Dispute Resolution Diffuses Explosive Situations

by Sheri Stevens Wilson

The Islamic Society of Greater Worcester is seeking town approval to develop a Muslim cemetery on 55 acres it plans to purchase in Dudley, Massachusetts. The group seeks a local option where their burial customs could be followed, which sometimes include ‘green’ burial options, direct contact with the dead, very specific positioning of the body according to their religious tradition and beliefs, and dignified behavior at the burial. At a recent public hearing, many residents voiced pointed opposition to the plan. Among the concerns were those of the possible effect on the local water table, traffic, noise, and vandalism. There were additional remarks made, however, which clearly showed emotional reactions and which transcended more straightforward issues.

Most present at the recent Zoning Board of Appeals public hearing might say there’s no hope of ever reaching resolution of this situation.

We hear this all the time.

We are mediators.

What are mediators? Mediators are skilled negotiators who assist those on opposing sides of an issue work toward agreement. Mediation has been a system of resolution for thousands of years and is practiced across the world in different cultures. As objective and unbiased neutrals, Mediators bring reasoning to situations where emotions and complex issues have often taken over productive discussion. Mediators have many different tools they employ, based on the conflicts and the parties involved. In general, they work to determine the genuine, underlying issues. They identify and dismantle false beliefs. They provide support for the parties to form new opinions based on facts. And they guide negotiations to determine the ways in which everyone’s needs can be met. Peacefully.

The beauty of mediation is that the parties retain all of the power, and are never made to accept methods of resolution that that decision-makers are not in agreement with. And the rate of settlement in approaching even the most complex problems in this manner is very, very high.

Attorney Brian R. Jerome, Founder and CEO of Massachusetts Dispute Resolution Services [MDRS] shares, “The controversy in Dudley involves competing interests of many factions and an interpretation of the law which creates uncertainty for all involved. That it is all in the context of an Islamic religious group raises the potential for passions and emotions to be inflamed, in part as a result of fear. In situations such as this, mediation provides a process where all of the competing groups can be heard, and their true needs and interests can be accommodated and satisfied by a carefully sculpted resolution. The parties would benefit from a better understanding of each other, and an attempt to collaborate rather than confront one another. Proceeding to a final arbitrary zoning decision may well be all or nothing, with a winner and a loser, rather than the give and take of mediation and what could be a win-win result. We encourage the parties to consider mediating their dispute, rather than continuing confrontation with the potential for further negative escalation.”

At MDRS, we’ve been helping people resolve disputes for 25 years. As leaders in the law, we find nothing as rewarding as helping our clients attain better end-results than they ever thought possible. If you are involved in a conflict and would like to speak with us further, please call (800) 536-5520 or visit us at www.mdrs.com.

Cross-Examine the Case Before Filing a Lawsuit

by Michael A. Zeytoonian, Esq.

I think it’s a good idea for people who find themselves in a dispute to do some cross-examining before they file a lawsuit.

Sounds odd, right? After all, based on what we know about litigation and how the legal process works from what we see on TV and in the movies, cross-examination is the high point of the lawsuit; it’s what everything builds up to, right?

There’s My Cousin Vinnie Gambini, (Joe Pesci), cross-examining the witness about how long it took him to cook his grits: “Were those magic grits, like the beans Jack bought to grow his beanstalk?”

Or passionate Lt. Calley (Tom Cruise) cross-examining high ranking Colonel Jessup (Jack Nicholson): “I want the truth!” “You can’t handle the truth!”

Matthew McConaughey in A Time to Kill: “Imagine the girl is white.” Atticus Finch in To Kill a Mockingbird. You can probably name ten more great TV scenes and riveting cross-examinations.

Real life court cases are not that way. First, less than 4% of the cases that get filed in court ever get to trial. Yes, you read that right. It happens rarely, and when it does, it is are not the stuff Hollywood is made of.

So back to my opening suggestion: Do some “cross-examining” of the case before deciding to file a lawsuit or hire a scorched earth litigator. Let’s move the spotlight around from just one place where your supposed “smoking gun” evidence is. Let’s examine behind the obvious and the positional statements, and peer into the corners of the other considerations about this case of ours. Test our assumptions, our biases and our maybe overconfidence about our “slam-dunk” case. Let’s ask a few more “why” questions before we start.

“I want to sue the other side,” you tell the lawyer you interview.

“Ok. Can I ask you why? What do you hope to achieve by litigating?”

“I want my day in court. I want the other side to suffer. I was wronged here; I want that wrong fixed and to get some justice.”

Suppose the lawyer stopped the inquiry of the client here and said “OK, let’s get started. We’re going to file a complaint, move things along and get you justice. Let me get some of the facts and then we’ll start wearing down the defendants into submission.”

You feel good hearing that. Pumped up. Yeah, baby; that’s what I’m talking about. You get your emotional high. Unfortunately, that high you’re feeling is very short-lived.

But you really haven’t had your dispute and your situation cross-examined to truly know what is ahead or what your options are. That was barely sufficient questioning to sign you up as a client. But not nearly enough to set you and your case up right. The lawyer didn’t even ask you what your desired goal was, or what you would consider to be a good outcome!

Now here’s what I’m talking about. A reality check. A cross-examination of the client about what she really wants, the interests underneath the position, her emotional bandwidth, pragmatic needs and level of risk aversion.

I’m reading another wonderful book by Dan and Chip Heath called Decisive. It cautions us against “the four villains of decision making”: Narrow framing, confirmation bias, short-term emotion and overconfidence. Essentially, the Heath brothers tell us with a great collection of story-telling and examples that we make poor decisions because one or more of these factors is at play in our decision-making process, and explain how to avoid them. Decisive, like their other books, Made to Stick and Switch, is a must read.

It is up to one’s lawyer, as a trusted advisor, especially if that lawyer is a person’s “Primary Care Lawyer (PCL)”, to cross-examine the client before deciding what course of action to take. Here are some recommended inquiries for you as a client to hear your lawyer ask you, before you sign on with the lawyer and absolutely before you choose a dispute resolution process. If your lawyer is not “cross examining” you with these before you start working together, think hard about getting a second opinion or interviewing more lawyers!

What is your goal here? What would a good outcome for you look like?

What does getting your day in court mean to you? What do you hope to get out of it?

Have you considered other ways of accomplishing your goals besides litigating?

What is your time frame for when you need to have this dispute resolved?

What is the skeleton in your closet that I need to know now so I’m not blind-sided later?

What is your level of risk aversion? Put it this way: A jury could decide this case the other way and you’d get nothing after spending several years and several tens of thousands of dollars on this litigation. How does that sit with you?

Do you want to control the outcome? Or would you prefer to leave the decision-making about your case to a jury of people you don’t know? Or an arbitrator who is probably very knowledgeable in the subject matter and applicable law in this case?

Can you negotiate or collaborate with the other side with some professional assistance from negotiation-style lawyers and/or a mediator?

Are there other parties and other considerations that we can include in our assessment of this dispute that will help us expand the pie of possible options for settlement?

How important is it to maintain a healthy (business, civic, organizational or family) relationship with the other party(ies)?

How important is confidentiality to the parties in this case?

This inquiry lays a solid foundation for going forward in a way that will achieve the best outcome. This cross-examination, done before you start, is likely far more valuable than the Hollywood one that will almost certainly never happen.

Michael Zeytoonian is a member of the MDRS Panel of Neutrals, and is the Founding Member of Dispute Settlement Counsel.

Celebrating 25 Years of Dispute Resolution at MDRS

MDRS 25As MDRS celebrates 25 years of providing Dispute Resolution, we reflect on no less than a quarter of a century in our field — a field which has thrived beyond all expectations: no longer a mere alternative to the courts, but widely recognized as a more direct route to positive outcomes for all kinds of disputes.

It can be argued that in the past 25 years, no area of legal practice has grown to have a wider impact on the practice of law than the cumulative forms of Dispute Resolution. Over 97% of all cases presented now reach settlement without trial, such that Dispute Resolution has moved into its rightful position — and away from being referred to as the ‘alternative’ resource. With fewer constraints than a courtroom, proven convenience and cost savings, and happier clients in the end, ‘DR’ continues to expand with new tools and techniques, and an ever-widening pool of practitioners.

One need only look back to our individual and collective experiences of bringing the practice into the mainstream, to see how much the reception of DR has changed, even as the basic principles have stayed relevant and enduring. We recently dug out a clipping of an article featuring our founder Brian R. Jerome, an early adopter of what was, in those early days, an oft-criticized method of resolving conflicts.

Reference to “the costly and painfully slow court process” seem familiar and timely, but it’s a quote from The Beverly Times article, dated August 8th 1995, when DR was still a revelation for many accustomed to seeing litigation as the only option.

Timeliness and civility? Also present in the enthusiastic testimony of a client who worked with Brian in the early days:

“One session with him and we were completely back on track…It was very civilized, which was a nice way of getting all the feelings and thoughts out. I felt it was very much like having a lawyer and a psychiatrist at the same time.”

And yet, in 1995, the State Supreme Judicial Court had only recently set up a committee to phase in dispute resolution.

As the old saying goes, “In matters of style, swim with the current; in matters of principle, stand firm as a rock.” The hundreds upon hundreds of DR practitioners in Massachusetts, and the continuing increase of DR use in so many areas of the law, demonstrate how comprehensively Dispute Resolution has been accepted as the right option for resolving disputes, after so many years of being the “alternative.”

