of the case-by-case analysis): infra text accompanying notes 214-215
(describing the majority’s disinclination to allow a case-by-case analysis because of policy considerations, such as
negating the speedy resolution benefits that arbitration intends).
177
Am. Express v. Italian Colors Rest., 130 S. Ct. 2401 (2010) (“Petition for writ of certiorari granted. . . [C]ase
remanded to the . . . Second Circuit for further consideration in light of Stolt-Nielsen”) (citation omitted). However,
the Supreme Court provided no guidance on how to apply Stolt-Nielsen. See also Andrea Doneff, Is Green Tree v.
173
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 89
II examined the holding and reasoning of Stolt-Nielsen, but affirmed its decision from Amex I in
reversing the District Court.178 As Stolt-Nielsen did not hold that a contractual clause barring
class arbitration is per se enforceable, the court found there was no reason to change its
decision.179
Following Amex II, the Second Circuit’s mandate was put on hold while the Supreme
Court issued its opinion on AT&T Mobility v. Concepcion.180 In Amex III, the court reviewed the
case for a third time in light of Concepcion; however, the court found that the opinion in
Concepcion still did not change its analysis.181 Without a Supreme Court mandate stating that
class-action waivers are per se enforceable, the Second Circuit refused to overrule its original
holding in Amex I.182
Randolph Still Good Law? How the Supreme Court’s Emphasis on Contract Language in Arbitration Clauses Will
Impact the Use of Public Policy to Allow Parties to Vindicate Their Rights, 39 OHIO N.U. L. REV. 63, 91 (2012).
178
Amex II, 634 F.3d at 187 (2nd Cir. 2011) (reviewing the decision in Stolt-Nielsen but affirming the decision in
Amex I, finding Stolt-Nielsen did not affect whether a class action waiver is enforceable); see Sugarman, supra note
157, at 711 (2012) (describing the court’s decision in Amex II as claiming to be unaffected by Stolt-Nielsen).
179
Amex II, 634 F.3d at 193 (“[Stolt-Nielsen] does not follow, as Amex urges, that a contractual clause barring class
arbitration is per se enforceable.”); see Doneff, supra note 177, at 91 (quoting Amex II, 634 F.3d at 193).
180
Amex III, 667 F.3d 204, 206 (2nd Cir. 2012). Amex II had based its decision on the policy argument in Discover
Bank rule, which was discussed in Concepcion. See Doneff, supra note 177, at 93 (speculating pre-Amex III that the
Discover Bank policy argument denied in Concepcion would make Amex II’s victory over large corporations “shortlived.”).
181
Amex III, 667 F.3d at 206 (“Concepcion does not alter our analysis, and we again reverse the district court’s
decision and remand for further proceedings.”). This decision was affirmed in Amex IV, 681 F.3d 139 (2nd Cir.
2012) where a rehearing en banc was denied.
182
Amex III, 667 F.3d at 214 (finding neither Stolt-Nielsen or Concepcion establish a rule that class-action waivers
are per se enforceable); see, e.g., Amex II, 634 F.3d at 187 (declining to find class-action waivers per se enforceable
in this case or the context of any antitrust actions); Sugarman, supra note 157, at 717 (indicating the courts explicit
statement that class-action waivers are not per se unenforceable nor enforceable).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 90
C.
The Opinions in American Express v. Italian Colors
1.
The Arguments
In their brief to the Supreme Court, the plaintiffs’ main argument was the applicability of
the effective vindication doctrine.183 Plaintiff-respondents argued that the doctrine is a tool to
“harmonize the FAA with other federal statutes,”184 and incentivizes parties to negotiate
agreements that benefit both parties.185 The doctrine, however, is narrow in scope;186 and the
burden required to satisfy the effective-vindication doctrine is “daunting.”187 Therefore, argued
Respondents, the Court should continue to apply the doctrine because the narrow scope and high
burden of proof will not lead to a widespread invalidation of arbitration agreements.188
Furthermore, respondents argued that in this case plaintiffs had “carried that burden” and proven
that without the costly expert evidence the plaintiffs cannot effectively vindicate their federal
statutory rights on an individual basis.189 These costs are real and supported by an affidavit, not
speculative like the cost risks in Randolph.190
183
Brief for Respondents, supra note 99, at 17 (arguing the effective vindication doctrine was “critical” to the
Court’s holding in Mitsubishi Motors).
184
Id. at 13.
185
Id. at 41.
186
Id. at 28 (describing the Doctrine as “rightly very narrow”).
187
Id. at 28–29 (detailing the demanding evidentiary showing for the Doctrine based on the Randolph limitation).
188
Brief for Respondents, supra note 99, at 33 (“The effective-vindication doctrine has been the law of the land for
over twenty years, and still the conjured flood is just a trickle.”). Respondents further asserted that the “future
doom” as warned by Petitioners is misconstrued, and the “heavy evidentiary burden” required to satisfy the effective
vindication doctrine will prevent any negative backlash due to overuse. Id. at 4, 15.
189
Id. at 2 (referring to the facts as a “rare care” where the plaintiffs managed to carry the burden of proof required
by the FAA and the Randolph court).
190
Id. at 52-53 (comparing this case to Randolph and concluding there is more than a mere “risk” of prohibitive
costs).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 91
Respondents additionally sought other avenues besides class arbitration for parties to
engage in cost sharing to vindicate their statutory rights.191 Respondents argued that the plaintiffs
are not seeking class arbitration, they are simply seeking “the ability to vindicate their federal
antitrust claims in some forum.”192 Respondents suggested class action litigation as a potential
mechanism; but would concede at least some other cost-sharing mechanism through arbitration if
the Court preferred to uphold arbitration.193 Additionally, Respondents referred to Concepcion
where AT&T offered to pay for attorneys’ fees.194 Respondents argue that if petitioners Amex
had offered to do something similar, then the recoverable damages issue would have effectively
been solved through bilateral arbitration.195
Alternatively, petitioners Amex argued that the Court should follow the existing
Congressional mandate to enforce arbitration clauses, 196 not the Court of Appeals’ own “proclass-action policy judgments.”197 Further, a decision enforcing the arbitration clause decision
was supported by Concepcion, which held that conditioning the enforcement of arbitration
191
Id. at 35–38 (arguing the Respondents “plain and simple” are not seeking class arbitration).
Id. at 15, 17. See also Transcript of Oral Argument at 39–40, American Express v. Italian Colors, 2013 WL
267025 (U.S.) (U.S. argued Feb. 27, 2013) (No. 12-133), available at
http://www.supremecourt.gov/oral_arguments/arguments_transcripts/12-133.pdf:
“Justice Scalia: But he wants a class. What he wants in the arbitration is the ability to sue on
behalf of a class, doesn’t he?
Paul D. Clement: That might be what they most want, but they don’t get that. They just get some
way to vindicate the claim. And if this had a cost-shifting provisions that the expert costs were
shifted, that would get the job done, that’s the Sovereign Bank example we talked about in our
brief. There are[sic] more than one way. We’re not trying to get a guarantee for class treatment in
one form or the other.”
193
Brief for Respondents, supra note 99, at 18 (suggesting Petitioners offer to share or shift Respondents’ cost as an
alternative to class arbitration).
194
Id. at 16.
195
Id. at 37–38.
196
Brief of Petitioners, supra note 83, at 16 (arguing that nothing in the text of the Sherman Act or the FAA
indicates a congressional intent to demand class proceedings).
197
Id. at 18 (criticizing the Second Circuit for imposing pro-class-action policy judgments “rather than adhering to
Congress’ mandate”).
192
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 92
clauses on the availability of class actions “frustrates” the FAA.198 Additionally, argued
petitioners, without any Congressional intention to preclude the arbitration clause, the Court
should follow precedent and continue to uphold arbitration agreements.199
Petitioners also asserted policy considerations, observing “Congress knows how to limit
arbitration when it wants to do so.”200 Petitioners further argued that this is why the Consumer
Financial Protection Bureau (CFPB) exists.201 Petitioners cited numerous articles and studies
supporting its argument that arbitration is the most cost-efficient and resourceful option for
everyone.202 For example, the expensive expert supposedly required for plaintiffs to prove their
claims in this case may not have been necessary in the arbitral forum if so decreed by the
arbitrator.203 Additionally, Petitioners argue that class action litigation should be limited because
it increases the risk of “questionable or frivolous claims” that give plaintiffs’ attorneys
198
See id. (“[C]onditioning the enforcement of arbitration agreements on the availability of class actions frustrates
the FAA no less than actually requiring it.”).
199
Id. at 22 (describing the fundamental principles enforcing parties’ choice of bilateral over class procedures); Brief
of Distinguished Law Professors in Support of Petitioners at 14, Am. Express Co. v. Italian Colors Rest., 133 S. Ct.
2304 (2013) (No. 12-133) 2012 WL 6762284 at *1 (arguing the decision in Amex III has no basis in a congressional
command, rather it is a manifestation of the Second Circuit’s judicial hostility towards arbitration) [hereinafter Brief
of Distinguished Law Professors].
200
Brief for Petitioners, supra note 83; Transcript of Oral Argument, supra note 190, at 15–16.
201
Id.; see also Transcript of Old Argument, supra note 190, at 15-16.
Michael Kellogg: And in addition, to the extent that there does need to be some sort of safety valve, of
course Congress can deal with that question. Congress recently in the Dodd-Frank Act said, in certain
circumstances we’re going to allow the Consumer Financial Protection Board to determine whether class
action waivers will be permitted. But obviously there’s nothing either in the FAA or in the Sherman Act
that would justify such an inquiry here.
202
See generally Brief for Petitioners, supra note 83 (listing the “proven” economic benefits of arbitration).
203
Id. at 50 (“Whether each claimant would have to submit a complex and costly economics expert report is a
decision for the arbitrator.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 93
“unbounded leverage” and force “corporate defendants to pay ransoms” in the form of
settlements.204
2.
The Majority Opinion
Although the Second Circuit had adamantly upheld its decision four times, the Court’s
majority opinion overruling the lower court’s decision in favor of Amex was unsurprising.205 The
opinion was delivered by Justice Scalia, and joined by Justices Kennedy, Thomas and Alito and
Chief Justice Roberts.206 In its analysis of the case, the opinion first asserted that there is no
“congressional command” that would compel the Court to find the class-action waiver
unenforceable.207 Congress has already demonstrated that it will go beyond the normal bounds of
the law to help facilitate consumer protection claims, explained Justice Scalia, by allowing treble
damages in antitrust claims, for example.208 Nevertheless Congress has not indicated that
antitrust law is intended to preclude a class-action waiver.209 “Antitrust laws do not guarantee an
affordable procedural path to the vindication of every claim.”210 Nor do they guarantee financial
incentives to assert these claims.211 Additionally, Congress has not established an entitlement to
class proceedings “for the vindication of statutory rights.”212
The opinion further relied on its holding Concepcion to support its argument.213 The
opinion affirmed Concepcion’s refusal to find that federal law guarantees the opportunity to
vindicate federal rights via class procedures in Rule 23 or some other informal class
mechanism.214 Concepcion also supported the Court’s rejection of the assertion that class
arbitration is a necessity to prosecute claims.215 In sum, according to the Italian Colors opinion,
204
Id. at 53. There is also a fear of plaintiffs’ attorneys who specialize in class actions and may have incentives that
do not align precisely with the consumer interests. Id. at 54 (citing to the Class Action Fairness Act to demonstrate
congressional fear that class-action lawyers attract frivolous litigation).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 94
there is no congressionally authorized guarantee that all statutory rights can be vindicated
through class-action procedures.216
Furthermore, the majority opinion briefly applied the facts of the case to the effective
vindication doctrine, referring to the doctrine as a “judge-made exception” to the FAA.217 The
Court drew a distinction for the application of the Doctrine: the Doctrine allows potential
205
See Garcia & Caseria, supra note 83, (referring to the Court’s opinion in Mitsubishi Motors, as continuing its
“recent trend of strictly enforcing the terms of arbitration agreements . . . .”).
206
See e.g., Italian Colors, 133 S. Ct. at 2307 (2013); Arbitration/antitrust, supra note 151, at 282.
207
See, e.g., Italian Colors, 133 S. Ct. at 2309 (2013) (finding no “contrary congressional command” requires the
Court to override the arbitration agreement in this case); David Herr & Steve Baicker-McKee, Class Action
Arbitration Waivers and the Federal Arbitration Act, 28-9 FED. LITIGATOR 13 (2013) (stating the court found “no
contrary congressional intent exists.”).
208
Italian Colors, 133 S. Ct. at 2309 (designating Congress’ enactment of treble damages as going beyond the limits
of “deterring and remedying unlawful trade practice.”).
209
Id. (“But to say that Congress must have intended whatever departures from those normal limits advance antitrust
goals is simply irrational.”).
210
Id. See also Herr & Baicker-McKee, supra note 202 (explaining the opinion to say that “antitrust laws do not
guarantee an affordable procedural path to adjudicate every claim.”).
211
Italian Colors, 133 S. Ct. at 2311 (“But the fact that it is not worth the expense involved in proving a statutory
remedy does not constitute the elimination of the right to pursue that remedy.”). See also Sutherland v. Ernst &
Young, 2013 WL 4033844 *1 (2d Cir. 2013) (quoting Italian Colors, 133 S. Ct. at 2311) (interpreting Italian Colors
to mean class action waivers will not be invalidated solely because the plaintiffs lack economic incentive to assert
their claims individually).
212
Italian Colors, 133 S. Ct. at 2309. See also, Quarles, supra note 123, at 477 (2007) (“There is no nonwaivable
right to bring class proceedings.”). The majority opinion additionally argues that allowing an entitlement to class
actions would violate 28 U.S.C. § 2072(b) (1990), because it would be “an “abridg[ment]” or ”modif[ication]” of a
“substantive right” forbidden to the Rules.” Id. at 2309–310; see generally 28 U.S.C. § 2072(a)–(b) (1990) (“The
Supreme Court shall have the power to prescribe general rules of practice and procedure . . . [s]uch rules shall not
abridge, enlarge or modify any substantive right.”).
213
See, e.g., Italian Colors, 133 S. Ct. at 2312 (2013) (“Truth to tell, our decision in AT&T Mobility all but resolves
this case.”); Herr & Baicker-McKee, supra note 202 (describing the majority’s opinion to “rely heavily” on the
Court’s holding in Concepcion).
214
Italian Colors, 133 S. Ct. at 2310 (noting the Court already rejected the proposition that federal law provides a
non-waivable opportunity to vindicate a federal claim); Klonoff, supra note 101, at 822 (observing the majority
opinion’s rejection of the Second Circuit’s attempt to distinguish Concepcion).
215
Italian Colors, 133 S. Ct. at 2312 (citing Concepcion, 131 S. Ct. at 1751) (“‘[T]he switch from bilateral to class
arbitration,’ we said, ‘sacrifices the principal advantage of arbitration—its informality—and makes the process
slower, more costly, and more likely to generate procedural morass than final judgment.’”); Garcia & Caseria, supra
note 83 (detailing the majority opinion’s reliance on Concepcion to support that class-action waivers will not be
rendered unenforceable due to the high cost to litigate individual claims).
216
Italian Colors, 133 S. Ct. at 2309-10 (“No contrary congressional command requires us to reject the waiver of
class arbitration here.”).
217
Id. at 2310-12 (referring to the Doctrine as “dictum”); see also Herr & Baicker-McKee, supra note 202 (referring
to the Doctrine as a “judicially created exception”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 95
litigator’s the “right to pursue” a statutory remedy, but it does not ensure the “right to prove”
such a remedy.218
Last, the opinion concluded with brief policy considerations.219 If the Court were to
establish a pre-arbitration, case-by-case determination of the evidence necessary, the cost to
develop such evidence, and the recoverable damages, this would “undoubtedly destroy the
prospect of speedy resolution” that the arbitral forum purports to provide.220
3.
The Concurring Opinion
Justice Thomas’s brief concurring opinion supports the majority opinion, but does so
through the plain meaning of the FAA.221 Echoing his concurring opinion in Concepcion,
Thomas affirms his belief that the FAA expressly directs a court to allow arbitration unless the
agreement was made under fraud or duress.222
218
Italian Colors, 133 S. Ct. at 2311; Brief of Distinguished Law Professors, supra note 195, at 12 (“Respondents’
inability to employ class procedures is likewise irrelevant under Randolph.”). See also Damato v. Time Warner
Cable, 2013 WL 3968765 (E.D.N.Y. 2013) (interpreting Italian Colors to hold that “the prohibitive cost of proving
a case in individual arbitration did not render the class action waiver in an arbitration clause unenforceable.”).
219
Italian Colors, 133 S. Ct. at 2312 (speculating on the “regime” that may have been established by Second
Circuit’s opinion if the Court didn’t decide to overrule the decision); Garcia & Caseria, supra note 83 (summarizing
the Court’s “brief, but important, glimpse into policy concerns.”).
220
Italian Colors, 133 S. Ct. at 2312 (declaring that the FAA does not sanction this sort of complex and inefficient
judicially created structure); Garcia & Caseria, supra note 83 (describing the Court’s refusal to establish a
“superstructure” that would force parties to preliminarily litigate the costs to prove their claims in the arbitral
forum).
221
Italian Colors, 133 S. Ct. at 2312, (Thomas, J., concurring) (“I write separately to note that the result here is also
required by the plain meaning of the Federal Arbitration Act.”); Mike Gottlieb, Details: American Express v. Italian
Colors Restaurant, SCOTUSBLOG (Jun 20, 2013, 11:39 AM), http://www.scotusblog.com/2013/06/details-americanexpress-v-italian-colors-restaurant (stating Justice Thomas wrote his concurring opinion to “underscore” the result’s
support in the plain meaning of the FAA). This opinion is unsurprisingly, as Justice Thomas is considered
classically “textualist.” For recent commentary on Justice Thomas’s generally textualist approach, see generally
Daniel J. Meltzer, Preemption and Textualism, 112 MICH. L. REV. 1, 23 (2013).
222
Italian Colors, 133 S. Ct. at 2312-13 (Thomas, J., concurring) (reiterating the concurring opinion in Concepcion
that the only ground for invalidation of the contract are based on issues at the time of contract formation); Garcia &
Caseria, supra note 84 (remarking that a party interested in challenging a class-action waiver must prove duress or
fraud at the formation of the contract, a rule supported by Thomas’s concurring opinion). Justice Thomas’s
concurring opinion in Concepcion is more fleshed out than the one in Italian Colors, see Concepcion, 131 S. Ct. at
1753–755 (applying a textual interpretation of the case in evaluating the plain meaning of Section 2). Additionally,
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 96
4.
The Dissenting Opinion
Justice Kagan’s powerful dissent was joined by Justices Ginsburg and Breyer,223 and
criticizes the majority’s specified attack on class actions and its likelihood of permitting de facto
immunity for corporations from antitrust claims.224 Justice Kagan summarized the majority’s
unsympathetic opinion in three words: “Too darn bad.”225 The dissent argued that the purpose of
the effective vindication doctrine is to invalidate arbitration clauses that cut-off a potential
plaintiff’s ability to bring a federal right, and was designed for situations exactly like this one.226
Additionally, the effective vindication doctrine exists to uphold the fundamental purposes of the
FAA.227 Furthermore, there is no reason for some special exemption for class-arbitration
waivers.228 The dissent asserted that the rule from Mitsubishi Motors includes both “the right to
pursue” and “the right to prove” and that a distinction between the two is unnecessary.229
Additionally, Justice Kagan expressed that courts and Congress should not fear that this rule
Justice Thomas argued: “Italian colors voluntarily entered into a contract . . . it cannot now escape its obligations
merely because the claim it wishes to bring might be economically infeasible.” Italian Colors, 133 S. Ct. at 2313
(Thomas J., concurring).
