Manual on Alternative Dispute Resolution, 2002
Colorado Bar Association
Alternative Dispute Resolution Committee
The Colorado Bar Association and the Alternative Dispute Resolution Committee make no implied or express warranties regarding the content of this Manual. The materials presented should be modified by lawyers for application to particular cases.
©1992 Colorado Bar Association, 1900 Grant Street, Suite 95, Denver, Colorado 80203-4309
SUPREME COURT OF COLORADO
LUIS D. ROVIRA
August 3, 1992
In 1992, the Colorado Supreme Court and the Colorado Legislature adopted separate measures which will have a profound effect on the way in which law is practiced in our state. First, the Court has included an alternative dispute resolution (ADR) provision in the newly adopted Model Rules of Professional Conduct and Comments thereto. Model Rule 2.1 states, in part:
In a matter involving or expected to involve litigation, a lawyer should advise the client of alternative forms of dispute resolution which might reasonably be pursued to attempt to resolve the legal dispute or to reach the legal Objective sought.
The Comment to Rule 2.1 states:
The last sentence of Rule 2.1 addresses the issue of alternative dispute resolution ("ADR"). Common forms of ADR include arbitration, mediation, and negotiations. Depending upon the circumstances, it may be appropriate for the lawyer to discuss with the client factors such as cost, speed, effects on existing relationships, confidentiality and privacy, scope of relief, statutes of limitation, and relevant procedural rules and statutes.
Second, sections 13-22-301 to 312, 6A C.R.S. (1991 Supp.), the Dispute Resolution Act, have been amended. This Act now grants courts of record authority to refer cases to any ancillary form of ADR.
In response to the inclusion of the ADR provision and the amendments to the Dispute Resolution Act, the Colorado Bar Association ADR Committee has published this manual. I believe it will assist you in the informed use of ADR in appropriate cases. I commend it to you.
Luis D. Rovira
Table of Contents
The term Alternative Dispute Resolution (ADR) is an umbrella phrase used to describe problem-solving methods or techniques. Many of these techniques have been used throughout history, but have recently become institutionalized in response to the need for efficient and cost-effective dispute settlement.
The United States' legal system was created as an alternative to violent, self-help dispute resolution. It is undeniably one of the best in the world. But, because access to the courts has become time-consuming, expensive and stressful, additional methods of settlement have become established. These methods include, among others, negotiation, mediation, settlement conferences, early neutral evaluation, mini-trials, summary jury trials, med-arb, and arbitration. They are referred to collectively as ADR and ought to be considered, along with litigation, for the resolution of disputes.
ADR methods are structured to meet specific client needs. Each technique has certain advantages but also presents some disadvantages or risks. Proper use or application, therefore, necessitates thorough analysis of the case, the parties' needs and the available methods of resolution. The objective is to employ the least expensive and intrusive method to achieve the most positive result for the client.
This Manual provides a brief overview of common ADR techniques which may be used to assist clients in a variety of ways. They may be applied in a preventative context which will help clients avoid disputes. They may also be used to help clients structure transactional relationships, or, if a dispute has become manifest, they may be used to resolve the problem. Effective lawyering requires knowledgeable use of ADR techniques. Clients should be advised of the potential benefits and risks of all ADR methods, as well as litigation.
The Dispute Resolution Continuum on the following pages is a graphic explanation of the most common ADR methods and their use. On the left side of the Continuum is "Negotiation." It is the most private and can be the most efficient method. It is the least adversarial and ideally results in a solution that is jointly selected by the parties. Litigation, on the right side of the Continuum, is a public, adversarial method of dispute resolution. It can be the most costly and time-consuming method. In litigation, the dispute is decided by a third party, the judge or jury, rather than the litigants.
The remaining methods fall in between Negotiation and Litigation. As the reader moves from left to right on the Continuum, the methods become more adversarial. The methods which are ultimately selected for use by clients should be those which match the needs of the case and the clients.
II. ADR Continuum1
1 See State Bar of Texas Standing Committee on Alternative Methods of Dispute Resolution, Handbook of Alternative Dispute Resolution 17-18 (1990).
The use of ADR techniques may be initiated by the parties or ordered by the Court. Court-ordered ADR is available in both state and federal courts. The Dispute Resolution Act, C.R.S. §13-22-301 et seq., establishes the Office of Dispute Resolution and grants authority to Colorado courts of record to refer a case to any ancillary form of ADR. Pursuant to The Civil Justice Reform Act of 1990, the Federal District Court must consider the possibility of referring appropriate cases to ADR programs. The U.S. Court of Appeals for the Tenth Judicial Circuit has implemented a Pre-argument Conference Program which provides mediation services for selected cases prior to the time when briefs must be filed. Parties may request that their case be referred to this program, or the Court may order it.