Of course with this progressive expansion and growth come increased responsibility. Serving this year as the Chair of the Massachusetts Bar Association’s DR Committee has given our founder Brian Jerome an opportunity to bring even more to the field he has dedicated his career to. It’s a pleasure to be able to announce that the Dispute Resolution Committee is moving forward with a new voice and refreshed objectives. We anticipate sharing with you, our clients and friends, many new and exciting opportunities in connection with this dedicated group in the coming months, not to mention many more months and years of exciting developments in our field – not only for MDRS, but for great numbers of our esteemed colleagues who practice Dispute Resolution and continue to advocate for peaceful, efficient, and cost-effective resolutions of conflict.

We at MDRS want to acknowledge that this milestone would not have been possible were it not for you, our treasured clients and friends. We thank you, appreciate you, and look forward to continuing our work with you in the future.

Recent Developments in DR

Notice to Bar Inviting Comment on Proposed Superior Court Initiatives. Comments due on or before March 4, 2016

The Superior Court invites comments on a set of proposed initiatives, as described below, designed to make civil litigation more just, speedy, and inexpensive. These proposals would make significant changes in the conduct of civil litigation in the Superior Court. Comments should be sent by email to maria.pena@jud.state.ma.us or by regular mail to The Superior Court Working Group on Civil Litigation Options, c/o Maria I. Peña, Superior Court Administrative Office, 13th Floor, Three Pemberton Square, Boston, MA, 02108, on or before March 4, 2016.

The three proposed Superior Court initiatives are:

Proposal #1
Menu of Options- Right to Individual Case Management and Tracking.  A “menu” of options that would take the form of an individual case tracking order, at the option of the parties and with the approval of the Court.  The parties would have the opportunity to agree to vary standard procedures in one or more ways, including the procedures that otherwise govern discovery, trial, and post-trial events.  For example, the parties may agree to an early and firm trial date, with or without a jury, and with a variety of limits on the quantity and kind of evidence.  Parties would seek an individual tracking order by filing a Motion for Case-Specific Management, which would be authorized by changes to Superior Court Standing Order 1-88 and a proposed new Superior Court Rule 20.


Proposal #2
Pilot Program for Early Case Management Conferences for Qualifying Cases.  A pilot program for early case management conferences in four case categories: real estate, construction, products liability, and employment discrimination.  The proposed pilot program would provide an opportunity to assess the value of early case management conferences and the time required to conduct them.  In each case included in the program, the Court would convene a conference with the judge and counsel within 90 days after service of process.  Prior to the conference, the parties would be required to confer, to exchange written settlement proposals and responses, and to complete a standard form addressing case management.  An amendment to Superior Court Standing Order 1-88 would establish procedures for the conferences, and provide the form for the parties to prepare and submit. In addition, to facilitate conducting the conference early in the life of the case, as provided in the proposed amendment to the standing order, the Superior Court would recommend that the Supreme Judicial Court amend Rule 4(j) of the Massachusetts Rules of Civil Procedure to reduce the time limit for service of process from the present 90 days to 30 days, or to provide for a more expeditious alternative similar to the process now used in federal court, where service is required only when a defendant fails to respond to notice by mail.


Proposal #3
New Superior Court Rule on Expert Disclosure.  As is already required by the court’s “Notice to Appear for Final Pre-Trial Conference” in Superior Court Standing Order 1-88, the new rule would require that unless the parties agree, or the court orders otherwise, each party shall set forth certain information in the final pre-trial conference memorandum relating to any expert that a party intends to call at trial.


A link for further information concerning these proposals is attached below, please cut and paste:  http://www.mass.gov/courts/court-info/trial-court/sc/notice-to-bar-inviting-comment-on-proposed-superior-court-initiatives.html


Litigation conduct – Arbitration Waiver

Where a plaintiff has moved to compel arbitration, the motion should be allowed based on an arbitration clause in the parties’ subcontract. The claims all arise out of allegedly defective exterior sheeting the Defendants installed during the construction of a building, the New Hall, for Mount Ida College (‘Mount Ida’). …


Defendants argued that the Plaintiff’s motion should be denied because pre-conditions to arbitration have not been satisfied, which required on-site meetings and mediation before arbitration may be pursued, and that this dispute does not fall within the scope of the arbitration agreement, and Plaintiff has waived its right to arbitration through litigation conduct. …


“… [T]he decision as to the effect of Plaintiff’s alleged failure to comply with the preconditions of arbitration is one for the arbitrator. …“Under these circumstances, the Defendants will not be prejudiced by the compulsion of arbitration. Minimal litigation conduct has occurred, and the situation here is patently different from scenarios where delay in moving for compulsion of arbitration has resulted in parties engaging in months or years of unnecessary discovery or litigation conduct. … Additionally, any claims Defendants seek to pursue against other subcontractors, whether in this Court or before an arbitrator, may be subject to statutes of repose regardless of the ruling on this motion. Compulsion of arbitration does not contribute to any prejudice Defendants may experience in this regard. Accordingly, Plaintiff has not waived its arbitration right by litigation conduct. In light of the findings above, Plaintiff’s motion to stay and compel arbitration is granted.”


Cutler Associates, Inc. v. Palace Construction, LLC, et al. (13 pages) (Hillman, J.) (USDC) (Civil Action No. 15-40021-TSH) (Sept. 22, 2015).


Arbitration – Counsel fees
The issue presented in this case is whether an arbitration panel who applied the commercial arbitration rules of the American Arbitration Association  and who found that the arbitration agreement did not authorize an award of attorney’s fees, nonetheless may award attorney’s fees based on its finding that ‘substantially all of the defenses were wholly insubstantial, frivolous and not advanced in good faith.’  Where the arbitration panel ordered a condominium trust to pay counsel fees to the owner of two units, the SJC ruled that the fee award was correctly vacated in Superior Court because the parties did not authorize any such award. The Court noted that no provision of the parties’ agreement authorized the award of attorney’s fees.


Unlike an arbitrator’s authority in Superadio [Ltd. Partnership v. Winstar Radio Prods., LLC, 446 Mass. 330 (2006)] to award monetary sanctions for discovery violations and noncompliance with discovery orders, the key difference, however, lies in the AAA rules concerning the specific sanctions at issue: the version of rule 23 at issue in Superadio, governing discovery, broadly authorized the arbitrator ‘to resolve any disputes concerning the exchange of information,’ whereas rule 47(d)(ii) expressly limits the availability of attorney’s fees in arbitration awards, allowing fees only where they are requested by the parties or authorized by law or agreement. The SJC futher stated that thought G.L.c. 231, §6F, which allows a ‘court’ to award attorney’s fees where ‘substantially all of the defenses … were wholly insubstantial, frivolous and not advanced in good faith ….an arbitrator, however, is not a ‘court’ that may award attorney’s fees under §6F. …”


Beacon Towers Condominium Trust v. Alex, SJC-11880


Arbitration – Retroactivity
In a case where a plaintiff college alleged that the defendant accounting firm committed malpractice when it failed to detect serious financial irregularities that occurred in the college’s financial aid office during fiscal years 1998 through 2004, the plaintiff’s claims are not subject to an arbitration clause in the parties’ 2005 agreement.


None of the annual agreements from 1998 through 2004, referred to by the parties as ‘engagement letters,’ makes any mention of arbitration as an available (much less mandatory) means for the parties to resolve disputes that might arise between them.


KPMG is relying on the engagement letter that the parties executed for fiscal year 2005 which for the first time in any of their annual agreements, the 2005 engagement letter included a mandatory dispute resolution provision. …


… In our view……the only reasonable interpretation of that language in the context of this forward-looking agreement is in reference to services that KPMG would perform after the new contract was executed……where ‘it would have been a simple matter for’ the contract drafter to include a term it now claims is brought within the sweep of arguably ambiguous contractual language, ‘[w]e see no reason to add th[at] term[] now.’


Class Action Arbitration Clause Waiver

In DIRECTV v. Imburgia, decided on Dec. 14, 2015 the U.S. Supreme Court again dealt with a California court’s refusal to enforce a class arbitration waiver contained in a consumer form agreement falling under the Federal Arbitration Act.


Plaintiffs were customers of DIRECTV who in 2007 signed a customer service agreement with DIRECTV that included a mandatory arbitration clause and a class arbitration waiver. The plaintiffs subsequently sued DIRECTV alleging that their imposition of early termination fees violated California law. DIRECTV moved to compel arbitration, but the California Court of Appeal denied the motion, and the California Supreme Court denied discretionary review.

The lower court based its decision on its interpretation of language in the 2007 agreement stating that if “the law of your state” invalidated the class arbitration waiver, then the entire arbitration agreement would be unenforceable.


In 2011 however when the Supreme Court decided AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) holding that the FAA preempts state laws that invalidate a class arbitration waiver contained in an otherwise valid arbitration agreement.


After Concepcion, then, “the law of your state” has no effect on the enforcement of a class action waiver. Therefore, the disputed “law of your state” language in the 2007 agreement is now a meaningless artifact from the pre-Concepcion era.


Nevertheless, the California Court of Appeal in DIRECTV interpreted “the law of your state” in the 2007 agreement to include the very California law hostile to class arbitration waivers that Concepcion subsequently declared to be invalid under the FAA.


