CHAPTER 5: Negotiation & ADR

Conflicts exist whenever there is two or more point of views.

Why do we shy away from conflicts? Because conflicts can lead to
disputes.
Dispute= Conflict + claim that is rejected by the other party.
Conflict should be resolved before it becomes a dispute.
Negotiation is the process used to persuade or coerce someone to do
what you want them to do.

Negotiation styles:

Positional Bargaining/Positional Negotiation:

Same as bargaining, two parties first describe their expectations and

then reach a common point where expectations of both the parties are
met. E.g. when a sales takes place the seller names his price and the
buyer his, eventually both come to a point where the price is
acceptable to both.
Chances of negotiated settlement through bargaining are minimal
because it does not take into account the underlying conflicts.

Principled negotiation:

Steps involved in principled negotiation:

o Communication Clear communication between both parties,
so concerns of both parties are addressed and understood.
o Relationships both parties can benefit one another more by
discussing how they can both benefit one another.
o Interests Communicate interests to one another, because the
interests might not be mutually exclusive.
o Options Brainstorm possible options to settle disputes.
o Legitimacy Involves application of accepted standards to the
topic rather than having unsupported, unverified propositions
o Alternatives Alternatives are outcomes other that the parties
can use other than bargaining table. If the alternatives are
unattractive than both parties would be more willing to
negotiate, for instance, filing law suits and going into litigation
can make both parties bankrupt.
o Commitment negotiations should conclude with parties
agreeing to realistic commitments that are followed.

Alternative Dispute Resolution (ADR):

Litigation does not preclude use of ADR; it is very common that ADR is
used during pre trial.
Disputing parties need not begin a law suit to use ADR
ADR can be used by disputing parties through a contractual
relationship between parties.

ADR Continuum:
Trial
Mediation

Focus groups
Settlement

Arbitration

High Cost
Low Cost

Settlements - Best option because:

Both parties to litigation are usually losers.

Not good for business and goodwill and PR.
Juries are sympathetic to individuals who have suits against large
corporations
Focus Groups:
Lawyers use a group of citizens and present evidence, the group then
deliberates on the findings. This gives lawyers insight into jury reaction

and weaknesses in the case. The verdicts by the groups can bring
plaintiffs to take a more realistic view of damages and towards more
meaningful negotiations.

Arbitration:

To avoid expenses of litigation, sometimes parties agree to have a third

party solve their disputes. This formal system of ADR is called
arbitration.
The person who decides the dispute should be disinterested in the
dispute and should be neutral; this person is known as the arbitrator.

Benefits of Arbitration:

Relatively quick and inexpensive resolution of disputes.

Serves to help ease congestion in courts cases.
Also has the advantage of submitting many disputes to experts for
solution. E.g. an issue regarding whether a building is properly
constructed can easily be decided by contacting an architect
The parties authorize the arbitrator to make decisions that are binding;
such act of referring a matter to arbitration is called submission.
When the arbitrator is chosen voluntarily than its voluntary
arbitration.
When a courts or statute requires parties to arbitrate then its called
mandatory arbitration.
The decision handed out by the arbitrator is known as award.

Selection of Arbitrators:

Expertise use an expert to resolve the dispute especially in labor

management relations. Experts usually have expertise in an industry
and through their knowledge are able to look beyond legal criteria and
include other factors to settle disputes, e.g. impact of decision on
productivity etc
Number usually one arbitrator is chosen, a list is provided by
arbitration service for qualified arbitrators. Sometimes, both parties
chose one arbitrator each and those two then choose a third arbitrator,
forming a three panel arbitrators. However, its problematic since the
losing parties accuse of biasness.

Award

The decision handed out by the arbitrator is binding on both parties

owing that they had agreed to arbitration and accepting the decision

handed out by the arbitrator. Courts usually favor the award, enforce
it, and treat it as the decision of the court itself.
Pre dispute arbitration when parties agree to arbitration
whenever a dispute arises.
Post dispute arbitration when parties already in dispute decide to
opt for arbitration instead of litigation. An obvious disadvantage is that
the disputing parties may not be able to find the common grounds to
agree to arbitrate.
For arbitration to be feasible, it should be affordable and
quick.
Arbitrations ruling cannot be set aside unless:
If the award requires parties do commit a crime.
Its fraudulent
Its against public policy.
Judicial review is warranted when mandatory arbitration is imposed.
Most courts in US have uniformly upheld that mandatory arbitration
poses constitutional challenges such as:
Deprive on of property and liberty of contract without due process of
law
Violates litigants 7th amendment right to jury trial/access to courts.
Result in unconstitutional delegation of legislative or judicial power in
violation of state constitutional separation of power.
If a party is unsatisfied with arbitrators award it can seek a de novo
judicial review. De novo means the court tries the issues anew as if no
arbitration took place.

Mediation:

Mediation is the process by which a third person attempts to assist

disputing parties in resolving disputes.

The decision by a mediator are not binding on the parties, however

the mediator being a disinterested party can help parties understand
the dispute and thus prevent litigation.
Number of mediation has increased over time because of 3 reasons:
o Disputing parties retain control over when to settle and when to
continue disputing this helps the parties understand the causes
of disputes better.
o Cost savings are even higher than arbitration and litigation,
active role of lawyers is not required.
o Roles of courts is minimal thus reduction of legal system
governing the process.

Advantage/Disadvantage of Mediation over Arbitration/Litigation

Advantage

Disadvantage

Parties retain full control over

resolution (or lack of thereof) of
their
dispute,
the
fact
that
mediation is party driven makes it
more efficient than ADRs.
Cost effective than ADR and
litigation.

