ADR and the cost of compulsion.
INTRODUCTION I. AN ARBITRATION CASE STUDY II. ADR's EMBRACE OF COMPULSION III. THE COSTS OF COMPULSION A. Compelled Arbitration 1. Substantive manipulations 2. Procedural manipulations 3. Attempts to thwart claims 4. Adhesion contracts and ADR providers B. Court-Compelled ADR 1. Variability of proceedings 2. Procedural failings 3. Pressure to settle C. The Reaction of Those Facing Compulsion D. Compulsory Informal Processes and Bias IV. WHAT SHOULD BE DONE ABOUT COMPULSION?
This Article will explore alternative dispute resolution's (ADR's) rush to embrace compulsion both in the private contract setting and with respect to court-compelled ADR programs. It will consider the risks posed when ADR is required rather than freely chosen. In the private contract context, these risks include the likelihood that adhesion contract drafters will use arbitration clauses and related requirements to short-circuit existing legislation with newly drafted provisions protective of their special interests, that contract drafters will, in some cases, go even further and use their drafting power to squelch all claims, and that ADR providers will be sorely tempted to cast their lot with adhesion contract drafters in order to win and retain valuable business. Next, the risks of compulsion in court-annexed programs will be canvassed. These include exposing litigants to wildly varying ADR experiences unrelated to the merits of their claims, as well as a range of procedural problems and heightened pressure to settle without a trial. This Article will then examine compulsion-created risks that are likely to arise in both the private and public contexts. Two of these will be the main focus: first, that compulsory ADR processes may fail to satisfy deep-seated psychological needs associated with a sense of justice; and second, that mandating ADR is likely to increase the prospect that biases favoring the strong over the weak will be introduced into the decisionmaking process.
In light of all these risks, the Article will conclude by arguing that compulsion should be abandoned. The likelihood that this will happen anytime soon is small, so the Article goes on to consider intermediate steps to help improve ADR processes and move them in a direction that will encourage greater trust and greater voluntary participation. Among the steps proposed are enhanced diversity among ADR providers and increased transparency in ADR proceedings. Finally, the Article will suggest that ADR needs to learn greater humility and respect for the rule of law or risk discrediting and politicizing itself.
I. AN ARBITRATION CASE STUDY
America's securities industry has aspired to regulate itself since its earliest days. (1) Congress has, in large measure, ratified the industry's power to oversee its own affairs by classifying national securities exchanges, including the New York Stock Exchange (NYSE), and registered securities associations, including the National Association of Securities Dealers (NASD), as "self-regulatory organization[s]." (2) Among the strategies these bodies have used to achieve the end of self-regulation is the championing of private arbitration of disputes in lieu of public adjudication by courts of law. (3) Securities industry arbitration keeps issues in the hands of industry-trained and -based decisionmakers rather than publicly selected judges. As part of their ongoing effort to maintain control, the NYSE and NASD, by the early 1970s, had mandated that their members arbitrate disputes at the request of an aggrieved customer. (4) Within less than a decade, this initial step toward compulsion was followed by the imposition on virtually all customers, and securities industry employees as well, of an involuntary predispute (i.e., contractual) requirement that all substantial disagreements be arbitrated rather than brought before a court. (5)
The transition to compelled arbitration was not an entirely smooth one. In 1975, Congress demonstrated its concern about arbitration practices and other securities industry conduct by enacting legislation imposing a number of restrictions on the industry and calling upon the Securities and Exchange Commission (SEC) to intensify its oversight of brokers and exchanges. (6) To help carry out the task of monitoring the industry, the SEC formed a "conference," the Securities Industry Conference on Arbitration (SICA), comprised of industry representatives, public representatives, academics, and others. (7) It prepared a Uniform Code of Arbitration, scrutinized the operation of the arbitration process, and sought more effective techniques for the training and selection of arbitrators. (8) This regulatory effort notwithstanding, the securities industry, with characteristic vigor, continued to press its arbitration agenda. By the mid-1980s compulsory arbitration requirements were becoming widespread. (9) The compulsion involved was troubling to some observers (10) but was, at least in official eyes, acceptable because of the oversight regime established by Congress in 1975. (11)
The self-regulatory power of the industry and the hold of compulsory arbitration were substantially strengthened in 1987, when the U.S. Supreme Court decided Shearson/American Express Inc. v. McMahon, in which the Court concluded that disputants with statutory claims based on the Securities Exchange Act of 1934 (12) and on the Racketeer Influenced and Corrupt Organizations (RICO) Act (13) could be compelled to arbitrate those claims on the basis of predispute agreements. (14) This result was mandated, according to the Court, by the Federal Arbitration Act (FAA), (15) which established a "federal policy favoring arbitration" (16) and required the Court to "vigorously enforce agreements to arbitrate," (17) even with respect to claims arising under statutes. The McMahon decision overrode precedent from the 1950s in which the Court had emphatically limited the reach of the FAA and of securities industry arbitration with respect to statutory claims by recognizing a "public policy" of allowing the enforcement of such claims in court, irrespective of the existence of a predispute arbitration clause. (18)
The hegemony of predispute securities industry arbitration clauses under the FAA was made virtually complete in 1991 when the Supreme Court decided Gilmer v. Interstate/Johnson Lane Corp., in which an employee of a stock brokerage firm was required to pursue his statute-based age discrimination claim in an NYSE arbitration proceeding rather than in court because, in 1981, he had signed a standardized securities industry registration form that required arbitration of "any dispute, claim or controversy." (19) Signing the form was "required by [Gilmer's] employment"; (20) he did not have any choice. The form had all the characteristics of a classic adhesion contract--a privately created document drafted by the dominant party to a legal relationship and imposed on the adherent without opportunity for negotiation or change. (21) The Court found arbitration, as a general matter, a satisfactory alternative, comparing it to appearing in a state rather than a federal court. (22) Only if Congress barred arbitration would a predispute arbitration clause be rejected and a court hearing required. (23)
Surprisingly, Gilmer was not the end of the securities industry arbitration story. Compelled arbitration did not sit well with those upon whom it was imposed. (24) Complaints were especially sharp from those who claimed that Wall Street practiced a pervasive form of sexual discrimination against female employees. Compelled arbitration provoked deep suspicion among the members of this group and a feeling that the required dispute resolution mechanism was tainted because of the close association between the industry and the arbitrators employed in the process. With complaints about bias mounting, an influential member of Congress, Edward Markey, called for a General Accounting Office (GAO) investigation of securities industry arbitration. (25) What the GAO found, while not proof of overt prejudice, was troubling. The arbitrators in the NYSE/NASD system were strikingly homogeneous. As the GAO put it: "We estimate that most arbitrators serving in NYSE's New York arbitrator pool are white males, averaging 60 years of age." (26) The statistics were stark: 89% of the arbitrators were male, 97% were white. (27) These findings were particularly troubling in light of the growing number of accusations that many of Wall Street's most important firms were engaging in a pattern of sexually discriminatory and harassing conduct.
As the 1990s reached their midpoint, Wall Street officials, old hands at using public reports and private arbitration to quell criticism, attempted to use the same strategy to address the discrimination crisis. A task force was formed by the NASD "to explore and propose broad reforms to the NASD arbitration process." (28) The NYSE held a two-day forum. (29) The SICA considered a nonbinding "Due Process Protocol." (30) The reports, meetings, and conferences eventually concluded that everything was all right or could be made so with a modest bit of tweaking. (31)
The victims of discriminatory conduct were not mollified. With increasing vigor and accompanying publicity they pressed their claims, charging, among others, industry giants Merrill Lynch, Morgan Stanley, and Smith Barney with a range of transgressions. (32) They filed complaints with the Equal Employment Opportunity Commission (EEOC), complained to the SEC, and resolutely resisted a secret, piecemeal, case-by-case arbitration approach. (33) Their efforts eventually led to the disclosure of shocking misconduct. Lurid tales about strippers, gross pranks, and physical abuse filled the press. (34) Arbitration was swept aside as the discrimination imbroglio deepened. Morgan Stanley paid $54 million to settle EEOC-initiated litigation, (35) and Merrill Lynch paid in excess of $100 million to settle the claims of about ninety-five percent of the more than nine hundred women who filed sexual discrimination claims against it. (36) Arbitration had not cleaned up the mess. It appeared, instead, to be part of the industry's effort at damage control.
In 1997, as the sex discrimination battle peaked, the NASD took a surprising step and proposed a rule change doing away with the requirement that securities industry employees arbitrate their discrimination claims. (37) Owning up, at least to some degree, to the inadequacy of compulsory industry-sponsored arbitration, the NASD declared, "After consideration of all the views presented, and in light of the public perception that civil rights claims may present important legal issues better dealt with in a judicial setting, the NASD determined that the appropriate action was to remove the arbitration requirement for such claims." (38) Although the statement was coyly worded to place the onus on "public perception" rather than on arbitration's shortcomings, the NASD admitted that its private dispute resolution mechanism could not persuade either complainants or the public of its legitimacy or its efficacy in solving the discrimination problem. Compulsory arbitration had instead heightened suspicions and thwarted efforts to find a systemic solution to a pervasive problem. Within a year, the NYSE followed the NASD lead, (39) and on January 1, 1999, the new rules ending the requirement of compulsory arbitration of discrimination claims went into effect. The influence of the earlier Wall Street strategy could, however, still be observed in 2004, as Merrill Lynch doggedly resisted a finding that it had engaged in "a pattern and practice of discrimination," and dragged its feet in a court-supervised (rather than industry-run) arbitration process designed to resolve the remaining discrimination claims. (40)
The securities industry story contains a number of lessons. One is that enhanced adhesion contract drafting power is likely to lead to explosive growth in the number and variety of compelled arbitrations. A second is that where a closed and clubby industry creates arbitration machinery, there is a substantial likelihood that the arbitrators will be a homogeneous lot strikingly different from the claimants whose cases they are to hear. A third is that claimants confronted with such arrangements are extremely likely to distrust whatever the industry offers. A fourth is that piecemeal private adjudications compelled by predispute arbitration agreements are unlikely to be able effectively to address a problem as deeply rooted as corporate sexism. A fifth is that compulsion must, sometimes, be abandoned if trust is to be reestablished and genuine social progress is to be made. Finally, the presence of even relatively passive regulators, like the SEC and SICA, may push reluctant compulsory systems toward meaningful improvement.
II. ADR'S EMBRACE OF COMPULSION
Significant numbers of Americans have, throughout the country's history, desired to use alternatives to public trials and judicial proceedings. (41) For many the goal was to avoid the intrusion of lawyers--a profession feared and reviled even before the beginning of the Republic. (42) Alternatives to court have also been sought by merchant and guild organizations desirous of regulating their own affairs. (43) It is notable that the arbitration processes used by these groups were voluntary, either with respect to the election of the process itself or with respect to enrollment in a group requiring ADR among its members. (44) The courts for their part were loath to compel arbitration. (45) So strong was the resistance to compulsion that it took several decades of agitation to convince Congress to pass the FAA in 1925 and to require the honoring of agreements, entered into by initially willing contracting parties, to arbitrate rather than litigate. (46) Mediation too has been closely associated with voluntary choice. The literature on mediation is replete with encomiums to party independence. As the Model Standards of Conduct for Mediators puts it, "Self-determination is the fundamental principle of mediation. It requires that the mediation process rely upon the ability of the parties to reach a voluntary, uncoerced agreement. Any party may withdraw from mediation at any time." (47)
Despite this long history and the rhetoric of choice, ADR, over the past quarter-century, has grown to prominence by compelling the vast majority of those who use it, in such contexts as consumer, banking, securities, and employment disputes, to participate in processes that they have not voluntarily chosen (48) and, in many cases, actively oppose. It is perhaps the central irony of the recent success of ADR that it is built on the sort of mandatory approach that ADR rejected throughout most of its history.
