Alternative Dispute Resolution

NEGOTIATION & ALTERNATIVE DISPUTE RESOLUTION

Section F.

ADR in the COURTS

Professor John Barkai

William S. Richardson School of Law University of Hawaii at Manoa 2515 Dole Street, Honolulu, Hawaii 96822 Phone (808) 956-6546 E-mail: [email protected] http://www2.hawaii.edu/~barkai ADR IN HAWAII and THE COURTS

Hawaii has been a leader in the field of ADR.

The Neighborhood Justice Center of Honolulu (NJC), a non-profit community mediation center, was founded in 1979 and was the first major organization involved in mediation and other non-binding ADR processes in Hawaii. NJC has been called the "primal mud" from which ADR evolved in Hawaii. Professor Barkai was in the first group of people trained to mediate at NJC, which is now called the Mediation Center of the Pacific (MCP).

In 1985 the Program for Conflict Resolution (PCR), an organization involved in research and ADR training, was founded at the University of Hawaii. Professor Barkai is a founding member of PCR.

In 1985, Former Chief Justice Herman Lum founded what was then the Program for Alternative Dispute Resolution. In 1989, the Legislature created CADR, see HRS 613, and the Program for ADR became the Center for ADR (CADR). CADR designs ADR systems, assists to resolve disputes, systematically promotes ADR, and oversees the mediation services provided to the judiciary by various community mediation centers on all islands.

ADR is used at all levels of the judiciary. Mediation programs range from mediation of cases in small court to an appellate mediation program for cases in the Intermediate Court of Appeals and the Supreme Court.

The American Arbitration Association is a national non-profit ADR organization (www.adr.org) which used to have a regional office in Honolulu. Historically, AAA has concentrated mainly on arbitration, but has increasingly used mediation. In the early years of ADR in Hawaii, the AAA was the primary ADR provider for ADR in lawsuits.

Dispute Prevention and Resolution (DPR) is now the major ADR provider in the State of Hawaii. Keith Hunter, formerly the Regional Director of the American Arbitration Association's Hawaii office is the CEO and a major provider of ADR services in Hawaii. Visit the web site at www.dpr4adr.com

There is a series of statutes, court rules, and informal policies that govern ADR and the court related ADR processes in Hawaii. The most important rule is probably circuit Court Rule 12, which governs settlement conferences and other ADR requirements.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 1 - Alternative Dispute Resolution (ADR) Requirements in Circuit Court Rule 12

1. SCOPE. All civil cases in the Circuit Court.

2. DEADLINE FOR PRETRIAL STATEMENT. The Plaintiff must file and serve a Pretrial Statement within eight (8) months after the complaint has been filed. Rule 12 (b).

3. CONTENTS. The Pretrial Statement shall include the following: o Verify that each party (or lead counsel) has met face-to-face with the opposing party (or lead counsel) to discuss ADR options. Rule 12 (b) (6). o Identify the ADR process to which the parties have agreed, or if any party objects to ADR, indicate which party and the reasons for objecting. Rule 12 (b) (7).

4. STATUS CONFERENCE. Within 60 days of the initial Pretrial Statement, the plaintiff shall schedule a trial setting status conference. Rule 12 (c).

5. ADR OPTIONS DISCUSSED WITH JUDGE. The Civil Administrative Judge, or his or her designee, shall conduct the status conference which will be attended by each party (or lead counsel), and at which the Judge shall discuss ADR options. Rule 12 (c) (1) (B).

6. COURT MAY ORDER ADR. The Court, in its discretion or upon motion by a Party, may order the parties to participate in an ADR process (except binding arbitration) subject to conditions imposed by the Court. Rule 12.2.

7. COMPLEX CASES. The Rules also establish criteria for designation and handling of complex cases. The judge assigned to a complex case shall determine deadlines for the parties including a meeting with the Judiciary Center for Alternative Dispute Resolution. Rule 12 (k) (3) (i) (aa).

Source: DPR web page

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 2 - HAWAII CIRCUIT COURT RULE

Rule 12. READY CIVIL CALENDAR. ... (b) Pretrial Statement. No case shall be placed on the "Ready Calendar" unless a "Pretrial Statement" has been filed and served in accord with Rule 5 of the Hawai`i Rules of Civil Procedure. The pretrial statement shall be filed within 8 months after a complaint has been filed or within any further period of extension granted by the court. It shall contain the following information: ... (6) A statement that each party, or the party's lead counsel, conferred in person with the opposing party, or with lead counsel for each opposing party, in a good faith effort to limit all disputed issues, including outstanding discovery, and considered the feasibility of settlement and alternative dispute resolution options. A face-to-face conference is required under these rules and shall not be satisfied by a telephone conference or written correspondence. The face-to-face conference shall take place in the judicial circuit where the action is pending unless otherwise agreed by counsel and/or the parties; and

(7) A statement identifying any party who objects to alternative dispute resolution and the reasons for objecting. If the parties have agreed to an alternative dispute resolution process, a statement identifying the process.

(c) Selection of Trial Date and Consideration of Alternative Dispute Resolution.

(1) Except in cases which have been designated as complex litigation, within 60 days of the filing of the initial pretrial statement, the plaintiff in all cases filed in the First Circuit shall schedule a trial setting status conference that shall be attended by each party or each party's lead counsel and shall be conducted by the Civil Administrative Judge, or the Civil Administrative Judge's designee. The Civil Administrative Judge, or designee, shall: ... (B) Discuss alternative dispute resolution options. The court may consider other matters which may be conducive to the just, efficient and economical determination of the case.

