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New ethics rules proposed laws could change California ADR.

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Michael 5. Oberman of New York
describes a technique neutrals can
employ to increase the understanding of complex testimony and events
in multiday arbitrations. .. Page 107
New arbitrator ethics rules take
effect on July 1, and new laws that
will change ADR provider operations seem destined for passage. The
issues, the motives, and the details in
California’s arbitration battles are
examined. ..........................
Page 107
A special prepublication offer for
two new CPR books on employment
and drafting dispute resolution
clauses is now available. ... Page 108
Charles Craver of Washington,
D.C., proposes that a beefed-up
U.S.Equal Employment Opportunity Commission would be a more
efficient ADR-oriented way of
resolving discrimination suits than
the court system. Analogizing his
proposed administrative processes
to those used by the National Labor
Relations Board for union matters,
Craver explores why more administrative hearings would mean lower
costs for everyone. ............ Page 109
The Air Force boosts ADR with a
new program, and by elevating the
status of its dispute resolution office
to an unprecedented level among the
armed services. .................. Page 113
CPR News ........................
Letter to the Editor .......... Page
ADR Brief .........................
Cartoon by Chase ............. Page
Index Info .........................
Online Info ........... Page 114 %I
VOL. 20 NO. 6 JUNE 2002
Mini-Summations Yield Benefits
in Complex Multiday Cases
One ofthe chaknges, if not privileges, ofpresiding over an arbitration is to customize procedures to match the dimensions of the case.
Multiday, complex cases especially invite creative techniques
which will allow the parties ample
latitude to present their proofs
and yet contain the length of the
hearings. Most satisfyingof all is
to develop a device that works
well in one case and that subsequently works equally well in
other cases.
My favorite exampleis the use ofmini-summations in multiday cases.
Several years ago, I was the sole arbitrator
in a 1Cday breach ofwarranty case.The claim-
ant had designed an electronic product and
contracted for the respondent to manufacture
it. Once sold, the product failed to operate
properly. The claimant contended that the re-
ence, the parties ,jointly
. proposed
a schedule of 14 hearing days over a four-week
period. Adherence to the schedule was imporrant to the parties since all of the 30 witnesses
(continued on page 115)
New Ethics Rules, Proposed Laws
Could Change California ADR
It‘s been a rough California spring for arbitration.
Despite a budget deficit, lingeringconcerns
about power supply, and fall elections, the nation’s largest state has
turned its attention to how it
deals with arbitration.
The focus is on the way arbiuators and ADR providers operate.
Many arbitrators regard new ethics
rules and a legislativepackage as an
all-out war on the practice.
“This is a very strong effort
by the trial lawyers and consumer attorneys,”
says Donne Brownsey, a lobbyist for the California Dispute Resolution Council, aprovider
group, and Jams Inc., a national provider based
in Irvine, Calif. “What they really want is to
eliminate consumer arbitration.”
The supporters of the new initiatives say
they’re only playing on a field constructed by
the industry, and are trying to rein in abuse.
So far, the proponents appear to include much of the
Legislature. Though the six
bills changing, among other
things, arbitrator disclosureand
providers’ business interests,
were introduced in February
and March, all already have
passed the California Assembly.
Two have passed the Senate Judiciary Committee and been referred to the
full body for a vote; the remaining four are
expected to reach the Senate floor shortly after Judiciary Committee hearings, as soon as
late June or July.
(continued on page 116)
(continued from previous page)
of arbitrator and counsel. That counsel came to
enjoy presenting their mini-summations in itself contributed to orderly hearings with cooperation between the parties.
The mini-summations worked so well in
this breach of warranty case that I used the
device again in my next multiday case, a threeday hearing to determine ownership of television shows. Because this intellectual property
case was scheduled for only three days, I did
not need mini-summations to keep straight
the testimony of a few witnesses. But I was
attracted to their use by the byproducts.