Leading modern ADR advocates have been ambivalent in their embrace of compulsion. The putative father of modern American ADR, Frank Sander, has been described as arguing that "there is a difference between being coerced into mediation and being coerced in mediation." (49) The former is said to be appropriate because of the ignorance, fear, or selfishness of the parties or their lawyers. (50) The latter is anathema because it trenches on the core notion of self-determination. Whether such a neat demarcation between the two may be maintained either in the minds of the compelled or of the compellers is an empirical question that ADR's advocates have not spent much time exploring but about which this Article raises a number of questions. One of the most articulate spokesmen on behalf of ADR, especially in the court-annexed context, is federal magistrate judge Wayne Brazil. Judge Brazil too has displayed ambivalence about compulsion. He has defended its use today as fostering the "growth curve" of initial ADR adoption, but has urged its abandonment when "the angle of [the] learning curve ... decline[s]." (51)
Whatever one thinks of compulsion, the evidence suggests that there would be far less ADR use without it. Empirical data indicate a huge gap between expressions of support for ADR and willingness to voluntarily use it. This gap has been noted by mandatory ADR's friends (52) and foes (53) alike. Critics have argued that the low degree of voluntary use of ADR indicates that there is little demand for its services, and that the ADR push is "almost entirely a supply side phenomenon" promoted by a number of interested judges and ADR providers. (54) In 1998, after more than a decade of promotion by ADR advocates, the ninety-four federal districts responded to a poll about ADR usage. (55) The majority of federal courts appeared unenthusiastic about ADR: thirty-one districts failed to provide any ADR information at all, another twenty-one stated that they had no qualified ADR program, and only eight districts had what could be classified as "robust" programs. (56) These data imply judicial skepticism about ADR (57) and do not point to any high level of litigant demand for such services. The attitude among the bar (58) and the public (59) has been similar. Where ADR programs exist, they have not been overwhelmed by disputant demand. When the Northern District of California's early neutral evaluation (ENE) program was assessed in 1994, it could not report a single voluntary request for its services. (60) The reasons for the gap between ADR boosters' enthusiasm and the voluntary usage figures will be a matter considered in some detail as this Article progresses.
One of the two vehicles primarily responsible for driving the growth of ADR is arbitration mandated by a predispute stipulation. Such a stipulation is most often contained in form contracts imposed by a powerful drafting party on a consumer, customer, or employee who has no choices besides accepting the contract in toto or forgoing the desired goods, services, or job. This take-it-or leave-it arrangement has become ubiquitous, and millions of adhering parties today simply have no choice but to yield on the question of arbitration. (61) Arrangements of this sort have all the characteristics of the classic adhesion contract. (62) As is usual in such situations, there is no bargaining over "peripheral" terms like arbitration--they are simply imposed by the drafter on the adherer. Adhesion contracts have generally been treated with suspicion by the courts. The absence of any opportunity for negotiation and the power wielded by one party over the other have made them the object of close judicial scrutiny. (63)
Adhesion contracts can have a dramatic impact on the relationship between contracting parties. For more than sixty years, scholars and courts have focused on the idea that such contracts make it possible for the drafting party "to legislate in a substantially authoritarian manner." (64) This notion of legislating is not in any sense figurative. It dramatizes the point that the drafter has the power to create new and different "law" (65) to govern the relations and disputes between itself and the adherer. If an adhesion contract is legally acceptable, the drafter is empowered to craft a favorable forum for itself--one in which legal impediments may be limited and congenial substantive and procedural rules adopted. While the use of such legislative power may be troubling, it generally leaves the adhering party some option or recourse. An altogether more objectionable scenario is presented when the drafting party seeks to use its power to negate all claims and liability. Such efforts to escape liability are frequently struck down by the courts, (66) but broad adhesion power creates a temptation to defeat all law and may invite the exercise of low cunning in an effort to disguise this objective.
Beginning in the early 1980s, the Supreme Court decided a series of cases that had the effect of expanding the reach of adhesion contracts that required disputes to be arbitrated rather than adjudicated in courts of law. As already noted, well into the twentieth century, agreements to arbitrate were viewed with disfavor. It was in reaction to this disfavor that Congress passed the FAA in 1925. Despite the enactment of that legislation, courts, for many years, continued to cast a jaundiced eye on predispute agreements to arbitrate. In 1953, the Supreme Court, in Wilko v. Swan, refused to enforce such an agreement and vigorously criticized arbitration as an inferior forum, (67) unfit to enforce important statutory rights like those arising out of the Securities Act of 1933. (68) This decision was widely interpreted as prohibiting the enforcement of arbitration clauses whenever statutory issues implicating "public policy" were presented. (69)
The restrictive views expressed in Wilko were implicitly challenged in 1983 when the Supreme Court, in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., embraced a policy liberally favoring arbitration pursuant to the FAA. (70) The new approach toward arbitration and the FAA was relied upon the very next year, in Southland Corp. v. Keating, to strike down a California statute that had sought to prohibit predispute arbitration contracts in an area rife with adhesion power problems--relations between franchisors and franchisees. (71) Adhesion contract power with respect to arbitration received a further boost in 1985, when the Court, in Mitsubishi Motors Corp. v. Solar Chrysler-Plymouth, Inc., ruled that a predispute arbitration agreement created by an auto manufacturer and imposed on a distributor was binding with respect to a statutory antitrust claim. (72) Although the Court placed special emphasis on the international character of the contract, the majority's language suggested that predispute agreements to arbitrate statutory matters would henceforward be given greater deference. (73)
That turned out to be the case in 1987, when the Court decided the McMahon case and required arbitration of both RICO and 1934 Securities Act claims on the basis of an arbitration clause in an adhesive securities industry contract. (74) In 1989, the Court declared that arbitration was a perfectly adequate alternative forum for most claims, (75) and in Gilmer, in 1991, went on to enforce an adhesive arbitration agreement against an employee claiming age discrimination. (76) The trend has continued apace, with the Court regularly enforcing adhesive agreements to arbitrate and striking down state legislation designed to limit such agreements. (77) The result of these twenty years of rulings under the FAA has been the clear endorsement of drafting party authority to exercise enormous power in the creation of predispute arbitration requirements. These requirements have been rendered virtually invulnerable to state laws designed to curtail overreaching and will generally be enforced as written.
Drafting parties have, with increasing frequency and vigor, used their FAA-based adhesion power to insist on arbitration clauses. Commentators have noted that arbitration requirements seem to be everywhere today: in the consumer context, the employment setting, the banking business, the securities industry, and elsewhere. (78) While it is hard to determine how much the use of such clauses has grown, some numbers gathered by Christopher Drahozal are suggestive. (79) In 1971, one study reported the appearance of arbitration clauses in 23% of the franchise contracts it sampled. (80) In 1993, in an arguably similar group of franchise contracts, Robert Emerson found that 31% had such clauses. (81) In Drahozal's own 1999 sample, the percentage had risen to 45%. (82) These numbers may not be perfectly comparable or definitive, but they do provide a suggestion of the direction in which the trend is moving.
While America's largest corporations have used their adhesion power to insert arbitration clauses in agreements with their small-time customers, they have energetically sought to escape having arbitration imposed on them in dealings with their equals. Perhaps the most significant shift in dispute resolution over the last decade has been corporate America's movement away from arbitration in favor of mediation for its large and serious disputes. (83) The reason for this shift appears to be a corporate desire for more control over the disputes which matter most. (84) Over the same period, corporate lobbyists have been busy protecting large corporations from mandatory ADR imposed by an even larger and stronger opponent--the federal government. In the Administrative Dispute Resolution Acts of 1990 and 1996, (85) the government was prohibited from imposing binding arbitration on unwilling parties to government contracts. (86) Since many of those contracts, and virtually all of the large ones, are with substantial corporations, the interests protected from arbitration are overwhelmingly likely to be those of the Fortune 1000. Corporations also leave themselves escape routes from arbitration in many of the predispute arbitration clauses they impose. Drahozal found that 94% of the franchise contracts he sampled provided some relief from arbitration for the drafters. (87)
Aside from predispute arbitration clauses, a second significant spur to the growth of ADR has been court-annexed programs that require parties involved in lawsuits to participate in processes like ENE (88) or mediation sessions (89 before their claims will be considered by a court. Over the past twenty years, there has been a marked shift toward compelling litigants to participate in such programs. Summarizing this movement in the federal courts, Judith Resnik has described a change from "persuasion" to "mandates." (90) In 1983, Rule 16 of the Federal Rules of Civil Procedure was amended to grant district courts power during pretrial conferences to consider and "take appropriate action, with respect to ... settlement and the use of special procedures to assist in resolving the dispute." (91) This opened the door to the consideration of ADR, but most courts did little more than arrange judicially supervised settlement conferences. (92) Congress tried to encourage greater ADR activity in 1990 when it passed the Civil Justice Reform Act of 1990 (CJRA), (93) which was designed to foster court experimentation with alternative approaches. (94) The results of that effort were disappointing, (95) so in 1998, Congress turned from encouragement to compulsion by enacting the Alternative Dispute Resolution Act (ADRA), (96) which imposes a duty on federal district courts, in Judge Brazil's words, "to require civil litigants to consider using ADR and to provide those litigants with at least one ADR process." (97) The law "empowers the courts to make participation in either mediation or ENE mandatory." (98)
Federal judges have viewed the ADRA as substantially increasing their power to compel litigant consideration of ADR. (99) In putting this mandate into operation, the federal district court for the Northern District of California has required both the parties and their counsels "to certify ... that they have read [an] ADR brochure, discussed ... ADR options, and considered whether their case might benefit from use of" ADR. (100) The mandate reaches further and, as interpreted by one of the chief architects of the program, gives judges the power to make ADR references over a party's objection. (101) It may even impose "a duty to try to settle cases" on litigants. (102) How far this duty reaches is not specified, but what is plain is that a great deal of pressure may be applied to federal court litigants in an effort to persuade them to settle without recourse to a courtroom hearing.
In response to the ADRA, more than half of the federal district courts now have mediation programs. (103) The federal courts of appeals appear to have even more robust ADR and settlement programs. (104) The story in state courts is more varied, but the use of compulsion seems widespread. Reporting the results of a large-scale analysis of state and federal court mediation programs, leading ADR researcher Roselle Wissler observed that "[m]ost programs involved mandatory referral of eligible cases to mediation on an automatic basis, on a judge's order, or at the request of one party." (105) There is little of the voluntary about any of this. Before litigants may win a day in court, many must pass through one or more layers of mandatory ADR.
Just how hard litigants must try to settle before they can get a day in court is a matter of some dispute. In state trial-court programs, "good faith" participation is often required. (106) The same sort of requirement has been adopted in several federal appellate courts. (107) The number of reported opinions about good faith participation in court-compelled ADR has started to grow. There were only three such cases before 1990. (108) Between then and 1998, the number grew by thirteen cases, and from 1998 to 2002 the total jumped by another eleven cases. (109) Besides spawning satellite litigation, good faith requirements have been viewed as a danger to the mediation process. They can breed distrust, resentment, and a sense of unfairness as the supposedly neutral and nonjudgmental mediator is forced to become an assessor of the conduct of the parties before her. (110) If a breach of good faith is found, some courts might allow the mediator to disregard the confidentiality of the mediation process and inform the court not only of the breach but of the details of the underlying mediation. (111) Under such circumstances, litigants would be warranted in distrusting the mediator and watching their every word in her presence. Knowledgeable observers have concluded that a good faith requirement is incompatible with core ADR principles, most particularly party autonomy and self-determination. (112)
In light of all this, it may be fair to ask why so many programs have adopted good faith requirements. It is difficult not to conclude that there is a connection between the increasing number of good faith requirements and the heightened level of compulsion now used by courts to push parties into ADR and to have them resolve their cases there. The line that Frank Sander wanted to draw between compulsion into ADR and compulsion in ADR seems increasingly difficult to maintain in light of the good faith doctrine. Even so careful and thoughtful a commentator as Judge Brazil has had difficulty maintaining the distinction. He has condemned good faith requirements as a mistake that can damage court-annexed mediation. (113) Yet, he has himself used the same rhetoric in describing each litigant's duty as a participant in ADR, stating that parties agree "to explore in good faith the possibility of settlement." (114)
III. THE COSTS OF COMPULSION
Compulsory ADR processes have a variety of costs, both in the contract-based arbitration setting and in the court-compelled context. In the former, the power shifted to contract drafters may be manipulated to produce a range of questionable results. In the latter, process values may be swept aside and settlements overzealously pursued.
