Issues & Overview ADR Update

Sunday, August 1, 2004 - 01:00

William K. Slate II
President and CEO of the American Arbitration Association

One of the most interesting changes in the alternative dispute resolution (ADR) field - and more specifically arbitration law - has been in the area of class actions. In a plurality opinion, the United States Supreme Court in Green Tree Financial Corp. v. Bazzle, held that it was for an arbitrator, and not a court, to decide whether an arbitration agreement permits or precludes class actions where the arbitration agreement was silent on the issue. In response to Bazzle, the AAA created Supplementary Rules for Class Arbitrations that apply to any dispute "Éarising out of an agreement that provides for arbitration pursuant to any of the rules of the AAA where a party submits a dispute to arbitration on behalf of or against a purported class." These rules also apply whenever a court refers a matter pleaded as a class action to the AAA for administration, or when new claims in a pending AAA arbitration are asserted on behalf of or against a class.

In developing the rules, fairness and due process were of paramount importance. The challenge of taking on a process that could bind absent class members, and the need to provide a fair process for those defending the class action, led us to build unique "safety valves" into our procedures, permitting any interested party to turn to a court at specified stages in the process if they wish to challenge a ruling by the arbitrator(s). We also created a class action docket on our website where information about class arbitrations can be viewed, as the presumption of confidentiality in arbitrations has also been reversed for class arbitrations.

On another front, we commissioned a major research study in 2003 that examined the use of non-judicial dispute resolution, including usage trends for arbitration and mediation. The empirical study also investigated whether companies might be identified as "dispute-wise," and, if so, whether a relationship exists between dispute-wise business management practices and favorable outcomes of both an economic and non-economic nature.

The study found that there are traits that characterize the legal departments of companies that can be termed "dispute-wise," and that companies embracing a dispute-wise approach to managing business and workplace conflicts enjoy lower legal costs and are more successful at preserving business relationships than companies which favor litigation as a matter of policy.

Conducted by an independent research firm, the study involved interviews with 254 senior legal department members and identified characteristics that describe dispute-wise legal departments: Typically, they are highly integrated into business planning, understand the broader issues facing their company and industry, spend a good deal of time on highly complex and technical issues, are often involved in cross-border international disputes, and are in an environment where senior management is focused on preserving relationships and settling disputes, rather than just winning cases whatever the cost.

Dispute-wise business management practices appear to be associated with positive business outcomes. "Most dispute-wise" companies tend to enjoy stronger relationships with customers, suppliers, and employees, and have significantly lower legal department expenses than companies that the survey found to be "least dispute-wise." They tend to manage their legal resources well and share an appreciation of the fairness and speed of ADR processes in resolving disputes.

The study confirms anecdotal evidence that there are specific business benefits associated with acceptance and use of ADR processes, which can provide a rapid, comparatively inexpensive, and easily accessed alternative to the judicial system in a time of steadily increasing litigation costs.

Finally, the use of online dispute resolution continues to gain momentum - cases filed using the AAA's WebFile platform grew 38% in 2003. AAA WebFile provides parties an expedited, cost-effective means of handling many aspects of the dispute resolution process online, and is designed to serve all types of cases and customer technology comfort levels. Users are able to file or submit demand forms online, use the online calculator to estimate fees based on key variables, access AAA rules and procedures electronically, and review and select arbitrator resumes for their cases. AAA WebFile allows users to monitor the progress of their case via Internet 24 hours a day.

All parties to AAA cases filed both online and traditionally are now able to check the status of their case using our online tools. AAA WebFile users are also able to communicate with their case managers more reliably and securely through SSL encrypted transmissions of documents and email. Enhanced access and search functions have also been added for ease of use. As the velocity and volume of online commercial activity continue to increase, technology applied to established ADR processes will further reduce the time and effort needed to resolve conflicts fairly and efficiently.