223
Italian Colors, 133 S. Ct. at 2313 (Kagan, J., dissenting). Justice Sotomayor recused herself because she sat on
the Second Circuit panel that originally decided the case. See also Amex I, 554 F.3d 300 (2nd Cir. 2009); Garcia &
Caseria, supra note 83.
224
Italian Colors, 133 S. Ct. at 2313 (Kagan, J., dissenting).
225
Id. (Kagan, J., dissenting). Kagan also calls the opinion a “betrayal of our precedents.” Id.
226
See id. (Kagan, J., dissenting) (declaring the Doctrine prevents contractual agreements from “confer[ring]
immunity from potentially meritorious federal claims.”); id. at 2316 (“And this is just the kind of case the [Doctrine]
was meant to address.”).
227
Id. at 2313 (Kagan, J., dissenting) (describing the Doctrine as reconciling the FAA with other federal statutes,
like antitrust law).
228
Id. (Kagan, J., dissenting) (criticizing the majority’s “concoction” of a special exception to class arbitration).
229
Id. at 2314 (Kagan, J., dissenting) (“An arbitration clause will not be enforced if it prevents the effective
vindication of federal statutory rights, however it achieves that result.”); Mitsubishi Motors, 473 U.S. at 637 (“And
so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum, the
statute will continue to serve both its remedial and deterrent function.”). It is further argued that the dissent feared
the majority opinion to essentially render the effective vindication doctrine “toothless.” Garcia & Caseria, supra
note 83.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 97
would render every arbitration agreement unenforceable, as there have been several cases where
an arbitration clause was upheld under the application of the doctrine.230
The dissent additionally criticizes Amex for using its monopoly power to shield itself
from any antitrust claims challenging its monopolistic practices.231 The effective vindication
doctrine is especially important in the antitrust context, because antitrust law exists to prevent
monopoly, but monopoly can be used to eliminate antitrust liability.232 It is important that a
party agreeing to arbitration does not forgo the rights afford by the statute; so if the provision
operates as to prevent the pursuing of the statute, then the court may invalidate it under the
effective vindication doctrine.233
Lastly, the dissent specifically targeted the faults in the majority opinion.234 For one, the
dissent urged a consideration (which the majority did not) that this Agreement precluded any
cost shifting to other parties, as a joinder was not allowed and there was a confidentiality
requirement preventing information from being shared amongst suits.235 In addition and most
230
Italian Colors, 133 S. Ct. at 2316 (Kagan, J., dissenting) (observing that the Doctrine has operated for years
without undermining the purported benefits that arbitration affords).
231
Id. at 2313 (Kagan, J., dissenting) (describing Amex’s use of its monopoly power in this case to shield itself from
antitrust liability).
232
Id. at 2314 (Kagan, J., dissenting) (“Without the [Doctrine], a company could use its monopoly power to protect
its monopoly power, by coercing agreement to contractual terms eliminating its antitrust liability.”); Garcia &
Caseria, supra note 83 (reporting on the dissent’s view that the majority approach may allow for de facto
prohibitions, such as arbitration agreements that may impose high filing fees, one-day statute of limitations or
prohibit economic testimony).
233
Italian Colors, 133 S. Ct. at 2314 (Kagan, J., dissenting) (stating no matter how it “achieves that result,” an
arbitration agreement that prevents a party’s ability to pursue statutory remedies should be invalidated); Alissa
Piccione, Class Warfare: Preventing Investor Casualties by Importing England’s Glo into America’s Class Action
Arbitrations, 12 J. INT’L BUS. & L. 417, 420 (2013) (explaining Justice Kagan’s dissent as supporting invalidating
the mandatory, bilateral arbitration clause through the effective vindication doctrine).
234
See Italian Colors, 133 S. Ct. at 2317 (Kagan, J., dissenting) (criticizing the majority opinion for having to little
to say on why the effective vindication doctrine does not apply).
235
Id. at 2316 (Kagan, J., dissenting) (addressing the fact that the agreement prevents any aggregation of claims such
as regular joinder procedures); Klonoff, supra note 101, at 822 (quoting the dissenting opinion to find that
preventing class arbitration was “only part of the problem”); see also Brief for Respondents, supra note 99, at 18
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 98
significantly, Justice Kagan concludes by expressing her belief that this is just the Court’s
attempt to dismantle a class action.236
IV. ANALYSIS
This Part discusses the strengths and weaknesses of the majority and dissenting
opinions.237 It supports the majority opinion’s denial of the application of the effective
vindication doctrine in this case, and supplements the opinion with other considerations such as
the distinction between class actions and arbitration, 238 the holdings in Stolt-Nielsen and
Concepcion,239 and the repercussions of adverse class actions.240 Lastly, this Part evaluates the
dissent, acknowledges the strong arguments in the dissenting opinion, but nevertheless supports
the majority’s decision in Italian Colors.241
A.
Evaluation of the Majority Opinion: Inapplicability of the Effective Vindication
Doctrine
The Court in Italian Colors did not overrule the effective-vindication doctrine: it chose not to
apply it.242 This Note argues that the majority opinion’s ruling is the proper application of the
(requesting the Court order or defendants offer some alternative to class proceedings in order to share or alleviate
costs to plaintiffs).
236
Italian Colors, 133 S. Ct. at 2320 (Kagan, J., dissenting) (“The Court today mistakes what this case is about. To a
hammer, everything looks like a nail. And to a Court bent on diminishing the usefulness of Rule 23, everything
looks like a class action, ready to be dismantled.”); Klonoff, supra note 101, at 822 (quoting Justice Kagan’s
dissent).
237
See infra Part IV.A–D. (expanding on the majority opinion and evaluating the dissent).
238
See infra Part IV.A. (arguing the distinction between class actions and arbitration means the effective vindication
doctrine does not apply).
239
See infra Part IV.B. (comparing the majority opinion against the holdings in Stolt-Nielsen and Concepcion).
240
See infra Part IV.C. (describing the repercussions of class actions and class arbitration and how they support the
majority’s decision).
241
See infra Part IV.D. (agreeing with the dissent in some regards but disagreeing on the point that this case is not
about class actions).
242
Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2310 (2013) (declining to apply the Doctrine to
invalidate the arbitration agreement at issue).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 99
doctrine because the merchants’ inability to effectively vindicate their claims was due to the
class-action waiver element of the clause, not the binding arbitration requirement.243
1.
Alternatives and Severance
In order to establish an understanding of why the effective vindication doctrine does not
apply, this Note analyzes hypothetical scenarios that would have occurred if the Supreme Court
decision had affirmed the Second Circuit’s rulings in the Amex’s.244 The options show that in
reality, the case could not go forward unless litigated as a class action, either in class arbitration
or class-action litigation.245
This Note will not attempt to expand on the severability doctrine in cases such as Rent-ACenter.246 Rather, this Note applies the conceptual understanding of the severability doctrine in
Rent-A-Center to theoretically sever the class-action waiver and the arbitration agreement in
Italian Colors.247 If the opinion had been able to sever the clause in Italian Colors, the Court
243
See infra Part IV.A.2. (arguing that the effective vindication doctrine does not apply because class actions and
arbitration are two distinct entities which must be evaluated for their effect separately, even within the same clause).
244
For a review on severability, see supra Part II.A.3. (explaining arbitration’s relation to contract doctrines
including severance).
245
See Transcript of Oral Argument, supra note 190, at 10:
“Michael Kellogg: I think we have to return to the fact that the only provision at issue here was the
class action waiver. That was the only issue that they raised below. It was the issue decided by the
Court. It was the issue on which this Court granted certiorari, and it’s directly contrary to this Court’s
decision in Concepcion.”
See also Erwin Chermerinsky, The Court Affects Each of Us: Supreme Court Term in Review, 16 GREEN BAG 2d
359, 376 (2013) (“Italian Colors said that the suit simply could not go forward except as a class action.”).
246
See, e.g., Buckeye, 546 U.S. at 445 (“[A]s a matter of substantive federal arbitration law, an arbitration provision
is severable from the remainder of the contract.”); Rent-A-Center, 130 S. Ct. at 2778 (“[A] party’s challenge to
another provision of the contract, or to the contract as a whole, does not prevent a court from enforcing a specific
agreement to arbitrate.”). Rent-A-Center is said to effectuate an “expansive application of the severability doctrine.”
Stipanowich, supra note 70, at 365.
247
See Gilles, supra note 8, at n.181 (“Courts have traditionally severed unconscionable or unenforceable provisions
in agreements to arbitrate disputes, thereby allowing the dispute to go to an arbitral panel without the offensive
terms.”). See, e.g., Felts v. CLK Mgmt., 2011-NMCA-062, 149 N.M. 681, 697, 254 P.3d 124, 140 (2011) (denying
severance of the class-action waiver because removing the waiver “would excise major portions of the arbitration
provision”); Puleo v. Chase Bank, 605 F.3d 172, 186 (3d Cir. 2010) (finding severance of the class-action waiver
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 100
could either invalidate the binding arbitration aspect but uphold the class or collective action
waiver, or uphold the binding arbitration but invalidate the class-action waiver.248
First, a court could sever the arbitration portion of the clause from the contract, allowing
plaintiffs to take the case to court.249 However, the class action bar would still have been upheld
and the expensive expert would still be unaffordable for individual plaintiffs.250 Second, the
court could sever the class action waiver and uphold binding arbitration.251 The parties would the
engage in class arbitration—but in light of Concepcion, this may not have been favorable for
either party.252 Also, according to Stolt-Nielsen, a party could not have been compelled to
participate in class arbitration without an indication of consent.253
possible on the condition that the waiver was deemed severable); Cooper v. QC Fin. Servs., 503 F. Supp. 2d 1266,
1292 (D. Ariz. 2007) (severing the class-action waiver provision after finding it was unconscionable).
248
However, it is questionable whether a court would sever the arbitration clause at all and instead find the whole
agreement invalid. See generally, CONSUMER ARBITRATION AGREEMENTS, supra note 64, at 75–78 (2005)
(describing different federal courts policies on dealing with unconscionable aspects of arbitration clauses). Since the
“‘primary purpose’” of the FAA is to ensure “that parties agreements to arbitration are enforced according to their
terms’ . . . [I]f an agreement to arbitrate can not be enforced according to its terms, a court should refuse to enforce
it.” Id. at 75 (quoting Volt Info. Scis., Ltd. v. Bd. of Trs. of Leland Stanford Univ., 489 U.S. 468, 479 (1989)).
Additionally, courts typically disfavor corporations who draft unenforceable adhesion contracts, and will “refuse to
aid a party who has taken advantage of his dominant bargaining power.” Id.
249
This could be done under a combination of the effective vindication doctrine and the severance doctrines. See
Mitsubishi Motors, 473 U.S. at 636–37 (1985) (presuming arbitration agreements are enforceable unless the
potential claimant cannot effectively vindicate her rights); RESTATEMENT (SECOND) OF CONTRACTS § 184 (1981)
(“A court may treat only part of a term an unenforceable . . .”).
250
See Amex I, 554 F.3d 300, 317 (2d Cir. 2009) (finding even trebled recovery damages for plaintiffs would make
the $1 million expert too expensive for plaintiffs to afford individually).
251
E.g., Szetela v. Discover Bank, 97 Cal. App. 4th 1094, 1102 (2002) (striking the class action waiver from the
arbitration clause and allowing the parties to engage in classwide arbitration).
252
See Concepcion, 131 S. Ct. 1740, 1751–752 (2011) (describing the three major distinctions between bilateral and
class arbitration). Both Concepcion and Stolt-Nielsen address concerns for the impact on plaintiffs in class
arbitration. See Concepcion, 133 S. Ct. at 1751 (affirming that even in class arbitration “class representatives must
at all times adequately represent absent class members, and absent members must be afforded notice, an opportunity
to be heard, and a right to opt out of the class”); Stolt-Nielsen, 559 U.S. at 682 (expressing concern that the benefit
to plaintiffs of privacy and confidentiality presumed in arbitration is sacrificed in a class action). For a more
detailed discussion on privacy in arbitration, see generally Amy J. Schmitz, Untangling the Privacy Paradox in
Arbitration, 54 U. KAN. L. REV. 1211 (2006).
253
Stolt-Nielsen, 559 U.S. at 685 (ruling that it cannot be assumed that parties consented to class arbitration).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 101
Even if the Court did not “sever” the clause or invalidate the entire agreement,
respondents requested that if class action relief was not plausible, then Amex could at least create
“a better arbitration agreement” that would allow for cost-shifting for prevailing parties.254 By
allowing joinder, cost shifting, or by removing the confidentiality agreement, respondents
argued, the agreement would at least allow the plaintiffs to effectively vindicate their legal
rights.255 However, this would require the Court to either “blue-pencil” the agreement,256 or for
Amex to change its standard-form agreements, neither of which was likely.257 Additionally,
allowing other procedural tools like joinder would not cover the costs anyway. If the price of an
expert to prove the case was close to $1 million, and maximum possible damages were around
$30,000, then an efficient joinder of claims would still not establish sufficient financial incentive
to file suit.258
2. Distinction between Class actions and Arbitration
Further supporting the inapplicability of the Doctrine is the assertion that arbitration and
class actions are inherently different: arbitration is a statutory right, whereas class actions are a
254
Brief for Respondents, supra note 99, at 4 (referencing the cost-shifting agreement offered by AT&T in
Concepcion as an example of a favorable compromise for plaintiffs and defendants).
255
Id. (“All that Respondents desire is the ability to effectively vindicate their federal antitrust rights in some
forum.”).
256
Courts generally disfavor “blue-penciling” contracts. See, e.g. Free Enter. Fund v. Pub. Co. Accounting
Oversight Bd., 130 S. Ct. 3138, 3162 (2010) (declaring blue-penciling statutes belongs to the legislature, not the
judiciary).
257
For Amex to change its standard-form contract, there must be some financial impetus. For suggestions on
creating such an impetus, see infra Part V.C.3. (balancing interests of consumers and corporations in considering
suggestions of congressional reform).
258
See Amex I, 553 F.3d 300, 316–17 (excerpting the expert’s affidavit calculating cost of an expert to be between
$300,000 to $2 million, while recoverable damages from the largest volume plaintiff would equal $38,549 when
trebled under the Clayton Act). Additionally, the higher the number of aggregated claims, the more likely a court
would sever the case into separate suits, see ANDERSON & TRASK, supra note 103, at 5–6 (observing how courts
may sever claims aggregated under joinder procedures because the case would be too complicated with so many
plaintiffs). Even the original Complaint acknowledges that a class action is necessary and joinder would be futile.
See Complaint, supra note 148, at 4 (“The members of the Class are so numerous that joinder of all members is
impracticable.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 102
codified procedural option.259 Federal law governs arbitration;260 unlike class actions, which are
procedural mechanisms through which parties may seek collective redress.261 Further, class
actions are tools that increase judicial efficiency and regulate and deter corporate malfeasance.262
They are not law; they are a procedural option, and their existence depends on judicial approval,
not a federal requisite.263
Because of the distinction between class actions and arbitration, in Italian Colors, the
effective-vindication doctrine does not apply.264 It was the class action waiver that made the
agreement unfair, not the requirement that the parties arbitrate.265 And because the effective-
259
See generally Richard A. Nagareda, The Litigation-Arbitration Dichotomy Meets the Class Action, 86 NOTRE
DAME L. REV. 1069, 1070–71 (2011) (comparing the litigation-arbitration “dichotomy” to the class action
procedure).
260
9 U.S.C. § 2 (2006) (“A written provision in any . . . contract evidencing a transaction involving commerce to
settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable,
and enforceable . . . .”). See, e.g., Am. Gen. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005) (stating “federal law governs
the arbitrability of disputes); John Hancock v. Wilson, 254 F.3d 48, 58 (2d Cir. 2001) (“Whether a party is bound by
an arbitration clause is governed by federal law.”); Cone Mem’l Hosp. v. Mercury Constr., 460 U.S. 1, 24 (1983)
(referring to Section 2 of the FAA as the embodying federal substantive law applicable to any arbitration
agreement).
261
See ANDERSON & TRASK, supra note 103, at 3–4 (describing how lawsuits are expensive, and sometimes difficult
to prove; therefore it makes more sense for the suit to be brought collectively rather than individually).
262
See id. at 13–15 (listing the benefits of class actions to include: leveling the playing field against larger
corporations; holding corporations accountable for their actions; limited waste of judicial resources that would occur
if all claims were tried individually; inter alia); MARTIN H. REDISH, WHOLESALE JUSTICE: CONSTITUTIONAL
DEMOCRACY AND THE PROBLEM OF THE CLASS ACTION LAWSUIT 1 (2009) (describing the substantial potential
benefits of class actions such as “achiev[ing] justice without overwhelming the judicial system.”). The most
common type of class action even requires “efficiency” and proof that the class action is a superior form of
adjudication. See FED. R. CIV. P. 23(b)(3) (requiring for certification “that a class action is superior to other
available methods for fairly and efficiently adjudicating the controversy.”).
263
See REDISH, supra note 262, at 2–3 (2009) (emphasizing that lawsuits do not “arise” under Rule 23, rather the
rights to be adjudicated are granted under other substantive federal law).
264
But see Myriam Gilles, Killing Them with Kindness: Examining “Consumer-Friendly” Arbitration Clauses After
AT&T Mobility v. Concepcion, 88 NOTRE DAME L. REV. 825, 827 (2012) (proposing the “liberal pragmatist” view
that the Doctrine should apply to any instance of arbitration even if it affects class actions).
265
See Amex I, 554 F.3d 300, 315–16 (2d. Circ. 2009) (observing that even in arbitration, the class-action waiver
would cause plaintiffs to incur “prohibitive costs”); Italian Colors, 133 S. Ct. 2304, 2311 (2013) (“The individual
suit that was considered adequate to assure “effective vindication” of a federal right before adoption of class-action
procedures did not suddenly become “ineffective vindication” upon their adoption.”); Brief of Distinguished Law
Professors, supra note 195, at 12 (arguing that Respondents’ inability to bring class procedures is irrelevant under
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 103
vindication doctrine exists to further the purpose of the FAA, it applies only to arbitration and
not to class actions.266
B.
Evaluation of the Majority Opinion: Support in Stolt-Nielsen and Concepcion
The majority opinion’s reliance on its holdings in Stolt-Nielsen and Concepcion signifies
that these cases paved the way for the decision in Italian Colors.267 Both Stolt-Nielsen and
Concepcion held that absent qualifying language, arbitration must be bilateral.268 In Italian
Colors, the contract specifically precluded class arbitration.269 It is reasonable to infer that if
class arbitration cannot be compelled without express consent when the contract is silent, it
certainly cannot be compelled when the contract expressly states class arbitration is
unpermitted.270
Furthermore, the Court’s rejection of the financial incentive argument is supported by the
opinion in Concepcion.271 The Second Circuit in all of the Amex’s reasoned that class actions are
the Randolph standard because the court in Randolph, 531 U.S. at 92 n.7, did not consider the existing class-action
waiver in its application of the Doctrine).
