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Baker, Nicola --- "Legislated Court Authority to refer to Mediation or Arbitration?" [1997] WkoLawRw 4; (1997) 5 Waikato Law Review 65


THE MCCAW LEWIS CHAPMAN ADVOCACY CONTEST

LEGISLATED COURT AUTHORITY TO REFER TO MEDIATION OR ARBITRATION?

BY NICOLA J BAKER[*]

1. Introduction

The High Court Review Committee recently prepared a proposal to extend the use of alternative dispute resolution (ADR) in civil cases in New Zealand.[1] The proposal was that the Court should have legislated authority to enable judges to refer cases to mediation or arbitration, probably shortly after a defence had been filed. This initiative followed similar overseas approaches to ADR in England, Australia and the United States of America.[2] The context of the proposal is stated as being the need to establish effective case management in all courts, and the objective is “to provide more timely, less legalistic, cost-effective dispute resolution”.[3] However, the overseas experience of court referral to ADR does not clearly indicate that these objectives of cost savings, efficiency and justice are met by the implementation of the system. Accordingly, it is submitted that compulsory referral to ADR should not become part of the legal system in New Zealand, but that it should remain a voluntary option for the parties involved.

2. ADR Overseas

The United States of America has had lengthy experience of compulsory referral to ADR. In the 1980s, referral became part of the compulsory intrajudicial processes designed to improve the legal system from within. However, with that element of compulsion, the nature of ADR changed, losing some of its original advantages.[4]

For example, mediation is usually perceived as a faster, cheaper and more “humanistic” way of resolving disputes. The United States experience was that, when the courts and lawyers became involved, mediation could lose that humanistic face: the advancement of settlement and agreement became the overriding goal; and mediators became pressured to achieve settlements and conform to legal standards rather than being non-directive and allowing more party self-determination.[5] It has been observed that “the higher the volume, the more routinized and de-humanized the process is likely to become”.[6] As mediation becomes increasingly directive, it is no longer an alternative to decision-making by judges, and can be more like a cheaper substitute.

Even if ADR processes do remain relatively informal, the United Kingdom experience is that parties can be confused by the disjunction between a cosy, user-friendly, informal procedure on the one hand and the formality of the decision itself.[7] To confuse the matter further, while the process is apparently informal, the outcomes it produces are confined to strictly legal criteria. In addition, sometimes the lack of legal representation is a serious disadvantage for weaker parties, even if the process is an attempt to move away from formality.

3. Expense and Efficiency

There is no evidence that mandatory ADR significantly reduces the expense and time involved in litigation. Procedures such as compulsory referral to ADR would divert large numbers of cases from the courts. However, given that 90 per cent of cases in New Zealand settle before a hearing,[8] surely the remaining 10 per cent are those in which any kind of settlement is unlikely to be reached? Requiring additional procedures such as mediation and arbitration in large numbers of cases adds a new layer of administrative expense for courts and another layer of transaction costs for litigants.[9]

Compulsory referral to ADR may even add to the case-load of the courts.[10] As more cases are settled and fewer judgments are handed down, the information available to prospective litigants about the probable resolution of their cases is reduced. Due to the resulting dearth of information, some litigants are likely to file a claim which they would not have filed if published adverse precedents existed.[11] Studies also show mixed results as to improved efficiency in the courts, as some cases are delayed by the ADR process.[12]

There are other ways to improve efficiency in terms of case-load and time management. Currently in the United States there is more emphasis on judicial management techniques such as discovery control and assertive use of deadlines to achieve efficiency in litigation.[13] The use of new technologies can assist greatly. For example, the courts can look at increasing the use of computers, CD-Rom disks for discovery, and videoconferencing.