Rule 12.1. CIVIL SETTLEMENT CONFERENCE; SETTLEMENT CONFERENCE STATEMENT. (a) Settlement Conference. A settlement conference may be ordered by the court at any time before trial. Any party may also file a request for settlement conference at any time prior to trial. A settlement conference in civil cases shall be subject to the following guidelines: (1) If a party settles or otherwise disposes of any action prior to a scheduled

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 3 - settlement conference, the party shall immediately notify the judge who scheduled the conference; (2) Each party to the action shall attend the conference or be represented by an attorney or other representative who has authority to settle the case; (3) For each party represented by counsel an attorney who is assigned to try the case shall attend the settlement conference. It is expected that the attorney will have become familiar with all aspects of the case prior to the conference; (4) Each party to the action shall have thoroughly evaluated the case and shall have discussed and attempted to negotiate a settlement through an exchange of written bona fide and reasonable offers of settlement prior to the conference; (5) The judge conducting the settlement conference may, at the conclusion of said conference, continue said conference to another time and date, and from time to time thereafter for continued settlement negotiations if he has reason to believe a settlement can thereby be effectuated; (6) Sanctions. The failure of a party or his attorney to appear at a scheduled settlement conference, the neglect of a party or his attorney to discuss or attempt to negotiate a settlement prior to the conference, or the failure of a party to have a person authorized to settle the case present at the conference shall, unless a good cause for such failure or neglect is shown, be deemed an undue interference with orderly procedures. As sanctions, the court may, in its discretion: (i) Dismiss the action on its own motion, or on the motion of any party or hold a party in default, as the case may be; (ii) Order a party to pay the opposing party's reasonable expenses and attorneys' fees; (iii) Order a change in the calendar status of the action; (iv) Impose any other sanction as may be appropriate. (b) Settlement Conference Statement. In all civil cases, including those which have been designated as Complex Litigation, a settlement conference statement shall be filed not less than 5 working days prior to the date of the settlement conference. The settlement conference statement shall be filed with the clerk of court and a file-marked copy shall be delivered to the office of the judge conducting the settlement conference, and copies served upon all other parties. The statement shall set forth, wherever applicable, the following information: (1) For the plaintiff: (i) The name, age, marital status and occupation of all non-corporate plaintiffs; (ii) The relief claimed by each plaintiff; (iii) A factual summary of the case; (iv) Plaintiff's theories of liability against each defendant; (v) The name, address, field of expertise and summary of substance of testimony of each expert witness who supports plaintiff's theories of liability; (vi) The name, address and summary of substance of testimony of all other witnesses who support plaintiff's theories of liability; (vii) A statement of plaintiff's position on general damages, including a statement of all injuries and damages claimed by plaintiff, together with the names of plaintiff's expert witnesses, including doctors, and copies of their reports;

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 4 - (viii) Plaintiff's claim of special damages including an itemized statement of all special damages claimed by plaintiff; (ix) The name, address, field of expertise and summary of substance of testimony of each expert witness who supports the plaintiff's claim of special damages; (x) The name, address and summary of substance of testimony of all other witnesses who support plaintiff's position on damages; and (xi) A statement of the status of settlement negotiations. (2) For the defendants: (i) The age, marital status, occupation and corporate or other legal status of each defendant; (ii) The name of applicable insurance carriers and the stated policy limits; (iii) A factual summary of the case; (iv) The defense to each of plaintiff's theories of liability; (v) The name, address, field of expertise and summary of substance of testimony of each expert witness who supports the defenses to plaintiff's theories of liability; (vi) The name, address and summary of substance of testimony of all other witnesses who support the defenses to plaintiff's theories of liability; (vii) A statement of the defense position on general damages, including a statement of all injuries and damages disputed by defendant, together with the names of defendant's expert witnesses, including doctors, and copies of their reports; (viii) The defendant's position on special damages including a statement of which special damages are disputed; (ix) The name, address, field of expertise and summary of substance of testimony of each expert witness who supports the defense position on special damages; (x) The name, address and summary of substance of testimony of other witnesses who support the defense position on damages; and (xi) A statement of the status of settlement negotiations. (c) Confidential Settlement Conference Letter. At least five (5) working days before the settlement conference, each party shall deliver directly to the settlement conference judge a confidential settlement conference letter, which shall not be filed or served upon the other parties. The confidential settlement conference letter shall not be made a part of the record and confidential information contained in the letter shall not be disclosed to the other parties without express authority from the party submitting the letter. The court will destroy the confidential settlement conference letter no later than entry of final judgment in the case. The confidential settlement conference letter shall include a forthright evaluation of the parties' likelihood of prevailing on the claims and defenses, a description of the major issues in dispute, including damages, counsel's good faith evaluation of the case, and other information requested by the court.

Rule 12.2. ALTERNATIVE DISPUTE RESOLUTION. The court, in its discretion or upon motion by a party, may order the parties to participate in an alternative dispute resolution process subject to conditions imposed by the court. (Added September 11, 1996, effective January 1, 1997.)

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 5 - THE ABC'S OF ADR: A DISPUTE RESOLUTION GLOSSARY

13 Alternatives to High Cost Litigation 147 November 1995

Center for Public Resources Institute for Dispute Resolution

Experts know that ADR encompasses a wide range of practices for managing and quickly resolving disputes at modest cost and with minimal adverse impact on commercial relationships. These processes, marked by confidentiality when desired, significantly broaden dispute resolution options beyond litigation or traditional unassisted negotiation.

Some ADR procedures, such as binding arbitration and private judging, are similar to expedited litigation in that they involve a third-party decision- maker with authority to impose a resolution if the parties so desire. Other procedures, such as mediation and the minitrial, are collaborative: a neutral third party helps a group of individuals or entities with divergent views to reach a goal or complete a task to their mutual satisfaction.