Therefore, the lower court struck the class waiver under invalid, pre-Concepcion California law. The court also applied the contract’s jettison clause and refused to enforce the entire arbitration agreement.


In a majority opinion written by Justice Stephen G. Breyer, the court held that the FAA preempts the lower court’s interpretation of the agreement. That means that a reference to “the law of your state” in any pre-Concepcion agreement evolves with the times and reflects any subsequent changes made by a state legislature, a state supreme court, or, as in this case, a decision of the Supreme Court on the supremacy of federal law over state law.


In short, the FAA preempts the lower court’s departure from general California contract law when it presumed that “the law of your state” referred to California law that was declared invalid in Concepcion.


Under the court’s decision, then, parties would have to refer expressly to invalid or preempted state law in their arbitration agreements (an unlikely but nonetheless enforceable contract clause under the FAA), to override the presumptive meaning of “the law of your state.”


$48M Arbitration Award Upheld-Impartiality of Arbitrator Denied

An arbitrator did not exceed his authority when he applied out-of-state law to award treble damages to a husband and wife who claimed they lost millions due to the fraud and gross negligence of their investment advisor, a Superior Court judge has ruled in upholding the $48 million award. The plaintiff argued that the award of treble damages under Pennsylvania unfair trade practices and consumer protection statutes contravened choice of law and limitation of liability clauses in its client agreement.  Judge Edward P. Leibensperger found no reason to disturb the arbitrator’s award.


Leibensperger wrote that “the Agreement expressly contemplates the application of federal and state statutes that, in the case of the Pennsylvania Unfair Trade Practice and Consumer Protection Law, according to the arbitrator, allows for treble damages.” Commentaors have expressed that f the limitation language had specifically included a limitation on multiple damages, the case might have come out differently and if one wants to limit the law just to Massachusetts, there are ways to do that as well.”


In addition to the arbitration clause, the parties’ agreement provided that it would be governed and construed by the laws of Massachusetts. Yet in his choice of law analysis on the issue of damages, the arbitrator concluded that Pennsylvania law applied because FEP and Weiss were registered as investment advisors in that state.


Accordingly, the arbitrator applied the Pennsylvania Securities Act and the Pennsylvania Unfair Trade Practice and Consumer Protection Law to award the Sutows treble damages.

Judge Leibensperger concluded that the arbitrator did not exceed his powers by awarding treble damages under Pennsylvania law, finding that the parties’ arbitration clause was “much broader” than their choice of law provision.


As to the claim of arbitrator impartiality…..“The sum and substance of the claim by FEP and Weiss of evident partiality is that [Philip S.] Cottone knew counsel for the Sutows as a fellow professional in the field of securities arbitration. …


“I find that the claim of ‘evident partiality’ is completely unsubstantiated. First, the professional interactions between Mr. Cottone and counsel for the Sutows were adequately disclosed. FEP and Weiss had no objection. Moreover, mere professional interaction between two members of a specialized area of the bar, without more, does not begin to suggest evident partiality. …

“… It is hypocritical, at best, for a losing party in a trial to which he fully submitted his defenses and claims in the hope of victory, to claim bias when he loses. …


Family Endowment Partners, L.P., et al. v. Sutow, et al. (9 pages) (Leibensperger, J.) (Suffolk Superior Court) (Civil Action No. 2015 CV 1411-BLS1) (Nov. 16, 2015).


Arbitration – Employment dispute

Where a defendant employer has moved to compel arbitration of an employee’s claims of wrongful termination and retaliation, the motion must be allowed based on arbitration clauses in the employment application and offer letter signed by the plaintiff.


In the Employment Application, the parties agreed ‘to resolve any claims or disputes arising out of or relating to [Hagerty’s] application for employment or, if hired, [his] employment with or termination from Cyberonics exclusively by final and binding arbitration before a neutral arbitrator under the then current rules of the American Arbitration Association.’. In the Offer Letter, the parties agreed that in ‘the event of a dispute concerning this employment offer or [Hagerty’s] employment relationship with Cyberonics, [Hagerty] and Cyberonics agree to submit the matter to binding arbitration under the then current rules of the American Arbitration Association.’ (Magee Decl. Ex. 2) (emphasis added).


“The ‘arising out of or relating to’ and ‘concerning’ provisions indicate an intent to arbitrate a broad scope of claims. … The arbitration clauses state that they specifically apply to ‘employment,’ ‘termination,’ and ‘employment relationship. … Therefore, in light of the ‘presumption of arbitrability’ and the federal policy favoring arbitration, Hagerty’s wrongful-termination claims are subject to arbitration, no matter whether the relevant agreement is the Employment Application, the Offer Letter, or both.


“Hagerty contends that the anti-retaliation claims do not fall within the scope of the arbitration clause because the clause does not contain ‘clear and unmistakable terms’ evidencing an enforceable agreement to arbitrate the relevant statutory claims. He cites Warfield v. Beth Israel Deaconess Medical Center, Inc., 454 Mass. 390 (2009) in support of that contention. …

“However, the court in Warfield incorrectly ‘appl[ied] general principles of State contract law to determine whether a particular agreement requires arbitration of a claim.’ … As previously stated, the question of ‘whether a particular dispute is within the class of those disputes governed by the arbitration clause .. is a matter of federal law.’ … In determining whether the particular dispute falls within a valid arbitration agreement’s scope, ‘“there is a presumption of arbitrability[:] an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.”’ … Applying the Warfield ‘clear and unmistakable terms’ test would not ‘place [the arbitration agreement] upon the same footing as other contracts,’ … and would run afoul of the presumption of arbitrability whereby ‘any doubts concerning the scope of an arbitrable issue should be resolved in favor of arbitration.’ … Therefore, the Warfield ‘clear and unmistakable terms’ test does not apply here.


“However, and in any event, Warfield is readily distinguishable because the arbitration provision at issue in that case was much narrower than the ones in the present case. …”


United States ex rel. Hagerty v. Cyberonics, Inc. (20 pages) (Saylor, J.) (USDC) (Civil Action No. 13-10214-FDS) (Nov. 13, 2015).

Arbitration – Waiver – Litigation conduct
Where defendants have moved to compel arbitration pursuant to an operating agreement, the motion should be allowed despite the plaintiff’s claim that the defendants waived the right to enforce the arbitration provision in the agreement.


“Plaintiff opposes sending this matter to arbitration. His only argument is that CRIC Realty has waived its right to enforce the arbitration provision. …


“While it is a close call in this case, I find that CRIC Realty has not waived its right to demand arbitration of plaintiff’s claims. Rather than a plaintiff commencing an action in court and later changing his mind to seek arbitration (the scenario in many of the cases), here it is the defendants who are invoking arbitration in their responsive pleading. The length of time between CRIC Realty being served with this lawsuit (December 2014) and when it indicated that it wished to enforce arbitration (August 2015) is not unduly long, as compared to many of the cases addressing undue delay. While plaintiff claims prejudice because discovery, initiated by both sides, has started, such discovery would have occurred in the arbitration process if arbitration had been demanded earlier. There is no unfair prejudice to plaintiff as a result of discovery.


“The countervailing consideration is that CRIC Realty invoked the jurisdiction of the court by filing a motion to dismiss plaintiff’s complaint. In fact, defendants filed their initial motion to dismiss in February 2015, and CRIC Realty did not raise the arbitration provision. That motion was not acted upon as plaintiff requested leave to file an amended complaint. CRIC Realty then filed a renewed motion to dismiss in which it argued for dismissal of claims on the merits but also noted the arbitration provision and its position that the claims should be sent to arbitration. Plaintiff arguably suffered some prejudice by having to respond substantively to defendants’ arguments in the motions to dismiss the claims on the merits.


“On balance, I find that plaintiff’s slight prejudice (slight, because he will have to confront CRIC Realty’s legal arguments in arbitration just as he did here) is outweighed by the strong policy to enforce a party’s arbitration rights. Moreover, CRIC Realty’s litigation conduct can be explained, in part, by the fact that the other CRIC entities that do not have an arbitration agreement with plaintiff were required to file a responsive pleading along with CRIC Realty. Those defendants were required to raise substantive grounds in defense. In sum, there is insufficient conduct by CRIC Realty to find an implied waiver of CRIC Realty’s arbitration rights.”


Harelick v. CRIC, LLC, et al. (Leibensperger, J.) (Superior Court) (Civil Action No. 2014-3930 BLS1) (Sept. 28, 2015).

Arbitration – Trust – Non-signatory
In a case where defendants have moved to compel arbitration under a voting trust agreement (VTA) formed along with the creation of a realty trust, the motion must be allowed despite the fact that the plaintiff never signed the VTA.
“After a careful review of the complaint, its attachments, and the arguments set forth by the parties, this court concludes that Elizabeth’s claims in this action against the Brown Defendants and Adams must be submitted to binding arbitration before the American Arbitration Association under the arbitration provision contained in the VTA. Although Elizabeth is a nonsignatory to the VTA, she is (1) bound by the agreement of her trustee, Adams, to enter into the VTA, and (2) a third-party beneficiary of the VTA. … Adams’ signature, as trustee of [Elizabeth Brown Realty Trust (EBRT)], on the VTA bound Elizabeth as he was her agent or representative. Moreover, Elizabeth was a beneficiary of [Canal Realty Trust (CRT)] and, thus, derived the benefits of the VTA, which was created to ‘insure the continuity and stability of management’ of CRT and ‘to avoid a conflict … with regard to the management’ of CRT. Elizabeth continues to benefit from CRT today in the form of twenty percent of CRT’s income.

