CH-5 Alternative Dispute Resolution – The Legal and Regulatory Environment of Business : Exam Guide

05 Key 1. Litigation is the quickest method of dispute resolution. Answer: False The litigation process within the court system imposes tremendous costs in terms of time, money, emotional stress, and harmony in relationships. This fact is a major reason why you probably have very little personal experience with litigation. It also is the reason most businesses try to avoid litigation and use it as a means of last resort to resolve disputes. 2. A dispute arises when one party makes a claim that another party denies. Answer: True A dispute arises when one party makes a claim that another party denies. 3. Negotiation is the process used to persuade or coerce someone to do what you want them to do. Answer: True Negotiation is the process used to persuade or coerce someone to do what you want them to do. All of us instinctively engage in some form of negotiation. Even as evidence of a conflict is exhibited (through comments or sighs or groans), the parties are negotiating. 4. Positional bargaining is an approach based on principled, interest-based negotiations. Answer: False In positional bargaining, the parties begin in a competitive style by stating their respective expectations. For example, in a sales transaction, the seller starts with as high an asking price as is considered reasonable. Likewise, the buyer begins with the lowest reasonable price. 5. Positional negotiation creates barriers to resolution that may be removed by using principles instead of positions. Answer: True Most people instinctively use a negotiation method called positional bargaining. A better approach to negotiating among disputing parties has been described as principled, interest-based negotiations. 6. Once a lawsuit has been filed, ADR may not be used until the suit has gone to judgment or has been dismissed. Answer: False Effective use of ADR systems can save disputing parties many of the costs associated with litigation, even after it has begun. 7. A negotiated settlement is generally more expensive and time-consuming than litigation. Answer: False The winning party in a lawsuit is a loser to the extent of the attorney's fees— which are often substantial. The fact that the loser usually also has to pay court costs is an added incentive to settlement without litigation. 8. Juries often decide close questions of liability, as well as size of the verdict, against business organizations. Answer: True Juries are frequently sympathetic to individuals who have suits against large corporations or defendants who are covered by insurance. Juries often decide close questions of liability, as well as size of the verdict, against business organizations because of their presumed ability to pay. As a result, businesses settle many disputes even though they might possibly prevail in litigation. 9. Focus groups can deliver binding decisions in civil cases. Answer: False Attorneys frequently use focus groups in significant cases. The attorneys assemble a group of citizens and present their evidence. This group then deliberates and makes findings. This dress rehearsal gives attorneys insight into possible jury reaction to the evidence and points up weaknesses in the case. 10. To avoid costly public litigation, parties can agree to have a private third party decide the merits of their dispute. Answer: True To avoid the various expenses of litigation, disputing parties sometimes agree to have a third party decide the merits of the dispute. This formal ADR system is called arbitration. 11. The arbitrator should be disinterested in any financial impact of the decision. Answer: True The primary reason for the use of arbitration is the laudable goal of providing a relatively quick and inexpensive resolution of disputes. The arbitrator should be disinterested in any financial impact of the decision. 12. The arbitrator is empowered by the parties to reach a binding decision in a voluntary arbitration. Answer: True Submission to arbitration often occurs when the disputing parties agree to use this form of ADR. Such an agreement by the parties is a submission to voluntary arbitration. Generally, an agreement to submit an issue to arbitration is irrevocable, and a party that thinks the process is not going well cannot withdraw from the arbitration and resort to litigation. 13. Normally, the decision to submit a dispute to arbitration is irrevocable. Answer: True Generally, an agreement to submit an issue to arbitration is irrevocable, and a party that thinks the process is not going well cannot withdraw from the arbitration and resort to litigation. 14. If a party is unhappy with the way a private arbitration is going, it may unilaterally close the proceedings and move the dispute to public litigation. Answer: False The parties authorize an arbitrator to make a decision that binds these parties and resolves their dispute. A party that thinks the process is not going well cannot withdraw from the arbitration and resort to litigation. 15. In most state statutes authorizing voluntary arbitration, the agreement to submit to arbitration may be written or oral. Answer: False The act of referring a matter to arbitration is called submission. Submission to arbitration often occurs when the disputing parties agree to use this form of ADR. Most state statutes authorizing voluntary arbitration require the agreement to arbitrate to be in writing. 16. Private arbitrators are not permitted to decide on questions of law. Answer: False The issues submitted to arbitration, as framed in the submission, may be questions of fact, questions of law, or mixed questions of fact and law. 17. The arbitrator chooses the issues of the hearing to be resolved. Answer: False The issues submitted to arbitration, as framed in the submission, may be questions of fact, questions of law, or mixed questions of fact and law. Parties that have contracted to arbitrate are not required to arbitrate any matters other than those they contractually agree to arbitrate. 18. An arbitrator must be a lawyer or a judge in good standing in the community where the arbitration is to take place. Answer: False There are no licensing requirements an arbitrator must satisfy. Appraisers can be used to decide disputes about the value of real estate, medical doctors can be used to decide health care disputes, and academicians can be used to decide issues within their area of expertise. 19. The sole source of qualified expert arbitrators currently is the American Arbitration Association. Answer: False Arbitrators generally are chosen by the disputing parties. A provision in the agreement to arbitrate or in the statute that requires the arbitration describes how the arbitrator is selected. 