A. Compelled Arbitration
1. Substantive manipulations
Contract drafters have used FAA-backed adhesion contracts to change the landscape of their disputes--to redraft the law that governs them and the procedures available to redress wrongs committed. The effect has been to substitute drafting-party law for that created by democratic processes. (115) Contracts of adhesion have been used to partially deregulate a number of relationships where protective legislation has long been in place.
For example, Congress created the Truth in Lending Act (TILA) (116) to protect the public from a range of economic depredations and misleading practices. (117) Consumer litigation was envisioned as one of the key enforcement mechanisms of the Act, and successful consumer litigants were to be awarded attorneys' fees as well as costs. (118) Lenders and others affected by the Act have adopted adhesion contract requirements that blunt TILA's reach. The Supreme Court was faced with such a situation in Green Tree Financial Corp.-Alabama v. Randolph when a consumer sought to file suit to enforce rights guaranteed by TILA but was prevented from doing so by a predispute arbitration clause. (119) That clause was silent on the magnitude of costs and fees. (120) In contrast to a courtroom pursuit of TILA rights, the Eleventh Circuit had found that the arbitration arrangement gave no assurances that "Randolph's ability to vindicate her statutory rights [would] not be undone by steep filing fees, steep arbitrators' fees, or other high costs of arbitration." (121) The Supreme Court rejected Randolph's claim that she should not be bound by the adhesive arbitration clause (122) and sanctioned a regime quite different from the one envisioned by TILA--one far more risky for consumers because of the potential of shifted financial burdens.
Adhesion contracts have also rewritten the legal reality of the Magnuson-Moss Warranty Act (MMWA). (123) That act contemplates the availability of nonbinding dispute resolution processes for consumers complaining about breaches of product warranties. (124) A number of warrantors have insisted on binding arbitration instead. (125) While the Supreme Court has not ruled on the question, a number of lower federal courts have enforced the arbitration requirement. (126) The result of these rulings is the rewriting of the MMWA in a manner congenial to warrantors rather than to their customers. (127)
The rewriting of consumer protection laws has reached even further. Montana adopted legislation that required adhesion contract drafters to warn adhering parties about arbitration requirements by using boldface type on the front page of affected contracts. (128) In Doctor's Associates, Inc. v. Casarotto, the Supreme Court struck down that statute. (129) It thereby allowed adhesion contract drafters to continue burying arbitration requirements in a mass of small-print legal jargon on the back pages of lengthy contract documents, or perhaps to go even further by incorporating such requirements in contracts by reference or by placing them on shrink-wrap packaging. (130) The Casarotto contract drafter was thus empowered under the FAA to override legal restrictions and to remake the legal context in which it operated.
2. Procedural manipulations
Contract drafters under the FAA can change not only protections arising out of substantive law but a wide range of dispute resolution procedures as well. Perhaps the most dramatic illustration of the limitation on procedural options has had to do with class actions. In many sorts of consumer cases, the class action is the only economically viable method of enforcing protective legislation or of punishing wrongdoing because the harm done to each individual consumer is of modest financial dimension. (131) The class action aggregation of claims makes their enforcement economical by providing incentives for contingency fee lawyers to take on such cases and by providing relief to many similarly situated individuals at the same time. (132) One of the central objectives of adhesion contracts has been to remove the class action from the complainant's arsenal. Some knowledgeable observers have suggested that cutting off class action litigation is the paramount objective of contract drafters exercising FAA-sanctioned authority to require arbitration. (133)
For some time it looked as if simply requiring arbitration in an adhesion contract might achieve this result. (134) Recently, however, the Supreme Court appeared to reject this notion, (135) and a number of state courts have concluded that class action claims can survive a simple arbitration requirement. (136) Many contract drafters have gone beyond simple arbitration requirements and have specifically barred class action claims in their adhesion contracts. A recent survey of Minnesota franchise contracts found that fifty-three percent of those requiring arbitration also specifically banned class action claims. (137) Other researchers have noted class action prohibitions in the Discover Platinum Cardmember Agreement and the American Express cardholder agreement, (138) as well as similar provisions in at least some versions of the rules of procedure of one of the largest ADR providers, the National Arbitration Forum (NAF). (139)
The reengineering of the procedure of disputes through the use of adhesion contracts has succeeded in changing the face of much consumer, customer, and employee dispute resolution. It has undercut basic tenets of the American adversary system with respect to a climactic confrontation in court (140) and has fostered, instead, a system that resembles the far less robust British civil legal system. Both systems are devoid of juries--in the British setting because of legislation (141) and in the adhesion contract context because of an insistence on arbitration (often supplemented by an outright ban on jury trials). (142) Both systems allow for very little discovery, which has long been the tradition in the British system, (143) but which, in the American system, was caused by specific prohibitions and historical precedent in commercial arbitration. (144) In these settings, there is little opportunity to aggregate claims, and losing claimants are often faced with substantial fees and costs--not only their own, but their opponent's costs as well. (145) The consequence of such systems is likely a chilling of the desire to seek relief for wrongs suffered, because risks are heightened and rewards diminished. (146) Access to counsel is substantially limited because contingency fee financing is undermined, and naturally risk-averse lawyers seek other sorts of cases. (147)
3. Attempts to thwart claims
A risk created when contract drafters are given adhesive power is that they will use this advantage to place every conceivable obstacle in the path of those seeking redress in the hope of discouraging potential claimants from pressing any actions at all. The paradigmatic example of this sort of behavior is Hooters of America, Inc. v. Phillips, in which the Fourth Circuit found that the Hooters restaurant chain--a group of establishments whose main claim to fame seems to be the costuming of its female employees rather than its cuisine--used adhesive contract power to thwart virtually all employee claims against it. (148) Hooters insisted that its employees sign an agreement substituting arbitration for court hearings with respect to all sorts of claims, including charges regarding statutorily prohibited forms of discrimination. (149) The agreement also stipulated that the arbitrators employed to preside over hearings had to be selected from a list drafted exclusively by Hooters, that Hooters was not required to give notice of its defenses (although the employee was required to provide notice of her claims), that Hooters alone could seek summary disposition, that only Hooters was permitted to record the arbitration proceedings, that only Hooters had the opportunity to bring suit in court to have a decision vacated on the ground that the arbitrators had exceeded their authority, and that Hooters alone had the right to cancel the arbitration agreement on thirty days' notice. (150) The Fourth Circuit said this process was "a sham system unworthy even of the name of arbitration." (151) In sum, Hooters did everything in its power to stack the deck and discourage employees from ever seeking to vindicate a discrimination claim or any other sort of claim against the company. It appeared to seek nothing less than the "waiver" of all such claims. (152) Although the ploy failed and the court refused to compel arbitration, it was only the tenacity of a courageous claimant that thwarted the company's strategy. One is left to wonder just how many Hooters employees who came before Annette Phillips were deterred by these procedures from ever filing a claim and how many others in similar situations created by other companies have been overborne because they had no highly motivated coworker willing to take the substantial risk of challenging an oppressive scheme.
While Hooters is an extreme case, many adhesion contract drafters have adopted similar, albeit more subtle approaches in what would appear to be efforts to discourage claims. Taking a page from Hooters's book, the American Federation of Musicians insisted in its contracts that the arbitrators in all of its cases be selected from its International Executive Board. (153) It was extremely unlikely that such arbitrators would provide claimants a neutral forum that would encourage the filing of claims. In Graham v. Scissor-Tail, Inc., the California Supreme Court rejected this ploy. (154) Other drafters appear to have sought a similar result by requiring that arbitration hearings take place in venues far from the scene of the dispute, thereby multiplying costs and logistical difficulties for claimants. (155) In Drahozal's survey of Minnesota franchise agreements, eighty-two percent of the reviewed contracts located hearings at the franchisor's principle place of business, notwithstanding that this requirement might prove extremely onerous to claimants. (156)
Others seem to have adopted a strategy to raise the cost of proceedings so high that few claimants will dare to go forward. In Shankle v. B-G Maintenance Management of Colorado, Inc., the Tenth Circuit concluded that imposing arbitration fees of somewhere between $1875 and $5000 on a janitorial employee made it impossible for him to press his claim and, therefore, invalidated the requirement. (157) Shankle is but one of a number of cases where low-wage employees have obtained court-ordered relief from burdensome cost requirements that would have deprived them of any realistic opportunity for a hearing. (158)
Other contract drafters have sought to deter claims by cutting off various sorts of damages. In Graham Oil Co. v. ARCO Products Co., the oil giant ARCO sought to prohibit franchisees from seeking statutory and tort damages. (159) Similarly, in Alcaraz v. Avnet, Inc., the drafter targeted Title VII damages. (160)
The problem posed by increasing costs and cutting prospective rewards is serious. It presents the risk-averse claimant with an intimidating set of choices involving exposure to ruinous costs and paltry recovery. In the British system, which features fee-shifting rules and modest awards, such arrangements have acted as a powerful deterrent to bringing claims. (161) This deterrent effect seems to be the result desired by many of the contract drafters described in this Part-a result they have succeeded in achieving in a substantial number of cases. Such arrangements may also make cases far less attractive to counsel and thereby undermine claimants' ability to secure representation.
Other strategies have also been employed to chill claimant enthusiasm, including building long delays into proceedings so that most disputants will become discouraged and abandon their cases. This tactic was embraced by the Permanente Medical Group in a case involving a patient named Engalla. (162) Permanente designed a proprietary malpractice arbitration system with such long delays that a seriously ill patient died before he could get his claim decided. (163) It is hard not to become indignant when confronted with this sort of manipulation of adhesion power. California was so disturbed by Permanente's conduct that it adopted a statutory presumption of arbitration failure (and a concomitant right to proceed to court) after a limited period of time had elapsed from the initial filing of a claim under a health care service plan contract. (164) Permanente's conduct, as well as that of the contract drafters in most of the cases mentioned in the preceding paragraphs, led to judicial intervention and the invalidation of arbitration mandates on behalf of a group of tenacious adhering parties. One cannot help but wonder how many similarly situated claimants have been intimidated into silence by similar clauses and procedures. The Supreme Court's decision in Green Tree Financial Corp.--Alabama v. Randolph exacerbates the problems described in this Part by refusing to compel drafters to be precise with respect to the requirements they are imposing.
4. Adhesion contracts and ADR providers
Adhesion contracts also create risks that threaten private ADR providers. Over the course of the last twenty-five years, there has been considerable growth in the number and size of provider organizations--entities dedicated to supplying neutral decisionmakers for ADR proceedings and support services to further those proceedings. (165) These organizations now include a large number of commercial concerns. (166) Commercial providers' motivation for involvement in the field is the usual desire to sell services and make a profit. The market for ADR services, however, has not yet proven particularly lucrative, and ADR businesses have struggled. (167)
In this difficult environment there is a strong temptation, especially for commercial ADR concerns, to do whatever is necessary in order to gain a competitive advantage and increase business. These pressures have led some ADR organizations to seek cooperative arrangements with adhesion contract drafters in the hope of securing a steady flow of business. Of course, the contract drafters need to be persuaded that it is in their interest to specify a particular provider in their contracts. The sort of inducements ADR providers can supply include a "track record" that displays sympathy with the drafter's point of view, (168) rules of procedure that address salient drafter goals like limiting exposure to class action claims, (169) and a willingness to alter standard practices to accommodate special drafter demands. Providers are also likely to be inclined to exploit market opportunities and charge high fees for their services where and when the opportunity arises.