Ambeliotis v. Brown, et al. (7 pages) (Leibensperger, J.) (Superior Court) (Civil Action No. 14-00855-BLS1) (Sept. 30, 2015).

Arbitration – Minimum wage
Where a defendant has moved to compel arbitration of a plaintiff’s minimum wage complaint, the motion must be denied because the issue of whether the parties’ dispute involving truck drivers is exempt from the scope of the Federal Arbitration Act is for the court, not an arbitrator, to decide.


“This case involves a labor dispute between a trucking corporation and a former truck driver. In March 2015, the plaintiff Dominic Oliveira brought this proposed class action alleging that the defendant New Prime, Inc. violated the Fair Labor Standards Act (FLSA), 29 U.S.C. §§201 et seq., and Missouri and Maine labor laws, by failing to pay its truck drivers minimum wage. … New Prime moved to compel arbitration under §4 of the Federal Arbitration Act (FAA), 9 U.S.C. §4, and two operating agreements signed by Oliveira on behalf of Hallmark Trucking LLC, both of which contain an arbitration clause. … Oliveira argues that the Court must determine whether the operating agreements are exempt from arbitration under §1 of the FAA before it can consider New Prime’s motion to compel arbitration. … New Prime maintains that the exemption’s application is a threshold question of arbitrability that the parties delegated to the arbitrator in the operating agreements. …


“… Section 1 … exempts ‘contracts of employment of transportation workers’ from the FAA entirely. … Employment contracts involving truck drivers fall within the transportation worker exception. …


“The FAA does not define the term ‘contract of employment.’ See 9 U.S.C. §1. Although neither the Supreme Court nor the First Circuit has directly addressed the issue, courts generally agree that the §1 exemption does not extend to independent contractors. …


“Neither the First Circuit nor Supreme Court has answered the central question in this case: does a district court have to determine the applicability of the FAA §1 exemption itself, or is the exemption issue just another gateway question of arbitrability that contracting parties may validly delegate to an arbitrator? …


“The Ninth Circuit held that the applicability of the §1 transportation worker exemption is not a question of arbitrability that the parties may delegate to an arbitrator. [In re Van Dusen, 654 F.3d 838, 843-45 (9th Cir. 2011)]. The court explained that because a ‘district court’s authority to compel arbitration arises under Section 4 of the FAA,’ a district court ‘has no authority to compel arbitration under Section 4 where Section 1 exempts the underlying contract from the FAA’s provisions.’ … ‘Section 4 has simply no applicability where Section 1 exempts a contract from the FAA, and private parties cannot, through the insertion of a delegation clause, confer authority upon a district court that Congress chose to withhold.’ … The court emphasized that ‘whatever the contracting parties may or may not have agreed upon is a distinct inquiry from whether the FAA confers authority on the district court to compel arbitration.’ …


“As the Ninth Circuit highlighted, its holding is consistent with the Supreme Court’s decision in Bernhardt v. Polygraphic Co. of America, 350 U.S. 198 (1956). …


“… Thus, this Court must keep on trucking in the present case to determine whether the two operating agreements Oliveira signed on behalf of Hallmark Trucking LLC are contracts of employment within the §1 exemption.”


Oliveira v. New Prime, Inc. (21 pages) (Saris, C.J.) (USDC) (Civil Action No. 15-10603-PBS) (Oct. 26, 2015).


Arbitration – Fraud – Fiduciary duty

Where a Superior Court judge confirmed an arbitration award in favor of a defendant and against the plaintiff minority shareholders, the arbitration award was not contrary to the law or public policy of Delaware.


“The plaintiffs contend that the arbitrator exceeded his authority when he ‘refused’ to apply a section of Delaware law, namely 8 Del. C. §271, which requires that stockholders be notified and have consented before ‘all or substantially all’ of the assets of a corporation are sold, leased, or exchanged. Basing his decision on Delaware cases, Massachusetts cases, treatises, statutes, and practice guides, the arbitrator was ‘not persuaded that the statutory duties of the Board to notify the shareholders and to obtain their consent … in a sale of all the assets is applicable to a sale pursuant to an assignment for the benefit of creditors,’ as was the case here. This legal conclusion is shielded from our review. …


“The plaintiffs next contend that the arbitrator’s award offends public policy, namely, Delaware public policy of providing stockholders with a right to vote on the sale of assets which, they claim, is ‘[e]mbodied in the [s]tatute.’ …


“… However, the plaintiffs have not ‘identified “a well defined and dominant public policy, ascertained from laws and legal precedents,” that is offended by the award … in this case.’ … An error of law, even one amounting to a misapplication of a statute, is not, in and of itself, a violation of public policy. …”


Paasch, et al. v. Ranoux (5 pages) (Appeals Court – Unpublished) (No. 14-P-1076) (Oct. 20, 2015).


Insurance – Arbitration – Uninsured motorist – G.L.c. 93A
Where a plaintiff’s complaint seeking to compel arbitration of an uninsured motorist claim was dismissed, the dismissal order must be reversed despite the defendant insurance company’s claim of non-cooperation on the part of the plaintiff.


“… The insurer moved to dismiss the complaint, pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974), arguing that the claim for uninsured motorist benefits was barred by the plaintiff’s non-cooperation (specifically his failure to complete an examination under oath and his failure to provide material documents and information in conjunction therewith), and that the claim asserting violations of chapters 176D and 93A is not subject to arbitration. A judge of the Superior Court allowed the motion to dismiss, stating in a marginal note that ‘the plaintiff’s complaint arises from a legal question of insurance coverage, an issue not properly committed to arbitration.’ …


“It is well-established that the plaintiff’s claim under chapters 176D and 93A is not within the scope of the policy’s arbitration clause. … The claim, however, may be litigated in court. Accordingly, while it was appropriate to dismiss so much of the complaint that sought to compel arbitration of the alleged violations of chapters 176D and 93A, dismissal should have been without prejudice to the filing of a new complaint, or the amendment of the present complaint, to assert the alleged violations in a civil action for damages.


“Insofar as the complaint sought to compel the insurer to arbitrate the plaintiff’s entitlement to uninsured motorist benefits, it should not have been dismissed. Although the representations in the insurer’s motion and accompanying memorandum, if substantiated, may well establish that it has a valid coverage defense to the payment of such benefits,a motion to dismiss must be decided based on the allegations of the complaint. On the face of the complaint, it cannot be determined, as matter of law, that the insurer is excused from liability under its policy.


Regis v. Progressive Insurance Company (4 pages) (Appeals Court – Unpublished) (No. 14-P-1848) (Oct. 16, 2015).


Arbitration – Counterclaim
Where a plaintiff who obtained a $1.24 million arbitration award against a defendant has moved to dismiss the defendant’s counterclaim seeking to vacate or modify the award, the dismissal request should be denied without prejudice despite the defendant’s error in failing to properly title the counterclaim as a motion.


“Section 6 of the Federal Arbitration Act directs that ‘any application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions.’ 9 U.S.C. §6. That means that the Federal Rules of Civil Procedure generally do not apply to actions to confirm, modify, or vacate arbitration awards. … Thus, respondents’ request for the Court to vacate or modify the arbitration award should have been titled as a motion instead of as an answer or counterclaim. …


“The court, however, has the power to treat respondents’ ‘counterclaim’ as a motion if, despite its form, its substance is that of a motion. …


“In substance, respondents’ filing meets the requirements to constitute a motion. … The filing is 19 pages long and includes both the factual and legal bases for respondents’ request that the award be vacated or modified. Accordingly, the Court will treat the counterclaim as a motion to vacate or modify the arbitration award.


“A Rule 12(b)(6) motion to dismiss is not the proper mechanism for contesting a motion to vacate or modify an arbitration award. … Therefore, to the extent that [plaintiff Cindy-Marie] Rogers’s motion to dismiss respondents’ counterclaim attacks the merits of the ‘counterclaim,’ it is itself procedurally improper and will be denied without prejudice.


“Although the Court recognizes that the parties have supplied some briefing as to the merits of respondents’ contention that the panel’s award should be vacated, the Court is unable to issue a ruling either confirming or vacating the award without the benefit of a factual record. To that end, respondents should re-file an appropriately titled motion to vacate or modify the arbitration award, along with a memorandum of law and any supporting affidavits or other documents, in accordance with Local Rule 7.1(b).”


Rogers v. Ausdal Financial Partners, Inc., et al. (4 pages) (Saylor, J.) (USDC) (Civil Action No. 15-12899-FDS) (Oct. 14, 2015).









Bracketing Can Break Impasse in Negotiation

by Brian R. Jerome, Esq.

Whether parties are negotiating directly with each other or with the assistance of a mediator, a basic axiom is that a case will not settle until the parties are discussing terms within a reasonable settlement range.  When negotiations reach a critical impasse, the possibility of settlement steadily decreases as the time without demonstrable progress continues to pass.  This is particularly true in situations where the demand (or offer) made may be deemed unreasonable by the other side, resulting in an equally unreasonable counter proposal.  When parties reach impasse, they begin to abandon hope.  In such situations, breaking impasse is perhaps the most essential achievement a mediator can make; finding common ground keeps the interest and attitude of the parties focused on resolution and promises a better likelihood of settlement as an incentive to continue negotiating.  Bracketing, one of the many specialized tools in a skilled mediator’s arsenal, can be a helpful tool to jump-start the process and break an impasse in settlement discussions.  Bracketing can make bridging the divide seem possible again, and encourages the parties to continue negotiating.