20. Each state has its own licensing regulations for arbitrators. Answer: False Arbitration provides for decision making by experts with experience in the particular industry and with knowledge of the customs and practices of the particular work site. 21. Generally an arbitrator's award does not need to set forth findings of fact, conclusions of law, or the reasons for an award. Answer: True Generally an arbitrator's award does not need to set forth findings of fact, conclusions of law, or the reasons for an award. However, a disclosure of findings and the reasons must be given if the applicable statute, arbitration agreement, or submission so requires. When the arbitrator does provide the basis for decision in the form of an opinion or letter, that document becomes a part of the award. 22. The Federal Arbitration Act is largely responsible for the prominent role and positive perception of arbitration among businesses today. Answer: True Prior to the enactment of the FAA, our common law system preferred litigation over arbitration as a means of resolving disputes. In 1925, congressional enactment of the FAA began to change this presumed way of dispute resolution. 23. In order for a federal court to assume that parties did not intend to arbitrate, a court must believe with positive assurance that the parties did not intend to include the particular dispute in the arbitration clause. Answer: True The federal policy clearly favors arbitration of commercial disputes. The FAA provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 24. Individual states are not limited by the Constitution when they make laws that deny arbitration of certain disputes Answer: False The Commerce Clause and the Supremacy Clause of the U.S. Constitution are often used to set aside such state laws that deny arbitration of certain disputes. 25. The federal system and all state systems require arbitration hearings to comply with established rules of evidence. Answer: False States have different rules relating to the admissibility of evidence. In most states the established rules of evidence must be followed by the arbitrators. Several jurisdictions, however, do not require hearings to be conducted according to the established rules of evidence. 26. From the perspective of judicial review, voluntary arbitration is a more effective alternative to litigation than mandatory arbitration. Answer: True The arbitration process is less time consuming and less costly than litigation only if the parties are limited in seeking judicial review of the arbitrators' awards. From this perspective, voluntary arbitration is a more effective alternative to litigation than mandatory arbitration. 27. Absent fraud or other inappropriate behavior, arbitration awards in voluntary proceedings are not subject to judicial review on the merits of the decision. Answer: True The fact that the arbitrator made erroneous rulings during the hearing, or reached erroneous findings of fact from the evidence, is no ground for setting aside the award because the parties have agreed that he or she should be the judge of the facts. An erroneous view of the law no matter how egregious is binding because the parties have agreed to accept the arbitrator's view of the law. 28. The judicial review of an arbitrator's award in a voluntary proceeding is quite restricted and is more limited than the appellate review of a trial court's decision. Answer: True Courts do not interfere with an award by examining the merits of the controversy, the sufficiency of the evidence supporting the award, or the reasoning supporting the decision. Were it otherwise, arbitration would fail in its chief purpose: to preclude the need for litigation. 29. If an arbitrator makes a clearly erroneous ruling pursuant to a voluntary contract-based arbitration, there will be sufficient grounds for a judge to set aside the award. Answer: False Error of law renders the award void only when it requires the parties to commit a crime or otherwise to violate a positive mandate of the law. 30. Mandatory arbitration proceedings are generally subject to a de novo judicial review if a party is dissatisfied with the award. Answer: True Courts throughout the United States have uniformly upheld mandatory arbitration statutory schemes as against the constitutional challenges previously mentioned where a dissatisfied party can reject the arbitrator's award and seek a de novo judicial review of that award. 31. The failure of a party to be present at an arbitration hearing constitutes a waiver of the right to reject the award and seek de novo judicial review. Answer: True The failure of a party to be present, either in person or by counsel, at an arbitration constitutes a waiver of the right to reject the award and seek de novo judicial review. In essence, a party's lack of participation operates as consent to the entry by the court of a judgment on the award. 32. Statutorily mandated arbitration requires a higher level of judicial review of an award than voluntary arbitration. Answer: True Although a party may voluntarily consent to almost any restriction upon or deprivation of a right, a similar restriction or deprivation, when compelled by government, must be in accord with procedural and substantive due process of law. Statutorily mandated arbitration requires a higher level of judicial review of the award. 33. An arbitrator may be considered partial or corrupt by independently investigating a material matter after the close of hearings without telling either party about the investigation. Answer: True Section 10 of the Federal Arbitration Act provides that an arbitration award may be vacated or set aside on any one of four grounds, including arbitral misconduct. The concept of arbitral "misconduct" does not lend itself to a precise definition, but undertaking independent, unauthorized investigations have been found to fit that definition. 34. Rules related to court-annexed mediation are federally mandated. Answer: False Rules related to court-annexed mediation are local in nature; thus, there are wide variations as to the type of cases that courts require to be mediated. 35. A mediator cannot impose a binding solution on the parties. Answer: True A mediator cannot impose a binding solution on the parties. However, as an unbiased and disinterested third party, a mediator is often able to help the parties bring about an understanding of a dispute and thus avoid litigation of it. 36. The court mandates an enforcement mechanism that ensures the parties will mediate in good faith. Answer: True Even in the court-annexed mediations, a party usually satisfies the court's order to mediate by simply showing up. Generally, there is no enforcement mechanism that ensures the parties will mediate in good faith. 