Arbitration, mediation and the minitrial tend to be the mechanisms most often used and, for many people, are synonymous with the term, "ADR." But to respond to specific needs, parties often craft hybrid procedures that combine elements of one or more dispute resolution methods.

The following glossary is designed to help parties communicate about this rapidly changing field. Definitions are not standardized, but flexible and creative like ADR itself. And with all aspects of ADR, it is most important not that the parties use exactly the same terms, but that they understand each other.

We have divided the glossary into private and court-related ADR processes. Most of these working definitions are derived from prior publications of the CPR Institute for Dispute Resolution, a number of which address particular ADR processes in depth....

PRIVATE ADR PROCESSES

Arbitration. The most traditional form of private dispute resolution. It can be "administered" (managed) by a variety of private organizations, or "non-administered" and managed solely by the parties. It can be entered into by agreement at the time of the dispute, or prescribed in pre-dispute clauses contained in the parties' underlying business agreement. Arbitration can take any of the following forms:

Binding Arbitration. A private adversarial process in which the disputing parties choose a neutral person or a panel of three neutrals to hear their dispute and to render a final and binding decision or award. The process is less formal than litigation; the

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 6 - parties can craft their own procedures and determine if any formal rules of evidence will apply. Unless there has been fraud or some other defect in the arbitration procedure, binding arbitration awards typically are enforceable by courts and not subject to appellate review.

Non-binding Arbitration. This process works the same way as binding arbitration except that the neutral's decision is advisory only. The parties may agree in advance to use the advisory decision as a tool in resolving their dispute through negotiation or other means.

"Baseball" or "Final-Offer" Arbitration. In this process, used increasingly in commercial disputes, each party submits a proposed monetary award to the arbitrator. At the conclusion of the hearing, the arbitrator chooses one award without modification. This approach imposes limits on the arbitrator's discretion and gives each party an incentive to offer a reasonable proposal, in the hope that it will be accepted by the decision-maker. A related variation, referred to as "night baseball" arbitration, requires the arbitrator to make a decision without the benefit of the parties' proposals and then to make the award to the party whose proposal is closest to that of the arbitrator.

"Bounded" or "High-Low" Arbitration. The parties agree privately without informing the arbitrator that the arbitrator's final award will be adjusted to a bounded range. Example: P wants $200,000. D is willing to pay $70,000. Their high-low agreement would provide that if the award is below $70,000, D will pay at least $70,000; if the award exceeds $200,000, the payment will be reduced to $200,000. If the award is within the range, the parties are bound by the figure in the award.

Incentive Arbitration. In non-binding arbitration, the parties agree to a penalty if one of them rejects the arbitrator's decision, resorts to litigation, and fails to improve his position by some specified percentage or formula. Penalties may include payment of attorneys' fees incurred in the litigation.

Confidential Listener. The parties submit their confidential settlement positions to a third-party neutral, who without relaying one side's confidential offer to the other, informs them whether their positions are within a negotiable range. The parties may agree that if the proposed settlement figures overlap, with the plaintiff citing a lower figure, they will settle at a level that splits the difference. If the proposed figures are within a specified range of each other (for example 10 percent), the parties may direct the neutral to so inform them and help them negotiate to narrow the gap. And if the submitted numbers are not within the set range, the parties might repeat the process.

Fact-finding. A process by which the facts relevant to a controversy are determined. Fact-finding is a component of other ADR procedures, and may take a number of forms.

In neutral fact-finding, the parties appoint a neutral third party to perform the

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 7 - function, and typically determine in advance whether the results of the fact-finding will be conclusive or advisory only.

With expert fact-finding, the parties privately employ neutrals to render expert opinions that are conclusive or non-binding on technical, scientific or legal questions. In the latter, a former judge is often employed.

Federal Rules of Evidence 706 gives courts the option of appointing neutral expert fact-finders. And while the procedure was rarely used in the past, courts increasingly find it an effective approach in cases that require special technical expertise, such as disputes over high-technology questions. The neutral expert can be called as a witness subject to cross-examination.

In joint fact-finding, the parties designate representatives to work together to develop responses to factual questions.

Mediation. A voluntary and informal process in which the disputing parties select a neutral third-party to assist them in reaching a negotiated settlement. Parties can employ mediation as a result of a contract provision, by private agreement made when disputes arise, or as part of a court-annexed program that diverts cases to mediation.

Unlike a judge or arbitrator, a mediator has no power to impose a solution on the parties. Rather, mediators assist parties in shaping solutions to meet their interests and objectives. The mediator's role and the mediation process can take various forms, depending on the nature of the dispute and the approach of the mediator. The mediator can assist parties to communicate effectively; can identify and narrow issues; crystallize each side's underlying interests and concerns; carry messages between the parties; explore bases for agreement and the consequences of not settling; and develop a cooperative, problem- solving approach.

By learning the confidential concerns and positions of all parties, the mediator often can identify options beyond their perceptions. The process is sometimes referred to as "facilitation" to structure participation in the mediation process, or "conciliation" in the international arena. The mediator's role can take various forms. Some mediators, who favor a "facilitative" style, encourage parties to generate their own settlement options, and will not suggest settlement terms. At the other end of the spectrum are "evaluative" mediators, who will propose settlement options and try to persuade parties to make concessions.