These temptations have seduced a number of providers into conduct that has rendered a variety of arbitration provisions unenforceable. One of the entities that has been a focus of concern is the NAF. Examination of its practices has disclosed a troublingly close connection between the provider and a large adhesion-contract-drafting client, First USA N.A. (170) The credit card issuer began mandating arbitration in early 1998 and designated the NAF as its ADR provider. (171) The Washington Post has reported that First USA won 99.6% of the cases that reached an arbitrator between January 1998 and November 1999, (172) while the company was paying the NAF $5.3 million. (173) At a minimum, these numbers make one uneasy about the NAF's neutrality and the fairness of its process. Those fears are heightened by the NAF's assurance to potential customers that its rules do not allow class actions. (174)
NAF arbitration has been rejected in a number of court eases. In Baron v. Best Buy Co., a Florida federal district court concluded that the adhesion contract's drafter had "failed to demonstrate in this record that the National Arbitration Forum is a neutral, inexpensive and efficient forum to determine these [TILA] claims as required by law." (175) Moreover, the court was disturbed by "the changing nature of the rules [the NAF] adopt[s] and the almost total discretion of [the NAF's] director to issue or modify any award or rule." (176) The court went on to note that despite TILA's remedial provisions, each party was required under the NAF's rules to bear its own attorneys' fees. (177) The story was much the same in Licitra v. Gateway, Inc., in which a New York court found that the NAF's procedures for what was, in essence, a small claims court matter increased costs dramatically, delayed the process substantially, imposed unrealistic and unfair time limits on hearings, raised the specter of a venue far from the claimant's home state, and opened up the possibility of a fee award that could have a profoundly "chilling effect" on claimants. (178) The unacceptable insensitivity and costliness noted in Licitra were also found in several cases arising in California, including Mercuro v. Superior Court, in which an employee faced what the California court found to be excessive costs, (179) and Ferguson v. Countrywide Credit Industries, Inc., in which the Ninth Circuit found that an employee's sexual harassment claims were improperly burdened by excessively high fees. (180) The NAF was also the target of litigation which claimed that it had failed to comply with California requirements concerning the reporting of consumer arbitrations conducted in the state. (181) Examination of the company's Web site suggests extremely modest recent efforts to comply with California's reporting requirements. (182)
While the NAF has been the focus of a great deal of public and judicial attention, other ADR providers too have appeared to yield to the temptations of the marketplace by employing troubling processes and rules. In MCI Telecommunications Corp. v. Matrix Communications Corp., the ADR provider designated by MCI not only had an agreement to adjudicate claims for the telecommunications company but also had entered into a secret side contract to provide its client with a range of counseling and other services. (183) As a part of this arrangement, the provider supplied MCI with quarterly reports and sent its arbitration personnel to MCI for specialized training. (184) The provider was paid a bonus if it asserted jurisdiction over MCI cases, and MCI made payments of more than $200,000 for dispute resolution services. (185) The one-sided nature of this behavior is disturbing and demands heightened concern because of the secrecy involved. One is reminded of the corrupting relationship between the Arthur Andersen accounting firm and the Enron Corporation--a relationship that undermined the integrity of both companies. (186)
While these troubling cases are little more than anecdotal evidence, they are suggestive both of the pressures that exist and their potential consequences. At a minimum they cry out for greater oversight of ADR providers. Systemwide evidence also raises serious questions. It has been observed that in the so-called labor arbitration field, in which unions and employers participate together in an industrial dispute resolution process, fees are modest and the process works effectively. (187) In the so-called employment arbitration setting, in which there are seldom any unions and employees are required to arbitrate by rules dictated by adhesion contracts over which they have no control, fees and costs for virtually identical services are far higher. (188) The disparity is hard to explain, especially in light of the fact that "some arbitrators serve in both capacities, and ... charge very different fees that are tied to the distinct markets for these services." (189) It may not be inappropriate to suggest that ADR providers, unchecked by disenfranchised adhering parties, are inflating their fees and charges with the tacit approval of adhesion contract drafters who are perfectly comfortable with an inefficient and expensive system that deters filings. The two-tier pricing phenomenon raises serious questions about the integrity and soundness of the adhesion contract arrangement and about the ability of ADR-provider organizations to resist the temptations created by compulsion.
The provider industry has vigorously resisted regulation meant to address some of the imbalances created by arbitration imposed by adhesion contracts. In 2002, California adopted a set of ethical rules for "Neutral Arbitrators in Contractual Arbitration." (190) These rules imposed a series of reporting requirements on arbitrators and, by extension, on providers. They were designed to thwart the secret deals and one-sided connections that have plagued the industry. (191) The theory behind the rules was that robust disclosure of the facts surrounding the arbitrator's past and present activities and associations would go a long way toward protecting consumers from bias and weeding out unfair arrangements. (192) Many providers assailed the rules. (193) The NASD and the NYSE filed suit, claiming that the rules were onerous and preempted by federal law. (194) The NAF, the College of Commercial Arbitrators, the California Dispute Resolution Council, and the Kaiser Mandatory System for Disputes with Members, to name but a few, complained about the disclosure requirements. (195) The American Arbitration Association, the not-for-profit leader in the provision of ADR services, threatened to pull out of California. (196) The industry's reaction signaled the providers' strong desire to remain unregulated and continue with business as usual. The problems that have arisen and been documented suggest that such a course is untenable and bespeak an industry that has drifted away from a commitment to fairness and neutrality and toward the protection of lucrative and cozy arrangements. The new California rules have gone into effect and may presage a growing willingness to protect consumers and others similarly situated.
B. Court-Compelled ADR
1. Variability of proceedings
Any sort of procedure mandated by the judicial branch of government must satisfy a series of constitutional requirements, including the equal treatment of all litigants and the use of processes that are fundamentally fair. (197) Among the chief risks of court-compelled ADR is that the process may not provide equal treatment. Many observers have noted the wide variation of approaches used by different third-party neutrals conducting mediation and ENE sessions within a single court-annexed program. (198) On so fundamental a question as the nature of the assistance mediators will provide the parties, neutrals vary wildly. In one of the best studies in the area, Roselle Wissler found that 31% of the mediators she studied would evaluate the merits of the case for the parties and that 28% would recommend a particular settlement figure. (199) This variation in practice is troubling. Recommending a specific figure tends to promote settlement, (200) while at the same time alienating participants and heightening their feelings of being unduly pressured. (201) Mediator variation on these points raises serious questions of unequal treatment.
Judge Brazil, an experienced overseer of court-annexed ADR programs, has noted the variation in practice among neutrals and decried it. His programs (as well as many others) have rules designed to control mediators' behavior. He notes, however, "that some neutrals we have trained sometimes deviate substantially from our process protocols.... We also have discovered occasions in which neutrals have misunderstood, sometimes fundamentally, the role they were to play or the specific characteristics of the process they were to host." (202) These deviations mean that different parties are likely to get very different treatment--some will have hearings that are more effective and satisfying, others far less so. Unlike court proceedings, there is no review or appeal with respect to ADR processes that yield settlements. Settlement leaves nothing to be reviewed and few possibilities for redress.
Variation, at least in part, is caused by the scarcity of resources devoted to ADR. Scarcity affects ADR in other ways as well. Limitations on resources lead to ADR interventions that may charitably be described as "modest." Empirical research suggests that in most court-annexed programs one session lasting two to three hours is all the process that is provided. (203) A number of scholars have pointed out the naivete of believing that one such session can actually lay to rest the difficult and protracted problems embedded in many lawsuits. (204) In such a short session, there is little time for the fashioning of truly thoughtful solutions. One is left to wonder whether such modest interventions reach sound solutions or simply expedient ones.
2. Procedural failings
Another cause of the variability in court-annexed programs is divergent supervision and compensation of neutrals. The problems of adequate supervision and compensation are serious ones that have not been well managed in judicially mandated programs that use large numbers of outside participants. (205) Such programs often turn to volunteers whose varying skills and levels of commitment provide substantial challenges to even the best court administrators. (206) If the courts decide to finance their ADR systems by charging litigants a low flat fee for services, they risk turning their programs into dispute resolution "mills." (207) If the courts allow unrestricted fees, litigant costs may skyrocket--either leading to abandonment of ADR or to wars of attrition in which the wealthy bleed dry the less well-heeled. (208) If fees are negotiable between the litigants and the neutral ADR provider, the parties may be placed in the difficult position of dickering with the "judge" who will consider their case. Such arrangements have been branded "untenable and unfair." (209) 0utsourcing ADR business also presents a serious risk of corruption, as a venal judge may be tempted to steer business to cronies. (210) All of these problems present threats to the integrity and consistency of mandatory court-annexed ADR.
A fundamental right in judicial proceedings is to be represented by counsel. (211) Compulsory court-ordered ADR programs pose a number of risks to the attorney-client relationship. In describing the appropriate process for the assignment of cases to ADR programs, Judge Brazil suggests that clients should be required to be present at the assignment conference. (212) His rationale is that clients may not have been given complete information about ADR, may not have had their attitudes accurately gauged by counsel, and may be in need of a "pep talk" about ADR. (213) While all of this advice is couched in respectful terms, stripped to its essentials, it is a declaration that the attorney cannot and should not be trusted to represent his or her client with respect to ADR. Such a scenario disregards the bond between lawyer and client and ultimately requires that the client represent herself. Empirical research has noted that some mediators use ADR procedures to "bypass" counsel and engage clients directly. (214) Some neutrals in ENE proceedings require that the parties themselves, rather than their lawyers, describe and defend their cases. (215) Clients who are forced to talk feel greater pressure to settle (216) and are compelled to face such pressure without the intervention of their chosen legal representatives. The ADR challenge to the right to counsel is potentially serious and gives both clients and counsel reason to distrust court-annexed processes.
3. Pressure to settle
A day in court or some other opportunity to be heard on the merits of one's claim is a fundamental element of procedural fairness, (217) but one that may be undermined by mandatory court-compelled ADR programs that zealously pursue settlement. The pressure for ADR to produce settlements begins outside the courtroom. When Congress passed the ADRA, it emphasized the importance of settlement. (218) Settlement has been described by the Chief Circuit Mediator for the Sixth Circuit, Robert Rack, Jr., as the reason his "program was created" and its "primary cost justification to Congress." (219) Settlement has been found to be the principal criterion used by legislative bodies to evaluate state court ADR programs. (220) Within the courts, too, there is a powerful rhetorical and practical allegiance to settlement. Judith Resnik has observed that the federal courts have placed the full weight of their "institutional authority" behind settlement. (221) In line with this commitment, settlement rates are the primary tool used to monitor the work of ADR personnel. (222) The message to staff could hardly be clearer: "What counts the most is how many cases you settle."
The pursuit of settlement poses risks for both the parties and the neutral. Parties pressed to settle their cases are likely to resent the effort. (223) The greater the settlement pressure, the more likely the parties are to find the neutral's proposals arbitrary and untrustworthy. (224) Neutrals driven by institutional mandates to seek a high volume of settlements may engage in a number of problematic behaviors. As catalogued by Judge Brazil, such behaviors may include improperly communicating with trial judges for the purpose of fostering conditions that increase settlement pressure, manipulating the timing of cases to heighten settlement prospects, ignoring unethical conduct by lawyers in order to secure a settlement, and overemphasizing settlement techniques at the expense of other approaches. (225) A dramatic example of what can happen when settlement pressure gets intense is Olam v. Congress Mortgage Co. (226) In that case, a court employee conducted a fourteen-hour mediation session ending at 1:00 a.m. that resulted in an elderly woman of questionable capacity entering into a settlement agreement likely to lead to her being rendered homeless. (227) Although the court (under Magistrate Judge Brazil) found the settlement to be enforceable, (228) the process bespeaks an eagerness for settlement that is worrisome. The involvement of a court official, the length of the session, the hour of its conclusion, the condition of the party being pressed to accept an agreement, and the consequences of that agreement all betray an ardor for settlement that raises serious questions about the appearance of fairness, a consideration perhaps as important to the courts as fairness itself.