The IP case was a high-stakes dispute, with
vigorous advocates on each side. Introducing
mini-summations helped me assert control but,
again, in a way that was user friendly. The parties’ counsel expressed their approval of the device after the first installment, and thanked me
for proposing it. The requirement to sum up
daily imposed a measure of discipline on the
examinations. And because the case raised challenging legal issues, I benefitted from the chance
to probe the issues by raising questions during
the mini-summations.
The use of mini-summations should be considered in any multiday arbitration of any complexity. For the device to work at its best, however,
several ground rules need to be imposed.
To avoid having a daily full-scale argument
on the merits, mini-summations should be
closely linked to the prior day’s testimony.
Counsel should be allotted only a few minU t e s for each witness, and they should be encouraged to use a bullet-point style.
Questioning by the arbitrator should be used
to gain any necessary clarification or to refocus the presentation on testimony. If there are
numerous parties in the case represented by
separate counsel, greater structure will be required-for example, limiting the mini-summation to the closing half hour of the day.
This article concludes with a mini-summation: There are three main points. First, the
use of innovative case management devices can
be an important way for effectively conducting an arbitration. Second, mini-summations
not only assist the arbitrator in mastering the
evidence, but they also facilitate an orderly
proceeding. Third, the device of mini-summations requires only a few guidelines for effective use. Follow these guidelines as an
arbitrator and you can use mini-summations
to maximum advantage.
New Ethics Rules Could Change California ADR
(continued from front page)
California Gov. Gray Davis’s ofice is studying the measures, but a spokesman says it is
too early to declare whether the governor will
sign any or all of them.
“They are a very comprehensive package
of arbitration reform bills,” says CDRC President Ruth V. Glick, a solo ADR neutral in
Burlingame, Calif., and an adjunct professor
at the University of California’s Hastings College of the Law in San Francisco. She adds,
“It‘s a big deal here.”
And the bills aren’t even the most current
worry. Because of ethics rules changes, the
future is now for arbitrators: In the wake of
a September 2001, law, requiring the state
Judicial Council to adopt ethics standards,
arbitrators can look forward to extensive new
disclosure and business practices rules to take
effect on July 1.
Because of the statutory requirement, the
Judicial Council-which is a constitutionally
mandated body responsible for California
court operations and justice administration-rushed the rules into effect. But the council,
acknowledging the tight time limits, is leaving open a comment period until Sept. 6. The
council is asking arbitrators whether the standards-which will serve as amendments to existing standards in Code of Civil Procedure
1281.9-“are necessary, particularly in light of
arbitrators’ experience with implementing the
standards.” The council will consider further
amendments at a Dec. 12 meeting.
Nevertheless, the rules will be in effect in a
few days. The providers haven’t been sitting
around waiting. In a Feb. 22 letter to the Ju-
dicial Council on the CDRC’s behalf, Glick
noted objections to each of the 12 new arbitrator standards, and asked for a deadline extension. “The proliferation of non-voluntary,
pre-dispute consumer arbitration agreements
in contracts of adhesion is the problem,” she
wrote. “Targeting the neutral arbitrators, who
are chosen jointly by the opposing attorneys
and their parties to bring resolution to the dispute, is not the solution to this challenge.”
The letter said that the council’s characterization ofthe new rules as “minimum standards”
is a misnomer. “These are the most comprehensive disclosure and conduct requirements required of arbitratorsanywhere,” Glick wrote, and
will exist in addition to “a very comprehensive
arbitrator disclosure statute which already exists
in [Civil Procedure Code section] 1281.9.”
Starting next month, arbitrators must disclose if a member of their “immediate family
has or has had a significant personal relationship with any party or a lawyer for a party.” In
addition to financial disclosures, arbitrators
also must disclose whether they or a member
of their “immediate family is, or within the
preceding two years, was an employee of or an
expert witness or a consultant for a party.”