For example, consider the case where the parties come to mediation and the plaintiff makes an initial settlement demand of $850,000.  The defendant, though having significant more settlement authority and/or willingness to move upward, may deem this demand unreasonably high and choose to make an in-kind, unreasonably low settlement offer of $50,000.  Hearing this, the plaintiff is immediately upset and frustrated:  “Why did we come to this table?  I have a lien three times that amount to satisfy!”  The plaintiff may then elect not to move, or move minimally, perhaps to $825,000.  Continuing this water torture approach to negotiation or mediation can result in significant frustration, and often emboldens further posturing – none of which lend to the collaboration and momentum parties need and a mediator seeks to resolve a case.

A skilled mediator by this point has likely gone well beyond an initial joint session with the parties and has been engaged in private caucuses with both sides.  S/he has begun to develop a sense of the needs and interests of both sides and by doing so, over time, likely begins to envision a range or window through which it is likely that both sides need to enter into for more fruitful discussions to begin.  In some cases, a party may elect to confidentially divulge to their mediator, hypothetical  lesser amounts or ranges that they may be willing to consider.  Being careful not to disclose these confidences, nor to prematurely provide their own evaluation which could prove counterproductive, an experienced mediator might suggest and begin to sculpt a process of bracketing that could revive the negotiation process, provide some optimism for the participants, and return some momentum to the session.

During private caucus, when the mediator makes a request to more significantly increase their offer, this defendant may indicate that if they were to raise their offer to $200,000 or $250,000 – which they might be willing to do at some point – they feel the plaintiff is likely to only reduce their demand by another $50,000 or so.  The defendant doesn’t want to be left in that negotiation position.  A mediator may ask where the plaintiff would need to be for the defendant to offer $250,000.  If they indicate $650,000, the mediator might ask for the defendant’s authority to propose these numbers as brackets, coming from the defense.

A mediator may inquire to a defendant who may be reluctant to disclose their own parameters, whether if the plaintiff was willing to reduce their demand to $650,000, would the defendant be willing to offer $250,000?  The mediator might stress to the defendant that should these brackets be found unacceptable by the plaintiffs, they often either result in a demand or a counter bracketing proposal that nevertheless will be more productive than making a single low offer.  Further, it could be suggested that if the plaintiff found this bracketing proposal unacceptable, the defendant could return to making a single offer at a level of his choice.

Though a bracketing proposal may often signal, or be perceived to signal, a willingness to reach the middle of these brackets, it does not necessary mean this.  Although such flexibility may be one of its advantages, as long as each party can settle this case at a number within these parameters, they may be inclined to assent to the bracket so as to take advantage of the momentum created by it.

After a bracketing proposal has been agreed to by both sides, the parties can return to negotiating by single offers or demands, or, can consider further bracketing to narrow their differences and reach a reasonable range of settlement.

Consider the use of bracketing to break an impasse in your direct negotiations with the other party – or better yet – have a capable mediator with knowledge and experience in this process help you sculpt your negotiations more effectively.  Remember that the numbers need to be a realistic reflection of the risks and realities of the case, and to give the other side time to gradually accept that their hoped-for, pre-mediation position may not be achieved.  Your mediator can assign rational reasons to the relative bargaining positions of the parties, and with his/her guidance, you can greatly enhance the prospects of resolving your more difficult cases.

The Ten Commandments of Mediation Advocacy

by Brian R. Jerome, Esq.

The process of mediation can be less formal than a courtroom, but its more relaxed setting does not lessen the importance of preparation and appropriate advocacy to achieve favorable results. Advocacy permeates this process well before the parties enter the mediator’s conference rooms. Attention to detail early on maximizes the prospects of having satisfied clients who feel their cases have been handled well. These ‘Commandments’ of Mediation Advocacy will help you achieveth the greatest success!

Determine Thy Timeline (How do you know When to Mediate?)

Generally, the best chance to get a case settled may be when it is mediated early. Time and money is saved, and early mediation brings people to the table while the parties may be more flexible and willing to hear strengths and weaknesses in their cases rather than after their positions have solidified and after considerable litigation expenses are incurred. However, investigation and case preparation has to reach a point where the case can be properly evaluated.  There can be reasons why an early mediation may meet the parties needs, including varied situations where parties cannot afford or withstand the time, expense, stress, or uncertainty of protracted litigation and/or trial, where extensive discovery may serve to undermine a parties’ position, or where the parties are either required or desire to continue an ongoing relationship.  A skilled attorney or advocate should consider and fully examine these considerations with their clients early on, since dispute resolution opportunities may be lost after months or years of contentious litigation.

Contemplate Thy Mediator

No two mediators are alike; careful consideration should be given to their selection. The mediator’s personality, experience, style, and skills should fit the particulars of the case so as to best enable the building of trust and respect among participants, maximizing the prospects of a satisfactory settlement.

While neutrality, patience, perseverance, specific training, and substantive experience are some of the most important traits to look for in a mediator, other subtle factors come into play.  Will the mediator’s personality fit with the parties well enough to earn their trust?  Does the client need a gentle hand, a forceful push, or perhaps both?  Can the particular mediator bring improvement to the discord created by litigation, and further, aid in the negotiation of a deal?  How many cases of the type involved in your matter has the mediator handled, and with what success?

Consultation with colleagues who have worked with a potential mediator should be considered.  Unlike the context of an arbitration, where ex parte communications are inappropriate, nothing prevents you from calling a potential mediator about your case. In fact, asking questions about the mediators experience and inquiring as to how the session would be conducted is time well spent by a strategic advocate who wants a satisfied client.

Be Cognizant Of Thy Opposition

Determine in advance who is coming from the other side. Be sure that the individuals(s) with full settlement authority are going to be physically present at the session. Whenever possible, determine the backgrounds, personality, and style of all participants by using sources available on public media or consultation with colleagues; this preparation will greatly assist your collaboration with them, and improve your ability to convince them of the merits of your case, much akin to jury research in a courtroom setting.

Equippith Thine Client

Preparing the client includes determining their interests, needs, motivations, concerns, and objectives; hopefully dispelling any unreasonable or unrealistic expectations they may have as well.  A range of possible outcomes at trial ought be discussed.  It’s also important to examine and understand the client’s tolerance for risk.

Be sure to explain to clients that they will be active participants in the mediation session and that most mediators will encourage them to speak at the session so as to hear directly from them what is most important.  A client who speaks well for their position may wish to participate actively in the joint opening session with a carefully planned presentation.  Having the client make a brief presentation in the right setting is very effective, but with the wrong client it could have disastrous consequences. Discuss with your client what information they should reveal, and be sure they understand which matters should not be shared. Clearly determine ahead of time how they will participate and what they intend to say.

Share with your client all available information about the mediator, their style, and how they conduct the mediation session. The differences between a trial and a mediation should be discussed so they know what to expect.  The joint opening session and opening statements should be reviewed.  The private nature of the individual caucuses the mediator will have with each party should be explained. Provide your client with specific guidance as to what they will or will not say during these private caucuses.

The confidentiality of the mediation process, both as outlined in the mediation agreement and under the provisions of the Massachusetts confidentiality statute, MGL c. 233 s.23C, should be explained to the client.

In cases involving parties such as businesses or corporations, consideration should be given as to who, among persons with authority, should attend the mediation.  Will the personality and demeanor of an individual detract from collaboration efforts?  Is there a personal animus that is likely to have a negative effect?  When issues of personality or emotion are apparent or anticipated, advise the mediator in advance.

Prepare For Thine Session

Plan to discuss all legal aspects of the case and be familiar with not only your client’s needs, but the other sides’ interest and goals as well.  Strategize possible solutions to meet their needs as well as your own.  Be prepared to highlight and explain the strengths and weaknesses of your case, and anticipate the arguments the opposing party is likely to make and the questions a mediator may ask.  A client or lawyer that can convince the mediator that he has considered all important facets of the case is more likely to convince a mediator that their position is serious and reasoned as opposed to mere posturing. Research jury verdicts and applicable case law, and be prepared to distinguish facts or legal issues in verdicts or legal decisions the other side may use to support its position, in addition to the ones that support yours.  Bring copies of any pertinent cases with you to the mediation session.

Composeth Thine Memorandum

Provide a mediation memorandum in advance to your mediator.  The mediation statement is the first opportunity to gain credibility and support with the mediator, so invest appropriate time crafting a compelling theme or story.  Be concise and set forth the background facts, legal theories, and defenses for the case.  Give the mediator the pertinent settlement history and the present demands and offers.

Make an informed decision whether to send the mediation memorandum to all of the parties or to send it confidentially only to the mediator.  Certain sensitive issues may not be best raised in an exchanged brief, since it may polarize the parties and intensify animosity or resentments.  You may choose to share it in a confidential memorandum only to the mediator.  Private and confidential “eyes only” communications work best when used to discuss a party’s underlying needs and interests rather than positions.  Your positions are best laid out in your public, shared submissions.  Providing this information in advance of the session allows your mediator appropriate preparation time, and ultimately brings benefit to your case.