To guide negotiations in major commercial disputes, parties sometimes ask the mediator to assume an evaluative role. The mediator might assess the merits of claims or defenses, liability or damages, or predict the likely outcome of the case in court. Generally, mediators need substantive law background or expertise to make such assessments.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 8 - Med-Arb. A short-hand reference to the procedure mediation-arbitration. In med-arb, the parties agree to mediate with the understanding that any issues not settled through the mediation will be resolved by arbitration using the same individual to act both as mediator and arbitrator. However, that choice may have a chilling effect on full participation in the mediation portion. A party may not believe that the arbitrator will be able to discount unfavorable information learned in mediation when making the arbitration decision.

Co-Med-Arb addresses the problem by having two different people perform the roles of mediator and arbitrator. Jointly, they preside over an information exchange between the parties, after which the mediator works with the parties in the absence of the arbitrator. If mediation fails to achieve a settlement, the case (or any unresolved issues) can be submitted to the arbitrator for a binding decision.

Minitrial. A structured process with two distinct components. Parties engage in an information exchange that provides an opportunity to hear the strengths and weaknesses of one's own case as well as the cases of the other parties involved, before negotiating the matter.

In the minitrial, an attorney for each party presents an abbreviated version of that side's case. The case is heard not by a judge, but by high-level business representatives from both sides with full settlement authority. It may be presided over by these representatives with or without a neutral advisor, who can regulate the information exchange. Following the presentations, the parties' representatives meet, with or without the neutral, to negotiate a settlement. Frequently, the neutral will serve as a mediator during the negotiation phase or be asked to offer an advisory opinion on the potential court outcome, to guide negotiators.

Multi-Party Coordinated Defense. A coordinated joint defense strategy in which a neutral facilitator helps multiple defendants negotiate, organize, and manage cooperative joint-party arrangements that are ancillary to the main dispute. In the process, they streamline the steps toward resolution. Coordinated defense efforts include agreements to: limit infighting among defendants; use joint counsel and experts; assign and share discovery and research tasks; coordinate and share the results of procedural maneuvers; and apportion liability payments, should they be imposed.

Multi-Step ADR. Parties may agree, either when a specific dispute arises, or earlier in a contract clause between business venturers, to engage in a progressive series of dispute resolution procedures. One step typically is some form of negotiation, preferably face-to-face between the parties. If unsuccessful, a second tier of negotiation between higher levels of executives may resolve the matter. The next step may be mediation or another facilitated settlement effort. If no resolution has been reached at any of the earlier stages, the agreement can provide for a binding resolution--through arbitration, private adjudication or litigation.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 9 - One form of multi-step ADR is the wise man procedure, typically used when problems arise in long-term partnerships such as those in the oil and gas industry. Sometimes called "progressive negotiation" or "mutual escalation," this procedure refers matters first to a partnership committee which oversees the day-to-day operations of the project. If the problem cannot be resolved at that level, the wise-man option--the next ADR step--is employed.

The wise men (or women) are respected senior executives of each company who are uninvolved in the project. These officials are given a fairly short time frame (sometimes just 30 days) to investigate the dispute. If that fails, the matter goes to a third step, usually binding arbitration. While pioneered in the oil industry, the wise man approach could also be useful in the high- technology field and other areas involving close and continuing business relationships.

Negotiated Rule-Making. Also known as regulatory negotiation, this ADR method is an alternative to the traditional approach of U.S. government agencies to issue regulations after a lengthy notice and comment period. In reg-neg, as it is called, agency officials and affected private parties meet under the guidance of a neutral facilitator to engage in joint negotiation and drafting of the rule. The public is then asked to comment on the resulting, proposed rule. By encouraging participation by interested stakeholders, the process makes use of private parties' perspectives and expertise, and can help avoid subsequent litigation over the resulting rule.

Ombudsperson. An organizational dispute resolution tool. The ombudsperson is appointed by an institution to investigate complaints within the institution and either prevent disputes or facilitate their resolution. The ombudsperson may use various ADR mechanisms such as fact-finding or mediation in the process of resolving disputes brought to his or her attention.

Partnering. Typically used as a dispute-prevention method for large construction projects, this method is capable of being transposed in other settings, particularly in joint ventures. Before the work starts, parties to the project generally assemble for a several-day retreat away from their organizations. With the help of a third-party neutral, they get to know each other; discuss some of the likely rough spots in the project; and even settle on a process to resolve misunderstandings and disputes as the project progresses.

Predispute ADR Contract Clause. A clause included in the parties' business agreement to specify a method for resolving disputes that may arise under that agreement. It may refer to one or more ADR techniques, even naming the third party that will serve as an arbitrator or mediator in the case. Predispute agreements requiring arbitration of consumer disputes, or entered into as a condition of employment, have generated substantial backlash lately from people who argue that these clauses are adhesion contracts.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 10 - Two-Track Approach. Involves use of ADR processes or traditional settlement negotiations in conjunction with litigation. Representatives of the disputing parties who are not involved in the litigation are used to conduct the settlement negotiations or ADR procedure. The negotiation or ADR efforts may proceed concurrently with litigation or during an agreed-upon cessation of litigation. This approach is particularly useful in cases when: it may not be feasible to abandon litigation while the parties explore settlement possibilities; or as a practical matter, the specter of litigation must be present in order for the opposing party to consider or agree to an alternative mechanism. It also is useful when the litigation has become acrimonious or when a suggestion of settlement would be construed as a sign of weakness.

COURT ADR PROCESSES

Court-Annexed Mediation. In mediation, a neutral third party--the mediator-- facilitates negotiations among the parties to help them settle. The mediation session is confidential and informal. Disputants clarify their understanding of underlying interests and concerns, probe the strengths and weaknesses of legal positions, explore the consequences of not settling, and generate settlement options. The mediator, who may meet jointly or separately with the parties, serves solely as a facilitator and does not issue a decision or make findings of fact. A hallmark of mediation is its capacity to help parties expand traditional settlement discussions and broaden resolution options, often by going beyond the legal issues in controversy.