266
See Italian Colors, 133 S. Ct. at 2313 (Kagan, J., dissenting) (indicating the purpose of the Doctrine is to
reconcile the FAA with all other federal law); Brief for United States as Amicus Curiae Supporting Respondents at
10, Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (No. 12-133) 2013 WL 367051 (demonstrating the
Doctrine was created from the body of federal substantive law governing arbitration) [hereinafter Brief for United
States].
267
See Italian Colors, 133 S. Ct. at 2309 (citing Stolt-Nielsen, 559 U.S. at 662 (to support its assertion that courts
must enforce contracts according to their terms, including with whom the parties agreed to arbitrate); Id. at 2312
(“Truth to tell, our decision in [Concepcion] all but resolves this case.”).
268
See Sullivan & Glynn, supra note 45, at 1036 (interpreting Concepcion and Stolt-Nielsen to mean that absent
qualifying language, arbitration must be exclusively bilateral). See also id. at 1036–37 (“[T]he Court emphasized
that class arbitration sacrifices the principal benefits of private dispute resolution.”).
269
Unlike Stolt-Nielsen, the Agreement with Amex specifically precluded class arbitration. See Amex I, 554 F.3d at
306 (2d Cir 2009) (quoting the agreement portion stating: “FURTHER, YOU WILL NOT HAVE THE RIGHT TO
PARTICIPATE IN A REPRESENTATIVE CAPACITY OR AS A MEMBER OF ANY CLASS OF CLAIMANTS
PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION . . . .”).
270
This is because class arbitration “interferes with fundamental attributes of arbitration,” and it is therefore
inconsistent with the FAA. Concepcion, 131 S. Ct. at 1748; Sullivan & Glynn, supra note 45, at 1038 (quoting
Concepcion, at 1748). See also Stolt-Nielsen, at 684 (emphasizing that pursuant to the FAA, arbitration is a matter of
consent).
271
Italian Colors, 133 S. Ct. at 2312 (“Truth to tell, our decision in [Concepcion] all but resolves this case.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 104
the only economically feasible means for plaintiffs to “press” their class action claims.272
However, the decision in Concepcion bars courts from “conditioning the enforceability of certain
arbitration agreements on the availability of classwide arbitration procedures.”273 Therefore, the
decision in Italian Colors is further justified by the holdings in Stolt-Nielsen and Concepcion.
C. Evaluation of the Majority Opinion: Adverse Effects of Class Actions
The opinion in Italian Colors is further supported by trends in the Roberts Court to clamp
down on class actions, especially at the certification stage.274 The fear of the adverse effects on
defendants through class actions is particularly prominent in Supreme Court decisions.275
However, many consumer advocates fear that a complete bar on class actions will remove all
opportunity for legal remedies for consumers.276 The benefits or detriments of class actions have
been a long-standing source of legal debate.277
272
See Amex I, 554 F.3d at 312 (focusing on the economic realities that certain claims are only justified if brought as
a class action); Amex II, 634 F.3d at 194 (2d Cir. 2011) (same); Amex III, 667 F.3d at 214 (2d Cir. 2012) (same).
273
Concepcion, 131 S. Ct. at 1744; see also Brief of Distinguished Law Professors, supra note 195, at 4–5
(interpreting Concepcion to indicate that “financial incentives do not bear on access, that is, whether the doors to the
arbitral forum are open to a particular claimant in the first place.”).
274
See supra text accompanying notes 103–108 (including Wal-Mart v. Dukes and Comcast v. Behrend as recent
Supreme Court cases preventing class actions at the certification stages); A. E. Dick Howard, Now We Are Six: The
Emerging Roberts Court, 98 VA. L. REV. IN BRIEF 1, 11 (2012) (observing the holdings in Dukes and Concepcion
indicate the majority of the Roberts Court is not fond of class action litigation); but see Klonoff, supra note 101, at
827–28 (arguing that the Court is not uniformly anti-class actions by listing four recent cases where the Court
upheld a class certification).
275
See Concepcion, 131 S. Ct. 1740, 1752 (2011) (“Faced with even a small chance of a devastating loss, defendants
will be pressured into settling questionable claims.”).
276
See Klonoff, supra note 101, at 815 (expressing concerns that arbitration clauses could allow a company or
individual to cause mass harm to a group of persons who would individually have no financial resources or incentive
to hire an attorney). But see Howard, supra note 274, at 11 (concluding that the Roberts court is not exclusively
pro-business).
277
ANDERSON & TRASK, supra note 103, at 16 (observing that legislators and legal scholars have debated the
potential adverse consequences of class action for years); Arthur R. Miller, Of Frankenstein Monsters and Shining
Knights: Myth, Reality, and the “Class Action Problem”, 92 HARV. L. REV. 664 (1979) (describing the class action
conflict as “a philosophical, social, and economic debate over the merits and demerits of the class action.”); see
generally Chris H. Miller, The Adaptive American Judiciary: From Classical Adjudication to Class Action
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 105
There are legitimate adverse effects of class actions, however, which have affected the
United States’ legal reputation throughout the world.278 Aggregation of claims can sometimes
simplify the litigation such that individualized issues are not addressed.279 Uncertainty in factual
situations and an increased risk of errors may also arise in a class action suit.280 Additionally,
although class actions are often considered more cost-efficient,281 there are instances where a
class action was more of a drain on judicial resources than a series of individualized claims
might have been.282 And lastly, courts and lawmakers particularly fear the potential for abuse
through the class action mechanism.283 The aggregation of small claims against a defendant
Litigation, 72 ALB. L. REV. 117 (2009) (detailing a history of class action developments and social attitudes towards
class actions throughout time).
278
See, e.g., Communication from the Commission of the European Parliament, the Council, the European
Economic and Social Committee and the Committee of the Regions 3 (EC), No. COM (2013) 401/2, 11 June 2013
(referring to the United States as an example of instances of the “adverse effects” that result from collective redress
that has not been properly safeguarded).
279
ANDERSON & TRASK, supra note 103, at 16 (asserting that in cases where the claims of thousands of people may
turn on the proof of a single litigant, courts may simply the litigation and ignore the “inherently individualized
issues.”).
280
Id. at 16 (“Uncertainty costs can be particularly acute where large numbers of potential plaintiffs may have
similar claims.”); Sergio J. Campos, Proof of Classwide Injury, 37 BROOK. J. INT’L L. 751, 757 (2012) (“The lack of
proof of classwide injury arises mainly from uncertainty as to the counterfactual world.”).
281
See, e.g., Klonoff, supra note 101, at 831 (reminding courts that class actions can be “a useful and efficient
device”); Drahozal, supra note 42, at 743 (detailing the theoretical benefits of class actions, including saving the
costs of adjudicating the same claims repeatedly).
282
ANDERSON & TRASK, supra note 103, at 17–18 (citing cases where a court speculated that the cost of a lengthy
trial and hearing of all issues would put a strain on judicial resources); Cronin-Harris, supra note 6, at 855 (listing
the increased volume of class actions as one of the delays in the court system in the 1960s and 70s).
283
See Piambino v. Bailey, 757 F.2d 1112, 1139 (11th Cir. 1985) (“Rule 23 class actions accomplish many salutary
goals; at the same time, they can cause great mischief.”); ANDERSON & TRASK, supra note 103, at 18
(acknowledging the costs of abusive class actions). Often plaintiffs’ attorneys are viewed with suspicion towards
them and their “entrepreneurial litigation.” See Gilles, supra note 8, at 373–74 (commenting on the reputation that
plaintiffs’ counsel in class actions are viewed as “immoral.”); ANDERSON & TRASK, supra note 103, at 18
(examining the plaintiffs’ counsel issues as an agency problem, where attorneys are agents the dispersed plaintiffs’
have no control over).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 106
corporation may threaten the defendant’s reputation, forcing it to choose settlement over
continued publicity before any finding of actual liability has been determined.284
Because class actions are still controversial, and there exists no federal statute
guaranteeing a right to litigate through a class action, the Supreme Court was correct in refusing
to establish a right to vindicate claims through a class action, although there exists no financial
incentive to bring the case without one.285 This Note has attempted to demonstrate that it is the
class-action waiver aspect of the Agreement that rendered the effective vindication of plaintiffs’
rights effectively impractical. Therefore, the Supreme Court’s focus on class actions, and
hesitancy to open opportunity to class action rights makes sense in light of the controversial
status of, and recent Supreme Court stance on, class actions.286
D. Evaluation of Dissent
Justice Kagan’s dissent predicted legitimate negative repercussions of the Italian Colors
opinion, as well as accurately identified the opinion’s failure to fully address some of its central
284
See ANDERSON & TRASK, supra note 103, at 98–99 (explaining how media coverage of a potential class action
can hurt a defendant corporation’s sales, stock prices, and public image and can motivate a defendant to settle claims
related to the litigation quickly); see, e.g., In re Rhone-Poulenc Rorer, 51 F.3d 1293 (7th Cir. 1995) (reversing the
District Court’s class certification because a class action would put defendants in a $25 billion bankruptcy-inducing
lawsuit that would put them under “intense pressure to settle.”).
285
See, e.g., Italian Colors, 133 S. Ct. at 2309–10 (refusing to find a congressional mandated entitlement to class
actions); Johnson v. W. Suburban Bank, 225 F.3d 366, 377 (3d Cir. 2000) (denying the existence of an unwaivable
right to class actions); In re Checking Account Overdraft Litig., 734 F. Supp. 2d 1294, 1300 (S.D. Fla. 2010) (“A
class action mechanism does not confer any additional substantive rights.”).
286
The majority opinion’s main commentary in Italian Colors on class actions is:
“Nor does congressional approval of Rule 23 establish an entitlement to class proceedings for the
vindication of statutory rights . . .The Rule imposes stringent requirements for certification that in
practice exclude most claims. And we have specifically rejected the assertion that one of those
requirements (the class-notice requirement) must be dispensed with because the “prohibitively
high cost” of compliance would “frustrate [plaintiff’s] attempt to vindicate the policies underlying
the antitrust” laws. (citation omitted))). One might respond, perhaps, that federal law secures a
nonwaivable opportunity to vindicate federal policies by satisfying the procedural strictures
of Rule 23 or invoking some other informal class mechanism in arbitration. But we have already
rejected that proposition in [Concepcion].”
Italian Colors, 133 S. Ct. at 2309–10.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 107
arguments.287 For one, the decision in Italian Colors may pose a real threat of monopolistic
dominance: antitrust law exists to prevent monopoly, but monopoly can be used to eliminate
antitrust liability.288 Although the dissent agreed the FAA encourages courts to enforce
arbitration, it argued the FAA does not encourage arbitration to create de facto immunity from
litigation.289 Furthermore, the dissent insisted that the effective vindication doctrine actually
furthers the goals of the FAA because it ensures companies adopt fair arbitration policies that
will result in the efficient and accurate handling of claims, which in turn encourages the
enforcement of more arbitration claims.290
Moreover, the dissent correctly identified holes in and unexplained portions of the
majority opinion. For one, the dissent criticized the majority opinion for providing little
287
It is also a more interesting read: even adamant supporters of the majority opinion agree the dissent outshines the
majority opinion. See Walter Olson, American Express v. Italian Colors: Arbitration Waiver of Class Actions,
OVERLAWYERED (June 20, 2013), available at, http://overlawyered.com/2013/06/american-express-v-italian-colorsarbitration-waiver-class-actions (referring to Justice Kagan’s dissent as “both longer and more spirited than Justice
Scalia’s majority opinion.”).
288
Italian Colors, 133 S. Ct. at 2314 (Kagan, J., dissenting) (asserting that without the effective vindication doctrine
“a company could use its monopoly power to protect its monopoly power, by coercing agreement to contractual
terms eliminating its antitrust liability.”); see also Brief for the United States, supra note 266, at 20 (reiterating that
parties may not waive their right to bring antitrust claims).
289
Italian Colors, 133 S. Ct. at 2315 (Kagan, J., dissenting) (stating the FAA “prefers” arbitration to litigation, but
does not confer shields against liability and allow corporations to impose “backdoor” waivers of federal statutory
rights).
290
Italian Colors, 133 S. Ct. at 2315 (Kagan, J., dissenting) (arguing the Doctrine supports federal liberal policy
favoring arbitration); see also Brief for Respondents, supra note 99, at 3 (“But when the FAA is in tension with
another federal statute . . . Randolph provides the basis for harmonizing the two federal statutes.”); Brief for the
United States, supra note 266, at 16–17 (observing that the FAA policy favoring arbitration does not support
instances where a plaintiffs must drop his claim entirely). Justice Kagan further explains:
“With the [Doctrine], companies have good reason to adopt arbitral procedures that facilitate
efficient and accurate handling of complaints. Without it, companies have every incentive to draft
their agreements to extract backdoor waivers of statutory rights, making arbitration unavailable or
pointless. So down one road: More arbitration, better enforcement of federal statutes. And down
the other: Less arbitration, poorer enforcement of federal statutes. Which would you prefer? Or
still more aptly: Which do you think Congress would?”
Italian Colors, 133 S. Ct. at 2315.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 108
explanation to justify its “right to prove” and “right to pursue” distinction.291 Secondly, as the
dissent correctly observed, the majority opinion barely addressed why the effective-vindication
does not apply.292 Although this Note argues the majority opinion’s decision is correct,293 it
agrees with the dissent’s criticisms towards the majority for its short and severely lacking
explanations.
Where this Note disagrees the most with the dissent is on its major point: that the
majority’s opinion is just another attempt to dismantle a class action. Justice Kagan argued that
this case was not about class actions;294 it was about whether a plaintiff can effectively vindicate
his rights in arbitration.295 Additionally, Justice Kagan claimed that the Doctrine looks at the
agreement as a whole to determine if the plaintiff can effectively vindicate his rights: “No single
provision is properly viewed in isolation.”296 However, as this Note frequently asserts, this case
is about class actions because the unavailability of aggregating claims made vindicating the
Merchants rights impossible, not the requirement that disputes be conducted in an arbitral
forum.297 Additionally, the arbitration agreement and the class-action waiver can and should be
291
Italian Colors, 133 S. Ct at 2317 (Kagan J., dissenting) (arguing the Doctrine “forecloses” on the distinction
drawn by the Court between the right to prove and the right to pursue); see also Brief for United States, supra note
266, at 18 (foreshadowing the Court drawing a distinction and arguing against the interpretation that the Doctrine
only applies to fees unique to arbitration).
292
Italian Colors, 133 S. Ct at 2317 (Kagan J., dissenting) (“The majority is quite sure that the effective-vindication
rule does not apply here, but has precious little to say about why.”).
293
See supra, Part IV.A.–B. (supporting the majority opinion’s holding based on the distinction between class
actions and arbitration and the adverse potentials of class actions).
294
Italian Colors, 133 S. Ct at 2320 (Kagan J., dissenting) (“The Court today mistakes what this case is about. To a
hammer, everything looks like a nail. And to a Court bent on diminishing the usefulness of Rule 23, everything
looks like a class action, ready to be dismantled.”).
295
Id. at 2319 (Kagan J., dissenting) (observing plaintiffs are not arguing class-actions are necessary, they are
seeking a way to effectively vindicate their rights).
296
Id. at 2318 (dismissing the majority’s premise that this case is solely about class-action waivers, arguing instead
the agreement should be viewed as a whole).
297
See supra, Part IV.A. (explaining why the effects of the class-action waiver, not the arbitration requirement,
impact the situation in Italian Colors).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 109
viewed separately, and, therefore, their specific laws and doctrines should be applied to them
only respectively.298
V. IMPACT
This Part discusses the immediate impact of the Italian Colors ruling.299 This Part also
argues that courts should be aware that opportunities to invalidate arbitration agreements still
exist in a narrow context.300 Additionally, it explores unanswered questions, including judicial
attitude towards arbitration and the FAA301 and the future of class actions.302 Lastly, this Part
establishes avenues for congressional reform based on balancing consumer and corporate
interests.303
A. Immediate Response
Courts have immediately responded to the Italian Colors decision.304 In Sutherland v. Ernst &
Young LLP,305 the Second Circuit applied Italian Colors to a class-action waiver provision that
removed the incentive for a potential litigator to bring a claim under the Fair Labor Standards
Act of 1938 (FLSA).306 The court solidified a common analysis to review the enforceability of an
298
See supra, Part IV.A.1 (applying the severability doctrine to distinguish class actions from arbitration within a
single clause).
299
See infra Part V.A. (detailing how courts have already begun applying and changing decisions based on the
Italian Colors ruling).
300
See infra text accompanying notes 313–315 (emphasizing that because the Court did not overrule the effective
vindication doctrine it may still be applicable in narrowed instances).
301
See infra Part IV.B.1. (discussing whether there will be restored judicial hostility towards the FAA).
302
See infra Part IV.B.2. (speculating on the future of class actions and class-action waivers).
303
See infra Part IV.C. (summarizing congressional efforts to reform the FAA and suggesting specific mechanisms
and approaches that could be employed by congress to reform both class actions and the FAA).
304
For more examples of immediate cases applying the ruling in Italian Colors, see Morris v. Ernst & Young, CV
C-12-04964 RMW, 2013 WL 3460052 *7 (N.D. Cal. July 9, 2013) (finding the plaintiff’s financial abilities not
outcome-determinative in applying the effective vindication doctrine); Feeney v. Dell, 993 N.E. 2d 329, 330 (2013)
(overruling its own prior interpretation of Concepcion to invalidate a class action waiver in light of Italian Colors).
305
726 F. 3d 290 (2d Cir. 2013).
306
Id. at 292–93 (“[The plaintiff] argued that the costs and fees associated with prosecuting her claims on an
individual basis would dwarf her potential recovery of less than $2,000.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 110
arbitration agreement, asking: (1) Is there a congressional command against enforcing the
arbitration clause?;307 and (2) Is the potential litigator prevented from effectively vindicating her
federal statutory right on an individual basis?308 After Italian Colors, the second question in the
analysis included an extra limitation: if the claim is not worth vindicating individually, this alone
will not justify a court’s finding that the party could not effectively vindicate her claim.309
However, courts may be confused moving forward, as indicated in In re A2P SMS
Antitrust Litigation, where the Southern District of New York found that the filing fees and
administrative costs do not constitute the elimination of the plaintiffs’ right to pursue their
claims; therefore the arbitration clause was held enforceable.310 This situation, however, is
exactly the kind of scenario that Randolph and Italian Colors consider an instance where an
arbitration clause may be unenforceable.311 Additionally, in a Seventh Circuit decision deciding
307
Id. at 296. Other cases also consider this contrary congressional command, see e.g. Shetiwy v. Midland Credit
Mgmt., 2013 WL 3530524 *3 (S.D.N.Y. July 12, 2013) (evaluating whether there is a contrary congressional
command in the RICO and FDCPA context); but cf. A2P SMS Antitrust Litig., 2013 WL 5202824 *24–25
(S.D.N.Y. Sept. 16, 2013) (quoting the Supreme Court’s search for a “contrary congressional command” but
declining to apply the inquiry to the case at hand).