37. is the process used to persuade or coerce someone to do what you want them to do. A. Avoidance B. Accommodation C. Negotiation D. Competition E. Collusion Answer: C. Negotiation Negotiation is the process used to persuade or coerce someone to do what you want them to do. All of us negotiate all the time with ourselves, our family members, our co-workers, and even with strangers. 38. A negotiation between a seller and a buyer begins with each party stating their respective expectations. The seller starts with as high an asking price as is considered reasonable. Likewise, the buyer begins with the lowest reasonable price. This is an example of: A. positional bargaining. B. principled negotiation. C. interest-based negotiation. D. fact bargaining. E. surface bargaining. Answer: A. positional bargaining. In positional bargaining, the parties begin in a competitive style by stating their respective expectations. 39. Interest-based negotiations are superior to position-based negotiation because: A. the differences between the interests of the parties are often large. B. interest-based negotiations allow room for consideration of non-factual concerns, such as relationships and long-term interests. C. position-based negotiation is often only concerned with preparing for litigation. D. interest-based negotiation requires the presence of a judge or magistrate. E. interest-based negotiation forces the parties to discuss resolution options for the week prior to open negotiation. Answer: B. interest-based negotiations allow room for consideration of non-factual concerns, such as relationships and long-term interests. Parties would likely benefit by discussing how each could benefit by continuing their relationship of customer and supplier. They may be able to solve the current problem and maintain, if not enhance, their future business opportunities together. 40. Roger Fisher, William Ury, and Bruce Patton wrote a seminal book on negotiation titled . A. The Principled Proposition B. Making It Work C. Let's Just Talk D. Getting to Yes E. Letting It Go Answer: D. Getting to Yes The book presents a better approach to negotiating among disputing parties and presents seven elements that should become the focus of negotiators. 41. According to Roger Fisher, William Ury, and Bruce Patton, is the element of interest-based negotiation that involves the application of accepted standards to the topic negotiated—rather than having the parties state unsupported propositions. A. options. B. collaboration. C. puzzle-solving. D. preparatory positioning. E. legitimacy. Answer: E. legitimacy. Legitimacy involves the application of accepted standards to the topic negotiated—rather than having the parties state unsupported propositions. 42. According to Roger Fisher, William Ury, and Bruce Patton, the element of interest-based negotiation that instructs parties to brainstorm possible solutions to the dispute is referred to as: A. options. B. collaboration. C. puzzle-solving. D. preparatory positioning. E. legitimacy. Answer: A. options. The parties should brainstorm possible options or solutions to their dispute. This exploration process is best done with the parties agreeing that an option mentioned is not necessarily a proposal for compromise. 43. According to Roger Fisher, William Ury, and Bruce Patton, in principled negotiation, are outcomes that are possible without the agreement of the other party. A. commitments B. alternatives C. options D. interests E. relationships Answer: B. alternatives Alternatives are outcomes that are possible without the agreement of the other party. In essence, alternatives are the thing that parties to a negotiation can do away from the bargaining table. 44. Which of the following is true of the use of ADR techniques? A. ADR techniques are ineffective once the pretrial process has begun. B. Disputing parties must begin a lawsuit to use any form of ADR. C. Disputing parties cannot use an ADR technique not specified in the original agreement. D. Disputing parties can agree to use an ADR technique after the dispute arises. E. Litigation precludes the use of ADR techniques for dispute resolution. Answer: D. Disputing parties can agree to use an ADR technique after the dispute arises. Disputing parties may agree to use an ADR technique after the dispute arises even if they did not foresee the possibility of needing to use a dispute resolution system at the time of their original agreement. 45. Often, to provide a dress rehearsal for jury trials, attorneys argue their cases in front of a(n) on the basis of assumed facts, presenting arguments and expected evidence to this mock jury composed of citizens. A. arbitrator B. barrister C. magistrate D. class E. focus group Answer: E. focus group The attorneys assemble a group of citizens and present their evidence. This group then deliberates and makes findings. The verdicts often cause plaintiffs to take a more realistic view of the damages to which they think they are entitled. 46. Which of the following is true of arbitration? A. The record of proceedings is available to the press and others. B. The decisions arising from arbitration are binding on the parties. C. Arbitration cannot be imposed on the disputing parties. D. The parties themselves resolve all the matters of contention, without the intervention of a third party. E. The arbitrator need not be a disinterested party. Answer: B. The decisions arising from arbitration are binding on the parties. Arbitrators are authorized to make decisions that are binding on the parties, thereby resolving the dispute. 47. The act of referring a matter to arbitration is called: A. a submission. B. a summons. C. appealing. D. de novo review. E. collective bargaining. Answer: A. a submission. The act of referring a matter to arbitration is called submission. Submission to arbitration often occurs when the disputing parties agree to use this form of ADR. 48. In the absence of a statute, the rights and duties of the parties to a submission for arbitration are described and limited by: A. the Constitution. B. de novo review. C. class-action certification. D. arbitrability. E. the agreement. Answer: E. the agreement. Parties that have contracted to arbitrate are not required to arbitrate any matters other than those they contractually agree to arbitrate. 49. The decision by an arbitrator is called a(n): A. submission. B. award. C. verdict. D. judgment. E. edict. Answer: B. award. The arbitrator's decision is known as an award. In most states the arbitrator's award must be in writing. The award is valid as long as it settles the entire controversy and states which party is to pay the other a sum of money. 50. A(n) will be enforced by the courts as if it were a judgment of the courts. A. award B. submission C. appeal D. pleading E. caucus Answer: A. award An arbitrator's award is final on all issues submitted, and it will be enforced by the courts as if it were a judgment of the court. 