Even when the pressure to settle is resisted and a judicial hearing is secured, mandatory court-compelled ADR may seriously threaten the legitimacy of the proceedings through the message it sends to litigants. A number of ADR advocates have argued that facts and law are of limited value in resolving cases. (229) In this view, other factors, such as the parties' feelings, may often hold the key to resolution. (230) When representatives of the courts say such things to litigants in their efforts to obtain settlements, there is a substantial risk that the litigants will believe them and conclude that court processes and lawyers' efforts are of dubious value. Doubts stirred in this way are likely to be deepened if, as is sometimes the case, the neutral goes on to denigrate in-court litigation as expensive and unpredictable. (231) The net result of all this behavior is to erode the legitimacy of courtroom processes. (232)
C. The Reaction of Those Facing Compulsion
Compulsory ADR, whether mandated by contract or compelled by a court, is deeply disturbing to many litigants--so much so that it may poison litigant and lawyer attitudes about alternatives to courtroom adjudication and undermine acceptance of such processes. Over the past thirty years, a body of psychological evidence has accumulated demonstrating that Americans like and desire to use adversarial adjudicatory processes. This finding was first suggested in the pathbreaking research of John Thibaut and Laurens Walker (233) and has been confirmed in both simulation experiments and real-world empirical assessments conducted since then. (234)
There are a number of overlapping theories about why this is so. Some analyses have focused on the question of litigant control over the decisionmaking process. When participants feel in control of the identification and presentation of evidence, as they do in adversary proceedings, they are more likely to be satisfied with the process. The desire to control one's fate through the presentation of proof is remarkably strong. The attractiveness of control extends far beyond procedure. Corporate America, for example, has moved ever more of its disputes into systems that it can control and away from ones where third parties have substantial influence over the outcome. (235) A second theory about the attractiveness of adversarial courtroom processes is that they increase the perception of fairness. (236) Onlookers and participants frequently assess the legitimacy of dispute resolution mechanisms by how fair they seem. Where procedures are open and allow for full disputant participation in proof gathering and legal argument, satisfaction and allegiance grow. Distinct from this factor, but related to it, is the notion that adversarial methods provide participants with "voice." (237) Voice has been held by some researchers to be critical to satisfaction. Disputants feel that they have voice in the adjudicatory process when they are free to present their claims and can see that their views have been considered.
Compulsory ADR, in both its adhesion contract and its court-annexed guises, offers a number of challenges to the American allegiance to adversarialism. First, and most obviously, compulsory ADR cuts off access to the adversarial courts either permanently (in the case of adhesion contracts requiring arbitration) or in a manner that renders the prospect of an eventual hearing uncertain (in the case of mandatory court-compelled ADR). The resentment likely to arise from such a diversion poses a serious challenge to ADR and is likely to create suspicions about the alternatives being offered. The alternatives themselves are often structured in ways that heighten suspicion. In many cases, disputants are offered little or no information about the ADR professional who has been inserted into their case by legal mandate. Similarly, disputants may be exposed to procedures whose costs and risks are never explained to them, as exemplified in Green Tree Financial Corp.-Alabama v. Randolph. (238) Second, the alternative process is likely to be structured in a way that makes securing the assistance of counsel difficult, if not impossible. Stripping parties of the protection and assistance of counsel cannot help but foster further negative reaction. Third, the process is likely to be radically truncated, with diminished opportunity for discovery and interrogation. A skeptical disputant will see the process being offered as half measures and half answers. While it is important to remember that most disputants would never have had the chance to appear in an adversarial courtroom, disputants may perceive ADR as denying them any chance to pursue that goal. Moreover, the paternalistic assertion that claimants do not know what is best for them is not likely to sit very well with most people.
The results of compelling the use of ADR are predictable. No matter how benign its goals and its rhetoric, compelled ADR often thwarts disputant independence and fails to provide those sorts of procedures capable of assuaging concerns about fairness. It should come as no surprise that disputants resent and try to avoid compelled ADR. ADR's legitimacy is eroded by its association with compulsion. It does not look or feel "safe" to those forced to use it. (239) In a nation preoccupied with the value and benefits of free choice in the open market, compelled ADR is anomalous and suspect. Echoing this point, a number of commentators have wondered why, if ADR is so valuable, it has to be forced on consumers. (240) Disputant resistance might be ascribed to ignorance or hostility, but any other American business that made such assumptions about its customers would be likely to find itself in bankruptcy court in short order.
D. Compulsory Informal Processes and Bias
In 1985, Richard Delgado and a group of colleagues published a seminal article in which they argued that the movement to "deformalize" dispute resolution through ADR increased the risk of class-based discrimination in adjudication. (241) At its heart, their argument was that formal court rules and sanctions tend to reduce bias in ways that informal processes cannot. (242) Such rules and sanctions achieve this result both by policing the adjudicatory machinery and by emphasizing to decisionmakers (both judges and jurors) that they are expected to put aside their personal prejudices when considering legal matters presented to them by contesting litigants. Since 1985, a great deal more data have been developed on the relation between process and bias--most of it supporting Delgado's hypothesis. (243) The implication of this material is that informal processes, like ADR, which do not have protective structures and rules, are likely to foster more biased decisionmaking than their courtroom analogues.
The challenge of bias is a serious one in American society. Problems of race- and gender-based discrimination still bedevil us, as even the briefest examination of employment conditions on Wall Street will confirm. Compulsory ADR is ineffective in addressing such matters. It tends to solidify the control of the powerful, (244) impose a range of disadvantages on the weak, (245) and deflect energy from collective action. (246)
IV. WHAT SHOULD BE DONE ABOUT COMPULSION?
ADR has become a critical part of the adjudicatory machinery in America. In the small claims setting in particular, ADR has been found to be more effective than the courtroom alternative at satisfying participants. (247) In higher courts and in a wide range of adhesive arrangements, results are more mixed. Compulsion has generated a great deal of business for ADR but does not seem to have won it many friends or enhanced its legitimacy. As the NASD and the NYSE concluded about employment discrimination claims, the wisest course might be to abandon compulsion. Unfortunately, the likelihood that compulsion will be surrendered any time soon seems small. Adhesion contract drafters give no indication that they will voluntarily surrender their power to impose arbitration. Congress appears mired in the sort of political gridlock that makes legislating in this area virtually impossible. (248) At least a significant part of the ADR-provider industry has been lured by the prospect of large fees into adopting the drafters' point of view. And courts, in their own ADR programs, seem to have embraced compulsion in the hope of cutting caseloads by securing settlements.
Given these considerations, it is likely that the best that can be hoped for is that new approaches to compulsory ADR will be adopted and that the process's risks will be reduced. Perhaps the most important step that might be taken is to demand that ADR providers assemble a more diverse group of neutrals. It is no secret that ADR personnel are, to an overwhelming extent, middle-aged white males. (249) It is widely acknowledged within the ADR-provider industry that diversity efforts have not made much progress in changing that reality. (250) Perhaps one of the most telling pieces of evidence on the question of diversity comes from a volume published by the American Bar Association's Section of Dispute Resolution. In 1998, the section published a book entitled ADR Personalities and Practice Tips. (251) The book was designed to be a showcase for ADR neutrals and "made a conscious effort to seek contributors from diverse backgrounds." (252) An examination of the photographs provided in the book and of the names listed suggests that nineteen of the twenty-three participating neutrals were white, nineteen were male, and fifteen were middle-aged white men.
What are the consequences of a lack of diversity? The literature in the field suggests that homogeneity among dispute resolution personnel causes a series of difficulties. At the outset it should be noted that a majority of the individual litigants in ADR proceedings are women or minority-group members. (253) Delgado has argued that such disputants are more likely than others to be overborne by neutrals who are members of a so-called superior group or class. (254) There is, not infrequently, a subtle but tangible bias manifested by majority-group ADR neutrals toward minorities. (255) That bias has been identified in a number of studies, including one in which a correlation was found between claimant ethnicity and gender and the award received. (256) It was found in another study that the ethnicity and gender of mediators had "important implications for both the procedural and substantive outcomes of [the mediations]." (257) The absence of diversity not only affects outcomes, it also breeds distrust. That was certainly the case in the NASD/NYSE setting, and led one Wall Street firm, Salomon Smith Barney, to promise that a female arbitrator would be placed on every one of its three-person arbitration panels. (258) Diversity is not only appreciated by disputants but by ADR neutrals as well. Judge Brazil has argued that only when there is a diverse pool of neutrals is there adequate opportunity for the sharing of needed "experience and perspectives." (259)
When inquiry is made into ADR diversity, it is striking how few data exist. One provider representative acknowledged that the reason for the scarcity of information was that the industry has performed poorly in terms of diversity. (260) An early inquiry by the National Academy of Arbitrators found that even the not-for-profit American Arbitration Association kept inadequate data about the qualifications and background of individuals on its panels. (261) Confronted with this problem, California sought to use a proxy solution in an effort to screen for bias. It required all arbitrators hearing California contractual arbitration cases to disclose whether they are members of clubs that discriminate. (262) There is no likelihood that the ADR diversity problem will be remedied anytime soon. There is little option but to echo advice from a ten-year-old study published in the Stanford Law Review which urged that disputants be given a considerable list of ADR neutrals from which to choose. (263) In addition, those who champion ADR should view diversity as a challenge they need to address.
A second step that may help reduce the risks created by compulsion is to introduce greater transparency into the operations of compulsory ADR programs. As things now stand, ADR services are delivered in an "environment of secrecy." (264) Even the rules that govern ADR are frequently hidden in masses of legal jargon or flied away where customers cannot find them. (265) When asked to explain arbitration requirements, employees of the companies that impose them often admit they have no more information than their customers. (266) In light of the Supreme Court's decision in Randolph, the rules can be indecipherably cryptic even with respect to such critical matters as the costs and fees to claimants. In addition, parties seeking hearings are often provided inadequate information concerning the neutrals who have been nominated to handle their case. (267) In recognition of this problem, California's ethics rules mandate a series of disclosures about potential conflicts of interest, the neutral's prior decisions, and a number of other matters. (268)
ADR proceedings themselves are walled off from public view. Generally, third parties are not permitted to attend hearings, (269) nor is the public granted any sort of access. (270) Often there is no record kept of the proceedings, so a detailed reconstruction of what happened is impossible. (271) Since, in many cases, no reasoned decision or recitation of factual and legal findings is required, case results are immune to rational examination. (272) It is to be expected that all of this secrecy is likely to breed suspicion, especially when it is coupled with compulsion. If attempts are to be made to gain greater public trust in ADR while compulsion continues, openness with respect to processes and outcomes must be expanded.
One further important step that could be taken to reduce the risks created by compulsion is a shift in attitude by those responsible for the operation and oversight of ADR programs. Judge Brazil has emphasized that ADR should not be thought of as a replacement for adjudication but as a set of opportunities provided "in addition to" the courtroom. (273) If such a view is sincerely pursued in court-annexed programs, cases that should be tried in a courtroom can be tried there. Settlement pressures may be reduced and a cooperative relation between courts and ADR providers can be encouraged. If claimants can be convinced that a sincere willingness to try appropriate cases exists, they may come to view ADR with less suspicion and resentment.
In the adhesion contract setting, such a shift in attitude will require greater judicial willingness to strike down unconscionable arbitration requirements and a society-wide willingness to put pressure on drafters to behave in a more reasonable manner. In the present legal climate, that may be expecting too much. There may be no good solution short of creating a new regulatory body to watch over ADR providers, perhaps a more robust version of the securities industry's SICA. While SICA and the rest of the overview machinery in the securities industry has been far from perfect, it has helped police the industry's ADR effort, publicized problems, and screened proposed reforms.
Unfortunately, there is little likelihood that open and reasonable attitudes will grow in the near future. A significant part of the ADR industry is wedded to the profit motive and finds itself in thrall to corporate interests. Moreover, the ADR idea has been appropriated, to a significant extent, by political forces identified with "tort reform." (274) Groups desirous of neutralizing the common law torts process, including the Civil Justice Reform Task Force and the American Corporate Counsel Association, have become avid boosters of ADR. (275) They and a number of others have poured a great deal of money and effort into shunting an ever-increasing flow of cases into private rather than public adjudication. This "privatization" of the judicial process (276) is part of a broader political push that has seen the rise of private prisons, charter schools, and gated communities. The challenges posed by such changes have been considered elsewhere and will not be addressed here. But it should be remarked that whatever the merits of privatization in other contexts, its adoption in the civil justice realm strikes at the heart of the rule of law. (277) Such a shift substitutes private and secret processes for public and open ones. It allows adhesion contract drafters to rewrite democratically enacted legislation. These changes challenge the very principle of democratic governance.