308
Sutherland, 726 F. 3d at 298 (addressing whether the plaintiff can effectively vindicate her rights pursuant to
Italian Colors after finding there was no contrary congressional command); Shetiwy, 2013 WL 3530524 at *3
(concluding “that a generalized congressional intent to vindicate statutory rights cannot override the FAA’s mandate
that courts enforce arbitration clauses”).
309
Sutherland, 726 F. 3d at 298 (quoting Italian Colors, at 2310) (“Plaintiffs cannot use the doctrine to invalidate
class-action waiver provisions by showing that “they ha[d] no economic incentive to pursue their [FLSA] claims
individually in arbitration.”).
310
2013 WL 5202824 *25 (S.D.N.Y. 2013) (holding filing fees and administrative costs for arbitration did not
constitute the elimination of the plaintiffs’ right to pursue their claim).
311
See Randolph, 531 U.S. at 90 (“It may well be that the existence of large arbitration costs could preclude a
litigant . . . from effectively vindicating her federal statutory rights in the arbitral forum.”); Italian Colors, 133 S. Ct.
at 2310 (noting the “right to pursue” may be prohibited by “filing and administrative fees attached to arbitration that
are so high as to make access to the forum impracticable.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 111
whether to compel arbitration pursuant to a contract clause, the court references Italian Colors
but declines to apply the Supreme Court’s analysis in its decision.312
Courts, attorneys, and policymakers should remember that the Court did not overrule the
effective vindication doctrine; it declined to apply it.313 For plaintiffs attempting to invalidate an
arbitration agreement, it would be best to focus on costs and inconvenience in the arbitration
process itself.314 Economic incentive should not be addressed in the complaint because Italian
Colors’s strongest assertion is that lack of this incentive is not sufficient to invalidate an
arbitration clause.315
312
Green v. U.S. Cash Advance Illinois, 724 F.3d 787, 792 (7th Cir. 2013) (interpreting Italian Colors to preclude
adding requirements to the FAA, which could prevent arbitration from being a fast and economical process).
313
See Italian Colors, 133 S. Ct. at 2311 (reasoning the class-action waiver limits arbitration to two parties, but does
not deny plaintiffs their right to pursue their federal claims). But see, Garcia & Caseria, supra note 84
(contemplating whether the Court’s narrow construction of the Doctrine will render it completely “non-useful”
going forward).
314
See Italian Colors, 133 S. Ct. at 2310 (suggesting that the Doctrine would “perhaps” cover the filing and
administrative fees attached to arbitration); Damato v. Time Warner Cable, 2013 WL 3968765 n.10 (E.D.N.Y.
2013) (finding the claim falls under the Randolph standard because the plaintiff’s complaint about costs of
arbitration focuses on costs to access the arbitral forum, not cost to prove the claim). Additionally, claims of
unconscionability may hold, especially in a California courtroom. See, e.g., Sonic-Calabasas A, Inc. v. Moreno,
2013 WL 5645378 *28 (Cal. 2013) (declining to apply Italian Colors, reasoning that the Court’s decision does not
affect the unconscionability analysis at issue). But see Andrade v. P.F. Chang’s China Bistro, Inc., 2013 WL
5472589 *13 (S.D. Cal. 2013) (granting defendant’s motion to compel arbitration even after an unconscionability
analysis).
315
Italian Colors, 133 S. Ct. at 2311 (“But the fact that it is not worth the expense involved in proving a statutory
remedy does not constitute the elimination of the right to pursue that remedy.”); see also Sutherland v. Ernst &
Young, 726 F.3d 290, 298 (2d Cir. 2013) (following Italian Colors to find lack of economic incentive not sufficient
to prove that the plaintiffs lacks the right to pursue their remedy). Additionally:
“If you want to undo a class arbitration waiver, you’ll need to do one of the following: (1) show
that there was no actual agreement or that the terms are so unfair or one-sided that they will not be
enforced under state law; (2) find a statute that guarantees your right to class proceedings for a
particular claim; or (3) petition Congress.”
Garcia & Caseria, supra note 83.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 112
B. Unanswered Questions
1.
Will Italian Colors Cause Restored Hostility towards the FAA?
As observed earlier, arbitration was traditionally opposed for mainly two public policy
reasons: one, that arbitration could provide an avenue for businesses to escape public regulation;
and two, the process of creating arbitration agreements was prone to one-sidedness.316 Indeed,
the decision in Italian Colors may allow Amex and other large monopolistic corporations to
“privatize justice” and use its monopoly power to establish “de facto immunity.”317 Additionally,
today, very little if any consumer contracts undergo actual bargaining.318 Binding-arbitration is
typically used in employment and consumer contracts that are provided for less sophisticated
buyers or employees.319 Therefore, it appears probable that the hostility towards arbitration may
be revived in light of Italian Colors.320
Nevertheless, there are some positive considerations: for one, the use of unfair arbitration
clauses may not be as widespread as anticipated.321 Additionally, it is possible that the holding in
316
See supra text accompanying notes 43–45 (detailing the traditional oppositions to arbitration inherited from
English common-law suspicions).
317
See Italian Colors, 133 S. Ct. at 2314 (Kagan, J., dissenting) (speculating a “company could use its monopoly
power to protect its monopoly power” because of the majority’s decision); Brief for Respondents, supra note 99, at
4 (speculating that the enforcement of the arbitration clause would grant Amex “de facto immunity” from millions
of dollars worth of antitrust liability).
318
See Green, supra note 61, at 560 (“Scholars in the legal field have widely accepted the fact that traditional
bargaining in consumer contracts is dead.”). After Concepcion, some commentators wondered if now all attorneys
will be expected to advise their clients to use class arbitration waivers. Philbin, supra note 6, at 36 (2011).
319
Additionally, consumers and lower-grade employees typically may not be able to “attract the counsel necessary
for meaningful access to court.” Philbin, supra note 6, at 39. Even “sophisticated” consumers and employees may
be trapped in arbitration agreements. See e.g. Pittman, supra note 1, at 791 (speculating that in the future, attorneys
will be forced to sign arbitration agreements with their law firms, similar to stock brokers).
320
See e.g., Stephanie Mencimer, The Supreme Court Just Made It Easier for Big Business to Screw the Little Guy,
MOTHERJONES (Jun. 20, 2013 at 9:19 AM) http://www.motherjones.com/politics/2013/06/consumers-get-screwedscotus-american-express-decision-small-biz (speculating that if Amex can use arbitration to escape antitrust liability,
then large companies could prevent people from filing sex discrimination or consumer fraud cases).
321
See Drahozal, supra note 42, at 721 (observing that there is little information on how common are unfair
arbitration clauses, stating “criticisms of arbitration clauses . . . generally rely on anecdotal reports”). Drahozal
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 113
Italian Colors could be construed as factually specific: this case is different from typical
consumer-corporation adhesion contracts because both parties involved businesses.322 Perhaps,
in the future, Italian Colors will be distinguished because it was a contract between two
businesses, not a business and a consumer.323 Last, this could incentivize the arbitration system
to revitalize itself by balancing the needs of consumers and corporations and following the
Court’s liberal federal policy favoring arbitration.324
2.
Will Italian Colors Bring Forth the End of Class Actions?
Published commentators feared the end of modern class actions even prior to the Italian
Colors decision.325 For example, one commentator warned of the adverse effects of class-action
waivers in particular: “Assuming the collective action waiver emerges more or less unscathed
argues that a systemic study is necessary in order to evaluate the actual extent and frequency of abuse in arbitration
clauses. Id. Therefore, it may be difficult to ascertain exactly how hazardous and negative arbitration clauses
actually are. Id.
322
Therefore, a certain level of sophistication is assumed, and some of the concerns usually present in a
consumer/corporation standard-form contract may not be present. See e.g. Green, supra note 61, at 558–59
(expressing concern over the level of literacy of the average American consumer and how it affects standard-form
contract relationships); Alan Schwartz, How Much Irrationality Does the Market Permit?, 37 J. LEGAL STUD. 131
(2008) (exploring the assumption that consumers are generally considered “naïve” whereas transactions between
business firms are “sophisticated”).
323
The court in Amex I asserts its decision was not influenced by the small businesses status of the plaintiffs. Amex
I, 554 F.3d 300, 320 (2d Cir. 2009). Considering that the Supreme Court in Italian Colors reversed the Amex I
decision, maybe the small business owner distinction was overruled as well.
324
See infra Part V.C.3. (suggesting a mutually corporate and consumer friendly mentality in congressional reform
efforts). Additionally, the American Arbitration Association is frequently changing its rules and procedures for
arbitration to address the demands of arbitration users to be provided with efficient dispute resolution. See e.g.,
American Arbitration Association Launches Updated Commercial Rules (Sept. 9, 2013), available at
http://images.go.adr.org/Web/AmericanArbitrationAssociation/%7Bab1ff406-ad8f-45b0-bdfef7b47ac1bea7%7D_CommRulesPressRelease082813Cln.pdf (announcing revisions to the commercial arbitration
rules to ensure “streamlined, cost effective, and tightly-managed arbitration process[es].”). Further, the CFPB is a
federal agency that will review consumer complaints. For more information, visit
http://www.consumerfinance.gov/complaintdatabase.
325
See e.g., Gilles, supra note 8, at 375 (“I believe it is likely that, with a handful of exceptions, class actions will
soon be virtually extinct.”); Linda S. Mullenix, Aggregate Litigation and the Death of Democratic Dispute
Resolution, 107 NW. U. L. REV. 511, 512 (2013) (quoting Kenneth R. Feinberg, Unconventional Responses to
Unique Catastrophes: Tailoring the Law to Meet the Challenges, Address Before the Faculty of the University of
Texas School of Law (Oct. 3, 2011)) (“Class actions are dead.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 114
from the current round of judicial challenges, it is only a matter of time before these waivers
metastasize throughout the body of corporate America and bar the majority of class actions as we
know them.”326 The Italian Colors decision will likely welcome a new wave of fear that classaction waivers will destroy class actions, permitting corporate America to behave with
unchecked recklessness.327 However, there are some positive realities despite these Supreme
Court mandated restrictions on class actions that hint that class actions will survive.328
For one, the Court in Italian Colors did not adopt a per se rule barring class actions.329
Some types of class actions will easily persevere despite the Italian Colors holding, such as
securities fraud cases and wage and hour cases.330 Secondly, methods still exist for the federal
government to police antitrust violations; and bringing mass attention to Amex’s agreements
may result in federal charges.331 And lastly, with congressional intervention, class actions may be
protected from extinction altogether.332
326
Gilles, supra note 8, at 377.
See Garcia & Caseria, supra note 83 (describing the Court’s opinion as making class action waivers as “ironclad”
absent congressional intent or direction from the savings clause in Section 2 of the FAA); Philip Bump, The
Problem with the Supreme Court’s AmEx Decision, Class Action, and You, ATLANTIC WIRE, Jun. 20, 2013,
http://www.theatlanticwire.com/national/2013/06/supreme-court-american-express-italian-colors/66443 (reporting
the Italian Colors decision with worry about its impact on consumers inability to assert class actions).
328
See Brian J. Murray, I Can’t Get No Arbitration: The Death of Class Actions That Isn’t, at Least So Far, FED.
LAW., at 62 (September 2013) (observing that class actions will survive despite the Concepcion decision). It is likely
that Murray’s reasoning can extend to Italian Colors as well. See id. at 74–75 (describing the impact of Italian
Colors couples with Concepcion).
329
Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309–10 (2013) (acknowledging that Rule 23 is
congressionally approved). In reality, class actions are “hard to kill off.” Mullenix, supra note 325, at 512. See id.
(arguing the repeated reports that class actions are “dead” are “highly exaggerated” as they have been recurring
since the 1970s).
330
See Klonoff, supra note 101, at 824–26 (noting that a court is more likely to certify cases where commonality is
readily apparent and damages are easily calculated, such as cases of securities fraud and wage and hour issues).
Klonoff additionally suggests filing class actions in federal circuits, where judges are generally more receptive to
class actions. Id. at 823. But cf. Italian Colors, 133 S. Ct. at 2310 (“Rule [23] imposes stringent requirements for
certification that in practice exclude most claims.”).
331
Besides private parties, the Federal Trade Commission (FTC), the Department of Justice (DOJ) and state
governments may all bring actions to enforce antitrust laws. See e.g., 15 U.S.C. §§ 4, 25 (granting the DOJ authority
to obtain injunctions, divestitures, rescission and forfeitures); 15 U.S.C. § 45 (giving the FTC authority to seek
327
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 115
C. Recommended Congressional Efforts to Reform
The combination of Stolt-Nielsen, Concepcion, and Italian Colors threatens to severely
limit consumers’ abilities to bring class actions or fight the enforceability of arbitration
clauses.333 At this point, any change in these decisions requires a “congressional command” for
courts to rule differently.334 In fact, case law has been seeking such congressional reform since
the introduction of the effective-vindication doctrine.335 Legislators have attempted some reform
measures;336 however, concrete and effective arbitration and class action legislation requires a
more thorough balancing of interests, consumer and corporation alike, to seek common ground
in upholding the benefits of arbitration.337
1.
Prior Case Law Supporting Congressional Reform
After the Italian Colors decision, the best option to prevent unfair monopolization is
Congressional reform for both class actions and the FAA.338 The majority opinion in Italian
remedies for charges of unfair competition). See also Brief of Amici Curiae American Bankers Association,
American Financial Services Association and Consumer Bankers Association in Support of Petitioners at 16–17,
Am. Express v. Italian Colors Rest., 133 S. Ct. 2304 (2013), (No. 12-133), 2012 WL 6755150 (arguing that
reversing the Second Circuit would not establish “de facto immunity” for corporations because there exist
government enforcement options to police antitrust behavior).
332
See infra Part V.C.2–3. (suggesting possible avenues for congressional reform).
333
See Garcia & Caseria, supra note 83 (describing class action waiver enforcement as “ironclad” after Italian
Colors); Christopher Brumwell, Opinion Analysis: What Counts as Arbitration, and Who Decides?, SCOTUSBLOG
(Apr 30, 2011, 8:32 AM), available at, http://www.scotusblog.com/2011/04/opinion-analysis-what-counts-asarbitration-and-who-decides (stating the holding in Concepcion makes it difficult for states to ban contracts that
potentially insulates companies from liability); Stolt-Nielsen, 559 U.S. at 699 (2010) (Ginsburg, J., dissenting)
(expressing concerns that this limitation on class arbitration imposed by the majority opinion in Stolt-Nielsen will
deprive potential claimants the incentive to vindicate their statutory rights).
334
See Pittman, supra note 1, at 812 (explaining the Court’s unwillingness to overrule itself because Congress has
the authority to statutorily overrule the Court); Klonoff, supra note 101, at 829 (“[W]ith respect to arbitration and
the FAA, congressional action is necessary.”).
335
See infra Part V.C.1. (detailing prior case law seeking congressional command).
336
See infra Part V.C.2. (summarizing some attempts by Congress to enact the Arbitration Fairness Act).
337
See infra Part V.C.3. (explaining the “balance of interests” necessary for arbitration or class action reform to
create tangible results).
338
“The obvious implication . . . is that statutory law, as well as judge-made liability rules, may need reform.”
MICHAEL S. GREVE, HARM-LESS LAWSUITS?: WHAT'S WRONG WITH CONSUMER CLASS ACTIONS 2 (2005). But cf.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 116
Colors hints that Congressional reform is needed for the Court to rule alternatively.339
Additionally, case law before Italian Colors sought congressional mandates in analyzing its
effective vindication doctrine application.340
First, in Mitsubishi Motors, the Court found that it is within the scope of congressional
power to specify which types of arbitrated claims should be held unenforceable.341 Further, in
Gilmer, the Court held that under the Moses standard supporting a liberal “federal policy
favoring arbitration,” it is presumed Congress intended to allow a statutory claim to be brought
under compulsory arbitration, even if not expressly stated in the statute.342 Therefore the burden
falls on the potential litigator to prove Congress intended otherwise.343 And lastly, in Randolph,
when the Court established a rule for determining when a statutory claim can be arbitrated, the
Court included an inquiry into whether there is a Congressionally evidenced intention to
preclude a waiver of judicial remedies for that specific remedy at issue in its analysis.344
Gilles, supra note 8, at 391 (taking a pessimistic view on direct legislative reform in class actions). See also
Schmitz, supra note 43, at 630 (2008) (discussing failed legislative efforts in banning pre-dispute arbitration).
Schmitz also notes that bans on pre-dispute arbitration may not benefit consumers anyway, as arbitration is cheaper
and faster than litigation and may provide higher recovery rates. Id. at 629–30.
339
See Italian Colors, 133 S. Ct. at 2309–310 (2013). The Court asserted: one, that there is no “congressional
command” that would compel the court to reject the class waiver; and two, that Congress has taken some measures
to “guarantee an affordable procedural path” for antitrust claims, such as by allowing treble damages under the
Clayton Act. Id.
340
See infra text accompanying notes 341–344 (describing instances in Mitsubishi Motors, Gilmer and Randolph
where the Court sought congressional reform).
341
Mitsubishi Motors, 473 U.S. at 628 (“It is the congressional intention expressed in some other statute on which
the courts must rely to identify any category of claims as to which agreements to arbitrate will be held
unenforceable.”).
342
Gilmer, 500 U.S. at 26–27 (quoting Moses, 460 U.S. at 24, finding that because nothing in the ADEA precludes
arbitration, arbitrating ADEA claims is within the congressionally intended purpose of the ADEA).
343
Id. at 26 (noting the burden is on the potential claimant to prove Congress intended a preclusion of arbitration for
claims under a particular statute).
344
Randolph, 531 U.S. at 90. It seems likely that future analyses post-Italian Colors will include a specific inquiry
into contrary congressional commands. See e.g., Sutherland v. Ernst & Young, 726 F.3d 290, 296–97 (2d Cir. 2013)
(incorporating a clear-cut analysis of any “contrary congressional command” in its enforceability of the arbitration
clause analysis).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 117
2.
Some Recent Attempts at Reform
There has already been some pushback in Congress in response to the Court’s formalistic
FAA interpretations.345 For example, there have been multiple attempts to implement an
Arbitration Fairness Act.346 The most recent attempt is a Proposed Bill to the 113th Congress that
would amend the FAA to disallow pre-dispute arbitration agreements in an employment,
consumer, antitrust, or civil rights dispute.347 However, it is unlikely to progress because has
received little co-sponsorship and faces likely Republican opposition to class action lawsuits.348
3.
Suggestion: A Balance of Interests
This Note suggests that consumer advocacy groups, corporations, and policymakers must
come together and resolve the issues in class actions and arbitration.349 There currently exists a
mentality in consumer-advocates that corporations “force” consumers into arbitration clauses or
345
See Sullivan & Glynn, supra note 45, at 1036, n.128 (referencing several (unsuccessful) Congressional actions to
restrict to FAA, including the Arbitration Fairness Act, plus acts that will not permit whistleblowing to be diverted
to arbitration, such as the Affordable Care Act and the Dodd-Frank Wall Street Reform and Consumer Protection
Act); see also Thomas V. Burch, Regulating Mandatory Arbitration, 2011 UTAH L. REV. 1309, 1333 (2011)
(observing that of the 139 arbitration reform bills introduced into Congress between 1995–2010, only five became
law).
346
See Turnbull, supra note 66, at n.196 (listing the progression of the Arbitration Fairness Act in Congress: S.