The private submission is an opportunity to tell the mediator how s/he can best help you, raising sensitive problems that you or the other side may have, suggestions to overcome these obstacles, and discussion of other intangible issues beyond monetary components.  Providing such information to the mediator in advance of the mediation session, affords them opportunity to begin consideration of mediation processes which fit the particular needs and interests of the parties.  The prepared mediator is then able to more immediately focus in on the issues during the session, as well as to air the more difficult, associated questions.

Consider attaching concise demonstrative evidence that may assist you in explaining your perspective, such as photographs (a picture is worth 1000 words), portions of deposition transcripts, medical records, or expert testimony.  Highlight these exhibits and don’t make the mediator or opposing counsel pore over pages reading every word to figure out which sentence(s) in a lengthy document is the one you’re relying on.  Information you attach to a mediation memorandum should be tabbed or marked for easy reference, and should be readily accessible at the mediation session so that you can avoid fumbling while searching for documents or not have the information you need at hand.

Encourage the other side to provide a copy to their client.  If you have a concern that the party on the other side of the case might not be given a copy of your summary to read, prepare two copies.  Serve both on opposing counsel and explain that one copy is a courtesy for their client.  Bring extra copies to mediation to provide one to the other side.  If it was not shared before, you can be sure it will be read during caucus.

Persuadith Thine Audience

There are mixed opinions of late as to whether and to what extent an opening statement should be made at mediation.  Certainly the risk of alienating the other party by making offensive or inflammatory opening comments is often stated by many attorneys, parties, and by many mediators as reason to avoid or limit an opening statement.

Trial lawyers, who are accustomed to speaking with and negotiating only with opposing lawyers, have the opportunity at a mediation to make a pitch directly to the principles on the other side.  The tone of the opening presentation should then strike a balance between interest in settlement and readiness to litigate. It is not helpful to be offensive or unnecessarily aggressive, but best to utilize the opportunity to make your legal arguments and to persuade decision-makers of the merits of the case and the risk of litigation if settlement is not achieved.

You want the mediator, opposing counsel, any insurance carrier, and the decision-makers to know that you are organized, well prepared, knowledgeable, and can effectively tell a compelling story to a third-party decision-maker whether it be a judge, arbitrator, or jury.  Present your case in a way that is reasonable and palatable to the other side.  Do not assume that the other side has read what you’ve filed in the case or even the mediation brief.

Mark Twain once said, “I spent a week preparing for an impromptu speech”.  While a week is unneeded, an opening statement should not be off-the-cuff, but rather, strategically thought out and prepared.

Aireth Thy Grievances

It is in private caucus that the parties and the mediator roll up their sleeves and where the hardest work of the mediation session takes place.  It is also where the mediator will ask his toughest questions, focusing the parties on the key issues in dispute.  A skilled advocate should anticipate what these questions will be and be prepared to answer them and/or have the client prepared for them, as well as having a plan of who will say what.

Separating opposing parties allows more open communication between the party in caucus and their mediator, helping the mediator understand the party’s point of view better.  Without the presence of the opposing party, the client is hopefully less tense, angry, and defensive, and more flexible and creative.  Clients who know that their private discussions with the mediator are confidential tend to speak more openly about their case and personal interests, providing information about their underlying interests and assumptions as well as suggesting new ideas for solutions.  It is often during these private caucuses where a party has the opportunity to vent or tell their story so they feel they’ve had their “day in court”.  Prepare your client to share their thoughts and feelings in a reasonable manner.

In addition, if a client has unrealistic expectations, the mediator will be able to directly address this in private caucus, diplomatically reality testing their assumptions.  If the advocate believes that the proposed settlement meets all of the needs of the client and that at trial a better outcome is unlikely, the mediator may be a useful ally in convincing the client to settle.

Worketh Thine Settlement

Parties and their counsel should understand and appreciate the importance of embodying agreements reached at a mediation session being articulated in a detailed and signed document.  All material terms of the agreement should be included in this Mediation Settlement Agreement so as to make it an enforceable contract.

Parties and counsel should anticipate early on, any and all potential issues that may arise when formalizing and embodying the material terms of the agreement in a Mediation Settlement Agreement and/or, should it be followed by a further release, all anticipated and needed terms of the release.

Waiting until the end of a mediation session to raise and discuss material terms required in both the Mediation Settlement Agreement and the release can result in disintegration of the anticipated deal. Consider bringing a release with you that could be executed at the end of the mediation session, or at least shown to the other parties when discussing specific terms required in the final release.

A skilled and experienced mediator will likely anticipate the issues that must be agreed upon before final settlement can be reached, but don’t rely on the mediator for this; raise these issues during the mediation at an earlier time and in an appropriate manner, such as in private caucus first, to help you avoid common pitfalls at the end of the session that could jeopardize settlement.

Ye Shall Persevere

Taking the steps suggested in these ‘Commandments’ at the beginning, middle, and end of a well-crafted mediation process will significantly increase your chances of obtaining a favorable result and most importantly, a satisfied client.

Use an Honorable Engagement Provision

Use an Honorable Engagement provision to make the “steep uphill climb” toward arbitral vacatur improbable.

By Anthony C. Adamopoulos, Esq. ©2015

In May, the First Circuit of the United States Court of Appeals issued a decision of interest to arbitration practioners. Of exceptional interest is the court’s recognition that when arbitration agreements contain an Honorable Engagement provision “… the prospects for successful arbitration are measurably enhanced…”.

First State Insurance Co. and New England Reinsurance Corporation v. National Casualty Co., 781 F.3d 7 (1st Cir. 2015) 1 (First State)  described and confirmed, in a clear and plain manner, two concepts of arbitration: (1) the unlikelihood of having arbitration awards vacated and (2) the value of an “ honorable engagement” provision in arbitration agreements.

In First State, the arbitration Panel’s award arose out of a dispute involving eight reinsurance agreements.  The Panel’s interpretation of the agreements was the basis for its award.  The award included the establishment of a payment protocol and a reservation of rights procedure.

The appellant, National Casualty Company, contended that the interpretation that led to the payment protocol exceeded the Panel’s authority and that the reservations of rights procedure “…[did] not draw its essence from the underlying agreements.” Id. P. 10.

The unlikelihood of vacatur.

The Panel first describes the practical likelihood of having an arbitral award vacated:

“A party that implores a court to vacate an arbitration award normally faces a steep uphill climb: the scope of judicial review of arbitration awards is ‘among the narrowest known in the law’.”  Me. Cent. R.R. Co. v. Bhd. of Maint. of Way Emps., 873 F.2d 425, 428 (1st Cir. 1989).” First State Insurance Company, 781 F.3d at 9.

“… A federal court’s authority to defenestrate an arbitration award is extremely limited. … A legal error (even a serious one) in contract interpretation is, in and of itself, not a sufficient reason for a federal court to undo an arbitration award. … Only if the arbitrators acted so far outside the bounds of their authority that they can be said to have dispensed their own brand of industrial justice will a court vacate the award. … Put another way, as long as an arbitration award draw[s] ‘its essence’ from the underlying agreement, it will withstand judicial review — and it does not matter how ‘good, bad, or ugly’ the match between the contract and the terms of the award may be.” (Internal quotation marks and citations omitted.).  First State Insurance Company, 781 F.3d at 11.

Massachusetts case law provides a similar “steep uphill climb”:           “… on review of an arbitrator’s decision, we do not review the arbitrator’s findings of fact or conclusions of law for error… . Judicial review of an arbitration award is narrowly confined… . [A] court is bound by the arbitrator’s findings and rulings ‘even if they appear erroneous, inconsistent, or unsupported by the record at the arbitration hearing’. ” (Internal quotation marks and citations omitted.) American Fed’n of State, County, & Mun. Employees, Council 93, AFL-CIO v. School Dep’t of Burlington, 462 Mass. 1009,1010 (2012) Rescript affirming: American  Fed’n of State, County, & Mun. Employees, Council 93, AFL-CIO v. School Dep’t of Burlington, 78 Mass. App. Ct. 511, (2011).

The First State Panel does not set new law; rather, it boldly reiterates what seasoned arbitral attorneys know about overturning an award, from step one, it is a “steep uphill climb”.

For Massachusetts practitioners, arbitration law generally flows from two sources, U.S. Code, Title 9 – Arbitration, The Federal Arbitration Act  (FAA) and M.G.L. Ch. 251 – The Uniform Arbitration Act for Commercial Disputes, The Massachusetts Arbitration Act (MAA). “In all relevant respects, the language of the FAA and the MAA providing for enforcement of arbitration provisions are similar, and…[our Supreme Judicial Court] has interpreted the cognate provisions in the same manner.” Warfield v. Beth Israel Deaconess Medical Center, Inc., 454 Mass. 390,394 (2009).

The FAA, at Section 10, lists four reasons for vacating an arbitral award. The MAA’s Section 12, lists five.

The value of an Honorable Engagement provision.

What power does an honorable engagement provision give to arbitrators? “…[A]n honorable engagement provision empowers arbitrators to grant forms of relief, such as equitable remedies, not following the strict rules of law.’ ” First State Insurance Company, 781 F.3d at 12.

Until this case the First Circuit had “…not had occasion to address the operation and effect of an honorable engagement provision in an arbitration clause.” First State Insurance Company, 781 F.3d at 12.