Mediation works much the same in courts and in private settings, with a few important differences. A court mediation program may be based in the court, or may involve referral by the court to outside ADR programs run by bar associations, nonprofit groups, other local courts, or private ADR providers. Some courts require litigants to use mediation in what are known as mandatory mediation programs. The purpose of the mediation session is unchanged whether litigants enter the program voluntarily or by court mandate. The court mediator may be a lawyer trained in mediation and compensated by the parties, or serve as a volunteer. Judges, magistrate judges, or court ADR professionals also serve as mediators in some court programs.

Mediation is the primary ADR process in federal, state and local courts, second only to the traditional judicial settlement conference. Mediation has proved useful in so many kinds of disputes that some experts favor its use in all civil cases, to improve case management and settlement.

In the federal system, more than 40 of the 94 district courts and almost all the circuit courts have mediation programs using judges or lawyers as mediators. Mediation programs are also underway in more than one-third of the state courts and in many bankruptcy courts.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 11 - Early Neutral Evaluation. Like mediation, ENE is applicable to many types of civil cases, including complex disputes. In ENE, a neutral evaluator--a private attorney expert in the substance of the dispute--holds a several-hour confidential session with parties and counsel early in the litigation to hear both sides of the case. Afterwards, the evaluator identifies strengths and weaknesses of the parties' positions, flags areas of agreement and disputes, and issues a non-binding assessment of the merits of the case.

Developed during the mid-1980's in the San Francisco federal court, ENE is now used in 18 federal district courts and several state courts. Usually, attorneys trained by the court serve as evaluators; in some courts, including the Southern District of California, magistrate judges conduct ENE sessions.

Originally designed to make both case management and settlement more efficient, ENE has evolved into a pure settlement device in some courts. Used this way, ENE resembles evaluative mediation, in which the mediator uses case evaluation as a settlement tool.

Court-Annexed Arbitration. An adjudicatory dispute-resolution process in which one or more arbitrators issue a non-binding judgment on the merits, after an expedited, adversarial hearing. The arbitrator's decision addresses only the disputed legal issues and applies legal standards. Either party may reject the non-binding ruling and proceed to trial.

Court annexed arbitration is used mainly in small- and moderate-sized tort and contract cases, when litigation costs are often disproportionate to the amounts at stake. Twenty-six federal district courts have established mandatory or voluntary arbitration programs and arbitration is common in many state courts. In some courts, about a third of all civil cases are referred to arbitration. Still, new court-annexed arbitration programs are rare these days. Once the premier court ADR process, it has lost popularity in recent years. Most court ADR development focuses on mediation.

Summary Jury Trial. The summary jury trial is a non-binding ADR process used to promote settlement in trial-ready cases headed for protracted jury trials. Usually a judge or magistrate judge presides over the SJT; occasionally, a neutral attorney conducts the process. Part or all of a complex dispute may be submitted to a summary jury trial. After an abbreviated hearing in which counsel present evidence in summary form, the jury renders an advisory verdict. Non-binding, it becomes the basis for subsequent settlement negotiations. If the parties do not reach a settlement, the case proceeds to trial.

Because they are costly, SJTs are used relatively rarely. Typically, the SJT is reserved for large cases when other settlement efforts have failed and litigants differ significantly about jury outcome.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 12 - Appellate ADR. Mediation programs have become increasingly popular among the nation's appeals courts. Each of the 12 federal circuits either has a settlement office or plans to open one shortly. One the state level, at least 50 appeals courts have used mediation at some time, and approximately 25 courts currently have active programs.

Unlike trial-level ADR, which ranges from mandatory arbitration to multidoor courthouses, appellate programs tend to look very similar. In most programs, staff attorneys or outside lawyers conduct mandatory, pre-argument conferences in those cases that seem most likely to settle. Some appellate programs are geared exclusively toward settlement, while other programs also address case management and procedural issues.

Judge-Hosted Settlement Conferences. The most common form of ADR used in federal and state courts is the settlement conference presided over by a judge or magistrate judge. Almost 94 of the federal district courts use judicial settlement conferences routinely, and nearly one-third of the courts assign this role almost exclusively to magistrate judges.

The classic role of the settlement judge is to articulate judgments about the merits of the case and to facilitate the trading of settlement offers. Some settlement judges and magistrate judges also use mediation techniques in the settlement conference to improve communication among the parties, probe barriers to settlement, and assist in formulating resolutions. In some courts, a specific judge or magistrate judge is designated as settlement judge. In others, the assigned judge (or another judicial officer who will not hear the case) hosts settlement conferences at various points during the litigation, often directly before trial.

Court Minitrial. The minitrial is a flexible, non-binding settlement process primarily used out of court. During the past decade, some federal district judges have used their own version of the minitrial. Like the summary jury trial, the court minitrial is a relatively elaborate ADR method generally reserved for large disputes.

In a typical court minitrial, each side presents a shortened form of its best case to settlement-authorized client representatives--usually senior executives. The hearing is informal, with no witnesses and a relaxation of the rules of evidence and procedure. A judge, magistrate judge or non-judicial neutral presides over the one- or two-day hearing. Following the hearing, the client representatives meet, with or without the neutral adviser, to negotiate a settlement. At the parties' request, the neutral advisor may assist the settlement discussions by acting as a facilitator or by issuing an advisory opinion. If the talks fail, the parties proceed to trial.