1782, 110th Cong. (2007) re-introduced S.931, 111th Cong. (2009), S.987 112th Cong. (2011), H.R. 3010, 110th
Cong (2007), re-introduced H.R. 1020, 111th Cong. (2009), re-introduced H.R. 1873, 112th Cong. (2011) (referred
to committee May 12, 2011)). All of these bills are similar: all attempt to ban pre-dispute arbitration in some
situations, and all have received little attention from Congress. See Schmitz, supra note 43, at 629 (“Such broad
bans on pre-dispute arbitration agreements, however, have not enjoyed legislative success.”).
347
S. 878, 113th Cong. (2013), available at, http://www.gpo.gov/fdsys/pkg/BILLS-113s878is/pdf/BILLS113s878is.pdf (“[N]o pre-dispute arbitration agreement shall be valid or enforceable if it requires arbitration of an
employment dispute, consumer dispute, antitrust dispute, or civil rights dispute.”).
348
Anant Raut, Antitrust in the 113th Congress, 12-AUG Antitrust Source 1, 5 (summarizing the most recent
attempt to bar pre-dispute arbitration, especially in class-action waivers used in the antitrust context, but noting there
is likely to be little headway as the bill has little co-sponsorship and the Republicans’ have a historical opposition to
class action lawsuits).
349
Other academics urge similar solutions. See e.g., Schmitz, supra note 43, at 630 (2008) (urging “companies,
consumers, and policymakers to join forces” and create procedural reforms that will help both consumers vindicate
their legal rights and companies protect their interests); Burch, supra note 345, at 1345 (proposing a goal-oriented
pragmatic approach to mandatory arbitration that is superior to the dogmatic approaches of both corporate and
consumer advocates); Turnbull, supra note 66 (arguing that for reform to stand any chance, it must “address the
concerns of both consumer and business advocates.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 118
class-action waivers in order to prevent consumers from exercising their legal rights.350 The
realistic business model is this: corporations want to make money, do not want to get bogged
down in costly and time-consuming litigation, and are suspicious of plaintiffs’ lawyers.351
Therefore drafting a clause that prevents costly and time-consuming litigation is their goal—it is
not necessarily an attempt to deprive others of their legal rights, or to try to get away with doing
“bad things.”352 Further, giving into the “evil corporation” mentality hinders policy reform: if
consumer protection and alternative dispute resolution (or class action) reform is to progress,
consumer advocates need to search for a fair middle ground.353
350
See e.g. Public Citizen, The Costs of Arbitration 2, (2002), available at
http://www.citizen.org/documents/ACF110A.PDF (accusing companies of wanting to use arbitration costs as a
barrier to prevent consumers and others from asserting their legal rights); Schmitz, supra note 43, at 628 (noting
arbitration allows corporations to “privatize justice”). Anderson and Trask describe the ideological divide on class
actions perfectly:
“There is a deep ideological divide between plaintiffs’ and defense lawyers. Given the high stakes
and high visibility of aggregated litigation, it is not surprising that class actions are controversial.
Advocates see class-action litigation as a way for large numbers of victimized “David’s” to
collectively obtain justice from a misbehaving “Goliath” when individualized lawsuits are
economically impractical. Opponents see class-action litigation as a means by which profitmotivated lawyers exploit the in terrorum nature of an aggregated case to extort windfall
settlements from unpopular companies or industries. The primary reason for these different
caricatures of class actions is that plaintiffs and defendants live in worlds that are structured
differently.
ANDERSON & TRASK, supra note 103, at xviii–xix. See also Turnbull, supra note 66 (describing business and
consumer advocates as “vehemently opposed”).
351
See Green, supra note 61, at 554 (2013) (“Firms are encouraged, as wealth-maximizing engines, to increase
profitability to the benefit of shareholders.”); Meredith R. Miller, Contracting Out of Process, Contracting Out of
Corporate Accountability: An Argument Against Enforcement of Pre-Dispute Limits on Process, 75 TENN. L. REV.
365, 365–66 (2008) (summarizing the “nexus contract model” of corporate law where the corporations relationships
are all governed by contract); J. Maria Glover, Beyond Unconscionability: Class Action Waivers and Mandatory
Arbitration Agreements, 59 VAND. L. REV. 1735, 1746 (2006) (observing that companies’ use class action waivers
because they believe the class action procedure is motivated by plaintiffs attorneys aiming to “wrest large and unfair
settlements from defendants.”).
352
See Drahozal, supra note 42, at 742 (“[T]he mere fact that arbitration clauses appear unfair does not, in itself,
mean that corporations are taking advantage of individuals . . .”). Drahozal additionally argues that business
reputation and arbitration institutions exist to limit corporations from taking advantage of consumers in arbitration.
Id. at 699.
353
See Burch, supra note 345, at 1337 (criticizing Congress for giving in to the push from consumer advocates to
eliminate, rather than regulate, arbitration) (“The problem is not arbitration itself; rather, the problem is that
companies have abused mandatory arbitration . . .”). Id.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 119
In turn, corporations themselves should keep in mind the interests of the consumers and
take advantage of the fact that consumers may prefer arbitration in certain circumstances.354 For
example, a Pew Research Study shows that checking account holders support the idea of
arbitration.355 However, these consumers found the arbitration process disagreeable when the
procedural components were described to them.356 Further, in some instances, businesses, and
the lawyers preparing their contracts, are aware of their reputation for creating unconscionable
arbitration contracts; as a result, companies have been making “plaintiff-friendly” arbitration
clauses to withstand court scrutiny on issues of unconscionability.357 Additionally, media
attention on repeating instances of corporate monopolization is more likely to incentivize
legislators to regulate corporate behavior.358 It is also likely to harm the reputation of a
corporation, hurting profits that arbitration would presumably save.359 Therefore, it is in the best
354
See Drahozal, supra note 42, at 749 (observing individuals may be inclined to give up their right to a jury trial in
exchange for the ability to arbitration more small-dollar claims which are more likely to occur).
355
Brief of Professional Arbitrators and Arbitration Scholars as Amici Curia Supporting Respondents at 18-19,
Italian Colors, (No. 12-133), 2013 WL 457379 (citing Pew Charitable Trusts, Banking on Arbitration: Big Banks,
Consumers, and Checking Account Dispute resolution, THE PEW CHARITABLE TRUSTS (Nov. 27, 2012),
http://www.pewtrusts.org/~/media/Assets/2012/11/27/Pew_arbitration_report.pdf).
356
Id.; see also Cronin-Harris, supra note 6 (arguing that encouragement of regular and systemic uses of ADR will
help all parties understand and utilize it properly).
357
Philbin, supra note 6, at 38 (2011); see also Drahozal, supra note 42, at 771 (concluding that if corporations do
not make efforts to share benefits of arbitration with individuals, the arbitration system may increase costs to both
parties).
358
See Drahozal, supra note 42, at 769 (“[T]he threat of government regulation can spur the industry to self-regulate
in an attempt to head off restrictive legislation.”). For example, the CFPB was established under Title X of DoddFrank Wall Street Reform and Consumer Protection Act of 2010, Pub. L. 111–203, §§ 1001–1100, 124 Stat. 2106
(2010). The financial crisis beginning in 2007 spurred legislative and presidential incentives to regulate consumer
protection. Creating the Consumer Bureau, CFPB, http://www.consumerfinance.gov/the-bureau/creatingthebureau/
(last visited Oct. 31, 2013). The CFPB has begun reviewing pre-dispute arbitration agreements, see Request for
Information Regarding Scope, Methods, and Data Sources for Conducting Study of Pre-Dispute Arbitration
Agreements, CFPB (April 25, 2012), http://files.consumerfinance.gov/f/201204_cfpb_rfi_predispute-arbitrationagreements.pdf (issuing a notice and request for information on pre-dispute arbitration agreements).
359
Drahozal observes that business reputation is crucial to corporate profits. Drahozal, supra note 42, at 767 (“A
good reputation is valuable to a business.”). A corporation with a reputation for “sharp dealing” and other unfair
competition practices will suffer in the marketplace. Id. Although this does not always deter corporations from
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 120
interest of corporations to seek compromises and keep consumer interests in mind.360 Only by
working together can policymakers, consumer advocates, and corporations begin to address
tangible and progressive arbitration and class action reform.361
D. Exploration of Some Suggestions
One option for class-action reform would be to statutorily expand class actions in the
consumer and antitrust context, and limit it in another context, such as employment law. As the
facts in Italian Colors indicate, antitrust claims are expensive to prove.362 Therefore, broadening
class actions in antitrust claims makes sense: how else can consumers be protected when the cost
of proving their claims is so expensive?363 Do expensive consumer claims indicate that antitrust
making mistakes or “cutting corners,” Drahozal criticizes arbitration critics for failing to consider the incentive
corporations have to maintain good reputations. Id. at 768.
360
See generally Turnbull, supra note 66 (describing what motives businesses have to seek more efficient means of
dispute resolution); Burch, supra note 345, at 1310 (stating that a compromise between consumer and corporate
advocates is difficult, but seemingly “the only workable approach.”).
361
For example, Turnbull argues that removing the privacy and confidentiality feature of arbitration would be a
reasonable compromise that would require publication of group arbitration proceedings. Turnbull, supra note 66, at
70. Additionally, Burch proposes legislature allow companies to mandate arbitration, but highly regulate the process
to ensure fairness. Burch, supra note 345, at 1310.
362
According to the expert used in Italian Colors, an economic antitrust analysis is “necessarily complex and costly”
because it requires, inter alia, an analysis into the relevant markets, defendant’s monopolistic presence in those
markets, whether the defendants alleged antitrust violation has created an anticompetitive effect on those markets.
Amex I, 554 F.3d 300, 316 (2d Cir. 2009) (including relevant portions of the expert’s affidavit). Further, this
knowledge that antitrust claims usually will not be brought on an individual basis is long-standing in Courts. See id.
at 312 (quoting Eisen v. Carlisle, 417 U.S. 156, 161 (1974)) (“No competent attorney would undertake this complex
antitrust action to recover so inconsequential an amount. Economic reality dictates that petitioner’s suit proceed as a
class action or not at all.”).
363
Petitioners in Italian Colors tout the benefits of deciding expensive cases in the arbitral forum, because
“[w]hether each claimant would have to submit a complex and costly economics expert report is a decision for the
arbitrator.” Brief for Petitioners, supra note 83, at 50. See also Brief of Distinguished Law Professors, supra note
195, at 9 (stating that is “makes no sense” that an arbitrator would need a $1 million expert to decide a $5,000–
$30,000 claim). But cf. Brief for United States, supra note 266, at 23 (asserting that although arbitration procedures
are “streamlined” versions of litigation procedures, they do not relieve parties of the burden of proving their case:
therefore an expert would still be required). Even attorneys for the plaintiffs acknowledge that bringing an antitrust
claim pre-Rule 23 wasn’t as expensive. See Transcript of Oral Argument, supra note 190, at 25 (“Paul Clement:
back in the good old days, you didn’t necessarily need a $300,000 expert to bring a Sherman Act claim.”).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 121
violations should solely be a policing mechanism in the hands of the government?364
Alternatively, other claims, such as employment law disputes, may be better suited for arbitration
or other forms of alternative dispute resolution.365 This categorical approach has been adopted in
foreign countries, where class actions are mainly limited to consumer claims.366 A categorical
approach could maintain a check on corporate malfeasance, while allowing corporations to
shield themselves from frivolous lawsuits as well.367
Another option, in the arbitration context, would be a legislatively mandated preference
for non-binding arbitration.368 Non-binding arbitration has the reputation of being inefficient.369
364
See, generally Gilles, supra note 8.
See Wal-Mart v. Dukes, 131 S. Ct. 2541, 2556 (2011) (finding “anecdotal evidence” of systematic sexdiscrimination towards employees as too weak to satisfy the commonality requirement in a class action
certification); Stephen Bough & Dirk Hubbard, Issues in Employment Class Action Litigation, 56 J. MO. B. 37, 37
(2000) (observing most class-action lawyers avoid employment law disputes because they generally involve
complex litigation). The United States Department of Labor encourages ADR (that meets reasonable standards of
fairness) to assist employees and employers in resolving disputes in the most economically efficient matter. See,
generally Special Report: IV. Employment Litigation and Dispute Resolution,
http://www.dol.gov/_sec/media/reports/dunlop/section4.htm (last visited Nov. 3, 2013). But see, Murray, supra note
328, at 63 (indicating that certain employment disputes require a right to collective action under the NLRA).
366
See e.g. Código Federal de Procedimientos Civiles [CFPC] [Federal Code of Civil Procedure] as amended,
Diario Oficial de la Federación [DO], 09 de Abril de 2012 (Mex.) art. 578 (limiting class action proceedings to
public or private consumption of goods or services and environmental actions); Department for Business Innovation
& Skills, Private Actions in Competition Law: A Consultation on Options for Reform - Government Response, 2013,
BIS/13/501, at 32 (U.K.) (proposing reforms in competition law such that suits can be brought by businesses and
consumers).
367
Other methods employed in foreign countries to promote class actions yet curb frivolous lawsuits include opt-in
rather than opt-out procedures and limits on attorneys’ fees. See European Commission, Commission
Recommendation of Strasbourg on common principles for injunctive and compensatory collective redress
mechanisms in the Member States concerning violations of rights granted under Union Law, COM (2013) 3539/3
(June 6, 3013) [hereinafter Recommendation] (directing European Union states to adopt opt-in procedures); id. at 9
(discouraging the EU member states from allowing contingency fees or punitive damages in collective actions in
order to discourage frivolous and for-profit law suits); see, generally Turnbull, supra note 66, at 69 (urging the
United States to adopt the UK’s GLO rule for class actions because the opt-in proceedings coupled with broader law
suits will lead to “more determinate classes”).
368
See generally Steven C. Bennett, Non-Binding Arbitration: An Introduction, DISP. RESOL. J., May–July 2006, at
22 (describing the underrated benefits of non-binding arbitration). For the existence of this kind of support for nonbinding arbitration in the FAA, see Stipanowich, supra note 70, at 451 (2007) (suggesting a “loophole” in Section 9
of the FAA that could be construed to support the concept of non-binding arbitration).
369
See Bennett, supra note 368, at 24 (“On its face, non-binding arbitration may appear to be quite inefficient.”);
Amy J. Schmitz, Nonconsensual Nonbinding = Nonsensical? Reconsidering Court-Connected Arbitration
365
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 122
However, it may actually save judicial resources: in non-binding arbitration, parties either
resolve their disputes and are saved a trip to the courtroom; or litigate anyway.370 The difference
in the latter example is that there is no litigation about the arbitration itself: while parties in
binding arbitration will first appeal issues such as the arbitrator’s bias, the arbitrator’s use of
proper procedure, or the arbitrator’s proper analysis of the facts, in non-binding arbitration the
case goes straight to the merits of the case.371 The increased litigation over the enforceability of
arbitration clauses defeats the efficient purpose of arbitration; therefore non-binding arbitration
may actually be the most efficient option.372
VI. CONCLUSION
This Note has discussed the majority and dissenting opinions in Italian Colors in light of
prior case law and the history of attitudes towards arbitration and class actions. It has evaluated
the strength and weaknesses of the opinions and, ultimately, sided with the majority.
Although the majority opinion put the small merchants at an unfair disadvantage, the
decision is justified. Arbitration and class actions are entirely different entities. Different
Programs, 10 CARDOZO J. CONFLICT RESOL. 587 (2009) (arguing that non-binding arbitration programs have failed
to serve arbitration’s intended purpose of efficiency and fairness).
370
See Bennett, supra note 368, at 24 ("[N]on-binding arbitration eliminates the possible need to appeal an adverse
decision, thereby making it less costly in time, money and frustration."). See also Charles B. Carter, Non-Binding
Arbitration: Curse or Blessing?, TRIAL ADVOC. Q., Summer 2009, at 23, 24 (observing a decision by an arbitrator
may “bring a party down to earth” and demonstrate the unreasonable expectations of a potential suit).
371
See Bennett, supra note 368, at 24 (noting that in non-binding arbitration, a dissatisfied party may still file suit,
but will employ careful consideration of the potential costs in a businesslike way). Carter argues that non-binding
arbitration may even be more efficient than mediation. See Carter, supra note 370, at 24–25 (“[N]onbinding arbitration using a single arbitrator may be viewed as cost effective when the overall cost is compared to
mediation and in turn compared to the settlement value.”).
372
See Bennett, supra note 368, at 24–25 (“These advantages . . . make non-binding arbitration a highly practical
process, especially for less complex commercial disputes that companies do not wish to mediate . . .”). Bennett
includes other advantages to non-binding arbitration: it is still flexible and private as for which arbitration is known,
but it is still more formal than mediation. Id. at 23–24. Additionally, non-binding arbitration can still be mandatory,
which is potentially beneficial for businesses, but does not prohibit anyone’s right to litigate, and is therefore less
likely to be detrimental to consumers. Id. at 25–26.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 123
principles, statutes, and judicial interpretations govern them. Therefore, the majority opinion’s
refusal to apply the effective vindication doctrine in Italian Colors is correct. The plaintiffs’
inability to afford legal recourse against Amex is because of the class-action waiver, not the costs
of arbitration. The effective vindication doctrine does not apply to collective action waivers—it
is a judicial doctrine that is derived from interpretations of Section 2 of the FAA, and has no
connection with Federal Rule of Civil Procedure 23.
Last, distinguishing class actions from arbitration is important in this case not just to
achieve a proper conclusion, but also to understand where courts and lawmakers may go from
here. Only by striking a balance between consumer and business interests can Congress establish
safeguards against both the abuse and extinction of the arbitration and class action mechanisms.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 124
SEATING ARRANGEMENTS IN MEDIATION
By: Samuel A. Bryant, Esq.1
I. INTRODUCTION
Seating arrangements are an aspect of mediation over which the mediator has the most
control2. Thus, the mediator can use seating arrangements to set the tone of a mediation before
the parties arrive. This paper will analyze the use of seating arrangements in mediation. Section
II describes the importance of seating arrangements in mediation. Section III explains the
psychological effects of seating arrangements on the mediating parties. Section IV provides
examples of different seating arrangements. Section V presents other considerations the mediator
must contemplate before using seating arrangements. Section VI describes ideas that will help a
mediator execute a planned seating arrangement. Finally, section VII concludes that every
mediator should carefully consider seating arrangements before mediation.
II. IMPORTANCE OF SEATING ARRANGEMENTS
Seating arrangements are important to mediation because it is an aspect that can help
mediators accomplish the ultimate goal of mediation--reaching a voluntary and mutually
satisfactory agreement. However, this cannot occur unless the parties perceive mediation as
being a fair process. A deliberate seating arrangement helps the parties perceive the mediation
process as a fair one. Furthermore, the American court system recognizes the importance of
1
Civil litigation associate at Wicker, Smith, O’Hara, McCoy & Ford in West Palm Beach Florida. J.D. 2014,
University of Florida. I would like to thank my family, especially my uncle, Aaron Samuel Lee Jr. for your love and
encouragement. I would also like to thank Professor Robin Davis for reviewing an earlier draft of this article and for
her counsel throughout this process.
2
See Eric Kornhauser & Shawn Whelan, Mediation and Environment, CMA LEARNING, available at,
http://www.cmalearning.com.au/images/stories/pdf/MediationEnvironment.pdf. (“Of all the elements in mediation,
the environment is probably the least dynamic therefore the most easily controlled.”)