4. Achieving Justice

An important question is whether compulsory referral to ADR will achieve quality of justice. Compulsory referral undermines the principle of every individual’s right to a fair trial.[14] It has been observed that “speedy injustice is not an improvement over slow justice”.[15]

ADR assumes a rough equality between the contending parties.[16] However, ADR may reinforce existing power imbalances.[17] For example, serious power imbalances may be created as private individuals are forced to negotiate with corporations that have well practised negotiation tactics, strategies, and access to expert negotiators. A poorer party may be less able to access and analyse information and therefore may be disadvantaged in the bargaining process.[18] Poorer parties are also generally more susceptible to an early settlement which may be significantly less than that to which they are entitled.[19]

With compulsory referral to ADR there are fewer opportunities for judicial rule-making, “in which a public figure explicates and actualizes public values as expressed in the law subject to appellate review”.[20] Case law develops and evolves through judgments, and a trial is the beginning of that process. The settlement of a case deprives a court of the occasion, and perhaps even the ability, to render an interpretation.[21] It also runs a risk of disservice to society as a whole as society has an interest in knowing the resolution of disputes.[22]

Is justice being sacrificed for the sake of cost efficiencies?[23] It is important to look at the diversity of interests behind the support for ADR and whether it is driven by the legal profession’s self-interest and instinct for self-preservation, rather than simply the efficient delivery of justice.[24] What happens to victims’ rights in ADR?[25] Some parties may be harmed and receive less justice the more ADR becomes incorporated in the judicial system. Another issue is that if ADR is used to cut short discovery, it can cut short opportunities for developing evidence.[26]

There are also constitutional issues concerning the separation of powers. When ADR procedures vest decision-making powers in non-judges, questions arise regarding the separation of powers. Judicial power usually rests with judges. However, with compulsory referral to ADR, will that power also be vested in arbitrators who may be practising lawyers or even non-lawyers such as medical experts?

5. Degree of Participation and Settlement Pressures

An old adage is: “you can lead a horse to water, but you can’t make it drink”. The parallel here is that one may force parties to attend mediation but they cannot be forced to settle. There are several difficulties with the compulsion aspect of referring parties to ADR. Are parties compelled actually to attend mediation and arbitration,[27] particularly if they object?[28] What level of participation is necessary?[29]

One must also ask how much pressure a judge can put on the parties to reach a settlement:

If the decision is left to the reasoned notions of the parties, then deciding to mediate a case can overcome any number of perceived problems in the legal system. But when judges alone become such a large part of the equation that the wishes of the parties are rendered meaningless, the legal system should tremble.[30]

If judges cannot compel participation, let alone the reaching of a settlement,[31] then what is the purpose of allowing a judge to order attendance at mediation or negotiation? There is little gain in efficiency if lawyers and their clients do not obey the court orders in good faith. Some parties may just go through the motions instead of participating in a meaningful manner.[32] Therefore referral simply adds one superfluous level of activity to an already overcrowded system.[33] It is inefficient to force parties to participate in a costly, time-consuming process that is futile.[34]

Compulsory ADR can evolve rapidly into intense pressure to settle, or at least negotiate and alter settlement tactics. This is highly questionable in terms of judicial ethics and basic litigant rights.[35] In the United States there is inconsistency in case law over the issue of compelled negotiations. What happens if the party’s position is not to settle? In some circumstances judges have penalised parties for failure to settle.[36] However, in another case, it was held that a mediator to whom a case is referred “may not compel the parties to mediate (negotiate) or coerce the parties to enter into a settlement agreement”.[37] These issues can give rise to further satellite litigation on ADR procedures themselves.

6. Conclusion

Compulsory referral to ADR does not necessarily improve efficiency in terms of cost and time in the judicial system. There are serious questions about the quality of justice achieved in compulsory referral. There is overseas evidence of increased coercion and undue pressure to settle, which goes against the very philosophy of ADR itself. There are also issues concerning the level of participation and co-operation by the parties involved. ADR should be an option available to parties, but it should remain voluntary.


[*] Third year LLB student, University of Waikato; winner, 1997 McCaw Lewis Chapman Advocacy Contest.

[1] Courts Consultative Committee, Court Referral to Alternative Dispute Resolution (1997) 6.

[2] Ibid, 17-20.

[3] Ibid, 10.

[4] Katz, “Compulsory Alternative Dispute Resolution and Voluntarism: Two-Headed Monster or Two Sides of the Coin” (1993) 1 JDR 1: “With the growth of ADR has come a strong element of compulsion and coercion. The voluntary nature of alternatives has been eroded, and individuals and institutions find themselves mandated or pressured into participating in what were once considered purely optional activities”.