The effect of ADR becoming a key tool in the tort reform effort was to undermine the system's ability to convince a large part of the populace that ADR should ever be trusted. The shame is that as the political war rages, ADR may find itself one of the dispute's most prominent casualties, a target of those seeking to strike back at compulsion and corporate dominance.
(1.) See Katherine Van Wezel Stone, Rustic Justice: Community and Coercion Under the Federal Arbitration Act, 77 N.C.L. REV. 931, 996-1005 (1999).
(2.) Securities Acts Amendments of 1975 [section] 3(6), 15 U.S.C. [section] 78c(a)(26)(2000).
(3.) See Stone, supra note 1, at 1002-05.
(4.) Id. at 1002.
(5.) See id. at 1002-05.
(6.) See Edward Brunet, Toward Changing Models of Securities Arbitration, 62 BROOK. L. REV. 1459, 1465 (1996) (discussing elements of the Securities Acts Amendments of 1975, Pub. L. No. 94-29, 89 Stat. 97 (codified as amended in scattered sections of 15 U.S.C.)).
(7.) See Constantine N. Katsoris, SICA: The First 20 Years, 23 FORDHAM URB. L.J. 483, 488-89 (1996).
(8.) Deborah Masucci, Securities Arbitration--A Success Story: What Does the Future Hold?, 31 WAKE FOREST L. REV. 183, 186-87 (1996); Thomas J. Stipanowich, Contract and Conflict Management, 2001 WIS. L. REV. 831, 900-01.
(9.) Stone, supra note 1, at 1002-03.
(10.) See, e.g., Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 260-66 (1987) (Blackmun, J., concurring in part and dissenting in part).
(11.) See, e.g., id. at 233-34.
(12.) 15 U.S.C. [subsection] 78a-78mm (2000).
(13.) 18 U.S.C. [subsection] 1961-1968 (2000).
(14.) McMahon, 482 U.S. 220.
(15.) 9 U.S.C. [subsection] 1-14 (2000).
(16.) McMahon, 482 U.S. at 226 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).
(17.) Id. (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985)).
(18.) David S. Schwartz, Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration, 1997 WIS. L. REV. 33, 89.
(19.) 500 U.S. 20, 23-24 (1991).
(20.) Id. at 23.
(21.) See Todd D. Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 HARV. L. REV. 1173, 1177 (1983). The Court more or less acknowledged this point when it addressed Gilmer's argument that the agreement he signed arose in a situation of "unequal bargaining power." Gilmer, 500 U.S. at 33.
(22.) Gilmer, 500 U.S. at 29.
(24.) See Carroll E. Neesemann et al., The Law of Securities Arbitration, in SECURITIES ARBITRATION 2002: TAKING CONTROL OF THE PROCESS 821, 845-46 (PLI Corp. Law & Practice Course, Handbook Series No. 1327, 2002); Norman S. Poser, When ADR Eclipses Litigation: The Brave New World of Securities Arbitration, 59 BROOK. L. REV. 1095, 1104 (1993) (detailing securities customers' concerns with compelled arbitration); see also Katherine Van Wezel Stone, Mandatory Arbitration of Individual Employment Rights: The Yellow Dog Contract of the 1990s, 73 DENV. U. L. REV. 1017, 1046-47 (1996) (detailing criticism of mandatory arbitration of workers' statutory rights, especially regarding sexual harassment).
(25.) Markey was the chair of the Subcommittee on Telecommunications and Finance of the House of Representatives's Committee on Energy and Commerce. An explanation of his reasons for commissioning the GAO report were set forth in his testimony to a Senate committee. Edward Markey, Testimony Before the Senate Banking, Housing, and Urban Affairs Committee (July 31, 1998), available at http://banking.senate.gov/98_07hrg/ 072898/witness/markey.htm.
(26.) GEN. ACCOUNTING OFFICE, EMPLOYMENT DISCRIMINATION: HOW REGISTERED REPRESENTATIVES FARE IN EMPLOYMENT DISPUTES 8 (1994).
(27.) Id. (It should be noted that the GAO's staff was only able to identify the race of 48% of the arbitrator pool.)
(28.) Constantine N. Katsoris, The Resolution of Securities Disputes, 6 FORDHAM J. CORP. & FIN. L. 307, 358 (2001).
(30.) See generally Robert E. Meade, Commercial Dispute Resolution Procedures (Including Mediation and Arbitration Rules), in CONSUMER DUE PROCESS PROTOCOL 385, 461 (PLI Corp. Law & Practice Course, Handbook Series No. 1102, 1999); Carrie Menkel-Meadow, Do the "Haves" Come Out Ahead in Alternative Judicial Systems?: Repeat Players in ADR, 15 OHIO ST. J. ON DISP. RESOL. 19, 42 (1999) (describing the "Due Process Protocol").
(31.) See Katsoris, supra note 28, at 359-60.
(32.) Patrick McGeehan, The Women of Wall Street Get Their Day in Court, N.Y. TIMES, July 11, 2004, [section] 3, at 5.
(34.) See, e.g., Patrick McGeehan, What Merrill's Women Want, N.Y. TIMES, Aug. 22, 2004, [section] 3, at 1.
(35.) Patrick McGeehan, Discrimination on Wall St.? The Numbers Tell the Story, N.Y. TIMES, July 14, 2004, [section] 3, at 1. The Supreme Court has upheld the EEOC's authority to sue, at least in some circumstances, despite the existence of a predispute arbitration agreement. See EEOC v. Waffle House, Inc., 534 U.S. 279, 297-98 (2002).
(36.) Patrick McGeehan, Court Makes Merrill's Past Part of Sex Bias Arbitration, N.Y. TIMES, Aug. 4, 2004, at C2.
(37.) Paul Rose, Developing a Market for Employment Discrimination Claims in the Securities Industry, 48 UCLA L. REV. 399, 413-14 (2000). It should be noted, however, that this proposal and the steps taken pursuant to it did not prohibit member organizations from continuing to require arbitration on their own. I am indebted to Jean Sternlight for bringing this distinction to my attention.
(38.) Id. at 413.
(39.) Id. at 417.
(40.) See McGeehan, supra note 36.
(41.) See generally JEROLD S. AUERBACH, JUSTICE WITHOUT LAW? (1983).
(42.) LAWRENCE M. FRIEDMAN, A HISTORY OF AMERICAN LAW 81-84 (1973); Schwartz, supra note 18, at 70.
(43.) Schwartz, supra note 18, at 70-72.
(45.) Id. at 73-74.
(46.) Id. at 75; see also Stone, supra note 1, at 979-91 (discussing the development of New York's precursor legislation).
(47.) MODEL STANDARDS OF CONDUCT FOR MEDIATORS, Standard I (1994), available at http://www.adr.org/sp.asp?id=22118.
(48.) See Harry T. Edwards, Where Are We Heading with Mandatory Arbitration of Statutory Claims in Employment?, 16 GA. ST. U. L. REV. 293, 296-98 (1999) (discussing the problems associated with compelled arbitration of claims that arise under public statutes).
(49.) Joseph B. Stulberg, Questions, 17 OHIO ST. J. ON DISP. RESOL. 531, 534 (2002).
(50.) See Wayne D. Brazil, Court ADR 25 Years After Pound: Have We Found a Better Way?, 18 OHIO ST. J. ON DISP. RESOL. 93, 133 (2002).
(51.) Id. at 146.
(52). See, e.g., Wayne D. Brazil, Continuing the Conversation About the Current Status and the Future of ADR: A View from the Courts, 2000 J. DISP. RESOL. 11, 13 (observing that "underutilization has generally been the experience" in voluntary programs).
(53.) See, e.g., Richard C. Reuben, Constitutional Gravity: A Unitary Theory of Alternative Dispute Resolution and Public Civil Justice, 47 UCLA L. REV. 949, 958-59 (2000) (identifying "the gap between high support for ADR and low actual voluntary usage").
(54.) Susan S. Silbey, The Emperor's New Clothes: Mediation Mythology and Markets, 2002 J. DISP. RESOL. 171, 174.
(55.) This poll is discussed in Dorothy Wright Nelson, ADR in the Federal Courts--One Judge's Perspective: Issues and Challenges Facing Judges, Lawyers, Court Administrators, and the Public, 17 OHIO ST. J. ON DISP. RESOL. 1, 7 (2001).
(56.) See id.
(57.) See Brazil, supra note 50, at 124-32 (discussing sources of judicial skepticism toward ADR).
(58.) See Reuben, supra note 53, at 984 (discussing lawyers' discomfort with and skepticism about ADR).
(59.) See Silbey, supra note 54, at 174 (discussing the public's ambivalence about ADR).
(60.) Joshua D. Rosenberg & H. Jay Folberg, Alternative Dispute Resolution: An Empirical Analysis, 46 STAN. L. REV. 1487, 1488, 1538 (1994).
(61.) See Charles L. Knapp, Taking Contracts Private: The Quiet Revolution in Contract Law, 71 FORDHAM L. REV. 761,776 (2002); Stipanowich, supra note 8, at 888.
(62.) See supra note 21 and accompanying text.
(63.) See, e.g., Louise LaMothe, Avoiding Potholes in Mandatory Employment Arbitration: A Look at Recent California Decisions, DISP. RESOL. J., May-Jul. 2003, at 18 (discussing arbitration in California employment context); Rakoff, supra note 21, at 1195.
(64.) Friedrich Kessler, Contracts of Adhesion--Some Thoughts About Freedom of Contract, 43 COLUM. L. REV. 629, 640 (1943).
(65.) Henningsen v. Bloomfield Motors, Inc., 161 A.2d 69, 86 (N.J. 1960).
(66.) See Schwartz, supra note 18, at 110-13.
(67.) 346 U.S. 427, 435-37 (1953).
(68.) 15 U.S.C. [subsection] 77a-77aa (2000); see also Wilko, 346 U.S. at 438.
(69.) Schwartz, supra note 18, at 90; see Am. Safety Equip. Corp. v. J.P. Maguire & Co., 391 F.2d 821,826-27 (2d Cir. 1968).
(70.) 460 U.S. 1, 24-25 (1983).
(71.) 465 U.S. 1, 3-4, 16 (1984).
(72.) 473 U.S. 614, 617-19, 640 (1985).
(73.) Id. at 625-27.
(74.) Shearson/American Express Inc. v. McMahon, 482 U.S. 220 (1987); see supra notes 12-17 and accompanying text.
(75.) de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 481 (1989).
(76.) Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991); see supra notes 19-23 and accompanying text.
(77.) See, e.g., Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91-92 (2000); Doctor's Assocs. v. Casarotto, 517 U.S. 681,687-88 (1996); Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 268-70 (1995).
(78.) See, e.g., Reuben, supra note 53, at 1031; Schwartz, supra note 18, at 36; Stipanowich, supra note 8, at 888.
(79.) Christopher R. Drahozal, "Unfair" Arbitration Clauses, 2001 U. ILL. L. REV. 695, 726-27.
(80.) URBAN D. OZANNE & SHELBY D. HUNT, SMALL BUS. ADMIN., THE ECONOMIC EFFECTS OF FRANCHISING (1971), cited in Drahozal, supra note 79, at 727 n.223.
(81.) Robert W. Emerson, Franchise Contract Clauses and the Franchisor's Duty of Care Toward Its Franchisees, 72 N.C.L. REV. 905 app. at 973 (1994), cited in Drahozal, supra note 79, at 727 n.222.
(82.) Drahozal, supra note 79, at 726-27.
(83.) See Lisa B. Bingham, Why Suppose? Let's Find Out: A Public Policy Research Program on Dispute Resolution, 2002 J. DISP. RESOL. 101, 109-10.
(84.) See Stipanowich, supra note 8, at 848.
(85.) 5 U.S.C. [subsection] 571-584 (2000).
(86.) See Bingham, supra note 83, at 112.
(87.) Drahozal, supra note 79, at 739 (stating that in the large majority of these cases arbitration was avoidable at the drafter's option alone; in the remainder, there was a categorical exclusion or an option available to either party).
(88.) For a description of ENE procedure, see Rosenberg & Folberg, supra note 60, at 1490-91.
(89.) For a description of mediation, see Stipanowich, supra note 8, at 847.