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 125
seating arrangements because every American courtroom specifically implements them. If the
American courtrooms formalize seating arrangements, mediators should do the same.
A. ENSURING A FAIR PROCESSS
Mediators can use seating arrangements to ensure the mediation will be a fair process. In
order for the parties to come to an equitable resolution, the parties must have three perceptions of
the mediation process3. First, the parties must perceive the mediator as being a neutral third
party. Second, the parties must perceive their opposing party as an equal. Third and finally, the
parties must perceive the mediator as an equal. There are seating arrangements that can produce
all three of these perceptions.
The way the mediator seats the parties can affect the parties’ perceptions of the
mediator’s neutrality4. Mediators can manifest external neutrality by deliberately planning a
seating arrangement that maintains the self-determination of the parties and protects the parties’
ability to present issues equally in the mediation5. If there is an obvious power discrepancy
between the parties, the less powerful party will appreciate the mediator’s use of the seating
arrangements to balance the power dynamic. This will affect both parties’ perception of the
fairness of the mediation process6.
3
Cf. Jeffrey S. Wolfe, The Hidden Parameter: Spatial Dynamics and Alternative Dispute Resolution, 12 OHIO ST. J.
these goals to the design of settlement facilities).
4
Evan M. Rock, Mindfulness Mediation, The Cultivation of Awareness, Mediator Neutrality, and the Possibility of
Justice, 6 CARDOZO J. CONFLICT RESOL. 347, 358 (2005); see also, Susan N. Exon, The Effects that Mediator Styles
Impose on Neutrality and Impartiality Requirements of Mediation, 42 U.S.F. L. REV. 577, 580 (2008) (defining
neutrality as “belonging to neither side nor party” and “[the] ability to be objective while facilitating communication
among negotiating parties.”).
5
Carol Izumi, New Directions in ADR and Clinical Education: Implicit Bias and the Illusion of Mediator Neutrality,
34 WASH. U. J.L. & POL’Y 71, 123 (2010). The concept of internal neutrality exists, but it is not relevant to this
paper.
6
See Rock, supra note 3.
ON DISP. RESOL. 685, 721 (1997) (applying
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 126
In addition, mediators can use seating arrangements to help the parties perceive each
other as equals. Certain seating arrangements create a situation where one party’s placement
becomes reflective of a dominant position. For example, an arrangement where the mediator
seats a party at the head of a table places one party in a dominant position over the other. If either
party perceives the head of the table as the power position, that party may perceive any person
who occupies that position as powerful7. This will affect how the parties perceive the mediation
process in general. Therefore, mediators should aim to use seating arrangements to assure the
parties that mediation is a fair process where both parties are considered equal.
Finally, mediators can use seating arrangements to ensure that the parties perceive the
mediator as an equal. For parties unfamiliar with mediation, it is easy to perceive the mediator as
the authority figure. The mediator sets the tone for the mediation, breaks the ice, and decides
when to end the mediation. This perception can compromise the mediation process because the
mediator’s actions will then affect how the parties perceive their positions, their opponent’s
positions, and the ultimate resolution. However, these issues will not appear in mediations where
the mediator is conscious of how seating arrangements affect the parties’ perception of power.
B. ATTAINING COURTROOM LEGITIMACY
Mediation will not receive the same legitimacy as processes in American courtrooms
without purposeful attention being given to seating arrangements. An American courtroom is
structured to endow it with a sense of formality. Every American courtroom has a similar seating
7
Cf. Wolfe, supra note 2, at 717 (applying perceptions of power to jury deliberations where studies showed that jury
members perceived the juror seated at the head of the table as the most powerful juror).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 127
arrangement8. The judge sits at an elevated status, the attorneys sit at tables in view of the jury,
and the jury sits in one designated area9. This arrangement has not changed for hundreds of
years10, and no one questions it. If the same thought is put into mediation seating arrangements
as was put into the courtroom design, society would eventually give mediation the same sense of
legitimacy that American courtrooms enjoy.
III. ANTHROPOLOGY OF SEATING ARANGEMENTS
Anthropologist Edward Hall has examined the effect of space on human interaction11. He
identified four different spatial distances that affect how people communicate to each other12.
The four spatial distances are personal, social, public, and intimate13. He concluded that, in each,
the distance affects how people perceive the words and actions of others14. He added that
settlement conferences take place at social distances15. A subsequent experiment concluded that
attention to message content was greatest at social distances of four to five feet.16 At intimate,
public, and personal distances, attention was directed away from the message content toward
other content17. Seating arrangements create these differing social distances, so mediators need to
8
Id. at 691.
Id.
10
Id.
11
See Wolfe, supra note 2, at 703.
12
Id.
13
Id.
14
Id.
15
Wolfe, supra note 2, at 704.
16
Wolfe, supra note 2, at 706 (describing an experiment where subjects listened to two to five minute statements at
distances ranging from one to fourteen feet). In this same experiment, the researcher noticed that as distance
decreased, the speaker appeared to focus his or her attention on the listener, giving the impression that the speaker
tried to influence the listener. As a result, the listeners reported it was difficult to relax because the listener was
more conscious of social conventions, such as maintaining eye contact and avoiding unnecessary movement.
17
Wolfe, supra note 2, at 706.
9
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 128
ensure that a particular arrangement does not negatively affect how one party perceives the
words of another party.
IV. SAMPLE SEATING ARRANGEMENTS
In approaching each distinct mediation session, the mediator is offered four basic seating
arrangements. Some of these arrangements are more effective than others. For example, the “face
to face” arrangement is popular but ineffective. The “side by side” arrangement is more effective
than the “face to face” arrangement18, but also has its limitations. The T-shaped arrangement is
generally the least effective of the basic seating arrangements19. Of the four examples, the
“shared corner” arrangement is an effective arrangement that will place each party in the best
position to achieve the goals of mediation.
A. “FACE TO FACE”
The “face to face” arrangement is an ineffective seating arrangement. In this
arrangement, the parties sit across from each other at the table20. The parties face each other and
the mediator sits 90 degrees to the left or right of the parties21. This is the arrangement most
18
Richard Cohen, Side By Side, Not Face To Face, SCHOOL MEDIATION ASSOCIATES (Jan. 2007), available at,
http://www.schoolmediation.com/newsletters/2007/01_07.html.
19
See Wolfe, supra note 2, at 736.
20
Cohen, supra note 17.
21
See Cohen, supra note 17.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 129
people envision when thinking about mediation. Despite its popularity, this arrangement can
compromise the mediation process.
This arrangement compromises the mediation by creating several problems. One problem
with this arrangement is that it creates an adversarial atmosphere between the parties22. The
parties are likely to perceive any person sitting across a table from them as an adversary instead
of a counterpart23. In addition, this arrangement may produce anxiety in parties who do not wish
to be in the same room as each other24. Finally, in this arrangement, only one party is in the
mediator’s field of vision25. As a result, the mediator cannot attend to non-verbal cues from one
party while simultaneously actively listening to the other party26. If the ultimate goal of
mediation is to resolve disputes between the parties, this seating arrangement does little to
accomplish this. Therefore, mediators should limit their use of this arrangement whenever
possible.
B. “SIDE BY SIDE”
22
Cohen, supra note 17.
See Cohen, supra note 17 (explaining that seating people across from one another creates an adversarial
atmosphere, “giving parties the sense that the ‘problem’ is the person sitting at the other side of the table”).
24
See Cohen, supra note 17.
25
Id.
26
Id.
23
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 130
The “side by side” arrangement is more effective than the “face to face” arrangement27.
In the “side by side” arrangement, the parties sit next to each other on the same side of the table,
while the mediator sits on the opposite side of the table28. Some mediators use this arrangement
instead of the “face to face” arrangement to create less of an adversarial atmosphere29. Therefore,
this arrangement may increase the potential for a successful mediation. It is easier to reach an
agreement with a perceived ally than it is to form an agreement with a perceived adversary.
There are five other benefits to this “side by side” arrangement. First, the arrangement
focuses the parties on the mediator if there are tensions or when the mediator needs to win the
parties’ trust30. Second, it allows the mediator to attend to one party’s non-verbal cues while
simultaneously engaging in active listening with the other party31. Third, in the context of comediating, the arrangement allows the mediators to communicate with ease32. Fourth, the
arrangement allows the parties to easily shift focus between the mediator and the other party33.
Finally, the arrangement turns the table into a tool rather than a barrier34. Instead of separating
the parties, the table allows both parties to use it equally, creating a co-equal relationship. All of
these benefits facilitate communication between the parties and the mediator.
27
Id.
Id.
29
See Jeffrey M. Senger, Advocacy in Mediation with the Government, 61 JAN DISP. RESOL. J. 50, 52 (2006).
Mediators use this arrangement to counter the impression of opposition. Id.
30
Cohen, supra note 17.
31
Id.
32
Id.
33
Id.; see also, Kornhauser supra note 1; but see Senger, supra note 28 (noting that this arrangement can be
awkward because “the parties are facing across the table at the neutral and have to turn in order to talk to each
other.”).
34
See Wolfe, supra note 2, at 689-90.
28
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 131
However, this “side by side” arrangement can cause two potential issues. By placing the
mediator in front of both parties across the table, the arrangement places the mediator in a
position of perceived power35. This arrangement mirrors arbitration where both parties present
their case to an ultimate decision maker36. Unlike arbitration, the mediator is not a decision
maker in mediation. The mediator’s role is to help the parties reach an agreement; it is not to
decide which party is right. This arrangement may cause the parties to give the mediator too
much attention, instead of giving attention to the real decision maker in mediation- the other
party37.
C. T-SHAPED ARRANGEMENT
M The “T-shaped” arrangement is ineffective in the mediation context38. In this
arrangement, two rectangular tables form a “T” shape. If the mediator sits at the head of the
35
See Kornhauser, supra note 1 (advising that a seating arrangement should not elevate the mediator to a judge-like
status).
36
See Kornhauser, supra note 1. (“An arrangement that allows the parties to shift focus between the mediator and
the other party is ideal and “clearly distinguishes mediation from an adversarial process like litigation or
arbitration.”).
37
See Wolfe, supra note 2, at 690.
38
See Wolfe, supra note 2, at 736.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 132
formation, the mediator places his or herself behind two tables39. This significantly increases the
perception of the mediator’s power because the mediator resembles a judge. In addition, the
arrangement places the parties at a significant distance from one another. This may reinforce an
adversarial atmosphere. This arrangement is not ideal for mediation unless it is necessary for the
mediator to exert control over the mediation.
The arrangements mentioned above are not exclusive. The amount of possible seating
arrangements a mediator can use is limited only by the mediator’s imagination. However, the
mediator cannot choose to apply these arrangements in a vacuum. A particular arrangement may
benefit one mediation session more than another. Therefore, the mediator cannot choose a
seating arrangement solely because of its potential benefits. Other considerations affect the
benefits of certain types of seating arrangements.
D. “SHARED CORNER”
The “shared corner” arrangement is another effective seating arrangement. Mediators can
use this arrangement with either square or rectangular tables. This arrangement seats the
39
Id.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 133
mediator at the head of the table, and the parties to either side of the mediator. Alternatively, the
mediator can place the parties at opposite corners of the table40.
The arrangement creates equality between each party. Each party shares exactly one
corner with the mediator, allowing both parties an equal amount of space to share information
with the mediator. In addition, this arrangement creates a closer proximity between the mediator
and both parties. The close proximity allows the mediator to attend to one party without
alienating the other party. All of these factors create a sense of equity because both parties enjoy
the same benefits of proximity and visual contact41. If both parties sense the mediation is
equitable, they may place more trust in the process.
V. OTHER CONSIDERATIONS
All mediations present other considerations the mediator must contemplate before
choosing a seating arrangement. This paper focuses on a few of these considerations such as
cultural issues, multiple parties, past relationships between the parties, the shape of the table, and
attorneys. This paper is limited to only addressing the previously mentioned considerations, but
it does not excuse a mediator from considering any other possible issues that would affect the
benefits of certain seating arrangements.
A. CULTURAL ISSUES
A mediator should consider the culture of each party in the mediation42. Doing so ensures
that a particular arrangement does not offend the cultural preferences of each party. Each seating
arrangement creates spatial orientations between the parties, and certain cultures prefer certain
40
See Wolfe, supra note 2, at 690.
Id.
42
Id.
41
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 134
spatial orientations more than others43. Therefore, mediators must choose seating arrangements
that create spatial orientations that do not alienate the cultural preferences of any party in the
mediation.
Some cultures prefer more spatial distance when engaging in conversation44. Parties with
these cultural backgrounds may become uncomfortable or annoyed if the seating arrangements
place him or her too close to their opposing party45. Therefore, the “face to face” arrangement
may provide the most comfort for these parties. In contrast, these parties may feel that the “side
by side” and “shared corner” arrangements are uncomfortable because the parties in those
arrangements sit closer to each other. The comfort of the “face to face” arrangement may
outweigh its disadvantages if the mediators use it for people of these cultures.
Other cultures prefer less spatial orientations46. These cultures allow for less personal
space, and people of these cultures feel comfortable touching others47. The “side by side”
arrangement is an ideal arrangement for parties of these cultural backgrounds48. The “side by
side” and “shared corner” arrangements allow the parties to converse in close proximity. Parties
that prefer closer spatial orientations may find the “face to face” arrangement disingenuous.
43
See generally Michelle LeBaron, Culture-Based Negotiation Styles, BEYOND INTERACTABILITY (JULY 2003),
http://www.beyondintractability.org/essay/culture-negotiation (stating that space orientations differ across cultures).
44
See LeBaron, supra note 42. “In Northern European countries, personal space is much larger than in Southern
European countries. For a German or a Swedish person, for example, the Italians or the Greeks get too close.”
45
Id.
LeBaron, supra note 42. “Certain cultures, including Mediterranean, Arab, and Latin American, are more tactile
and allow more touching. However, Asian, indigenous American, Canadian, and U.S. cultures tend to discourage
touching outside of intimate situations.”
47
See LeBaron, supra note 42.
48
See LeBaron, supra note 42. “Americans ten[d] to talk with people seated opposite them, or at an angle. For the
Chinese, these arrangements may lead them to feel alienated and uneasy. They prefer to converse while sitting side
by side.”
46
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 135
Accordingly, parties of these cultures may find it difficult to trust another party that is not in
close proximity to them.
There are also variances in how cultures perceive eye contact49. Some cultures perceive
eye contact as a sign of reliability and trustworthiness50. Other cultures perceive lack of eye
contact as a sign of respect51. There are seating arrangements that allow for more or less eye
contact. For example, the “side by side” arrangement allows the parties to avoid eye contact with
each other if the parties prefer. Conversely, the “face to face” or the “shared corner” arrangement
compels the parties to look each other in the eye. If the mediator arranges the seating with
cultural preferences for eye contact in mind, the mediator will create an environment that is
comfortable for the parties.
Mediations that involve parties from two different cultures present a challenge for
mediators. If the mediator is not careful, he or she may alienate one of the parties by arranging
the seating for the comfort of only one party. Therefore, the mediator must arrange the seating in
mediation so that no party’s cultural norms are offended.
B. MULTIPLE PARTIES
Seating arrangements are especially important when mediation consists of more than two
parties. In this context, each side would consist of more than one person or the mediation would
include more than two sides. Nevertheless, the added parties complicate the mediator’s task.
However, it is still possible to create effective seating arrangements that accommodate multiple
parties.
49
Id.
Id.
51
See LeBaron, supra note 42.. (This is true in the United States, Canada, and some Arab countries.)
50
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 136
When arranging the seats in mediation for multiple parties, the mediator should aim to
balance power disparities52. If a mediating party consists of more than one person, it is likely
there will be an uneven number of participants in each party. In this case, or cases where one side
is noticeably larger than the other side, it is best to seat the parties in a circle53. Not only should
the mediator seat the parties in a circle, but the mediator should also intermingle the parties with
each other54.
This arrangement has two benefits. First, it reduces the rigidity of a back and forth
discussion by encouraging open discussion55. Second, it gives individual group members the
opportunity to speak for themselves instead of relying on the group56. Together, these results
reduce the power of the larger group. Once the seating arrangement diminishes the power, the
parties can mediate at arm’s length.
C. PREVIOUS RELATIONSHIPS
An effective seating arrangement respects the previous relationships of the parties. If the
parties previously knew each other and there is potential for reconciliation, a mediator can use
seating arrangements to take advantage of the relationship. Seating arrangements that pit the
parties closer together may be effective. If the relationship was not volatile, the arrangement may
allow the parties to reconnect. It is not necessary for the parties to reconcile, but working closely
together increases the probability that the parties mediate with positive communication.
52
Pamela Peters, Gaining Compliance Through Non-Verbal Communication, 7 PEPP. DISP. RESOL. L.J., 87, 104
(2007).
53
Id.
54
Id.
55
56
Id.
Id.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 137
Sometimes, mediators encounter situations in which the parties have a previously hostile
relationship. In these situations, the mediator must arrange the seating so that the parties can
successfully mediate without letting their emotions hinder the process. Depending on the nature
of the hostility, the best arrangement may be one that allows for little eye contact57. Furthermore,
an arrangement will decrease the tension between the parties if it allows the parties to focus on
either the mediator, or some sort of blackboard58. Changing the seating arrangements to
accommodate hostile parties allows the mediator to ease tensions without disrupting the flow of
the mediation.
There are two potential beneficial seating arrangements for hostile parties. First, the “side
by side” arrangement may be beneficial. This arrangement both diminishes the eye contact
between the parties and allows the parties to direct most of their attention towards the mediator
instead of each other. However, if the mediator chooses to use this arrangement, he or she should
consider creating significant space between the seats. The space may diminish the ability of the
mediator to keep both parties in his or her peripheral vision, but the arrangement decreases the
potential for arguing during the mediation59.
The “shared corner” seating arrangement is another potential beneficial seating
arrangement for hostile parties. This seating arrangement decreases the proximity of the parties
to each other. It also directs the parties’ attention towards the mediator and away from the other
57
Scott H. Hughes, Elizabeth’s Story: Exploring Power Imbalances in Divorce Mediation, 8 GEO. J. LEGAL ETHICS
553, 580 (1995).
58
Id.
59
The mediator may choose to place attorneys between the parties in this arrangement to eliminate any awkward
space. However, the mediator risks the attention of the mediation being drawn away from the mediating parties and
towards the attorneys.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 138
party. The only concern the mediator may encounter with this arrangement is the potential for
sustained eye contact. This arrangement pits the parties at opposite sides of the table, which
creates the same adversarial dynamic as the “face to face” approach. Nevertheless, these
arrangements are better than ignoring the potential issues that accompany mediating parties with
hostile relationships.
D. SHAPE OF TABLE
While not an obvious consideration, the shape of the table should be an important
consideration for mediators. The shape of the table determines the types and number of possible
seating arrangements that become available to the mediator. This paper will explore three
possible shapes: circular, rectangular, and triangular tables.
1. CIRCULAR
Circular tables offer more opportunities for mediators to emphasize psychological
closeness between the parties60. Circular tables offer a limited number of arrangements, but
nearly every arrangement avoids placing one party in a more powerful position than the other
party61. Therefore, mediators should use round tables where one party is inherently in a weaker
position than the other party. For example, this arrangement is ideal in mediations between a
representative of a corporation and an ordinary consumer.