The arbitration section in each of the subject reinsurance agreements contained an honorable engagement provision. That provision “… directs the arbitrators to consider each agreement as an honorable engagement rather than merely a legal obligation and [it] goes on to explain that the arbitrators are relieved of all judicial formalities and may abstain from following the strict rules of law.” (Internal quotation marks omitted.)  First State Insurance Company, 781 F.3d at 12.

The Panel spoke plainly on the value of such a provision.  “This is a huge advantage: the prospects for successful arbitration are measurably enhanced if the arbitrators have flexibility to custom-tailor remedies to fit particular circumstances. … An honorable engagement provision ensures that flexibility.” First State Insurance Company, 781 F.3d at 12.

As to the Appellant’s contention that the arbitrators’ payment protocol was not derived from the subject Agreements, the Panel, in effect, said that while Appellant’s contention may be sound in contract law it is not relevant, because, “… the honorable engagement provisions in the arbitration clauses of the underlying agreements authorized the arbitrators to grant equitable remedies”. First State Insurance Company, 781 F.3d at 12.

The take away.

If parties negotiating an arbitration agreement want to measurably reduce the chance of a future award being vacated they should craft into their arbitration agreement an honorable engagement provision and thereby make the “steep uphill climb” toward vacatur remotely improbable to reach.

1 The Panel that heard this case included Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States.

2 “The FAA was originally enacted in 1925… and then reenacted and codified in 1947 as Title 9… Its 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, and to place arbitration agreements upon the same footing as other contracts. Dean Witter Reynolds Inc. v. Byrd, 470 U. S. 213, 219-220, and n. 6 (1985); Scherk v. Alberto-Culver Co., 417 U. S.506, 510, n. 4 (1974).”  Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)

In Support of … Arbitration

By Brian R. Jerome, Esq. and Jeffrey S. Stern, Esq.

A recent three-part series in the New York Times, (Arbitration Everywhere, Stacking the Deck of Justice October 31, 2015), which spotlighted certain abuses and injustices in particular types of arbitration, has gained wide attention in the ADR community, the broader legal community and with the public. While the series was unquestionably effective in pointing out problems where they exist, it also painted with such a broad brush as to tarnish (perhaps inadvertently) the arbitration system as a whole, and the many respected and ethical professionals who operate within it, and who provide just and effective resolutions to conflicts of many forms.

The primary emphasis of the series in the Times was the growing use of arbitration clauses being placed into commercial and consumer contracts among parties with unequal bargaining power, such as low-wage employees against their employers, credit card or bank customers against large financial organizations, and the like. Such arbitration clauses are being inserted in an ever-widening range of contracts, often buried in fine print and unbeknownst to the consumer or not understood by them, and in circumstances that bear no resemblance to freely negotiated agreements. The articles were particularly critical of corporations including arbitration clauses that have been interpreted to waive class actions by consumers, a practice which has been upheld by recent, highly controversial, Supreme Court decisions. While reasonable people’s opinions can differ about the merits of class actions, with some critics believing that they benefit attorneys more than the class members, the Times articles demonstrate that without the leverage of class actions, it is simply impractical to pursue many claims, by arbitration or otherwise, against large corporations.

The second installment of the series was particularly troubling to the ADR community. It highlighted a small number of cases, the outcomes of which seemed particularly unjust, and strongly suggested that the process of arbitration, and arbitrators as a whole, were somehow biased and that the system itself was anti-consumers or plaintiffs. Obviously, unjust outcomes are not unique to the arbitration process, as evidenced by the unpredictability of jury decisions. However, a few anecdotes of inequitable arbitration awards should not characterize the work of so many dedicated arbitrators who objectively follow the evidence and make unbiased and reasoned decisions.

The Times articles makes a case for reform, either by court decisions or legislative response, as to the use of mandatory arbitration clauses in contracts that are neither prominently displayed nor understood by the parties, and particularly in circumstances where parties have significantly unequal bargaining power.

It is the professional obligation of the ADR community, which we believe is undoubtedly shared by the populous of dedicated professionals providing arbitration services, to emphasize that the arbitration process has a long and honorable history, and should justifiably remain a viable and often preferred option to litigation and trial for many disputes. Unlike the situations described in the Times, arbitration is more frequently and freely decided upon by parties and their attorneys in ongoing cases, without any mandatory arbitration clause. It is selected as the preferred dispute resolution process because one or more of its inherent features is appropriate for the case, such as:

– the time, expense, and costs saved by choosing arbitration over extensive litigation, discovery, and trial in the court system;

– the ability to mutually select the arbitrator or panel of arbitrators to hear the case, customarily neutrals with legal expertise in the area of the law involved and with track records of integrity and fairness;

– the convenience and efficiency of selecting the time and place of the hearing;

– the privacy of a conference room over a court room, and the finality of an arbitration award, as may be deemed mutually beneficial to the parties.

The Times article focuses on abuses pertaining to a narrow segment of the arbitration field, the regrettable hallmark of which is the use of arbitration clauses in contracts involving parties with unequal bargaining power and where the agreement is neither fully understood nor freely bargained for. As such, its focus is not — and should not —be seen as representative of arbitration or arbitrators as a whole. As attorneys and ADR providers we are bound by strict ethical rules and believe that authentic neutrality is at the very center of our mission and professional life. Indeed, those are the reasons why ADR has become so progressively utilized and appropriate as a fair and effective resolution process, and that it is trials in the courtroom which are now viewed by many as “the alternative.”

Brian Jerome is the Founder of Massachusetts Dispute Resolution Services (MDRS) and Chair of the MBA’s ADR Committee. Jeffrey Stern is a neutral at The Mediation Group and a member of the MBA’s ADR Committee.

Avoiding Mediation Hazards, and getting to YES!

The expectations of the parties and their counsel or insurer coming into a mediation session play an important role in how successful the mediation process will be. Some cases come to mediation on the eve of or even after a trial, while others arrive before suit is filed or perhaps even before the parties have consulted with counsel about their dispute. In some cases, little-to-no negotiation has taken place. In others, extensive negotiations have taken place and have reached an impasse with specific parameters, or offers or demands being recognized and defined. When to go to mediation is important for both the parties and their counsel to consider.

How can the expectations of the participants impact the mediation process and the overall prospects of success, at both the essential initial stages as well as at its conclusion? And how can parties, counsel, and the mediator all take steps to avoid the pitfalls of misunderstood or unfounded pre-mediation expectations of the other side? In this article we’ll review some real-life examples of expectation pitfalls, consider what the impact to the mediation could be, and offer ideas on how to avoid the hazards which can negatively impact your chances of settling.

Over the years, I have experienced many situations which could have been avoided, if they had been identified early in the case, such as:

– a case comes to mediation with a high six-figure demand, where no offer has been made, when the defendant advises the mediator in an initial private caucus that they have authority only up to $10,000 for settlement;

– a case comes to mediation where at the beginning of the mediation session a prior settlement demand is increased significantly by the plaintiff, or a prior offer by the defendant is reduced, whether justified or not;

– a case comes to mediation where the parties have had prior negotiations, and where settlement offers and demands were made, but an impasse was reached. Now at the mediation session, one or both sides indicate they are starting at a zero offer, or at the initial demand made before negotiations began;

– a case comes to mediation where counsel or the parties have had a so-called “off-the-record” settlement discussion which set some informal expectations, but at the mediation session – either after a more formal discussion with their clients or not – a change is made from previous informal representations;

– a case comes to mediation where a party previously indicated off-the-record that a certain amount would likely settle their case, then at the mediation, makes a formal initial starting demand significantly higher than the off-the-record amount;

– a case where mediation has been suggested and deemed beneficial by the parties, where the plaintiff indicates they will not attend without a formal offer, perhaps of a minimum amount, or where the defendant will come only if the plaintiff lowers their demand to a certain number.

These scenarios can have very negative impact to the mediation session, the work of the mediator, and any future collaboration between the parties. Some general reactions I have heard from parties in these scenarios show the problematic effect:

“If I knew that was the other side’s position, I would never have come to mediation.”

“They should have told me that before coming today; they’ve wasted my time and my client’s time. I’m going to demand they pay my expenses and our share of the mediation costs.”

“They are not acting in good faith! I’ll never negotiate with them now on this case. I’ll see them in court!”

“I am going to assert a 93A and 176D claim over this bad practice and low offer.”

“We only came to the table when we were told a certain number or range would likely settle this case, and now they are starting with an unrealistic demand. We are finished here.”.

“If that is their position, I am raising my demand [or lowering my offer].”

“Mr/s. Mediator, you have to remind counsel, and tell their client as well, that we were told off-the-record that [a certain amount] would likely settle this case.”

“Until the other side puts their last pre-mediation demand [or offer] on the table, off-the-record or not, we are not going to begin negotiating.”

“I will never mediate with this attorney and/or insurer again.”;

“I will never go to mediation again without a significant pre-mediation offer [or more reasonable settlement demand].”

“I will never use you again Mr/s. Mediator, if you can’t get the other side to commit to a realistic starting number.”

Parties, counsel, insurers, and mediators need to know how to avoid the hazards in the examples above.

Here are some ways to remedy the common hurdles:

– The parties and/or their counsel should communicate clearly with the other side their reasonable expectations of one another before coming to a mediation session, or in many cases, before agreeing to the mediation process, to avoid surprises or unfounded expectations.