However, parties do not have to wait for the issuance of a court order to participate in ADR. The use of ADR techniques may be provided for by prior contractual agreement or by mutual, post-dispute agreement.
The Colorado Pledge is an example of pre-dispute planning by Colorado corporations. Sponsored by the Colorado Bar Association, the Colorado Association of Commerce and Industry, the National Federation of Independent Businesses and the Colorado Society of Certified Public Accountants, corporate signers agree to explore ADR methods before pursuing full-scale litigation.
Once a dispute arises, the parties may voluntarily agree to use an ADR technique. If there is no agreement, a party may ask the court to order ADR, or the court may do so on its own motion.
Selecting a third-party neutral or provider of ADR services is like choosing any other professional. The person(s) must meet the requirements of the case and of the parties. At a minimum, the neutral cannot favor any of the parties. Furthermore, the neutral must be impartial and may not have a "stake in the outcome of the case." The neutral should be knowledgeable in the subject matter of the dispute, especially where the process chosen results in a decision, and must be experienced in the ADR technique chosen. It is important that this person be trusted by all parties.
The Colorado Bar Association and the Colorado Council of Mediators and Mediation Organizations have jointly produced a directory to aid parties and lawyers in the selection of neutral third parties. The Colorado Judicial Institute has also promulgated a Resource Guide. Representatives from any of these organizations will be happy to answer questions.
Negotiation is a process whereby
Negotiation is the process people use most often to settle disputes. We negotiate all types of disagreements in our personal lives and in the work place.
When negotiations are used in the legal arena, many disputes which otherwise would be litigated are settled before trial because the disputants talk about the issues and discuss ways to resolve their differences. The negotiations may take place directly between the disputants, who consult with their attorneys as discussions proceed, or the parties may negotiate indirectly through attorneys or other representatives. A combination of these negotiation techniques is often used.
Negotiating a settlement gives disputants maximum control over the outcome. They direct the give and take necessary to fashion a settlement. Thus, the result is most likely to meet their individual needs. Negotiation works best when disputants are willing and able to talk about their dispute and to compromise their differences.
The negotiation process includes all of the benefits of mediation, i.e., solving problems in a rational way, vesting participants in the settlement reached, and providing mechanisms for change. Through negotiation, however, disputants reach settlements without the assistance and added expense of a neutral third party.
Negotiation may not be appropriate if one of the parties is in a position of power or control over the other. As with mediation, negotiation is based on the voluntary disclosure of information and good faith participation of the parties. If this is lacking, discovery may need to be conducted.
Negotiation is a private, efficient, and cost effective way to resolve disputes. It is the mechanism for solving or settling a dispute which is most likely to be satisfactory to the parties involved because the solution or settlement will be crafted by them.
Mediation is a process whereby
Mediation is recommended when the parties' emotions or positional bargaining have restricted their ability to negotiate with each other, but they do not want to relinquish the decision-making authority to a judge or arbitrator. It is an appropriate method to use when parties want to preserve their ongoing relationship or terminate an existing relationship in the least adversarial way.
In mediation, the mediator, a neutral and impartial third party, facilitates communications between the parties in a private and confidential meeting. The mediator has no decision-making authority and can give legal information but not legal advice. An experienced mediator can often help the parties generate optional solutions which are not available through litigation or developed by parties in direct negotiation.
Mediation may be inappropriate if the case presents constitutional or precedent-setting issues for which a judicial opinion is desired. It may not be advisable if a party is unable to negotiate due to substance abuse, psychological impairment, physical or emotional abuse by the other party, or ignorance. Because the process is based on voluntary disclosure, parties may be at risk if they are not knowledgeable of the facts of the case. The process may not be successful if the mediator's qualifications, attitude or style are inconsistent with the needs of the parties.
To address these problems, parties in mediation should be represented by attorneys who can educate them about the process and advise them of their legal rights and the probability of success should the case be litigated. Attorneys may attend the mediation sessions with their clients. Discovery may be conducted prior to or during the mediation process. The parties must understand that a mediator can help them create solutions, but it is the parties themselves who ultimately share responsibility for the outcome.
Mediation is an efficient and cost effective method for resolution of simple and complex cases. It is a process which increases both the likelihood and quality of settlement.