2. RECTANGULAR
60
See Wolfe, supra note 2, at 691.
But see Wolfe, supra note 2, at 691 (stating that arrangements at circular tables that place the parties diagonally
from each other create psychological distance between the parties).
61
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 139
Rectangular tables are very dynamic because they offer more seating arrangements than
circular tables62. However, there is a greater potential for the creation of ineffective
arrangements63. An experiment revealed that people prefer specific seating arrangements in
specific contexts64. Therefore, the mediator must carefully consider his or her seating
arrangements when using rectangular tables.
3. TRIANGLE
Triangular tables give the mediator the benefits of both the circular and rectangular
tables. Triangular tables allow each party to use the corners in the rectangular arrangement
without placing one party at the head of the table. The mediator should consider this arrangement
if the room or the mediator’s resources allow for it. Otherwise, the triangular table provides for
an effective arrangement. Even if the mediator does not use this arrangement, the mediator
should consider the shape of the table when contemplating seating arrangements.
E. ATTORNEYS
Mediators must consider attorneys when making seating arrangements. A seating
arrangement can affect an attorney’s role in mediation. A mediator may want the lawyers to play
a secondary role in the mediation and serve as an advisor rather than advocate. If so, the
mediator can sit the clients on either side of him or her65. This forces the attorneys to sit further
62
Id.
Id.
64
The results of an experiment revealed the subjects preferred different seating arrangements in different contexts.
See Wolfe, supra note 2, at 690. For example, the subjects preferred “corner to corner” or “face to face”
arrangements in casual conversations, “side by side” arrangements in cooperative conversations, and “face to face”
in competitive conversations.
63
65
James J. Alfini, Mediation Theory and Practice at 464-465 (Lexis Nexis, 2d ed. 2006); Senger, supra note 28.
“Some mediators like to talk to the parties directly and prefer that the lawyers sit farther away.”
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 140
away from the mediator66. As a result, the distance of the lawyers from the party- mediator
interaction would likely decrease the ability of the lawyer to control the conversation67. Instead,
the attorneys will only have a close proximity to their client. This seating arrangement is one
way a mediator can use seating arrangements to prevent attorneys from dominating the
conversation.
Alternatively, the mediator can affect the role of the attorney by seating them behind the
parties68. In this arrangement, the mediator does not sit the attorneys at the table. Instead, the
mediator seats the attorneys behind their clients. In this arrangement, the mediator should expect
the attorneys to contribute little to nothing to the conversation. This allows the parties to engage
in the mediation while having the comfort of their counsel behind them. However, the mediator
would risk alienating the attorneys, causing the mediator to lose credibility with the attorneys.
VI. FOR THE FUTURE
Although consideration of seating arrangements is ideal, mediators cannot fully take
advantage of its benefits without proper execution. Mediators must develop practical ways to
arrange the seating in mediation without compromising the previously stated goals of mediation.
Two ways in which mediators can successfully arrange the seating in mediation are pre-marking
the seats and requiring the parties to fill out questionnaires before the mediation.
A. PRE-MARKING SEATS
The mediator can pre-mark each seat at the mediation. This will ensure that each party
sits at a predetermined seat. More importantly, it prevents attorneys from choosing seats for
66
See Alfini, supra note 64.
See id.; see also Senger, supra note 28. “Many lawyers prefer to sit between the client and the mediator. This
gives them more control over interactions with the mediator.”
68
See Alfini, supra note 64.
67
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 141
themselves and their clients. It is possible that some attorneys are aware of the importance of
seating arrangements and will attempt to sit themselves and their clients at the most
advantageous seat69. This places the mediator in a tough position because the mediator will risk
losing an appearance of neutrality if the mediator tells a party to move his or her seat. However,
if the mediator allows the parties to seat themselves anywhere, the mediator’s effort of predetermining the seating becomes moot. Pre-marking the seats with each party’s name eliminates
this occurrence.
B. USE OF QUESTIONNAIRES
Mediators can also request each party to fill out questionnaires before attending
mediation. The mediator would then determine the seating arrangements from the results of the
questionnaires. These questionnaires may include questions about the parties’ cultural
background, personal history with the opposing party, temperament in certain situations, or
personality. This allows the mediator to gain insights into the background of the parties so that
the mediator can plan the arrangements accordingly. The questionnaires can give the mediator
the ultimate tool for preparing an effective mediation environment.
VII. CONCLUSION
Mediators should not underestimate the effects of seating arrangements on mediation.
The mediator has complete control over the seating arrangement and can use it to legitimize the
mediation process, correct power imbalances, and create a positive atmosphere for
communication. However, this task is not an easy one. A mediator must consider many factors
69
See Kornhauser & Whelan, supra note 1. “[M]ediators should be wary of practitioners who…ignore the important
role that the environment plays in the communication process. In so doing, they can disempower the mediator and
their own clients, and limit the potential of mediation.” See also Wolfe, supra note 2, at 717 (explaining that the first
party in the door takes the leadership position, leaving his or her opponent in a less powerful position).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 142
because the slightest arrangement decision can affect the entire dynamic of the mediation.
Therefore, it is important for a mediator to consider ways to configure a room so that the
mediation has the greatest chance of success. A seating arrangement’s potential impact on
mediation is worth the mediators’ time and thoughtful effort.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 143
The Poker-Litigation Game
F.E. Guerra-Pujol*
∗
There is an undeniable . . . symmetry between law practice and poker . . . . 1
Abstract: Is litigation a search for truth, like science or philosophy, or a game of
skill and luck, like the game of poker? Although the process of litigation has been
modeled as a Prisoner’s Dilemma, as a War of Attrition, as a Game of Chicken
*
Professor at the University of Central Florida, College of Business Administration, Dixon
School of Accounting, 4000 Central Florida Blvd., Orlando, Fla. 32816, USA. [email protected]. Image courtesy of Wikimedia Commons, available at
http://commons.wikimedia.org/wiki/File:Holdem.jpg.
1
See Steven Lubet, Sidebar: The Game is Lawyer’s Poker, 32 LITIG. 59, 59 (2005).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 144
and even as a simple coin toss, no one has formally modeled litigation as a game
of poker. This paper is the first to do so. We present a simple “poker-litigation
game” and find the optimal strategy for playing this game.
1. Introduction
Is litigation a search for truth, like science or philosophy, or a game of skill and luck, like
the game of poker?2 If the former, then how do we explain the occurrence of frivolous claims or
negative-expected value lawsuits? If the latter, how do we explain the demand for costly
methods of dispute resolution and the critique of random methods of justice?
Although the process of litigation has been modeled as a Prisoner’s Dilemma,3 as a War
of Attrition,4 as a Game of Chicken,5 and even as a simple coin toss,6 and although, in the words
of one scholar, “there is an undeniable . . . symmetry between law practice and poker,”7 to our
knowledge no one has formally modeled litigation and the legal process as a game of poker. This
paper is the first to do so. Specifically, we present a simple “poker-litigation game” and then find
the optimal strategy for playing this game.
The remainder of this paper is organized as follows: Section 2 summarizes the
similarities between litigation and the game of poker. Next, Section 3 presents a simple model of
2
For an overview of the game of poker, see JOHN SCARNE, SCARNE ON CARDS 224-40 (rev. aug. ed. 1965).
Ronald J.Gilson & Robert H. Mnookin, Disputing Through Agents: Cooperation and Conflict Between Lawyers in
Litigation, 94 COLUM. L. REV. 509, 514-22 (1994).
4
Paul Klemperer, Why Every Economist Should Learn Some Auction Theory, SOCIAL SCIENCE RESEARCH NETWORK
(Oct. 12, 2000), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=241350.
5
F.E. Guerra-Pujol, Coase and the Constitution, 14 RICH. J.L. & PUB. INT. 593, 595-97 (2010).
6
F.E. Guerra-Pujol, Chance and Litigation, 21 B.U. PUB. INT. L.J. 45, 46-48 (2011).
7
Lubet, supra note 2, at 59-70.
3
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 145
our poker-litigation game, and then Section 4 presents a formal solution of the game based on the
work of David L. McAdams.8 Section 5 concludes.
2. Similarities between poker and litigation
Litigation has many important features in common with the game of poker, for example:
(i)
both poker and litigation are strategic games in which the players/litigants must make
their choices independently of each other;9
(ii)
both poker and litigation are zero-sum, non-cooperative games in which the economic
interests of the players/litigants are opposed;10
(iii)
both are games of incomplete information: just as a player in a game of poker does
not know with certainty when another player is “bluffing,” a litigant in a civil or
criminal case may not know with certainty the strength of his adversary’s case during
pre-trial negotiations;11
(iv)
both games involve significant elements of chance or luck: e.g. random assignment of
the cards in poker; random selection of judges and jurors in civil and criminal cases.12
In addition, poker has a rich history of study in other academic fields, including
mathematics,13 game theory,14 computer science,15 and law.16 This paper, however, is the first to
8
See David L. McAdams, World’s Simplest Poker, CHEAP TALK (Nov. 20, 2012), available at
http://cheeptalk.files.wordpress.com/2012/11/worlds-simplest-poker.pdf.
9
See, e.g., John Nash, Non-Cooperative Games, 54 ANNALS MATH. 286, 286 (1951).
10
See, e.g., DOUGLAS G. BAIRD ET AL., GAME THEORY AND THE LAW 220-24 (1994).
11
See, e.g., STEVEN LUBET, LAWYER’S POKER: 52 LESSONS THAT LAWYERS CAN LEARN FROM CARD PLAYERS 9293 (2006).
12
See generally NEIL DUXBURY, RANDOM JUSTICE: ON LOTTERIES AND LEGAL DECISION-MAKING (1999).
13
Nash, supra note 10, at 293-94; Harold W. Kuhn, A Simplified Two-Person Poker, in 1 CONTRIBUTIONS TO THE
THEORY OF GAMES (Harold W. Kuhn & Albert W. Tucker, eds., 1950).
14
JOHN VON NEUMANN & OSKAR MORGENSTERN, THEORY OF GAMES AND ECONOMIC BEHAVIOR (3d ed. 1953).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 146
formally model litigation as a game of poker. We present a simple model of our poker-litigation
game in section 3 below and then find the optimal strategy for playing this game in section 4.
3. The model
Building on the work of John von Neumann, Oskar Morgenstern, John Nash, and others,
we model litigation and the legal process as a game of poker.17 Specifically, our poker-litigation
game proceeds in four successive stages as follows:
(i)
time T1
. . . an opening round in which each player is dealt one card
(ii)
time T2
. . . a quiet round in which the players examine their hole cards
(iii)
time T3
. . . a betting round in which the players place their bets
(iv)
time T4
. . . a final round in which the bets are paid to the winner
The rules and payoff structure of our poker-litigation game are as follows:
1. There are three players: (i) player P, the plaintiff, (ii) player D, the defendant, and (iii)
player J, the dealer/judge. The objective of players P and D is to win the poker-litigation
game (by maximizing their payoffs from the game), while the objective of the
dealer/judge, by contrast, is to shuffle and deal the cards, collect and pay out the bets, and
enforce and administer the rules of the game.18
15
Darse Billings, et al., The Challenge of Poker, ARTIFICIAL INTELLIGENCE 134 (2002).
LUBET, supra note 12; see, e.g., Scarne, supra note 3, in CHEATING AT BLACK JACK, for a historical overview and
general description of poker.
17
See Billings, supra note 16, at 237-39 for a glossary of poker terms and phrases. See also Scarne, supra note 3, at
228-32.
18
Previous mathematical models of the game of poker take the role of the dealer/judge for granted. See, e.g.,
McAdams, supra note 9; VON NEUMANN & MORGENSTERN , supra note 15, at 186-219; Nash, supra note 10, at
293-94; John Nash & Lloyd S. Shapley, A Simple Three-Person Poker Game, in 1 CONTRIBUTIONS TO THE THEORY
OF GAMES 105-16 (Harold W. Kuhn & Albert W. Tucker eds., 1950); and Kuhn, supra note 14, at 93-103. In our
model, by contrast, the judge is an essential player, since her role is to detect cheating and monitor compliance with
the rules of the game.
16
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 147
2. Each player, P and D, is dealt a card “face down” by the dealer/judge at the start of play,
i.e. time T1. In summary, these “hole” cards (or private cards) represent the strength or
weakness of each player’s case. For simplicity and mathematical tractability, we assume
that the values of the players’ private cards are independent and identically distributed
(i.i.d.) random variables on the interval [0, 1].19 We further assume that cards with higher
values (i.e. values nearer to 1) are deemed stronger (i.e. are worth more) than cards with
lower values (values approaching 0).20
3. The players may (but are not required to) examine their hole cards at time T2, although
the values of their cards are not revealed until after the betting round.21 In other words,
each player/litigant is able to determine the strength or weakness of his case but does not
know the strength or weakness of the other litigant’s case.
4. After examining their hole cards, the players must simultaneously and secretly place their
bets at time T3.22 Specifically, all bets must be placed in separate sealed envelopes and
handed over to the judge, who will then award the combined bets to the winning player at
the end of play at time T4.23
19
That is, in place of a standard, finite deck of playing cards with values ranging from 2, 3, 4, 5, 6, 7, 8, 9, 10, Jack,
Queen, King, and Ace, we assume an infinite deck of cards with values randomly ranging from 0 to 1.
20
McAdams, supra note 9. See also VON NEUMANN & MORGENSTERN , supra note 15, at 187-88 (“[E]ach player
draws a number s + 1, . . . , S instead. The idea is that s = S corresponds to the strongest possible hand, s = S – 1 to
the second strongest hand, etc., and finally s = 1 to the weakest … Thus the game begins with two chance moves:
The drawing of number s for player 1 and the for player 2, which we denote s1 and s2.”) (ellipsis in original).
21
See infra Rule 4. Note that not even the judge is allowed to see the private hole cards of the players until after the
betting round.
22
Cf. VON NEUMANN & MORGENSTERN, supra note 15, at 188 (“The next phase of the general game of Poker
consists of the making of ‘Bids’ by the players.”). In this paper, we shall use the more common term “bets” instead
of “bids.”
23
See infra Rule 6. As an aside, the bets of the players in this simple game can be likened to “investment levels” of
the litigants. That is, during the process of the litigation, each litigant must decide (independently of the decision of
the other litigant) how much effort to invest in his case. Unlike litigation, however, where the level of investment
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 148
5. The players are allowed to make only two possible bets, a high bet, a, or a low bet, b,
where a > b > 0, and all bets made at time T3 are final.24 Thus, there is only one round of
betting, and the players are not allowed to “call” or “re-raise.”25 Also, for further
simplicity and tractability, we assume a = 2b.26
6. Lastly, the players reveal their cards at time T4, and the dealer/judge declares a winner
based on the following sub-rules:
a. if both players P and D have submitted high bets, the player with the highest card
wins both bets for a net gain of +a (in the event of a tie, the players get back their
original bets and play again);
b. if both players have submitted low bets, the player with the highest card wins both
bets for a net gain of +b (in the event of a tie, the players get back their original
bets and play again);
c. if one player has submitted a high bet and the other a low bet, the player
submitting the high bet automatically (by default) wins both bets for a net gain of
+b, regardless of the values of the players’ cards.
arguably has some effect on the outcome of the case, in poker the size of one’s bet has no effect on the strength of
one’s hole cards.
24
Cf. VON NEUMANN & MORGENSTERN, supra note 15, at 189-90 (“We shall express … restrictions on the size of
bids … in the simplest possible form: We shall assume that the two numbers a, b
a>b>0
are given ab initio, and that for every bid there are only two possibilities: the bid may be ‘high,’ in which case it is a;
or ‘low,’ in which case it is b. By varying the ratio a/b —which is clearly the only thing that matters—we can make
the game risky when a/b is much greater than 1, or relatively safe when a/b is only a little greater than 1.”).
25
Id. at 186-88. We make these assumptions for mathematical tractability and ease of exposition.
26
A high bet is like a “double-or-nothing” bet, since a high bet is twice as large as a low bet.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 149
Although our model of the poker-litigation game is simple and artificial, it isolates two
important variables of the game: (i) the size of each player’s bet or level of investment in his case
(the variables a and b), and (ii) the relative strength of his case (depending on his randomlyassigned hole card). Moreover, our model captures several essential features that poker and
litigation have in common: both activities are strategic, zero-sum games of incomplete
information involving elements of luck or chance. Specifically, the poker-litigation game is a
strategic game because the players must choose their strategies (i.e. place their bets)
independently, without communicating with each other, and their choices, once made, are final.27
In addition, the poker-litigation game is a game of incomplete information, and this condition
makes the solution of the game non-trivial. If the values of the players’ hole cards were common
knowledge (that is, if the players could see each other’s cards before placing their bets), the
solution would be trivial. The players would always make optimal bets: bet low when the value
of one’s card is lower than the other player’s card to minimize one’s losses.28
Given this simple set of rules (see Rules #1-6 above) and given the temporal and strategic
structure of the game, what is the optimal or best strategy in the poker-litigation game?29 Put
another way, given that the poker-litigation game is a strategic game of incomplete information,
when should a player bet high or bet low in order to minimize his losses and maximize his gains?
Stated formally, does any strategy in this game guarantee a player a non-negative expected
27
Nash, supra note 10, at 286 (“[E]ach participant acts independently, without collaboration or communication with
any of the others.”); see also MARTIN J. OSBORNE & ARIEL RUBINSTEIN, A COURSE IN GAME THEORY 14 (1994)
(“For a situation to be modeled as a strategic game . . . the players [must] make decisions independently, no player
being informed of the choice of any other player prior to making his own decision.”).
28
See Alvin E. Roth & Michael Malouf, Game-Theoretic Models and the Role of Information in Bargaining, 86
PSYCHOLOGICAL REVIEW 574 (providing an overview of the role of information in game theory); see also BAIRD ET.
AL., supra note 10, at 79-121.
29
Stated formally, what is the equilibrium strategy or Nash equilibrium of players P and D?
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 150
payoff?30 Below, we proceed to find the solution or symmetric equilibrium (in pure or mixed
strategies) of the poker-litigation game.
4. Solution
The most well-known solution concept in game theory is the Nash equilibrium.31 Stated
formally, a game has an equilibrium point when “no player can profitably deviate [i.e. play a
different strategy], given the actions of the other players.”32 Stated simply, a strategy is a Nash
equilibrium when it is a best response given the possible choices of the other players.
Following the work of David McAdams,33 who applies Nash’s contradiction method of
analysis,34 we conjecture that an equilibrium exists with a threshold t and probability p such that
a player always bets high given any card whose value is greater than t (i.e. when such player has
a “strong” case) and bets low with probability p given any card whose value is lesser than t
(when such player has a “weak” case).
To test this conjecture, we consider three different treatments or litigation scenarios: (i)
case #1, when the value of a player’s private card is equal to t (in other words, when the player
has a “marginal” or close case in which he is just as likely to win as to lose); (ii) case #2, when
the value of his hole card is below t by some unknown quantity x, or t – x (i.e. when the player
has a “weak” case); and (iii) case #3 when the value of his hole card exceeds the threshold t by x,
or t + x (the player has a “strong” case).
30
Cf. McAdams, supra note 9.
Nash, supra note 10, at 286; see, e.g., OSBORN & RUBINSTEIN, supra note 28 at 14-15; see also BAIRD, ET AL.,
supra note 11 at 19-23.
