7-6

Chapter Case: Hunt Manufacturing Company (cont.)

Investigation by HMCs, HR director confirmed the incidents Insurance company agreed to pay a claim up to $250,000 if Stephan and HMC agree to mediation Douglas Hunt suffered a massive heart attack and HMC board contacted Thomas who agreed to an acquisition if the lawsuit was settled

ADR: Overview

7-7

Increasingly negotiators when at an impasse turn to a third party (ADR) ADR = an alternative to litigation, in which a neutral third party utilizes mediation, arbitration, or a hybrid form of the two ADR now commonly used in a variety of fields:
Labor-management Commercial disputes Landlord-tenant Small claims Employment issues Family disputes Neighbor vs. neighbor International business

What Are Common Causes of Negotiation Impasse?

1. No real ZOPA thus no possible settlement point 2. Entrenchment by one or both parties in their position(s) (heat of the battle) 3. Unskilled negotiators fail to discover a proposal with mutual gains 4. One or more parties had no real intention to settle 5. Settlement pressure as a negotiation approaches a partys resistance point and possible deal they feel pressure and walk away

7-8

7-9

Why Has ADR Increased in Use?

To achieve a settlement, compared to litigation, ADR:
Cost: often less than litigation Complexity of issues: parties can choose a knowledgeable third party Time: often is faster Confidentiality: mediation, in particular, is a private process (courts are public) Avoid disastrous decision: mediation, in particular, can keep a party from losing a decision because the parties develop the final decision

7-10

Contract Clause Specifying the Use of Mediation and Arbitration to Settle International Disputes

Any dispute, controversy, or claim arising out of or in connection with this contract, or the breach, termination, or invalidity thereof, shall first be referred to mediation in accordance with the Rules of the Mediation Institute of the Stockholm Chamber of Commerce, unless one of the parties objects. If one of the parties objects to mediation, or if the mediation is terminated, the dispute shall be finally resolved by arbitration in accordance with the Rules for Expedited Arbitration of the Arbitration Institute of the Stockholm Chamber of Commerce. The place of arbitration will be Indianapolis, Indiana, the language to be used in the arbitral proceedings shall be English, and the arbitral tribunal shall be composed of a single arbitrator.

Mediation

7-11

Evolved over the past 30 years as the preferred method of conflict resolution Alternative Dispute Resolution Act of 1998 requires local rules Defined: Mediation includes three elements:
1. A private, confidential process 2. Third party (neutral) 3. Facilitation of a mutually acceptable resolution

Mediator does not usually offer proposals or have any authority to force agreement