Case Valuation ("Michigan Mediation"). This hybrid ADR process provides litigants in trial-ready cases with a written, non-binding assessment of the case's judgment value, delivered by a panel of three attorneys with subject- matter expertise after a very

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 13 - short hearing. If the panel's valuation is accepted by all parties, the case is settled for that amount. If any party rejects the panel's assessment, the case proceeds to trial.

Used only in the federal and state courts in Michigan, the arbitration-like valuation process is known widely by the misnomer "Michigan Mediation." Established in the Michigan state courts almost 20 years ago, today the process is used mainly for money-only contract, personal injury and civil rights cases.

Multidoor Courthouse or Multi-Option ADR. This term describes courts that offer an array of dispute resolution options or screen cases and then channel them to particular ADR methods. Some multidoor courthouses refer all cases of certain types to particular ADR programs, while others offer litigants a menu of options in each case. Multidoor courthouses have been established in state courts in New Jersey, Texas, Massachusetts, and the District of Columbia. On the federal level, courts in the Western District of Missouri, the Northern District of California, the District of Rhode Island, and others now have multi-option ADR.

Settlement Week. In a typical settlement week, a court suspends normal trial activity and, aided by bar groups and volunteer lawyers, devotes itself to the mediation of long-pending civil cases. Mediation is the mainstay ADR method in a typical settlement week. Volunteer lawyers conduct mediations in courtrooms, conference rooms and other areas of the courthouse. Sessions may last an hour or two, with additional sessions held as needed. Unresolved cases return to the court's docket.

Settlement weeks are used regularly only in two federal district courts. The process is used more widely in state courts and a few federal courts send cases to settlement weeks sponsored by local state courts.

Private Judging. Private judging is a general term used to describe a private or court-related process in which disputing parties empower a private individual to hear and decide their case. The procedure may be exclusively a matter of contract between the parties or may be undertaken in connection with an authorizing statute. When authorized by statute, the process is sometimes referred to by the colloquial term, "Rent-a-Judge."

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 14 - HAWAII'S COURT-ANNEXED ARBITRATION PROGRAM FINAL EVALUATION REPORT

March 1992

Professor John Barkai Professor Gene Kassebaum

EXECUTIVE SUMMARY

Background

During the past few years, virtually all state and federal jurisdictions have considered various alternative dispute resolution (ADR) methods to treat the two major problems with their court systems: high cost and excessive delay. Court-annexed arbitration is one of the most popular innovations. Arbitration programs are currently operating in at least twenty states and ten United States Federal District Courts.

Program Description and Goals

Hawaii's Court Annexed Arbitration Program (CAAP) is a mandatory, non-binding arbitration procedure for tort cases with a probable jury award of $150,000 or less. The program has the highest dollar jurisdiction of any mandatory state arbitration program in the country. Approximately 1,500 such Hawaii tort cases are eligible for CAAP each year.

The major goals of the Hawaii arbitration program are to:

1) reduce costs for private litigants by managing and reducing pretrial discovery; 2) move cases through the courts at a faster pace; 3) provide litigants with a fair, just, and satisfactory "day-in-court;" 4) encourage early settlements; and 5) prevent backlogs and delays.

CAAP seeks to achieve these goals by eliminating unnecessary pretrial discovery and setting time deadlines for arbitration. The arbitrators are volunteer lawyers with five or more years of practice experience. The program encourages the early settlement of cases and yet offers litigants a low-cost "day-in-court" in the form of an arbitration

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 15 - hearing. Litigants who are not satisfied with the arbitration award may "appeal" the award and request a trial de novo. The case is then returned to the regular litigation track and moves toward trial.

Research Design

Researchers from the University of Hawaii's School of Law and Department of Sociology collected data on CAAP cases in the First Circuit from when the program began in 1986 until late 1991. During that time period more than 4,500 First Circuit tort cases entered CAAP and over 3,300 terminated. Data for the evaluation came primarily from surveys of lawyers and the case record databases of the First Circuit Court and the Arbitration Administrator. Surveys to lawyers and arbitrators were the heart of the evaluation process. Nearly 5,000 surveys were sent out and over 3,000 surveys were returned. The evaluation design randomly assigned approximately one-half of the cases to CAAP and the other half to a comparison group that went through the regular litigation process. In every fourth CAAP case that settled and in every CAAP award, all lawyers and the arbitrator were surveyed when the case closed.

Overview of Critical Evaluation Issues

The major goals of CAAP are 1) to reduce litigant costs, 2) to increase the pace of disposing of tort cases, and 3) to improve or at least maintain the level of satisfaction for litigants and attorneys.

A. Litigation Costs

The high cost of litigation is often cited as the number one problem with American courts. The Hawaii program may be the only arbitration program in the country that has made the reduction of litigation costs its major goal. The plaintiff's and defendant's costs of litigating are called "private" litigant costs. On the other hand, the costs of maintaining the court and the costs of processing the cases through the court are called "public" litigation costs. CAAP was designed primarily to reduce the litigation costs of private parties, although it also may reduce public costs. Public cost savings are most likely to be time savings for judges and other court personnel.

Litigation costs for private parties in a lawsuit are comprised of two components: (1) pretrial discovery costs, and (2) lawyers' fees. CAAP was designed to reduce pretrial discovery, and thereby reduce litigation costs. The evaluation indicates that CAAP has significantly reduced pretrial discovery expenses for both plaintiffs and defendants. In CAAP the average plaintiff saves $496 in discovery expenses and the average defendant saves $266 in discovery expenses. It has also reduced defense lawyers' fees by an average of $159 per defendant. Plaintiffs' lawyers' fees are unchanged because these lawyers work by contingent fees.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 16 - B. The Pace of Litigation

The slow pace of litigation is considered to be the second major problem in American courts. Increasing the pace of litigation is a major goal of virtually every arbitration program. The problem is often referred to as pretrial delay even though most cases end in voluntary settlements between the parties and not end in trials.