32
OSBORNE AND RUBINSTEIN, supra note 28 at 15.
33
See McAdams, supra note 9.
34
Nash, supra note 10, at 293.
31
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 151
4.1. case #1: t
Assume that a given player (say, player P, the plaintiff) likes to hedge his bets: he bets
high, a, when the value of his hole card is greater than or equal to a certain threshold, t, and bets
low, b, when his card is below this threshold.35 In plain English, the intuition behind this strategy
is that one should place larger bets the stronger one’s card is in order to maximize one’s gains,
since one has a higher chance of winning the game when one has a strong card.36 Now, assume
that the value of Player P’s card is equal to t and, in addition, assume that his opponent, player D,
also likes to hedge his bets.37
Player P must consider two possible scenarios: either player D’s card is greater than t (in
which case player D bets high, a) or it is lesser than t (in which case D bets low, b). If player D
bets low b because his hole card is lesser than t, then player P will win +b regardless whether he,
player P, makes a high or low bet. By contrast, if the value of player D’s card is greater than t,
then player P will lose his bet (regardless whether he, player P, has made a high or low bet), but
because player P loses more in this scenario when he bets high than when he bets low, player P
should prefer to bet low in this case in order to minimize his losses, since b < a. But notice that
this preference is inconsistent with player P’s strategy of making high bets when the value of his
hole card is greater than or equal to the threshold t; therefore, a mixed or m-type strategy cannot
be an equilibrium strategy or best response for player P.
This analysis leads us to a larger point about our game: a player can still lose even with a
high-value hole card, depending on the hole card of the other player, since the ultimate outcome
35
For reference, we shall designate this strategy as an “m-type” strategy or mixed strategy.
And conversely, one should make smaller bets—the weaker one’s card—in order to minimize one’s losses.
37
Stated formally, assume player D is also an m-type player. That is, assume player D is playing the same m-type
strategy against player P that P is playing against D.
36
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 152
of the game depends on the respective values of the hole cards of both players (and conversely, a
player can still win even when he holds a low-value hole card). In other words, like litigation,
playing this game and making bets are risky activities because there are costs and benefits of
making high bets (and low bets). In equilibrium, these costs should be equal to the benefits—
thus we proceed to define these costs and benefits to find the equilibrium strategy of this game.
First, suppose that the value of player P’s card is equal to t and that the other player’s
card (player D’s card) is greater than t, an event which occurs with probability 1 – t.38 Player P
will thus lose the game regardless whether he bets high or bets low, but he loses –a when he bets
high and –b when he bets low. (That is, in this case player P loses an additional amount, the
difference between a and b, and this differential loss is equal to b since we have previously
assumed that a = 2b.) Thus, from player P’s perspective, the true cost a making a high bet in this
scenario is b(1 – t).
Next, suppose player D’s private card is below the threshold t, an event which occurs
with probability t.39 Also, suppose player D bets high in this scenario with probability p. When
player D bets low in this case, player P wins +b (the value of player D’s low bet) regardless
whether player P himself bets high or low. But when player D bets high (an event which occurs
with probability p), then player P wins +a (or 2b since a = 2b).40
38
See supra Rule #2. This event occurs with probability 1 – t because we are assuming that the possible values of
each player’s card in this game are independent and identically distributed (i.i.d.) random variables on the interval
[0, 1]. Thus, if t is the probability that player P or D’s card is equal to t, then 1 – t is the probability that player D’s
card is greater than t.
39
See supra note 39. This event occurs with probability t because, by definition, if player D’s card is above t with
probability 1 – t, then his card will be below t with probability t.
40
As an aside, it is worth asking, why would player D ever bet high with a low-value card? Because if player P
placed a low bet instead of a high one, then player D would have won +b instead of losing –a.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 153
Thus, the benefit to player P from making a high bet in this scenario (i.e. when player D’s
card is below t) can be stated formally as follows:
(b + a)(t)(p), or 3b × t × p (since a = 2b), or 3btp.
In equilibrium, the costs and benefits of making high bets in both scenarios must be the
same:
b(1 – t) = 3btp, or equivalently (after simplification): 1/t = 1 + 3p
Furthermore, in equilibrium, this equality must hold not only at the threshold t but also
everywhere above and below t. Thus, we consider two additional scenarios or cases: case #2 in
subsection 4.2 below, when the value of a player’s hole card is below t (i.e. when such player has
a “weak” case), and case #3 in subsection 4.3, when his card exceeds t (when he has a “strong”
case).
4.2. case #2: t – x
We now proceed to determine a player’s best strategy or best response when the value of
his hole card is less than t.
For simplicity, consider this second type of case from player P’s perspective.41 Assume
the value of player P’s private card is below the threshold t by some unknown quantity x, or t – x.
In summary, player P has two options in his strategy set: he can either make a high bet, a, or
41
Recall, however, that our analysis also applies to player D since the payoffs in this game are symmetrical.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 154
make a low bet, b. But what are player P’s payoffs for each such strategy in this case compared
to his payoffs in the first type of case (i.e. when the value of player P’s private card is equal to t)?
In summary, if player P bets high in this second type of case (i.e. when the value of his
hole card is t – x), then player P loses –a rather than winning +a only when two conditions are
met: when (i) the value of player D’s private hole card lies on the interval [t – x , t] and (ii)
player D bets high. Since player D will bet high in this particular scenario (i.e. when his hole
card is on the interval [t – x, t]) with probability p times x (recall that by assumption a player bets
high with probability p when the value of his hole card is below t), player P’s payoff in this
scenario is –2apx lower (or stated equivalently: –4bpx lower, since a = 2b) than when the same
scenario occurs in the first type of case (when the value of player P’s hole card is equal to t).
If, however, player P bets low in this second type of case, then he loses –b rather than
winning +b only when two conditions are met: (i) when the value of player D’s card lies on the
interval [t – x, t], and (ii) when player D bets low. Since player D will bet low with probability (1
– p)x, player P’s payoff is now –2b(1 – p)x lower in this scenario than when the same scenario
occurs in the first type of case (threshold = t).
Next, to find player P’s best response, we set player P’s revised payoffs for both
strategies equal to each other and simplify as follows:42
2p = (1 – p), or p = 1/3
42
We set these “t – x” payoffs equal to each other because, in equilibrium, a player (player P and, by symmetry,
player D) should be indifferent between making high and low bets.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 155
In plain words, randomizing between high and low bets is a best response given any card
less than t. Or, stated formally, a player (player P and, by symmetry, player D) is indifferent
between making high or low bets for all values of x only when the other player is placing high
bets with probability 1/3. Otherwise, if one of the players were placing high bets with a
probability greater than or lesser than 1/3, the other player could adjust his betting strategy
accordingly to increase his gains (or reduce his loses). Furthermore, given that p = 1/3, when we
substitute this value for p in our original equilibrium equation, 1/t = 1 + 3p, and solve for t, we
see that t = 1/2 or 0.5. Thus, the optimal threshold is 0.5 and a player should bet high with
probability 1/3 (or bet low with probability 2/3) when the value of his hole card is below this
critical threshold.
4.3. case #3: t + x
Lastly, we wish to confirm a player’s best strategy (best response) when the value of his
hole card is greater than t.
Again, for simplicity, consider this third type of case from a particular player’s
perspective, player P, although the same analysis also applies to player D since this game is
symmetrical, but now, assume the value of player P’s private card exceeds the threshold t by
some unknown quantity x, or t + x. As before, player P has two possible moves in this game (i.e.
he can make a high bet a or a low bet b), so given this case (i.e. when the value of player D’s
card lies on the interval [t, t + x]), we proceed to find player P’s payoffs for each such strategy
compared to his payoffs in the first type of case (when the threshold is set to t).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 156
If player P makes a high bet in this case (i.e., when his card exceeds t by an amount x),
then he wins +a rather than losing –a when the value of player D’s card lies on the interval [t, t +
x], since by assumption a player always makes a high bet a when his card is greater than t. Thus,
player P’s payoff in this case is +2ax higher (or, +4bx higher, since a = 2b) than his payoff when
the same scenario occurs in the first type of case (when threshold = t).
If, however, player P bets low in this scenario, he wins +b, which is the same amount he
would have won in this scenario in the first type of case (when threshold = t), when the same two
conditions are met: when (i) the value of player D’s hole card is less than t and (ii) player D
makes a low bet. Since these are the same conditions under which player P wins in the first type
of case, player P’s payoff in this third scenario (case #3) is identical to his payoff when this same
scenario occurs in case #1.
The payoff from making a high bet is increasing over the interval [t, 1], and the payoff
from making a low bet is constant, since by definition b = b, player P (and, by symmetry, player
D) strictly prefers to bet high when the value of his hole card is above t. Further, since this is a
symmetrical game, this same conclusion applies to player D.
To recap, given the rules and payoff structure of our game, a player should bet high with
probability 1/3 (or bet low with probability 2/3) when the value of his private card is below t and
bet high in all other cases.
5. Conclusion
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 157
Before concluding, we wish to acknowledge and say a few words about the artificiality of
our poker-litigation game,43 or in the words of Nate Silver, we wish to explain why our model is
“sophisticatedly simple.”44 Admittedly, our poker-litigation game is a simple representation or
model of a more complex activity (civil and criminal litigation), but parsimony and simplicity
can also be a virtue for several reasons.45 One is tractability. A simple model is easier to analyze
and work with than the “real world” is. That is, a simpler representation of poker (or litigation) is
more tractable than the actual real-world game being modeled, or in the words of John von
Neumann and Oskar Morgenstern, the founders of game theory, “actual Poker [like actual
litigation, we would add] is really much too complicated a subject for an exhaustive
discussion.”46 Another virtue of simplicity is clarity. The process of creating a simple model
requires us to identify the players and their strategy sets, clearly define our terms, and explicitly
state our assumptions, and unlike a purely verbal description of reality, a formal model allows us
to make falsifiable predictions about the real world. But most importantly, a simple welldesigned model can capture the essence of a strategic interaction that is present in a more
complex real-world situation. Specifically, our simple model of litigation can help us isolate and
demonstrate some fundamental features of the legal process.
In this paper, we have presented a simple model of the process of litigation, the “pokerlitigation game,” based on the premise that litigation has much in common with the game of
43
See VON NEUMANN & MORGENSTERN, supra note 15; see also Nash, supra note 10; see also Nash & Shapley,
supra note 19; see also Kuhn, supra note 14 (all of whom invented simplified poker games to illuminate
fundamental principles of game theory).
44
NATE SILVER, THE SIGNAL AND THE NOISE: WHY SO MANY PREDICTIONS FAIL—BUT SOME DON’T 225 (2012).
45
See, e.g., VON NEUMANN & MORGENSTERN, supra note 15, at 186-88; see also F.E. Guerra-Pujol, A GameTheoretic Analysis of the Puerto Rico Status Debate and Other Legislative Wars of Attrition, 18 AM. U. J. GENDER
SOC. POL’Y & L. 625, 630-31 (2010).
46
VON NEUMANN & MORGENSTERN, supra note 15, at 186.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 158
poker. In summary, our simple model is useful because it isolates two important variables of the
game: (i) the size of each player’s bet or level of investment in his case (captured by the
variables a and b), and (ii) the relative strength of his case (captured by the variable t). In
addition, our model provides an alternative explanation of the existence of frivolous claims (or
“negative-expected value” lawsuits) as well as prosecutorial misconduct, for one of the main
lessons of our model is that (from the perspective of the players) there is an optimal level of
bluffing in the poker-litigation game, with bluffing defined as placing a high bet probabilistically
or randomly even when the strength of one’s case is weak.
But what is this optimal level of bluffing in our game? Given the rules and payoff
structure of our game, the optimal level is to bet high with probability 1/3 when the value of
one’s private card is below the critical threshold 0.5. Likewise, in real-world litigation games, we
would expect the optimal level of bluffing (i.e. frivolous claims) to be a function of two
variables: (i) the amount at stake, or in the language of our model, the sum of the bets placed,
and (ii) the relative strength and weakness of player P and D’s cases.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 159
Acknowledgments
First and foremost, the author wishes to thank Jeffrey Ely for posting on cheaptalk.org David
McAdams’s poker game (“World’s Simplest Poker”) as well as McAdams’s simple and elegant
solution to the game. As an aside, all the solutions, save for one, posted in response to Professor
Ely’s initial blog post (including my own solution), were wrong. (See Appendix for my initial
failed attempt to solve the game.) I must also thank professors Ely and McAdams for taking time
during the holidays to answer my technical questions about the McAdams model. I developed
my poker-litigation game and wrote up a first draft of this paper during the end of year holidays
in 2012 at the home of my dear friends Renard and LaTanya Damon in Cooper City, Florida, at
the home of my gracious in-laws, Erle and Andrea Robinson, in Tarpon Springs, Florida, and at
the home of my caring and generous parents, Francisco and Oilda Guerra, in Glendale,
California. Thus I also wish to thank the Guerras, the Robinsons, and the Damons for their
kindness, support, and hospitality. Lastly, I wish to thank my wife Sydjia Guerra for
proofreading and double-checking the mathematics in my paper. (The image on my cover page is
courtesy of Wikimedia Commons and is available at
http://commons.wikimedia.org/wiki/File:Holdem.jpg.)
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 160
Appendix
As an aside, I set forth in this appendix my initial (and failed) attempt to solve the pokerlitigation game (i.e. to find the optimal or best strategy in this game). I include my false start to
contrast it with the correct solution to the game, which I obtained from David McAdams and Jeff
Ely.
In summary, in my initial failed attempt to solve the game, I considered three types of players:
“a-type” players who always make high bets, “b-type” players who always make low bets, and
“m-type” players whose bets depend on the value of their hole cards.
a-type players
First, I considered an “a-type” player who always submits a high bet, a. An a-type player will
lose his bet only when two conditions are met: (i) when the other player has made a high bid, and
(ii) when his card has a lower value than the card of the other player. Otherwise, an a-type player
always win (as per Rule #6c above), and thus, if such a player plays the litigation game an
infinite number of times, his expected payoff is equal to the sum of pa – (1 – p)(a) when the
other player makes a high bid—where p is the probability that his card is higher than the other
player’s card—, and +a when the other player makes a low bid.
b-type players
Next, I considered a “b-type” player whose strategy is to always place a low bet, b. In summary,
a b-type player wins the game only when two conditions are met: (i) when his card has a higher
value than the card of the other player, and (ii) when the other player has submitted a low bid.
Otherwise, when neither of these conditions are met, a b-type player will always lose. Thus, if a
b-type player plays the litigation game an infinite number of times, his expected payoff is equal
to the sum of –b when the other player submits a high bid and pb – (1 – p)(–b) when the other
player submits a low bid, where p is the probability that his card is higher than the other player’s
card.
m-type players
Lastly, I considered an m-type player who plays a mixed or probabilistic strategy, that is, a
player who makes a low bet, b, when his card is below a certain threshold, namely 0.5, and who
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 161
makes a high bet, a, when his card is above this critical threshold.47 An m-type player has many
ways of winning or losing the litigation game, depending on what strategy the other player is
choosing and on the value of other player’s card. Thus, we find an m-type player’s expected
payoff against a-type players, b-type players, and other m-type players as follows:
First, an m-type player’s expected payoff against an a-type player, i.e. a player who always
makes high bids, is equal to the following value:
E(m|a) = q(–b) + (1 – q)[pa – (1 – p)(–a)]
where E(m|a) is the expected payoff of an m-type player against an a-type player, q is the
probability that the m-type player’s card is below the critical threshold value 0.5 and where p is
the probability that his, the m-type player’s, card is higher than the other player’s card. In other
words, when playing against a high-bet, a-type player, an m-type player loses his bet b when the
value of his hole card is below the critical threshold, i.e., when q < 0.5, and wins +a with
probability p but loses –a with probability 1 – p when the value of his hole card exceeds the
critical threshold, i.e. when q > 0.5.
Next, what happens when an m-type player plays against a b-type player, that is, a player who
always makes low bets? In this case, the m-type player’s expected payoff is equal to:
E(m|b) = q[pb – (1 – p)(b)] + (1 – q)(b)
where E(m|b) is the expected payoff of an m-type player against an b-type player and q is the
probability that the m-type player’s card is below the threshold value 0.5. In plain English, when
playing against a low-bid, b-type player, an m-type player wins +b with probability p but loses
his bet b with probability 1 – p when the value of his hole card is below the critical threshold, i.e.
when q < 0.5, and he wins the bid +b when the value of his hole card exceeds the critical
threshold, i.e. when q > 0.5.
Third and last, what happens when an m-type player plays against another m-type player? That
is, what happens when his opponent also plays the same mixed or probabilistic strategy? Now,
the m-player’s expected payoff not only depends on q, the probability that the m-type player’s
card is below the critical threshold value 0.5; his expected payoff is also a function of r, the
probability that the other player’s card is below the threshold. Stated formally, when playing
47
Such a mixed strategy is probabilistic in nature because the value of one’s hole card is a uniform independent
random number on the interval [0,1] as per Rule #2 of the poker-litigation game.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 162
against another m-type player, an m-type player’s expected payoff is equal to the following
value:
E(m|m) = qr[pb – (1–p)(b)] + q(1–r)[–b] + (1 – q)(r)[b] + (1–q)(1–r)[pa – (1–p)(–a)]
where E(m|m) is the expected payoff of an m-type player against an another m-type player, q is
the probability that the m-type player’s hole card is below the critical threshold value 0.5, and r
is the probability that the other player’s hole card is below this threshold. Since this is such a
lengthy equation, we shall break it down into its four constituent parts and explain the substance
of each part in plain words as follows:
qr[pb – (1 – p)(b)] + q(1 – r)[–b] + (1 – q)(r)[b] + (1 – q)(1 – r)[pa – (1 – p)(–a)]
scenario #1
scenario #2
scenario #3
scenario #4
Notice that each part of this lengthy expected payoff equation corresponds to one of following
four possible scenarios:
1. Scenario #1—both players’ hole cards are below the critical threshold.
2. Scenario #2—the first m-type player’s hole card is below the threshold; theother player’s
hole card is above the threshold.
3. Scenario #3—the first m-type player’s hole card is above the threshold, while the other
player’s hole card falls below the threshold.
4. Scenario #4—both players’ hole cards exceed the critical threshold.
Thus, depending on which scenario occurs, that is, depending on the values of the hold cards of
the players, an m-type player will earn the following payoffs:
1. In scenario #1, an m-type player wins +b with probability p but loses his bet b with
probability 1 – p.
2. In scenario #2, an m-type player loses –b.
3. In scenario #3, an m-type player wins +b.
4. And in scenario #4, an m-type player wins +a with probability p but loses –a with
probability 1 – p.
To recap, in my initial failed attempt to solve the poker-litigation game, I considered three types
of players (or three types of strategies)—“a-type” players who always bet high, “b-type” players
who always bet low, and “m-type” players who bet high or low depending on the value of their
hole card—and I also figured out the expected payoffs of the strategies of each type of player.
But it was at this stage that I was “stumped,” unable to determine which strategy is the optimal
strategy (and thus I was unable to find what type of player earns the highest expected payoffs in
this game).
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 163
In short, because of my inability to solve the game using traditional methods, I instead turned to
David McAdams’s elegant solution to steer me in the right direction.
Resolved: Journal of Alternative Dispute Resolution
Volume V, Issue I
Page 164