A Settlement Conference is a process whereby
Settlement conferences may be held before a judge who will not preside at trial, or disputants may choose to have a private settlement conference outside of the court system. Settlement conferences are recommended for cases in which the disputants have strongly held positions about the probable case outcome, but would listen to a competent third party's view of their positions and possible trial results.
It is important to note that the difference between mediation and settlement conferences is basically one of style. Mediation uses facilitative or interest-based bargaining techniques, and settlement conferences use directive and reality-testing techniques. While a distinction between the two methods is made for purposes of this Manual, both techniques may be used in the same session by the same neutral. The choice of style depends on the issues and needs of the parties.
Settlement conferences can help disputants analyze the issues in dispute, review the facts and evaluate positions in their case. The disputants may present their case in a more informal and less costly setting than either a mini-trial or a full jury trial and still obtain input on the likely trial outcome. The opinion received can and often does facilitate settlement of the dispute before trial. If the entire case is not settled, agreement may be reached on some of the issues, thereby at least narrowing the issues to be litigated.
As with all dispute resolution techniques, there are some risks to settlement conferences. There will be added expense and possible delay if the dispute is not resolved, even in part, and all issues go to trial. If the dispute does go to trial, there also is a risk that some element of trial strategy may be disclosed or compromised in the settlement conference process.
Settlement conferences may be used for simple and complex cases. This method may be combined with mediation.
Early Neutral Evaluation is a process whereby
Early Neutral Evaluation ("ENE") is a non-binding, confidential evaluation process conducted early in a lawsuit by a neutral evaluator. The evaluator is typically a senior attorney recognized as an experienced litigator and/or knowledgeable in the applicable area of substantive law The primary purpose of ENE is to obtain case control and management. This may be accomplished by developing a discovery plan, narrowing issues or eliminating unnecessary parties. A secondary purpose of ENE is to assist with case settlement.
The evaluation session is typically held within 60 days after the case is at issue, or even sooner. Both sides may give the evaluator a written, pre-session statement of their case. At the ENE session, the parties make short and informal case presentations. The evaluator may question the parties and their attorneys to clarify and develop issues. The evaluator then facilitates a discussion that identifies areas of common ground and agreement. This is designed to produce stipulations to be filed with the court which will simplify and streamline the case.
After the discussion, the evaluator prepares a written evaluation which may be the functional equivalent of a judgment or may state what is needed before a judgement can be rendered. Before the written evaluation is presented, the evaluator may conduct settlement negotiations with the parties. If settlement is not achieved, the evaluator presents his/her written evaluation. The evaluator may then conduct another round of settlement negotiations. Multiple sessions with the evaluator may be held on a voluntary basis.
ENE is used primarily for large, complex cases that can benefit from focused case management.
A mini-trial is a process whereby
The mini-trial uses elements of negotiation, mediation and adjudication to facilitate settlement. Parties or their representatives are exposed in the non-binding mini-trial to the theories, strengths and weaknesses of each side of the controversy. The goal of the mini-trial is to facilitate settlement negotiations between top officials of the parties.
The procedure for a mini-trial is usually negotiated in each case. The typical mini-trial involves a stay of court proceedings and limited discovery. At the mini-trial, the lawyers present their abbreviated version of the case to the panel members. The party officials then conduct settlement negotiations facilitated by the neutral panel member. The neutral member may be asked to present a written opinion stating the strengths and weaknesses of each party's position.
The mini-trial was developed to encourage the settlement of business disputes. It is especially useful in large and complex cases where negotiations are stalled, and, tike the summary jury trial, the parties need to see for themselves the strengths and weaknesses of their cases in order to reopen negotiations. Cases that would take months or years of litigation can take place in a few days in a mini-trial. The process is much less expensive than litigation and provides confidentiality not found in a trial. The parties are free to be practical and creative in their settlements, unlike traditional resolution of issues by the court. The use of the mini-trial may save a business relationship between parties that might otherwise be destroyed by bitter litigation.
The risks of using mini-trials are the possible disclosure of trial strategies and the added expense and delay if a trial is ultimately needed.
The mini-trial can be an efficient and cost-effective method of resolving complex litigation and should be considered when an impasse to negotiations has occurred, but the parties are still interested in settlement of their dispute.
A summary jury trial is a process whereby
The summary jury trial is the only ADR method which provides for case presentation before a jury. Although the process is time limited, the parties have the satisfaction of having their case heard by their peers. The goal of the summary jury trial is to provide litigants with a jury verdict which will help them facilitate settlement.