[5] Alfini, Barkai, Bush, Hermann, Hyman, Kovach, Liebman, Press, and Riskin, “What Happens When Mediation is Institutionalized?: To the Parties, Practitioners, and Host Institutions” (1994) 9 (2) OSJDR 307, 309.

[6] Ibid, 311.

[7] Lloyd-Bostock, “Alternative Dispute Resolution and Civil Justice Reform: Is ADR being used to Paper over Cracks?” (1996) 11 (2) OSJDR 397, 402.

[8] Courts Consultative Committee, supra note 1, at 31.

[9] Katz, supra note 4, at 46.

[10] Fredlund, “Just, Speedy, and Inexpensive or Just Speedy and Inexpensive? Mandatory Alternative Dispute Resolution in the Western District of Missouri” [1992] 1 JDR 133, 146.

[11] Ibid, 146.

[12] Katz, supra note 4, at 47.

[13] Ibid, 52.

[14] Ibid.

[15] McPheeters, “Leading Horses to Water: May courts which have the power to order attendance at mediation also require good faith negotiation” (1992) (2) JDR, 377, 392.

[16] Fiss, “Against Settlement” (1984) 93 Yale LJ 1073, 1076.

[17] Fredlund, supra note 10, at 154.

[18] Fiss, supra note 16, at 1076.

[19] Dawson, “Non-Consensual Alternative Dispute Resolution: Pros and Cons” (1993) 4(3) ADRJ 173, 176.

[20] Katz, supra note 4, at 50.

[21] Fiss, supra note 16, at 1084.

[22] Fredlund, supra note 10, at 153.

[23] Lloyd-Bostock, supra note 7, at 401: “Is it not likely that goals such as cost savings and reducing the caseload of the court will conflict with other goals, not least of which is justice?”

[24] Dawson, supra note 19, at 174.

[25] Lloyd-Bostock, supra note 7, at 401: “Mediation can place very strong psychological pressure on claimants to settle for less than the amount a court would award. In what sense is this a “good thing”?”

[26] Katz, supra note 4, at 5.

[27] For example, a company would have to send a representative with sufficient authority to make a settlement without consulting the Chief Executive Officer, because of the need for speed underlying the system. A company may send a lawyer as a representative anyway, bringing more formality back into the process.

[28] In the case of Decker v Lindsay 824 SW 2d 247 (Tex Ct App 1992) the district judge ordered the parties to mediate. The plaintiffs objected to the order and were overruled. The plaintiffs then went to the Texas Court of Appeal, reiterating their objections to the mediation order. The Court of Appeal held (at 252) that, when a party clearly indicates its wish not to negotiate a settlement of a dispute but to proceed to trial, a referral to mediation cannot require good faith negotiation.

[29] In Graham v Baker 447 NW 2d 397 (Iowa 1989), the Iowa Supreme Court held that mere attendance equated to participation in mediation, even though the attorney’s position was not negotiable and his client refused to settle.

[30] McPheeters, supra note 15, at 388: “any entry by a judge into settlement matters can appear to be coercive”. See eg G Heilman Brewing Co v Joseph Oat Corp [1989] USCA7 231; 871 F 2d 648.

[31] McPheeters, ibid, 391: “Courts readily admit that referral to mediation carries no guarantee of settlement. All that they can require is that parties make an effort to reach agreement”.

[32] Katz, supra note 4, at 37-38. In one case “the defendant sent a representative to arbitration who called no witnesses and stated to the arbitrator that she did not care what he did, since the client would refuse to pay any damages awarded”.

[33] McPheeters, supra note 15, at 390.

[34] Winston, “Participation Standards in Mandatory Mediation Statutes: ”You can lead a horse to water...” (1996) 11(1) OSJDR 187, 196.

[35] Katz, supra note 4, at 41: “Compulsory ADR, therefore, raises important questions as to the authority of judges to pressure parties to settle and therefore their authority to compel good faith settlement negotiations”.

[36] Ibid, 45: “The US Supreme Court has indicated that when a defendant offers a settlement that includes all relief a plaintiff could potentially win at trial, the court may effectively force settlement by entering an order in accordance with the defendant’s offer”.

[37] Ibid.


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