51. Which of the following is true of the Federal Arbitration Act? A. It covers any arbitration clause in a contract that involves interstate commerce. B. It favors litigation over arbitration in cases where an arbitration clause is ambiguous. C. It nullifies the rights of parties to litigate disputes if an arbitration clause exists. D. It ensures that arbitration is used only in federal cases, and not in state cases. E. It guarantees that all arbitration clauses are irrevocable under any circumstances. Answer: A. It covers any arbitration clause in a contract that involves interstate commerce. The FAA covers any arbitration clause in a contract that involves interstate commerce. 52. Arbitrators are typically chosen by: A. the U.S. Supreme Court. B. fiat. C. the disputing parties. D. Federal Rules of Civil Procedure. E. mediators. Answer: C. the disputing parties. A provision in the agreement to arbitrate or in the statute that requires the arbitration describes how the arbitrator is selected. 53. When a losing party in an arbitration proceeding makes allegations of bias against an arbitrator, the allegations: A. automatically nullify the panel's opinion. B. normally do not impact the results of arbitration. C. result in a judge overturning the opinion. D. normally remove that arbitrator's opinion from the results of the arbitration. E. set off a new round of litigation. Answer: B. normally do not impact the results of arbitration. It is not surprising that when this procedure is used, allegations of bias are often made by the losing party. Courts generally do not allow such allegations to form a basis for overturning a panel's award unless there is evidence of overt corruption or misconduct in the arbitration proceedings. 54. In most cases, an arbitrator's award: A. needs to set forth the legal reasons for the result. B. needs to set forth the findings of fact. C. needs to set forth the specific credentials of the arbitrator. D. needs not set forth any specific facts, law, or reasons. E. needs to set forth the names of the parties. Answer: D. needs not set forth any specific facts, law, or reasons. However, a disclosure of findings and the reasons must be given if the applicable statute, arbitration agreement, or submission so requires. 55. Which of the following is true of arbitration? A. Arbitration is more expensive and time-consuming than litigation. B. Arbitrators' decisions are rarely binding on the parties. C. Arbitrators must be licensed pursuant to the American Arbitration Association. D. An arbitrator is always a neutral third party. E. Arbitrators must be licensed and trained to assume the role. Answer: D. An arbitrator is always a neutral third party. The arbitrator should be disinterested in any financial impact of the decision and neutral regarding the issues presented in the dispute. There are no licensing requirements an arbitrator must satisfy. However, an arbitrator often is chosen from a list of qualified arbitrators provided by the arbitration service. 56. Who frames the issues to be resolved in arbitration? A. The arbitrator B. The judge C. The parties to the dispute D. The Supreme Court E. The National Federation of Arbitrators Answer: C. The parties to the dispute The parties themselves, by virtue of the submission, frame the issues to be resolved and define the scope of the arbitrator's powers. 57. The of the U.S. Constitution is often used to set aside state laws that improperly deny arbitration of certain disputes. A. Takings Clause B. Bill of Rights C. Supremacy Clause D. Third Amendment E. Due Process Clause Answer: C. Supremacy Clause The federal policy favoring arbitration frequently conflicts with state laws favoring litigation as the means to resolve a dispute. The Supreme Court exhibits great deference to arbitration and the authority of the arbitrator. 58. Contract-based arbitration is considered to be: A. voluntary because both parties have willingly agreed to participate. B. unconstitutional in most states because it limits redress of grievances. C. coercive because it provides an unfair advantage to the party originating the contract. D. restrictive and undesirable because of expense and time considerations. E. legally impractical because these agreements are too difficult to reach in early contract negotiations. Answer: A. voluntary because both parties have willingly agreed to participate. In essence, the contracting parties show good judgment in understanding conflicts exist, conflicts give rise to disputes, and disputes are better resolved through arbitration rather than by litigating. 59. A(n) is a decision that arises when parties already in dispute decide that arbitration is better than litigation. A. submission B. motion to compel arbitration C. injunction D. arbitrability award E. postdispute arbitration agreement Answer: E. postdispute arbitration agreement Postdispute arbitration agreements arise when parties already in dispute decide that arbitration is better than litigation. 60. Which of the following distinguishes mandatory arbitration from voluntary arbitration? A. The right of the dissatisfied party to reject the award B. The dollar amount involved C. Whether or not an attorney is required D. The quality of the arbitrators E. Whether there will be one or three arbitrators Answer: A. The right of the dissatisfied party to reject the award Courts throughout the United States have uniformly upheld mandatory arbitration statutory schemes as against the constitutional challenges previously mentioned where a dissatisfied party can reject the arbitrator's award and seek a de novo judicial review of that award. 61. Ben and Jerry enter into a business agreement to assemble and sell prepackaged salads. In their written agreement, they both agree that they will be required to settle all disputes through arbitration. Which of the following is true of this situation? A. This is an example of a mandatory arbitration clause. B. This is an example of a voluntary arbitration clause. C. This is an example of a caucus. D. This is an example of court-annexed mediation. E. This is an example of a postdispute arbitration agreement. Answer: B. This is an example of a voluntary arbitration clause. Agreements to voluntarily arbitrate come in two basic forms. One is known as the predispute arbitration clause. In essence, the contracting parties show good judgment in understanding conflicts exist, conflicts give rise to disputes, and disputes are better resolved through arbitration rather than by litigating. 