– Carefully consider the downsides of changing previously expressed settlement demands or offers on the day of the mediation. If such revisions are merited or sought, consider advising the other side well in advance of the mediation session, and provide rationale for such changes so the opposing side has the opportunity to digest and review the proposition and are not surprised at the mediation.

– As best possible, reach an understanding of what the starting demand and offer will be at the mediation session to avoid surprises. Agree on what effect “off-the-record” conversations will play, if at all, at the mediation session.

– Consider having a pre-mediation conference with the mediator should some of these issues arise so the mediator might assist you in sculpting an agreed-upon mediation process to best fit the needs and expectations of all participants.

– Many cases that settle have come to mediation without pre-mediation settlement demands or offers having been made. However, parties and their counsel or insurers may well consider whether and to what extent pre-mediation negotiations, offers, demands, or other parameters may be needed in a particular case to increase the likelihood that a mediation session will be most productive and successful.

– In certain cases, the parties may need to set parameters or expectations before coming to mediation. Recognize that pre-mediation conferences or telephone calls to negotiate parameters and/or expectations before the formal mediation session begins, can mean the difference between settlement or trial.

The good news is that experienced mediators have the skills to deal successfully with all of the issues, pitfalls, and avoidable frustrations noted above. Being informed of issues in advance, an experienced mediator can arrange for pre-mediation conferences so that false expectations won’t torpedo the session ahead. Even if these issues rear their heads only when the session begins, a seasoned mediator will use his skills to help the parties navigate these choppy waters, and steer everyone’s attention to the merits, strengths, and weaknesses of the case, the true needs and interests of the parties, and the benefits of a negotiated resolution. Avoid the prolonged time, expense, frustration, and uncertainty of further litigation and trial and come to the table with founded expectations….there’s a very high likelihood you will get to YES.

Avoiding Pitfalls During Mediation Settlement

It’s 6 PM after a long mediation and all the participants are cranky and tired…but an agreement on a monetary amount has been reached! The moment the parties heard “yes”, they began packing up their files, but the mediator insists that they stay long enough for him or her to prepare a mediation settlement agreement. The responses are varied but sound like this: “Jim and I can work out the release details later this week”, or, “A handshake has always been good enough for me”. A good mediator, however, wears suspenders and a belt for the parties and does not want their hard work (or his or hers) to be lost because fifteen more minutes of attention are needed. Don’t leave now, because all of your efforts could unravel unless a written mediation settlement agreement, containing all the necessary terms of the agreement, is signed by all needed parties. This agreement need not be long and most often, the settlement agreement contemplates that a further more detailed release will be signed by theparties. I can’t stress enough that it is the best practice – and in the best interests of you and your client – to contemplate and deal with all potential issues that may arise in agreeing on the terms and specific wording of this more formal release, since the devil, as they say, is in the details. Remember: a mediation settlement agreement in and of itself is a binding, enforceable contract as long as it contains all the material terms of the agreement, even without a later, more detailed release being executed.

Here are some examples, based upon my experiences, of what may come up (too) late in the mediation process that can jeopardize the finalizing of agreements reached at a mediation session:

Let’s take, for example, a personal injury case where Bill Smith, now 68 years old, was injured four years ago while working in the course of his employment, suffering serious and allegedly permanent injuries at on off-site location. There is an issue as to whether all of his injuries were causally related to this accident as opposed to pre-existing conditions he suffered from. His workers compensation case was lump-summed, and reflected contested issues of medical causation. Some of Bill’s initial medical bills were paid by workers’ compensation, while other contested medical bills were paid by his personal health insurer. He turned 65 after the injury and now qualifies for Medicare, who has paid some of his more recent bills. The case is in suit against multiple high profile defendants who don’t want furtherpublicity, and multiple insurers are involved. Though none of the insurers had been named as defendants, Bill’s lawyer had sent MGL c. 93A and 176D demand letters to some of the insurers. Bill will need future medical care or perhaps rehab or nursing home care that may well involve further Medicare and/or Medicaid payments.

Now it’s the end of a long day of negotiation, and a final joint settlement offer made on behalf of all of the defendants has been found acceptable by Bill and his lawyer. The mediator insists upon drafting a mediation settlement agreement to be signed by all involved parties. The mediator sharpens his pencil and consults with the parties as to the terms of this mediation settlement agreement, which is to be followed by a more detailed release to be prepared by the defendants within a scheduled period of days. Here we highlight a selection of issues which may or may not have been dealt with by the parties earlier during the session…which could potentially torpedo the hard fought agreements reached:

* The mediator may be told that the defendants need a strict confidentiality clause and a non disparagement clause in the release applying to Bill, his wife, and his attorney, and to the benefit of all defendants and their insurers, and a liquidated damages clause in the event of breach. Bill’s attorney may say, “I don’t agree to confidentiality clauses, period…”, “This issue was never raised or negotiated”, “If you need that clause, you’ll need to pay us $50,000 more”, ” I intended to put this case in Lawyer’s Weekly or the Boston Globe”, “What specific language are you looking for?”, or, “I can’t agree to that, haven’t you read the Dennis Rodman case?” (Amos v. Commissioner, T.C. Memo. Docket No. 13391-01, 2003-329, December 1, 2003 Tax Court rules that portion of personal injury settlement attributable to secure a confidentiality clause is taxable).

* The mediator may be told that the defendants need a defense and hold harmless agreement as to any and all claims brought by anyone arising out of this litigation. The plaintiff may be unwilling to agree, defend, or indemnify the defendants against claims brought by others outside of their control.

* The mediator may be told that the defendants, in addition to agreeing to defending and holding harmless the defendants and insurers as to any and all liens, also need lien discharge letters from all lien holders in hand before making any payment. Plaintiff’s counsel may say, “Bill or I will hold you harmless personally, but it takes too long to get lien discharge letters and Bill needs the money now.”

* The mediator may be told that the workers compensation lien holder won’t agree to a reasonable compromise, and Bill’s lawyer needs to file a Curry motion with the Court to have a judge decide the lien amount.

* The mediator may be told that the defendants need extensive and detailed Medicare language included in the release. Because Bill will need long term medical care and perhaps nursing home care involving Medicare and/or Medicaid, the defendants may respond, “We also need to set up a Medicare Trust and set aside, to protect the defendants and their insurers from potential further Medicare/Medicaid claims.” Bill’s lawyer may demand the defendant’s counsel to “Show me the specific language you need in the release”, or ask, “Why is this being brought up now?”, or indicate that they
“don’t agree that a Medicare set aside is needed in these circumstances.”

* Some of the defendants may insist on adding Medicare or Medicaid or other large lien holders on the settlement check and not allow Bill’s attorney time to negotiate these liens and provide discharge letters after which separate checks can be issued. Bill’s attorney may say, “If you put the lien holders on the settlement check I lose all leverage and will never be able to negotiate a fair compromise of these liens”, or, “It will take forever to get endorsements from the lien holders and Bill needs his money now.”

* The defendants may say, “We want Bill and his wife, individually, to sign the release, and because Bill’s late-in-life son is a minor, we need a minor’s settlement approval by the Court.” Bill’s lawyer may respond that, “These requests were never raised during our mediation”, “They are not parties to this lawsuit”, “If you want these other releases you need to increase the settlement”, or, “I’m not going to court for approval of a $1.00 payment to Bill’s son”.

* The defendant may say, “Our release must include all potential claims from the beginning of time until the date the release is signed”. Bill lawyer may respond, “No way. Our claim is confined to a specific date of injury.”

* Defense counsel may say, “The release must discharge all claims against all insurers for claims of violation of MGL. 93A or 176D claims”. Bill’s attorney may respond, “No suit was brought on these claims”, “Defense counsel does not represent these insurers”, or, “We never negotiated settlement of these claims, so you need to increase the settlement amount to discharge these claims”.

Discussing the merits of the issues raised above, or methods by which these issues can be resolved, is beyond the scope of this article. The good news is that with time, all of these issues can usually be negotiated and resolved with the help of an experienced mediator. My purpose in this article is to highlight the problems that can occur if these issues are not raised earlier in the mediation session, but rather, are left to the end. To avoid this problem, may I suggest these thoughts for your consideration:

– Parties and their counsel should understand and appreciate the importance of embodying agreements reached at a mediation session into a detailed and signed Mediation Settlement Agreement;

– All material terms of the agreement should be included in the Mediation Settlement Agreement so as to make it an enforceable contract;

– Parties and their counsel should anticipate any and all potential issues that may arise when formalizing and embodying the material terms of the agreement in a Mediation Settlement Agreement and/or, should it be followed by a further release, all anticipated and needed terms of the release, including, but not limited to, such issues as discussed above;

– Parties and their counsel should not wait until the end of a mediation session to raise and discuss all material terms required in both a Mediation Settlement Agreement and the specific terms of any further release required;

– Anticipating that specific terms and language will be needed in a release, parties and/or their counsel may wish to bring a release with them that could be executed at the end of the mediation session and/or at least shown to the other parties when discussing specific terms required in the final release.

A skilled and experienced mediator will likely anticipate the issues that will need to be agreed upon before final settlement can be reached, and will raise these issues during the mediation at an earlier time and in an appropriate manner, such as in private caucuses first, to help you avoid pitfalls at the end of the session that could jeopardize the overall settlement.