(90.) Judith Resnik, Mediating Preferences: Litigant Preferences for Process and Judicial Preferences for Settlement, 2002 J. DISP. RESOL. 155, 157.
(91.) FED. R. CIV. P. 16(c), (c)(9).
(92.) See generally Daisy Hurst Floyd, Can the Judge Do That?--The Need for a Clearer Judicial Role in Settlement, 26 ARIZ. ST. L.J. 45, 51, 53 (1994) (explaining that the amended Federal Rule of Civil Procedure 16 codified judges' common practice of attempting to settle cases and noting that a 1980 study found that judges initiated settlement discussions in seventy-five percent of federal jury trials).
(93.) 28 U.S.C. [subsection] 471-482 (2000).
(94.) See Brazil, supra note 50, at 117 n.70.
(95.) See Nelson, supra note 55, at 6-7.
(96.) 28 U.S.C. [subsection] 651-658 (2000).
(97.) Brazil, supra note 50, at 112 (citing 28 U.S.C. [section] 652(a)).
(99.) See Nelson, supra note 55, at 7.
(100.) See Wayne D. Brazil, For Judges: Suggestions About What to Say About ADR at Case Management Conferences--And How to Respond to Concerns or Objections Raised by Counsel, 16 OHIO ST. J. ON DISP. RESOL. 165, 169 (2000) (citing N.D. CAL. ADR R. 3-5(b) (2000)).
(101.) Id. at 187.
(102.) Id. at 192 (illustrating the impact of the ADRA by means of a hypothetical dialogue).
(103.) See Reuben, supra note 53, at 972.
(104.) See Brazil, supra note 52, at 14-15.
(105.) Roselle Wissler, The Effectiveness of Court-Connected Dispute Resolution in Civil Cases, CONFLICT RESOL. Q., Fall-Winter 2004, at 55, 63.
(106.) See, e.g., John Lande, Using Dispute System Design Methods to Promote Good-Faith Participation in Court-Connected Mediation Programs, 50 UCLA L. REV. 69, 78-80 (2002) (listing states and courts with good faith requirements); John P. McCrory, Mandated Mediation of Civil Cases in State Courts: A Litigant's Perspective on Program Model Choices, 14 OHIO ST. J. ON DISP. RESOL. 813, 848 & n.130 (1999) (describing good faith requirements in Ohio, Georgia, and Maine); Roselle L. Wissler, Court-Connected Mediation in General Civil Cases: What We Know from Empirical Research, 17 OHIO ST. J. ON DISP. RESOL. 641,658 (2002).
(107.) See Kathleen M. Scanlon, A Case for Judicial Accountability: When Courts Add a Settlement Detour to the Traditional Appellate "Path," 17 OHIO ST. J. ON DISP. RESOL. 379, 396 & n.71 (noting good faith requirements in the Second, Seventh, and First Circuits).
(108.) Carol L. Izumi & Homer C. La Rue, Prohibiting "Good Faith" Reports Under the Uniform Mediation Act: Keeping the Adjudication Camel out of the Mediation Tent, 2003 J. DISP. RESOL. 67, 76.
(109.) See id.
(110.) See Brazil, supra note 50, at 142-43.
(111.) Id. at 143.
(112.) See Edward F. Sherman, Court-Mandated Alternative Dispute Resolution: What Form of Participation Should Be Required?, 46 SMU L. REV. 2079, 2094 (1993).
(113.) Brazil, supra note 52, at 31-33.
(114.) Brazil, supra note 100, at 180.
(115.) See Reuben, supra note 53, at 1015.
(116.) 15 U.S.C. [subsection] 1601-1667 (2000).
(117.) See Mourning v. Family Publ'ns Serv., Inc., 411 U.S. 356, 363-64 (1973); Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246, 248 (3d Cir. 1980).
(118.) See 15 U.S.C. [section] 1640 (granting successful plaintiffs the right to seek attorneys' fees).
(119.) 531 U.S. 79, 83-84 (2000).
(120.) Id. at 90.
(121.) Randolph v. Green Tree Fin. Corp.-Ala., 178 F.3d 1149, 1158 (11th Cir. 1999).
(122.) 531 U.S. at 91-92; see id. at 94 (Ginsburg, J., dissenting) (emphasizing the adhesive nature of the clause).
(123.) 15 U.S.C. [subsection] 2301-2312 (2000).
(124.) Id. [section] 2310(a)(3).
(125.) See, e.g., Davis v. S. Energy Homes, Inc., 305 F.3d 1268, 1270 (11th Cir. 2002); Walton v. Rose Mobile Homes LLC, 298 F.3d 470, 471-72 (5th Cir. 2002); Wilson v. Waverlee Homes, Inc., 954 F. Supp. 1530, 1532 (M.D. Ala. 1997).
(126.) See, e.g., Davis, 305 F.3d at 1270; Walton, 298 F.3d at 479. But see, e.g., Wilson, 954 F. Supp. at 1539-40.
(127.) See Mace E. Gunter, Can Warrantors Make an End Run? The Magnuson-Moss Act and Mandatory Arbitration in Written Warranties, 34 GA. L. REV. 1483 (2000); Daniel G. Lloyd, The Magnuson-Moss Warranty Act v. The Federal Arbitration Act: The Quintessential Chevron Case, 16 LOY. CONSUMER L. REV. 1 (2003). But see Katie Wiechens, Arbitrating Consumer Claims Under the Magnuson-Moss Warranty Act, 68 U. CHI. L. REV. 1459 (2001).
(128.) MONT. CODE ANN. [section] 27-5-114(4) (1995) (prior to 1997 amendment); Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681,683 (1996).
(129.) Casarotto, 517 U.S. at 688.
(130.) Jean R. Sternlight, Mandatory Binding Arbitration and the Demise of the Seventh Amendment Right to a Jury Trial, 16 OHIO ST. J. ON DISP. RESOL. 669, 698-703 (2001); see also Stone, supra note 1, at 962-64.
(131.) See Jean R. Sternlight, As Mandatory Binding Arbitration Meets the Class Action, Will the Class Action Survive?, 42 WM. & MARY L. REV. 1, 28-31 (2000).
(132.) See id. at 30.
(133.) Telephone Interview with Jay Welsh, General Counsel, Judicial Arbitration and Mediation Services, Inc. (JAMS) (June 24, 2004) [hereinafter Welsh Call]; see also Jean R. Sternlight & Elizabeth J. Jenson, Using Arbitration to Eliminate Consumer Class Actions: Efficient Business Practice or Unconscionable Abuse?, LAW & CONTEMP. PROBS., Winter/ Spring 2004, at 75, 75-76.
(134.) See Champ v. Siegel Trading Co., 55 F.3d 269, 274-75 (7th Cir. 1995) (summarizing holdings from seven circuits rejecting class actions based on the presence of an arbitration agreement).
(135.) See Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003) (recognizing, in a divided opinion, arbitrator authority to decide whether classwide arbitration was allowed when the underlying agreement was silent on the permissibility of class action proceedings).
(136.) See, e.g., Keating v. Superior Court, 645 P.2d 1192 (Cal. 1982), rev'd in part on other grounds, Southland Corp. v. Keating, 465 U.S. 1 (1984); Kalman Floor Co. v. Jos. L. Muscarelle, Inc., 481 A.2d 553 (N.J. Super. Ct. App. Div. 1984), aff'd, 486 A.2d 334 (N.J. 1985).
(137.) See Drahozal, supra note 79, at 731-32.
(138.) Johanna Harrington, Comment, To Litigate or Arbitrate? No Matter--The Credit Card Industry Is Deciding for You, 2001 J. DISP. RESOL. 101, 102.
(139.) Id. at 104-05.
(140.) See STEPHAN LANDSMAN, READINGS ON ADVERSARIAL JUSTICE: THE AMERICAN APPROACH TO ADJUDICATION 2 (1988).
(141.) Sally Lloyd-Bostock & Cheryl Thomas, The Continuing Decline of the English Jury, in WORLD JURY SYSTEMS 53, 59 (Neil Vidmar ed., 2000).
(142.) See Sternlight, supra note 130.
(143.) Oscar G. Chase, American "Exceptionalism" and Comparative Procedure, 50 AM. J. COMP. L. 277, 292-94 (2002).
(144.) Mark E. Budnitz, Arbitration of Disputes Between Consumers and Financial Institutions: A Serious Threat to Consumer Protection, 10 OHIO ST. J. ON DISP. RESOL. 267, 283 & nn.140-42 (1995).
(145.) Drahozal, supra note 79, at 759. In Drahozal's sample of franchise agreements, forty-four percent adopted the "English rule" requiring the loser to pay both sides' legal fees. Id.
(146.) See id. at 759-60.
(147.) See Knapp, supra note 61, at 783-84.
(148.) 173 F.3d 933 (4th Cir. 1999).
(149.) Id. at 936.
(150.) Id. at 938-39.
(151.) Id. at 940.
(152.) Keith N. Hylton, Agreements to Waive or to Arbitrate Legal Claims: An Economic Analysis, 8 SUP. CT. ECON. REV. 209, 235 (2000), cited in Drahozal, supra note 79, at 757; see also Stone, supra note 24, at 1047 (discussing an apparent trend toward using arbitration requirements to thwart employment-related litigation, particularly regarding claims by working women).
(153.) Graham v. Scissor-Tail, Inc., 623 P.2d 165, 168 (Cal. 1981).
(154.) Id. at 177.
(155.) See, e.g., Keystone, Inc. v. Triad Sys. Corp., 971 P.2d 1240 (Mont. 1998) (finding void a provision in an arbitration agreement that required a hearing in California even though the dispute arose in Montana).
(156.) Drahozal, supra note 79, at 733.
(157.) 163 F.3d 1230, 1234 (10th Cir. 1999).
(158.) See Michael H. LeRoy & Peter Feuille, When Is Cost an Unlawful Barrier to Alternative Dispute Resolution? The Ever Green Tree of Mandatory Employment Arbitration, 50 UCLA L. REV. 143 (2002).
(159.) 43 F.3d 1244 (9th Cir. 1994). The franchisee's statutory claims were based on the Petroleum Marketing Practices Act, 15 U.S.C. [subsection] 2801-2806 (2000), and included punitive damages and attorneys' fees. Both were barred by the ARCO contract. Graham Oil Co., 43 F.3d at 1248-49.
(160.) 933 F. Supp. 1025 (D.N.M. 1996).
(161.) See supra notes 145-46 and accompanying text.
(162.) Engalla v. Permanente Med. Group, Inc., 938 P.2d 903 (Cal. 1997).
(163.) Stipanowich, supra note 8, at 898.
(164.) CAL. HEALTH & SAFETY CODE [section] 1373.20 (West 2000); Marc A. Rodwin, Backlash as Prelude to Managing Managed Care, 24 J. HEALTH POL. POL'Y & LAW 1115, 1118 (1998).
(165.) See Reuben, supra note 53, at 964 & n.43; Stipanowich, supra note 8, at 878.
(166.) Resnik, supra note 90, at 167.
(167.) See James F. Henry, Some Reflections on ADR, 2000 J. OF DISP. RESOL. 63, 6768; Anthony M. Aarons, Packaging ADR, CAL. LAW., Feb. 1998, at 26, cited in Reuben, supra note 53, at 964 n.43.
(168.) See Schwartz, supra note 18, at 60-61.
(169.) See Sternlight, supra note 131, at 72 n.278.
(170.) See Caroline E. Mayer, Win Some, Lose Rarely?: Arbitration Forum's Rulings Called One-Sided, WASH. POST, Mar. 1, 2000, at E1.
(174.) Sternlight, supra note 131, at 72 n.278.
(175.) 75 F. Supp. 2d 1368, 1370 (S.D. Fla. 1999), stay granted by 79 F. Supp. 2d 1350 (S.D. Fla. 1999), rev'd and vacated by 260 F.3d 625 (11th Cir. 2001).
(178.) 734 N.Y.S.2d 389, 394-96 (Civ. Ct. 2001).
(179.) 116 Cal. Rptr. 2d 671, 681-82 (Ct. App. 2002).