62. Which of the following is true of arbitration procedures? A. Arbitration is a voluntary procedure that cannot be forced on the parties. B. Judicial review of the arbitrator's award occurs in most cases. C. The award resulting from the voluntary arbitration procedure is final. D. If the arbitrator made erroneous rulings during the hearings, the award can be set aside. E. The arbitrator's award is binding on the parties only if there was no error of law on the part of the arbitrator. Answer: C. The award resulting from the voluntary arbitration procedure is final. Generally, the award resulting from the voluntary arbitration procedure is final. The arbitrator's findings on questions of both fact and law are conclusive. 63. Courts can use judicial review to change the awards of voluntary arbitration when: A. either disputing party is dissatisfied with the award. B. the arbitrator made erroneous rulings during the hearing. C. the actions of the arbitrator are deemed fraudulent or arbitrary. D. the arbitrator reached erroneous findings of fact from the evidence. E. an arbitrator makes a mistake of law during the proceedings. Answer: C. the actions of the arbitrator are deemed fraudulent or arbitrary. The arbitrator's findings on questions of both fact and law are conclusive. The judicial review of an arbitrator's award is quite restricted and is more limited than the appellate review of a trial court's decision. 64. In which of the following cases will courts most likely use judicial review to change the awards of voluntary arbitration? A. Both parties are dissatisfied with the award. B. The decision violates a positive mandate of the law. C. The arbitrator reached erroneous findings of fact from the evidence. D. One party is dissatisfied with the award. E. The arbitrator misunderstands the law. Answer: B. The decision violates a positive mandate of the law. Error of law renders the award void only when it requires the parties to commit a crime or otherwise to violate a positive mandate of the law. 65. For mandatory arbitration to be constitutional: A. proceedings must be bound by standard judicial tenets such as discovery. B. licensed practitioners must preside over all proceedings. C. all disputing parties must agree in advance to be bound by the arbitration award. D. fair procedures must be provided by the legislature and ultimate judicial review is available. E. the foundational statute must have passed with a super-majority. Answer: D. fair procedures must be provided by the legislature and ultimate judicial review is available. Although a party may voluntarily consent to almost any restriction upon or deprivation of a right, a similar restriction or deprivation, when compelled by government, must be in accord with procedural and substantive due process of law. 66. A party dissatisfied with the mandatory arbitration award has the right to: A. appeal the award directly to the state supreme court. B. appeal the award directly to the U.S. Supreme Court. C. reject the award and seek a review in the appropriate trial court. D. sue the arbitrator. E. ignore the disputed award. Answer: C. reject the award and seek a review in the appropriate trial court. Courts throughout the United States have uniformly upheld mandatory arbitration statutory schemes as against the constitutional challenges previously mentioned where a dissatisfied party can reject the arbitrator's award and seek a de novo judicial review of that award. 67. If arbitration is conducted pursuant to state statute: A. the statute determines what grounds may be used to challenge an award in court. B. if a dispute arises involving interstate commerce, the statute of the state where the dispute is first submitted prevails. C. a disputing party may choose to have Federal Arbitration Act provisions govern any resolution of the dispute if the state statute appears unfavorable to his or her position. D. only Congress can overturn it. E. only the U.S. Supreme Court can overturn it. Answer: A. the statute determines what grounds may be used to challenge an award in court. When the arbitration is pursuant to state statute, that statute determines what, if any, grounds are available to challenge an award in court. In cases that involve interstate commerce issues, the provisions of the Federal Arbitration Act control. 68. De novo review means that: A. the court appoints an arbitrator to initiate arbitration proceedings. B. the court tries the issues anew as if no arbitration occurred. C. the court recommends that the party opt for mediation instead of litigation. D. the court halts a mediation process and begins litigation. E. the court takes into account the arbitrator's award in the litigation. Answer: B. the court tries the issues anew as if no arbitration occurred. De novo review means that the court tries the issues anew as if no arbitration occurred. 69. James has been appointed as an arbitrator in a dispute. Which of the following can he do without the danger of it constituting misconduct? A. Accepting gifts from a party to the proceedings B. Holding hearings without a member of the arbitration panel present C. Communication with a party to the proceedings with consent of the other party D. Receipt of evidence as to a material fact without notice to a party E. Conducting an independent investigation into a material matter after the close of hearings Answer: C. Communication with a party to the proceedings with consent of the other party The concept of arbitral "misconduct" does not lend itself to a precise definition, but it is not likely considered misconduct if the arbitrator has discussions with a party when the other party has given consent. 70. The outcome of mediation: A. is binding on all parties. B. can have no impact on dispute resolution in any way. C. is a legal finding that may be used in court if the dispute proceeds to litigation. D. helps point out weaknesses in a case without an actual trial. E. is a necessary precursor to arbitration. Answer: D. helps point out weaknesses in a case without an actual trial. A mediator cannot impose a binding solution on the parties. However, as an unbiased and disinterested third party, a mediator is often able to help the parties bring about an understanding of a dispute and thus avoid litigation of it. 71. Mediators are similar to arbitrators in that: A. they can impose binding decisions on the parties. B. they must be qualified and trained to practice. C. their decisions can be imposed in a court of law. D. they operate in cases of federal rather than local importance. E. they must be disinterested third parties. Answer: E. they must be disinterested third parties. A mediator cannot impose a binding solution on the parties. However, as an unbiased and disinterested third party, a mediator is often able to help the parties bring about an understanding of a dispute and thus avoid litigation of it. 72. Typically, mediators utilize the principles of: A. positional bargaining. B. fact bargaining. C. option-based negotiation. D. surface bargaining. E. interest-based negotiation. Answer: E. interest-based negotiation. Parties to a dispute may agree that mediation should be attempted as an alternative to litigating their controversy. 