An analysis of court records indicates that CAAP is more than four months faster (133 days) than regular litigation, which is a 29 percent increase in the pace of litigation. The majority of lawyers who were surveyed also believed that their CAAP case terminated sooner than if the same case had been in regular litigation.

CAAP rules provide a nine-month deadline for the filing of arbitration awards. Over half of CAAP settlements do make the nine-month (270 day) deadline, but only 10 percent of the awards do.

C. Satisfaction with the CAAP Process

If any arbitration program is going to be successful, it must be acceptable to the participants.

1. Satisfaction with the Program

The majority of lawyers were satisfied with CAAP. Most lawyers indicated that they were very satisfied with how their case was handled in regular litigation. They were more satisfied with settlements than awards. Defense lawyers were less satisfied with both settlements and awards than were plaintiffs' lawyers. Lawyers who handled the most cases in CAAP were the least satisfied with CAAP.

2. Satisfaction with the Arbitrators

Although there have been persistent, informal concerns about the quality of the arbitrators, responses to the surveys indicate an almost overwhelming endorsement of the arbitrators who are actually appointed to the cases. The average arbitrator had 14.6 years of law practice experience.

Caveat to Comparing CAAP with Regular Litigation

There is one caveat to the conclusion that CAAP is faster and less expensive then regular litigation. Sixteen percent of all tort cases filed are exempted from CAAP because they are over the jurisdictional limit of $150,000. Twenty-four percent of the cases assigned to CAAP are later dismissed, exempted, or removed from CAAP for other reasons. This second group of 24 percent includes complex cases which might be more expensive to litigate and have high trial rates. Hence, it is possible that some

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 17 - of the slow moving cases with high litigation costs are removed from CAAP even though such cases still would appear in the comparison sample.

Summary of Research Findings

Program Goals:

 Hawaii's Court-Annexed Arbitration Program has met each of its major goals. CAAP has

- reduced pretrial discovery; - reduced litigation costs for private litigants; - increased the pace of litigation; - provided litigants with a fair, just, and satisfactory "day-in-court"; - encouraged early and less expensive settlements; - increased the percentage of cases that terminate each year; and - may have reduced the number of trials.

A Profile of CAAP Cases:

 The ratio of settlements to awards is 2.2 settlements to 1 award. Slightly more than 50 percent of awards are appealed.

 Sixteen percent of tort cases are exempted from CAAP because they are potentially above the jurisdictional amount of $150,000. CAAP services 72 percent of the cases assigned to it. Twenty-eight percent of the cases are exempted, dismissed, or removed from CAAP. Hence, CAAP actually serves 60 percent of all tort cases.

 Although CAAP is designed for cases up to $150,000, the average CAAP case terminates at approximately $30,000, and 88 percent of all CAAP cases terminate at $50,000 or less.

Complexity:

 Although some people thought that the higher valued cases in Hawaii's $150,000 arbitration program would be complex and probably inappropriate for arbitration, lawyers only rated 7 to 14 percent of CAAP cases as complex.

Pretrial Discovery:

 Both lawyers' survey data and court records indicate that CAAP has reduced

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 18 - pretrial discovery.

 CAAP averaged about one half the depositions per case as did regular litigation (2.53 in CAAP to 4.9 in regular litigation).

 The average CAAP plaintiff saves $496 in discovery expenses; the average CAAP defendant saves $266 in discovery expenses.

 For a case with one plaintiff and one defendant, pretrial discovery has been reduced 32 percent.

Lawyers' Fees:

 A defendant saves $159 in lawyers' fees in the average CAAP case. Plaintiffs' lawyers' fees are not affected by CAAP because these plaintiffs' lawyers use a contingent fee.

 CAAP has had very little impact on lawyers' fees which is the largest component of litigation costs. In the average regular litigation case that terminates at $30,000, the total lawyers' fees of both the plaintiff and defendant are $14,740 or 86 percent of all costs. In CAAP, the total lawyers' fees are reduced $159 to $14,581 but are 90 percent of all costs.

Pattern of Settlements, Awards, and Appeals:

 One of every three CAAP cases go to an award. One of every six CAAP cases is appealed. Appeals are much slower and much more expensive than settlements. Awards significantly reduce CAAP's advantage over regular litigation.

 The pattern between settlements, accepted awards, and appealed awards is consistent across all evaluation measures. Settlements are faster and less expensive than accepted awards, and accepted awards are faster and less expensive than appealed awards.

 CAAP creates an opportunity for an arbitration award. However, if the case actually goes to an award hearing instead of settling before the award, the average award is slower and more expensive than the average case in regular litigation.

 Taking a case to an award hearing increases litigation costs substantially. Even if the CAAP case terminates after the award hearing without an appeal, the cost savings from CAAP completely disappear.

Public Costs:

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 19 -  CAAP had four fewer documents filed per case than did cases in regular litigation (27.4 for CAAP to 23.3 for regular litigation).

 CAAP cases required fewer appearances by lawyers in court for Status, Pre-trial, and Judicial Settlement Conferences. However, CAAP created a new proceeding - the award hearing - which requires the presence of lawyers and usually the clients, before an arbitrator.

Overall Costs of Litigation:

 After deducting CAAP administrative costs ($256 per case), the average CAAP case, which has 1.6 defendants, is $920 less expensive than the average case in regular litigation.