In her letter to the Judicial Council, Glick
wrote that many individual practitioners don’t
have the resources for such extensive conflicts
checks. She added in the letter that the rules
may cause arbitrators to drop out of consideration for cases, decreasing access to alternative
dispute resolution and increasingcourt caseloads.
The ethics rules don’t apply to party or international arbitrators, or judicial arbitrations,
among other exceptions.
Glick and others in the arbitration field say
that the rules are placing a burden on arbitrators to disclose information that is only known
by the parties and their attorneys.
For example, Standard 7(b)(12) requires
disclosure in consumer arbitrations of “currently expected financial or professional relationship or affiliation between that dispute
resolution provider organization and a party
or lawyer in the arbitration.” Wrote Glick,
“‘Currentlyexpected relationships as defined
in the standards may include the selection of
the arbitrator in a future dispute resolution
capacity. Often ADR providers send lists of
neutrals to the lawyers. Therefore, it is the
lawyer, and not the arbitrator, who knows
whether the arbitrator is under consideration
for future business. It is also the lawyer or law
firms who know how much business they do
with the ADR provider.”
For now, providers have a reprieve from
Standard 7(b) ( 1 2): the section’s effectiveness
date has been delayed by the Judicial Council until Jan. 1, 2003. But providers also
have no choice but to help their neutrals adapt
to the rest of the ethics rules changes immediately.
The nation’s largest provider, the American Arbitration Association, has overhauled its
arbitrator questionnaires dealing with particular matters. According to India Johnson, a
vice president based in Atlanta who follows
legislation and regulation for the New Yorkbased nonprofit organization, the forms are
now seven pages, increased from four pages.
She says that, at press time, the AAA is con(continued on following page)
sidering introducing the forms with awareness
programs or seminars, to help its neutrals understand the new disclosure requirements.
Ruth Glick says the 8-year-old CDRC will
renew and revise its objections about the rules
in a letter to the Judicial Council before the
September deadline. Johnson says that the
AAA also likely will file comments again with
the Judicial Council.
Providers also plan to be front-and-center
for the legislative efforts. John J. Welsh, Jams’
general counsel, says his company remains
neutral and will not take a position on the bills,
nor will it file suit to challenge any that become law. “We were very active, however,” says
Welsh, “in providing technical assistance to
the [legislative] staff so that unintended consequences could be avoided. Since the focus
was on consumer arbitration, we worked hard
to make sure that none of the legislation affected business or commercial arbitration.”
The Jams and CDRC lobbyist, Donne
Brownsey, says she focused most on AB-3029
and AB-3030, which were sent to the full Senate by the Judiciary Committee during the
third week of June.
Brownsey says AB-3029’s ban on solicitations, despite language allowing for Constitution-protected speech, may be the biggest
problem in the bills. She says that the section’s
general language is overbroad, and potentially
a violation of constitutional commercial speech
rights. The proposal currently says that
A solicitation regarding a consumer arbitration case may not be made by or on
behalf of a private arbitration company
to any party, prospective party, or attorney for a party or prospective party, unless the solicitation is protected from
abridgment by the Constitution of the
United States or by the Constitution of
the State of California.
The bill is the only one Jams General Counsel
Welsh would address specifically. “We feel [the
proposal] is overly broad and we feel it violates
our constitutional rights of both free speech and
commerce,” says Welsh, “and we’re in the process of deciding what to do about that.”
Brownsey was instrumental in getting AB3029’s view of providers’ non-ADR business
interests softened. The section, which mainly
deals with arbitrator selection, also says that
providers may not, after Jan. 1,2003, do “any
paid or unpaid consulting, management, or
other business service or product to any party
to the consumer arbitration or to any attorney
for a party in the arbitration, other than arbi-
tration, mediation, or other methods of resolving specific, identified disputes.”