73. Which of the following is true of mediation? A. Mediators tend to be more expert in the field than arbitrators so their decisions are less likely to be erroneous. B. The disputing parties do not have control over the process, reducing preparation time. C. Though mediation is typically more expensive than litigation and arbitration, the quality is often better. D. A mediator cannot impose a binding solution on the parties as he is an interested party to the dispute. E. A trial judge can require the disputing parties to submit to the mediation process before litigation. Answer: E. A trial judge can require the disputing parties to submit to the mediation process before litigation. A trial judge can require the disputing parties to submit to the mediation process before a complaint can be litigated formally. There is a growing movement in this court-annexed mediation as one means of controlling the heavy caseload faced by courts. 74. The difference between a mediator and an arbitrator is that: A. a mediator is not a neutral party. B. an arbitrator is chosen by the disputing parties, while a mediator is not. C. an arbitrator can force a binding solution on both parties. D. a mediator can impose a binding solution on the parties. E. only an arbitrator may be appointed by a judge. Answer: C. an arbitrator can force a binding solution on both parties. A mediator cannot impose a binding solution on the parties. However, as an unbiased and disinterested third party, a mediator is often able to help the parties bring about an understanding of a dispute and thus avoid litigation of it. 75. occurs when a trial judge requires the disputing parties to submit to the mediation process before a complaint can be litigated formally. A. Restorative justice B. Party-directed mediation C. Precursor mediation D. A caucus E. Court-annexed mediation Answer: E. Court-annexed mediation A trial judge can require the disputing parties to submit to the mediation process before a complaint can be litigated formally. There is a growing movement in this court-annexed mediation as one means of controlling the heavy caseload faced by courts. 76. Which of the following is true of caucuses in dispute resolution? A. They generally occur during a mediation proceeding. B. They only occur when mandated by a court order. C. A caucus involves both parties negotiating without the mediator. D. They are illegal because they are considered ex parte communications. E. Caucuses are synonymous with de novo reviews. Answer: A. They generally occur during a mediation proceeding. Sometimes, the mediator may decide that the process will be more productive if the parties and their attorneys meet with the mediator outside the presence of the other disputant. This private meeting is called a caucus. 77. The meeting between a mediator and one disputant outside the presence of the other disputant is called a _______. A. calumny. B. consensus. C. convention. D. convocation. E. caucus. Answer: E. caucus. Sometimes, the mediator may decide that the process will be more productive if the parties and their attorneys meet with the mediator outside the presence of the other disputant. This private meeting is called a caucus. 78. Which of the following is true of a caucus in the process of mediation? A. It constitutes misconduct on the part of the arbitrator. B. Once the mediator uses a caucus, the parties cannot meet face-to-face. C. A caucus is only allowable if both parties are present at all times. D. The presence of a mediator is not essential to the conduct of a caucus. E. A caucus involves the mediator, and only one of the disputing parties. Answer: E. A caucus involves the mediator, and only one of the disputing parties. Sometimes, the mediator may decide that the process will be more productive if the parties and their attorneys meet with the mediator outside the presence of the other disputant. This private meeting is called a caucus. 79. The final step of a successful mediation is: A. submitting any conclusions to a judge for judicial approval prior to implementation. B. writing down the basic agreement reached and having it signed by all the parties. C. providing all evidence given during the mediation to the parties' attorneys for use in the next phase of litigation. D. agreeing that all future disputes be resolved in the same manner. E. turning the results over to the arbitrator as the submission for arbitration. Answer: B. writing down the basic agreement reached and having it signed by all the parties. Through the good judgment and experience of the mediator, the differences between the parties hopefully will be resolved and a common agreement can be produced. The final step to a successful mediation is the writing of the agreement and the signing of the agreement by the parties. 80. When parties agree to resolve all the matters of contention that they can and to arbitrate the unresolved matters, they are said to be using a variation of dispute resolution known as: A. judicial review. B. a focus group. C. submission. D. Med-Arb. E. a caucus. Answer: D. Med-Arb. The parties resolve all the matters of contention that they can and they agree to arbitrate the unresolved matters. This variation has become known as Med-Arb. 81. Discuss Roger Fisher, William Ury, and Bruce Patton's influential book and the seven elements of negotiation presented in it. What is the focus of the book and how do the authors hope to change the focus of negotiation through it? Answer: The book, Getting to Yes, presents the principled, or interest-based, negotiation scheme, which focuses on Communication, Relationship, Interests, Options, Legitimacy, Alternatives, and Commitment. The elements will vary in importance depending on the factual situation in dispute and on the parties' individual perspectives, but the authors argue that concentrating on these elements can help remove some of the barriers created by positional negotiation. Students should address the individual elements and discuss how the "softer," more interests-based approach can foster more amiable, and less contentious, negotiations. When the parties take time to address each other's concerns and truly dig down to their interests, they may find that positional, adversarial negotiation is counter-productive. 82. Why would a business choose to settle a dispute with a customer rather than litigate, even if the business is likely to prevail? Answer: In addition to personal reasons, a business would settle rather than litigate to preserve goodwill and public relations, and because any delays in the court process, which may be protracted even without delays, costs the business time and in most cases, time is money. Litigation is an emotional and financial drain on companies that they should avoid if possible. Juries tend to favor individuals over businesses and given the litigious environment, avoiding litigation is a wise business decision. 