 Although pretrial discovery is significantly reduced in CAAP, the impact of this discovery reduction on total litigant costs is relatively small. Lawyers' fees, not pretrial discovery, are the major component of litigation costs. CAAP reduces pretrial discovery by 32 percent, but the increase in total net recovery is only 2.6 percent for the plaintiff and savings for the defense is only 1.2 percent of the total payout (the sum of discovery costs, lawyer's fee, and the amount paid to the plaintiff).

The Pace of Litigation:

 The median CAAP case is more than four months (133 days) faster than the average regular litigation case.

 The pace of CAAP cases is 29 percent faster than the pace of regular litigation cases.

 In about 75 percent of the CAAP cases, the lawyers were of the opinion that their case in CAAP ended sooner than if it had been in regular litigation.

Reducing the Backlog of Cases:

 The increase in the pending case rate has decreased significantly since CAAP began. However, there are still more cases filed than terminated each year.

The Trial Rate:

 Since CAAP began, the percentage of cases going to trial has decreased. However, the rate of trial was already so low before CAAP began that statistically it cannot be said that CAAP has decreased the trial rate.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 20 - Satisfaction with CAAP:

 The majority of lawyers were satisfied with CAAP.

 Lawyers were generally more satisfied with settlements than with awards.

 Defense lawyers were less satisfied with both settlements and awards than were plaintiffs' lawyers.

 Lawyers who handled the most cases in CAAP were the least satisfied with CAAP.

The Arbitrators:

 The arbitrators averaged almost 15 years of law practice experience, and 80 percent of the arbitrators were in private practice.

 The arbitrators generally had high, positive opinions of the arbitration program.

 Most lawyers had high, positive opinions of the arbitrator who handled their case.

 Lawyers rated the arbitrators as impartial and experienced enough to handle the arbitration in 88 to 96 percent of the cases.

 Lawyers' satisfaction with their arbitrator was unaffected by whether the arbitrator was a litigator or not, and unaffected by whether the arbitrator was a personal injury specialist or not.

 The majority of lawyers thought that the arbitrators made decisions based upon the merits of the cases and did not simply "split-the-difference" between the plaintiff's and defense's position.

Early and Less Expensive Settlements:

 CAAP has encouraged early and less expensive settlements.

- The median time for a CAAP settlement is almost six months (178 days) faster than the disposition time for regular litigation cases.

- The average CAAP settlement is $4,541 less expensive than the average regular litigation case.

Arbitrators' Time:

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 21 -  The time committed by the volunteer arbitrators constitutes a major donated cost of the program. Arbitrators averaged almost 9 hours per case (5 hours for settlements and 15 hours for awards). If the donated time of the arbitrators was valued at market rates, almost all of CAAP savings would be eliminated.

 The majority of arbitration hearings took four hours or less. The average hearing time was 4.6 hours.

Arbitrator Supply:

 The CAAP caseload places severe demands on the supply of available arbitrators and may be a long term problem.

Providing A "Day-In-Court":

 CAAP provides litigants with a "day-in-court." Plaintiffs testified in 85 percent of the award hearings, and defendants testified in 60 percent of the hearings.

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 22 - Data on Hawaii's Court Annexed Arbitration Program John Barkai and Gene Kassebaum, University of Hawaii 1992 Median Pace of Litigation Time: Filing until Termination Regular CAAP Accepted Appealed All ALL Litigation Settlements Awards Awards CAAP CAAP Awards Pace 451 273 320 623 461 318 (in days) Savings over 178 131 -172 -10 133 Regular Litigation

Average Litigation Costs for CAAP Options Regular CAAP Awards Awards All Litigation Settle- Accepted Appealed CAAP ments Discovery - Plaintiff $1,307 $508 $1,192 $1,440 $811 Discovery - Defendant 1,086 479 1,213 1,533 820 Fees - Defendant 4,740 3,008 6,541 7,577 4,581 Total Litigation Costs $7,133 $3,995 $8,946 $10,550 $6,212 Savings over comparison $3,138 $-1,813 $-3,417 $921

The Hawaii data is both more extensive and more precise than prior evaluations.* In the Hawaii evaluation the number of cases reviewed for the evaluation of pace was 2-3 times more than the number of cases reviewed for the other evaluations. The Hawaii evaluation had 3-4 times more survey data on litigation cost than did previous evaluations.

Number of Cases or Surveys used in the Evaluations New Jersey North Carolina Hawaii Pace 504 304 1,085 Fees & Costs 180 203 749

* E. Lind, Arbitrating High-Stakes Cases: An Evaluation of Court-Annexed Arbitration in a United States District Court (1990); R. MacCoun, E. Lind, D. Hensler, D. Bryant & P. Ebener, Alternative Adjudication: An Evaluation of the New Jersey Automobile Arbitration Program (1988).

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 23 - Fitting the Forum to the Fuss: A User-Friendly Guide to Selecting an ADR Procedure, Frank E.A. Sander and Stephen B. Goldberg, 10 Negotiation Journal 49 (January 1994)

Procedures Non-binding Binding Objectives Mediation Mini-trial Summary Early Arbitration, Court Jury Trial Neutral Private Evaluation Judging Minimize Costs Speed Privacy Maintain/Improve Relationship Vindication Neutral Opinion Precedent Maximizing/ Minimizing Recovery

0 = unlikely to satisfy objective 1 = satisfies objective somewhat 2 = satisfies objective substantially 3 = satisfies objective very substantially

Professor John Barkai --- University of Hawaii Law School - ADR in the Courts p. 24 -