No enforcement method, even in

court annexed mediations a party
usually shows up just to satisfy
the court.
Selection of a mediator is also
problematic since the parties
need to agree on the mediator
and if they do not agree
mediation cannot start.

CH 6: Constitution & Regulation of Business

Separation of Powers
o The success of the constitutional experiment lies in the
separation of powers between the legislative, executive
and the judiciary.
o There also exists a separation of powers between the federal and
the state governments; this separation of powers is known as
federalism.

Supremacy Clause

Article 6 of US states that the constitution is supreme under all laws

and that federal law is supreme over a state law or a local ordinance.
Under the supremacy clause the courts may be called upon to decide
if a state is invalid because it conflicts with federal law.
When various laws are not consistent the priority is:
1. US Constitution
2. US laws
3. State and local laws

Preemption

Sometimes a federal law is said to preempt an area of law. If a federal

law preempts a subject, then any state law that attempts to regulate it
is unconstitutional under the supremacy clause. This preemption
applies to federal statutes as well as to the rules and regulations of the
federal administrative agencies. For instance, the US Supreme court
recently ruled that the state of Michigan cannot regulate the mortgage
lending business of a major national bank.
Contract Clause: No state shall pass any law that impairs obligation of
contracts. This means that states cannot enact laws that impact rights
and duties under existing contracts; however, the federal government
can and does enact laws and regulations that effect existing contracts.

Due process of law

The government may not deprive citizens of life, liberty, or property

without due process of law. This means that the government has to

follow rules and established procedures in everything it does. This does

not apply on any except the government and government bodies.
Procedural due process cases involved whether proper notice has
been given and a proper hearing has been conducted. Such cases
frequently involve procedure established by statute, however many
cases involve procedures that are not created by statutes. E.g.
dismissal of a university student from public university.
In essence, due process clause can be invoked anytime the
government procedures are questioned in litigation.

Equal protection clause

Everyone should be treated as equals in law.

However, no law treats everyone equally and draws lines and treats
people differently.
This clause embodies the ethical idea that law should not treat people
differently without a satisfactory reason.
In deciding cases invoking the equal protection clause the courts use 3
distinct approaches:

Minimum Rationality

A law creating different classifications will survive an equal protection

clause of it has a rational connection to a permissible state end.
Permissible state end is not prohibited by any law. It qualifies as a
legitimate goal of government, however, it must have a reasonable
basis and the courts can assume any statement of facts to justify
classification.
E.g. A state law restricting advertising to company owned trucks was
held valid when the rational basis test was applied because it is
reasonable to assume that less ads on trucks provides safer roads.

Strict scrutiny

Under this test a classification will be a denial of equal protection

unless the classification is necessary to achieve a compelling state
purpose.
It is not enough that the classification be permissible to achieve any
state interest, it must be a compelling state objective.
This test involves either a suspect class or a fundamental
constitutional right.
Suspect class a class that has disabilities, has been subjected to
such a history of purposeful unequal treatment or place in such

position of powerlessness that it commands extraordinary protection

from the political process of majority.
E.g. classifications directed at race, national origin etc are suspect

Quasi-strict scrutiny

Some cases fall between rationality and strict scrutiny, such cases are then
called quasi-strict scrutiny because classifications are only partially suspect
or the rights involved are not quite fundamental.
E.g. classifications directed at gender.

Regulative Process Administrative Agencies

Administrative agencies are boards, bureaus, commissions

organizations that make up the governmental bureaucracies.

and

Types Of Authorities

Quasi Legislative an agency can issue rules (regulations) that have

impact of laws.
Quasi Judicial can make decisions like courts.

Standing to sue

For a judicial review a party has to prove standing to sue, to establish

standing two issues must be addressed.

Reviewability

Not all decisions are. The Federal Administrative Procedure Act provides for
judicial review except where:
1. Statutes preclude judicial review
2. Agency action is committed to agency direction by law.
E.g. Prisoners asked FDA to ban lethal injections for death penalties,
FDA refused. The Supreme Court held this decision of FDA not a
subject to judicial review.

Aggrieved Party

The person must have been harmed by an action of the administration to

have standing.

Review of Rule Making

Legislature usually creates administrative agencies or quasi legislative

powers to agency.
The rules and regulations of agency should be confined to the grant of power
from legislative or the courts term it void.

Once courts decides that an act of legislature is constitutional or rule is

authorized it wont inquire into its wisdom or effectiveness.
Two issues in challenging validity of rule made by administrative agencies
are:
Is delegation valid
Was authority exceeded?

Delegation Validity

For delegation to be valid it needs to be:

Definite clearly defined scope of work.
Limited limitations of scope of work is defined.

Authority Exceeded:

If the agency goes beyond the intent it was created for or powers the court
will hold that the agency has exceeded its authority.
Review of Adjudications (a formal judgment on a disputed matter)
Judicial review is limited because agencies are delegated responsibilities
because of their expertise in the said area.
The courts lack the authority to substitute their judgments with the
procedures of agency. Their responsibility is to ensure consistency with
statutes and demand of constitution.
Based on due process of law two doctrines guide judicial review:
Exhaustion of remedies - courts refuse to review administrative action
until all remedies and procedures have been exhausted by the complaining
party.
Primary Jurisdiction A claim filed in the courts which was in area under
the purview of an agency will be sent back to the relevant agency and the
court proceedings would be suspended.