83. With regard to dispute resolution, what is a focus group and why and when might one be used? Answer: A focus group is a group of citizens assembled by an attorney to simulate a jury. The attorney presents evidence to the focus group which then deliberates and makes findings. This dress rehearsal gives the attorney an opportunity to assess a potential jury's reaction to evidence and allows the attorney to determine his or her strengths and weaknesses regarding the case at hand. Attorneys look to focus groups as a form of a reality test to see how potential juries will react to their evidence and arguments. 84. Discuss the importance of arbitration for labor relations disputes. Answer: Students' answers may vary. Over the past 80 years, arbitration has played an increasingly important role in resolving business disputes. Historically, arbitration has been the most commonly used ADR system. The primary reason for the use of arbitration is the laudable goal of providing a relatively quick and inexpensive resolution of disputes. Arbitration not only helps the parties avoid the expense of litigation but also provides a means of avoiding the formalities of the courtroom. Formal pleadings, for example, and other procedural steps such as discovery and the rules of evidence are usually not used in an arbitration hearing. Arbitration is of special importance in labor relations, where it provides the grievance procedures under collective bargaining contracts. Arbitration is a means for industrial self-government, a system of private law for all problems that may arise in the workplace. 85. What potential problems do you see arising as a result of a poorly drafted predispute arbitration clause? Answer: Students' answers may vary. The benefit of arbitration is that the parties get a lot of control over what happens should a dispute arise, but the parties may not be very good at choosing what control they exert. Though the parties have planned for arbitration, they may not be able to plan for all disputes, so the clause may leave out something, which will cause issues of arbitrability. Because they did not think of covering all disputes, one of the parties may resist arbitration, which will force the other to compel arbitration. This would force an additional step in their dispute resolution that will force them into court, which they ostensibly were hoping to avoid in the first place. Also, the parties may not be sophisticated enough to choose a good arbitrator, good procedures, or a proper venue, making the resulting dispute resolution confusing and potentially null and void. 86. What functions do experts serve in an arbitration? Answer: Arbitration has the advantage of submitting many disputes to experts for solutions. The specific issues under dispute may be very nuanced or idiosyncratic, so sending them to an expert, rather than a generalist judge, cuts out the necessity of explaining the industry, goods, and business characteristics before you can even address the dispute. For example, if the issue involves whether a building has been properly constructed, the matter could be submitted to an architect for resolution. If it involves a technical accounting problem, it could be submitted to a certified public accountant. 87. What are the advantages of using an expert rather than a judge as an arbitrator? Answer: One reason arbitration is frequently preferable to litigation is the use of an expert to resolve the dispute. Appraisers can be used to decide disputes about the value of real estate, medical doctors can be used to decide health care disputes, and academicians can be used to decide issues within their area of expertise. Arbitration provides for decision making by experts with experience in the particular industry and with knowledge of the customs and practices of the particular work site. Parties expect the arbitrator to look beyond strictly legal criteria to other factors that bear on the proper resolution of a dispute. These factors may include the impact of a particular result on productivity, its consequences to morale, and whether tensions will be heightened or diminished. The ablest judge usually does not bring the same experience and competence to bear upon the determination of a grievance, because the judge cannot be as informed as the expert arbitrator. 88. What are the benefits and difficulties of choosing a panel of three arbitrators over a single arbitrator? Answer: It is common to use one arbitrator who is considered objective and impartial. Any person the disputing parties agree upon can be an arbitrator. There are no licensing requirements an arbitrator must satisfy. However, an arbitrator often is chosen from a list of qualified arbitrators provided by the arbitration service. The disputing parties are not limited to the list unless they have agreed to make their selection from this list. It is also common to have a panel of three arbitrators. In such cases, each party selects an arbitrator and the two so selected choose a third. It is not surprising that when this procedure is used, allegations of bias are often made by the losing party. Courts generally do not allow such allegations to form a basis for overturning a panel's award unless there is evidence of overt corruption or misconduct in the arbitration proceedings. Since such evidence usually is difficult to obtain, allegations of bias normally do not impact the results of arbitration. 89. Discuss arbitral awards and their relation to the courts. Answer: Generally an arbitrator's award does not need to set forth findings of fact, conclusions of law, or the reasons for the award. However, a disclosure of findings and the reasons must be given if the applicable statute, arbitration agreement, or submission so requires. When the arbitrator does provide the basis for decision in the form of an opinion or letter, that document becomes a part of the award. Because the parties themselves, by virtue of the submission, frame the issues to be resolved and define the scope of the arbitrator's powers, the parties are generally bound by the resulting award. A court will make every reasonable presumption in favor of the arbitration award and the arbitrator's acts and proceedings. An arbitrator's award is final on all issues submitted, and it will be enforced by the courts as if it were a judgment of the court. Awards are not subject to judicial review on the merits of the decision. Only when fraud or other clearly inappropriate action by the arbitrator can be shown is a court willing to reverse the award granted in a voluntary arbitration proceeding. After the award is made by the arbitrator, it is usually filed with the clerk of an appropriate court. If no objections are filed within a statutory period, it becomes final and enforceable, like a judgment. 