(180.) 298 F.3d 778, 785-86 (9th Cir. 2002).
(181.) On May 17, 2004, Trial Lawyers for Public Justice filed a lawsuit alleging that the NAF had violated its obligations under CAL. CIV. PROC. CODE [section] 1281.96 (West Supp. 2005) to provide a set of mandated details about its consumer arbitrations in California. The lawsuit is Corbett v. National Arbitration Forum, No. 04-431430 (Cal. Super. Ct. filed May 17, 2004). Press Release, Trial Lawyers for Public Justice, TLPJ Charges National Arbitration Forum with Violating CA Disclosure Law (May 17, 2004), available at http://www.tlpj.org/pr/naf_051704.htm.
(182.) Nat'l Arbitration Forum, Consumer ADR Proceedings in California, at http://www.arb-forum.com/focus/consumers/ca_consumer.asp (last visited Feb. 20, 2005); see also Am. Arbitration Assoc., Disclosures for California Consumer Cases, at http://www.adr.org/sp.asp?id=21856 (last visited Mar. 17, 2005); Judicial Arbitration and Mediation Servs., Inc., Consumer Arbitration--JAMS Disclosures for California Consumer Arbitrations, at http://www.jamsadr.com/arbitration/consumer_arbitration_data.asp (last visited Feb. 20, 2005).
Comparing the NAF's response to California's reporting requirements to those of the AAA and JAMS reveals that the NAF presents the data disclosure as an act of largess. The NAF leaves the inquiring party with the impression that the NAF is not bound by the California Arbitration Act but chooses to make the disclosure anyway. The AAA and JAMS simply state that they provide the disclosure information pursuant to California's reporting requirements. Additionally, study of the disclosures provided by the three ADR providers in December 2004 revealed that the NAF's disclosure was a single page, whereas the AAA's was 512 pages and JAMS's was 532 pages.
(183.) 135 F.3d 27, 30 (1st Cir. 1998).
(184.) Id. at 36.
(185.) See Reuben, supra note 53, at 1059 n.531.
(186.) See Stephan Landsman, Death of an Accountant: The Jury Convicts Arthur Andersen of Obstruction of Justice, 78 CHI.-KENT L. REV. 1203, 1204-17 (2003).
(187.) See LeRoy & Feuille, supra note 158, at 158.
(188.) See id. at 158-65.
(189.) Id. at 160 n.95.
(190.) See Jay Folberg, Arbitration Ethics--Is California the Future?, 18 OHIO ST. J. ON DISP. RESOL. 343 app. at 361 (2003).
(191.) Id. at 344.
(192.) See id. at 347-52.
(193.) See id. at 352-57; Keisha I. Patrick, Note, A New Era of Disclosure: California Judicial Council Enacts Arbitrator Ethics Standards, 2003 J. OF DISP. RESOL. 271, 296-98.
(194.) Folberg, supra note 190, at 352-53. The federal court hearing the lawsuit dismissed it on Eleventh Amendment grounds. Id.
(195.) See Patrick, supra note 193, at 291 n.197.
(196.) See Folberg, supra note 190, at 355.
(197.) See LAURENCE H. TRIBE, AMERICAN CONSTITUTIONAL LAW 550-56 (1978); Jerry L. Mashaw, Administrative Due Process: The Quest for a Dignitary Theory, 61 B.U.L. REV. 885, 899-906 (1981).
(198.) See Brazil, supra note 50, at 115; Rosenberg & Folberg, supra note 60, at 1489 (stating that "the ENE process varied significantly from case to case and from neutral to neutral").
(199.) Wissler, supra note 106, at 656.
(200.) Id. at 679.
(201.) See id. at 684 (noting that the statistic was due to cases that did not settle).
(202.) Brazil, supra note 50, at 115.
(203.) See Wissler, supra note 105, at 63-64.
(204.) See, e.g., Deborah R. Hensler, Suppose It's Not True: Challenging Mediation Ideology, 2002 J. DISP. RESOL. 81, 97; Murray S. Levin, The Propriety of Evaluative Mediation: Concerns About the Nature and Quality of an Evaluative Opinion, 16 OHIO ST. J. ON DISP. RESOL. 267, 287 (2001).
(205.) See Brazil, supra note 50, at 120-22.
(206.) See Robert W. Rack, Jr., Thoughts of a Chief Circuit Mediator on Federal Court-Annexed Mediation, 17 OHIO ST. J. ON DISP. RESOL. 609, 612 (2002).
(207.) Brazil, supra note 52, at 27.
(209.) Id. at 28.
(210.) Id. at 28, 35 (warning about the risk of creating the impression of an "old boys' network" and highlighting the need for a "competitive bidding" process).
(211.) See Goldberg v. Kelly, 397 U.S. 254, 268-70 (1970) ("The right to be heard would be, in many cases, of little avail if it did not comprehend the right to be heard by counsel.") (quoting Powell v. Alabama, 287 U.S. 45, 68-69 (1932)).
(212.) Brazil, supra note 100, at 169-70.
(214.) Rosenberg & Folberg, supra note 60, at 1525.
(216.) See Brazil, supra note 50, at 123.
(217.) See Goldberg v. Kelly, 397 U.S. 254, 267 (1970).
(218.) Brazil, supra note 52, at 19-22; Laurie Leader & Melissa Burger, Let's Get a Vision: Drafting Effective Arbitration Agreements in Employment and Effecting Other Safeguards to Insure [sic] Equal Access to Justice, 8 EMPLOYEE RTS. & EMP. POL'Y J. 87, 121 (2004).
(219.) Rack, supra note 206, at 622.
(220.) See Wissler, supra note 106, at 674 & n. 118.
(221.) Resnik, supra note 90, at 159.
(222.) See, e.g., Rack, supra note 206, at 621-22.
(223.) Brazil, supra note 50, at 123.
(225.) See id. at 121-22. On the corrosive effect of settlement pressure on mediators and their use of coercive tactics, see Peter N. Thompson, Enforcing Rights Generated in Court-Connected Mediation--Tension Between the Aspirations of a Private Facilitative Process and the Reality of Public Adversarial Justice, 19 OHIO ST. J. ON DISP. RESOL. 509, 514, 527-28 (2004).
(226.) 68 F. Supp. 2d 1110 (N.D. Cal. 1999).
(227.) Id. at 1117.
(228.) Id. at 1151. For a discussion of other cases like Olam, see Thompson, supra note 225, at 529-30.
(229.) See, e.g., Brazil, supra note 50, at 111.
(231.) Hensler, supra note 204, at 96.
(233.) See JOHN THIBAUT & LAURENS WALKER, PROCEDURAL JUSTICE: A PSYCHOLOGICAL ANALYSIS (1975).
(234.) For a thumbnail sketch of the literature, see Hensler, supra note 204, at 85-95.
(235.) See Stipanowich, supra note 8, at 848-49.
(236.) See Hensler, supra note 204, at 88-91, 94.
(237.) Id. at 92-93 (reviewing the work of Tom Tyler and E. Allan Lind).
(238.) 531 U.S. 79, 89-92 (2000); see also supra notes 119-22 and accompanying text.
(239.) See Reuben, supra note 53, at 984.
(240.) See, e.g., Knapp, supra note 61, at 792.
(241.) Richard Delgado et al., Fairness and Formality: Minimizing the Risk of Prejudice in Alternative Dispute Resolution, 1985 WIS. L. REV. 1359. (242.) Id. at 1368.
(243.) See, e.g., Tom R. Tyler & E. Allan Lind, Procedural Justice, in HANDBOOK OF JUSTICE RESEARCH IN LAW 65, 65-92 (Joseph Sanders & V. Lee Hamilton eds., 2001).
(244.) Delgado et al., supra note 241, at 1392-94 (relying primarily on the work of Richard Abel).
(245.) Id. at 1394-95.
(246.) Id. at 1397.
(247.) See Wissler, supra note 105, at 55-60 (reviewing ten studies of small claims ADR).
(248.) See, e.g., Consumer Credit Fair Dispute Resolution Act of 2001, S. 192, 107th Cong. (2001); Consumer Fairness Act of 1999, H.R. 2258, 106th Cong. (1999). These rejected bills are but two examples of Congress's inability to deal with the problem.
(249.) Nicole Buonocore, Resurrecting a Dead Horse--Arbitrator Certification as a Means to Achieve Diversity, 76 U. DET. MERCY L. REV. 483, 483 (1999).
(250.) Welsh Call, supra note 133. In our conversation, Mr. Welsh, the general counsel of JAMS, indicated that ADR providers had not effectively dealt with the diversity problem and are where the court system was "twenty-five years ago." Id.
(251.) SECTION OF DISPUTE RESOLUTION, AM. BAR ASS'N, ADR PERSONALITIES AND PRACTICE TIPS (James J. Alfini & Eric R. Galton eds., 1998).
(252.) Id. at vii.
(253.) Wissler, supra note 106, at 653 n.45.
(254.) Delgado et al., supra note 241, at 1403.
(255.) See Nancy A. Welsh, Remembering the Role of Justice in Resolution: Insights from Procedural and Social Justice Theories, 54 J. LEGAL EDUC. 49, 54 (2004).
(256.) See Gary LaFree & Christine Rack, The Effects of Participants' Ethnicity and Gender on Monetary Outcomes in Mediated and Adjudicated Civil Cases, 30 LAW & SOC'Y REV. 767, 789-93 (1996); see also Buonocore, supra note 249, at 493 (citing a study that found that arbiters' ages were correlated with awards made).
(257.) Stulberg, supra note 49, at 540 (citing MICHELLE G. HERMANN, UNIV. OF N.M. CTR. FOR THE STUDY AND RESOLUTION OF DISPUTES ET AL., THE METROCOURT PROJECT FINAL REPORT (1993)).
(258.) Mijha Butcher, Using Mediation to Remedy Civil Rights Violations When the Defendant Is Not an Intentional Perpetrator: The Problems of Unconscious Disparate Treatment and Unjustified Disparate Impacts, 24 HAMLINE J. PUB. L. & POL'Y 225, 270 (2003).
(259.) Brazil, supra note 52, at 28.
(260.) Welsh Call, supra note 133.
(261.) See Budnitz, supra note 144, at 293.
(262.) See Folberg, supra note 190, app. at 375. Folberg reproduces the California ethics standard requiring disclosure of membership in organizations practicing discrimination:
(Membership in organizations practicing discrimination) [One nominated or appointed as an arbitrator must disclose his or her] membership in any organization that practices invidious discrimination on the basis of race, sex, religion, national origin, or sexual orientation. Membership in a religious organization, an official military organization of the United States, or a nonprofit youth organization need not be disclosed unless it would interfere with the arbitrator's proper conduct of the proceeding or would cause a person aware of the fact to reasonably entertain a doubt concerning the arbitrator's ability to act impartially.
Id. app. at 361, app. at 375.
(263.) Rosenberg & Folberg, supra note 60, at 1548.
(264.) Reuben, supra note 53, at 964.
(265.) See Stipanowich, supra note 8, at 891.
(266.) See id. at 891 n.350.
(267.) See Budnitz, supra note 144, at 293.
(268.) See generally Folberg, supra note 190.
(269.) See Stipanowich, supra note 8, at 882.
(270.) Reuben, supra note 53, at 1014.
(271.) Schwartz, supra note 18, at 48 n.40; Stipanowich, supra note 8, at 882.
(272.) See Reuben, supra note 53, at 1014.
(273.) Brazil, supra note 50, at 94.
(274.) See Hensler, supra note 204, at 84.
(275.) Id. at 82 n.4.
(276.) Knapp, supra note 61, at 765.
(277.) See id.; Reuben, supra note 53, at 953.
Stephan Landsman *
* Robert A. Clifford Professor of Tort Law and Social Policy, DePaul University College of Law. This Article benefited enormously from the advice and suggestions of Lorna Schofield, Jean Sternlight, Neil Vidmar, and Roselle Wissler, as well as the research assistance of Breighanne Fisher.
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|Title Annotation:||The Civil Trial: Adaptation and Alternatives|
|Publication:||Stanford Law Review|
|Date:||Apr 1, 2005|
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