The lobbying effort got the Senate to exempt a key provider revenue source and ADRrelated function, training. In the draft of the
bill sent to the California Senate, the following sentence was added: “Nothing in this section prohibits a private arbitration company
from conducting training programs regarding
the arbitration process in general, provided that
these programs do not create the appearance
of a potential conflict of interest.”
The proposal originally applied to securities regulatory organizations, but they were
deleted, observers say, because of strong lobbying efforts. i\ call to Fred Pownall at
Sacramento’s KahUPownall Advocates, the
state’s top lobbying firm, according to an April
survey of lobbying revenue in the Recorder of
San Francisco, was returned by a spokesman
at Pownall’s client, the New York Stock Exchange, who declined comment.
AB-3030, also sent to the full Senate, extends
arbitrators’ immunity to providers, a stronger
version than originallyproposed. The latest version also explicitly recognizes that the immunity
provisionsare focusingon consumer arbitrations,
not business-to-business transactions.
The other pending bills, and their principal focuses, include:
A-2504, which involves arbitrator disclosures and disqualification standards;
A-2574, which restricts providers’ financial and commercial ventures;
A-2656, which requires ADR providers
to make available data on the arbitrations they
conduct, either on the Internet or by request,
A-29 15, which would prevent losing consumers from being forced to pay prevailing arbitration parties’ costs.
“They’re all very troublesome,” says the
AAA’s India Johnson. “What‘s really troublesome is that it looks like the trial lawyers have
devised this scheme to get through the
backdoor what they can’t get through the front
door. . . . They can’t get rid of the Federal
Arbitration Act, so they just make it hard for
people in organizations to provide arbitration.”
Johnson adds that the proposals’ supporters “are very good at trench warfare, and . . .
the Triple A is not. We’re like babes in the
woods. We’ve got to do a better job of educating people and legislators.”
Clifford Palefsky, a San Francisco attorney
active in state and national consumer-sponsored fights against mandatory arbitration who
has worked on the California proposals, says
that legislators are receptive because of the
ADR providers’ miscues. “The industry has
no one to blame but themselves for these bills,”
says Palefsky, a name partner in McGuinn,
Hillsman & Palefsky. “In some regards it is a
shame that this has become necessary. If arbitration was voluntary, most of them would be
unnecessary. In light of the industry standing
behind and trying to sustain mandatory arbitration, they have to recognize that there has
to be some sort of oversight.”
The Legislature’s background information
on the bills says they emanate from a Feb. 12
Assembly Judiciary Committee hearing, “Arbitration in Consumer Disputes: A Focus on
Providers,” which the Legislature says followed
from a three-part series in the Oct. 7-9,2001,
San Francisco Chronicle. The introduction to
the newspaper series carried the following
headings: “Private Justice-Millions are losing their legal rights-Supreme Court forces
disputes from court to arbitration-A system
with no laws.” The series is available in full
text in the archives at
Palefsky says that A-2574, which prohibits
providers from engaging in consulting relationships, is “absolutely essential.” Says Palefsky,
“Providers can’t call big corporations clients
and pretend to be neutral.”
One place where bill proponents and the
providers agree is the prospects for passage.
Palefsky says that he believes the bills will continue to move along “quite easily.” He says
there is “very little opposition.” Lobbyist
Brownsey says that she believes all will pass
the Legislature, but she says she’s not sure what
Gov. Davis will do. “My sense is he is going to
be more inclined to sign these, not less.”
CRDC President Ruth Glick says that the
issues her members face should be a warning
to arbitrators and providers around the nation.
“People outside of California don’t realize the
importance of what‘s happening here,” she
says, adding “It may have an impact on the
rest of the country.”
Says Jams’ John Welsh, “We would not be
surprised if legislation of this kind was picked
up by other states.”
The California bills can be tracked by the bill
numbers in this story a t
The Calzfrnia Dispute Resolution Council
can befoundat’homepage
is A detailed Ca&ornia]udicial Council ethics standards reportsummary
is available at B
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