Although a summary jury trial may be voluntary, it is generally initiated upon motion by one or all of the litigants or the court. In the court context, the parties select six jurors from a panel of ten to twelve jurors. After a brief voir dire by the court or the attorneys, the jurors are empaneled.
Case presentation is usually limited to one hour, including rebuttal, although this time period may be extended if the case is unusually complex. Evidentiary and procedural rules are somewhat relaxed, and the court will resolve disagreements.
The jurors are not instructed regarding the advisory nature of their verdict. They hear and consider the evidence and dosing arguments, then retire with an abbreviated charge and juror forms. It is only after the jury renders its verdict that they are told that it is advisory and will be used to facilitate settlement.
The summary jury trial can drastically cut trial time, and it can provide a catalyst for settlement. It also provides a way to obtain feedback as to how the case will be received at trial. The disadvantages of this method relate to preparation time, disclosure of case strategy and potential expenses. In order to be effective, the case must, in essence, be ready for trial. All motions must be finalized, and discovery must be complete. Thus, by the time of the summary jury trial, litigants may have a substantial investment in the case which may limit settlement options. Additionally, trial strategies may be inappropriately revealed, and expense and delay will be added if the subsequent negotiations do not result in settlement.
The summary jury trial can be an efficient, relatively low-risk method to obtain an assessment of the case on which to base settlement negotiations.
Med-Arb is a process whereby
Med-Arb is a hybrid of two very different ADR processes, mediation and arbitration. By selecting a neutral to serve as both mediator and arbitrator in their dispute, the parties have the benefit of the techniques of assisted negotiations and discussion coupled with the outcome of a final and binding decision.
The risk of using med-arb is that the parties may not be candid with the mediator, knowing that the mediator may become an arbitrator. Additionally, there is a difference between facts in mediation and facts in arbitration. In mediation, whatever the parties agree upon is fact. In arbitration, however, facts must be proven. Essentially, med-arb provides leveraged mediation. When used successfully, the parties rarely go to the arbitration phase.
The process works best when the participants are of relatively equal bargaining experience and when the efficiency of a combined procedure outweighs the inhibiting or strategic effect of the mediator's anticipated role change. Med-arb can save time and money by using the same neutral to make the decision instead of having to present the dispute in its entirety to a different arbitrator. In situations where the parties have an ongoing relationship, such as family or labor disputes, med-arb can help the parties preserve their relationship by promoting voluntary communication and settlement, with arbitration only being used to decide those issues upon which the parties cannot reach agreement.
Med-arb should be considered when a negotiated settlement is desired, but when a quick settlement or decision is needed.
Arbitration is a process whereby
In arbitration, the parties to a dispute agree to use privately selected decision maker(s) to resolve their case. Arbitration is most frequently accessed via a future disputes clause appearing in the parties' contract, or parties may agree to the submission of an existing dispute. The parties may use standard arbitration roles promulgated by an organization which administers arbitration proceedings or elect to modify such standard rules. The key to successful use of the arbitration is designing a process which successfully meets the parties' needs in terms of time, decision makers, discovery and rules.
Although arbitration is typically, though not necessarily, less formal than court proceedings, it is adversarial. Following the case presentation, the arbitrator(s) render a decision which may be legally binding on the parties and can be enforced by any court having jurisdiction. The decision can be non-binding and advisory if the parties agree in advance. If the decision is binding, it is not appealable; limited court review is available only for very specific circumstances set forth by statute.
Arbitration may provide numerous positive benefits to the parties. It is private and results in an opinion rendered by arbitrator(s) who have extensive experience and expertise in the area of the dispute. With arbitration, discovery and motions are limited by statute, but can be agreed upon as appropriate. Accelerated time deadlines may compel adversaries to confront the issues more quickly.
It should also be recognized that there are inherent risks in arbitration. Parties have a limited right to court review. Punitive damages are not available in arbitration controlled by current Colorado law. Absent agreement to the contrary, discovery is limited. With the exception of labor arbitration, arbitration decisions have little or no precedential value.
Arbitration, however, can be efficient and cost effective. It results in a speedy decision rendered by arbitrator(s) with specialized knowledge.
The use of alternative of dispute resolution techniques has become an integral part of the legal system in Colorado. Its presence requires understanding and vigilance by Colorado lawyers. Not only will courts be ordering ADR in a greater number of cases, clients will be requesting it.
The use of ADR offers ways to provide creative and well-planned settlement of cases. It can be efficient in terms of time devoted to a case, and it can help reduce direct and indirect costs associated with litigation. It offers the opportunity to increase client satisfaction and realize a new and higher level of professionalism.