90. What impact has the Federal Arbitration Act had on how the courts view arbitration? Answer: The reenactment of the Federal Arbitration Act (FAA) in 1947 helped change the perceptions of arbitration. At that time, courts began to encourage the use of arbitration as an alternative to litigation. The FAA laid the groundwork for enforceable regulation of the arbitration process and provided a framework for states to individually legislate arbitration. The FAA also addresses contractual arbitration when interstate commerce is involved, and generally takes precedence over state regulations in such cases. The Supreme Court widely accepts arbitration as an enforceable alternative dispute resolution tool. 91. How are arbitrators selected and compensated for mandatory arbitration proceedings? Answer: The arbitrators in the mandatory arbitration process are retired judges and practicing lawyers, usually experienced trial attorneys. A list of eligible arbitrators is maintained by court officials in charge of the mandatory process. Although the parties may agree on using only one arbitrator, mandatory arbitration cases are usually presented to a panel of three. Arbitrators are paid a per-diem fee. The parties involved in the arbitration are responsible for paying these costs. 92. Compare and contrast voluntary and mandatory arbitration. Answer: In voluntary arbitration, submission is based on the parties' agreement to arbitrate or on the contract, while in mandatory arbitration, submission is based on state statute. The procedures involved in voluntary arbitration are quick, informal, with typically no rules or discovery. Mandatory arbitration involves court supervision, frequently there is discovery, and many states require the rules of evidence to be followed. Voluntary arbitration allows no review of the award, unless there is proof of fraud or other inappropriate acts by the arbitrator. For mandatory arbitration, the court will conduct a de novo hearing as if the hearing had not occurred. 93. What is the role of judicial review in voluntary contract-based arbitration awards? Answer: In most cases, the award resulting from a voluntary contract-based arbitration is final. Arbitrator's findings are considered conclusive even when they result in erroneous findings of law. Judicial review can correct fraudulent or arbitrary actions by an arbitrator or when the decision is clearly contrary to public policy. 94. What are some of the constitutional challenges to mandatory arbitration? Answer: Laws providing for mandatory arbitration are subject to numerous constitutional challenges. Many courts have generally held that mandatory arbitration statutes that effectively close the courts to the litigants by compelling them to resort to arbitrators for a final and binding determination are void as against public policy and are unconstitutional in that they: 1. Deprive one of property and liberty of contract without due process of law. 2. Violate the litigant's Seventh Amendment right to a jury trial and/or the state's constitutional access to courts' provisions. 3. Result in the unconstitutional delegation of legislative or judicial power in violation of state constitutional separation-of-powers provisions. 95. What are the four grounds that section 10 of the Federal Arbitration Act provides for vacating an arbitration award? Answer: Section 10 of the FAA provides four grounds to vacate an arbitration award: 1) the award was procured by corruption, fraud, or other undue means; 2) where the arbitrators were obviously partial or corrupt; 3) where the arbitrators were guilty of misconduct; and 4) the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 96. What is arbitral misconduct? List five instances of arbitrator misconduct that would lead to the vacating of an arbitrator's award. Answer: Although difficult to precisely define, arbitral misconduct occurs when the actions of the arbitrator cast doubt on the transparency and fairness of the proceeding. Five examples of arbitrator's misconduct that could lead to the vacating of the award are (1) communications with a party or witness without the knowledge or consent of the other party; (2) receiving evidence of a material fact without notice to a party; (3) holding hearings or deliberations in the absence of a member of the arbitration panel or rendering an award without consulting a panel member; (4) undertaking an independent investigation into a material matter after the close of hearings or without notice to the parties; and (5) accepting gifts or other hospitalities from a party during the proceedings. 97. What are the typical steps in the mediation process? Answer: The mediation process follows the following steps: 1) the mediator makes an introduction and explains the mediation; 2) parties make their opening statements; 3) parties exchange dialogue or negotiation; 4) possible options are brainstormed; and 5) a written agreement is signed. If necessary, private caucuses are arranged during the process at the mediator's discretion. 98. What is a caucus? How is it used in mediation? Answer: Sometimes, the mediator may decide that the process will be more productive if the parties and their attorneys meet with the mediator outside the presence of the other disputant. This private meeting is called a caucus. After each side caucuses with the mediator, the mediator may call the parties back together for continued discussions, or the mediator may begin to act as a shuttle diplomat, moving back and forth between the parties who are in separate rooms. Especially during these caucuses, the mediator must win the trust and confidence of each party to the dispute. 99. The Magnuson-Moss Warranty Act provides that if a business adopts an informal dispute resolution system to handle complaints about its product warranties, then a customer cannot sue the manufacturer or seller for breach of warranty without first going through the informal procedures. How does the act benefit the business and the consumer? Answer: Student answers should address the flexibility of ADR systems, and discuss how creative companies can keep lawsuits out of the media by forcing consumers to attend to mediation or arbitration before going to litigation. Many of the informal procedures will require confidentiality, so the allegations will not flow to the media. Consumers may actually find benefit in this act's requirements by getting quick settlements, by avoiding costly litigation, and by having attorneys who specialize in the business's informal procedures. Test Bank for The Legal and Regulatory Environment of Business O. Lee Reed, Marisa Pagnattaro, Daniel Cahoy, Peter Shedd, Jere Morehead 9780073524993, 9780077437336, 9781260161793