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Out-of-Court Mediation Takes Off

Many would-be litigants use alternative dispute resolution to avoid judicial tie-ups, costs

WHEN an underwater oil pipeline ruptured in January 1990, releasing 567,000 gallons of heating oil into the Arthur Kill, a waterway between New York and New Jersey, pipeline owner Exxon could have expected to spend years settling civil suits over the damages.But the New Jersey judge hearing two of the suits against Exxon decided to call Eric R. Max, an experienced mediator with the state of New Jersey. Mr. Max was named the mediator of the case by court order and rounded up Exxon and the parties with claims over the spill. He untied a knot of differences to arrive at a mediated settlement just five months later. Not only was the settlement reached quickly, it included terms that would be impossible under a litigation award, according to Max. The settlement - announced concurrently with a guilty plea and $5 million fine on a criminal charge - included $10 million from Exxon to be divided up among specific environmental restoration and preservation projects, as well as agreements to share data on the pipeline and the spill and to train government workers for handling future spills. (See story in Nov. 14 Monitor, P age 10.) As public courts are increasingly inundated with criminal cases, the promise of a quick and less-expensive settlement is driving would-be litigants into the welcoming arms of alternative dispute resolution (ADR). "If the public wants to pay for the courts, let them pay for the courts and make them better by giving them enough funding," says former Washington State Supreme Court Chief Justice Keith Callow, now with Orange, Calif.-based Judicial Arbitration and Mediation Services Inc. (JAMS). "ADR is a stopgap, it's a safety valve, it's a release" for court systems with a crush of criminal cases that "sit there like a great white shark gobbling up judicial time," he says. California was among the first states to officially sanction ADR; a 1979 move to clear court backlogs farmed out about 5,000 cases to arbitrators in one fell swoop. This was the impetus for the founding of JAMS, which began hearing these and other cases in 1979 with three retired judges. Today, JAMS has more than 150 judges and justices, an expansion that shows the large and growing popularity of mediation. Similar growth is reflected in the success of the New York-based Center for Public Resources Inc. (CPR) in promulgating a pledge encouraging corporations to try alternatives to litigation. Forty-six companies initially signed the pledge in 1983; today, 647 companies (including Apple Computer, Raytheon, Xerox, and Coca-Cola) and 1,800 of their subsidiaries have signed up. The privacy of records, which draws many to ADR in the first place, can make it difficult to determine just how effective the pledge has been in replacing litigation with negotiation. But CPR claims to have saved 142 participating companies more than $100 million in legal costs for disputes resolved in 1990. Large private providers like JAMS and Philadelphia-based Judicate Inc. are probably the most conspicuous of ADR's many faces. Such firms have similar features: cost savings (despite hourly rates of $150 and up), tailored procedures, experienced personnel, quick resolutions, and privacy. Clients choose their own judge, the type of proceeding, and the rules under which it will operate. The less-confrontational methods of ADR may contribute to some resistance from within the legal establishment, however. "Lawyers have adversarial personalities," says Carrie Menkel-Meadow, professor of law at the University of California, Los Angeles. "You're asking them to adopt a whole different mind-set when they do this sort of work." Jim Henry, CPR's president, says lawyers sometimes oppose alternatives when they feel their clients' interests are best served through traditional litigation or simply because they are unfamiliar with new techniques. "It's just inertia and ignorance more than a conviction that it's not a good thing," concurs Dana Freyer, ADR coordinator for Skadden, Arps, Slate, Meagher & Flom of New York, one of more than 150 signatories of CPR's new "Law Firm Policy Statement on Alternatives to Litigation," a companion to its corporate pledge. ADR may be changing the way judges think as well. Are judges retiring early to enter the more lucrative world of private ADR, as some critics allege? "The fees that can be earned in private-sector judging are so much greater than the pay of a public judge, it is bound to have that effect," says J. Anthony Kline, a California appeals court justice. Supporters counter that if judges are leaving early, they are motivated more by the prospect of leaving behind overcrowded dockets and insufficient funding and support staff than by visions of riches. They see in ADR a system that is better able to provide civil justice. CRITICS, in turn, welcome the spotlight this puts on the poor state of the public judicial system. ADR has given the influential and powerful a way to meet their legal needs without addressing the disintegration of the public court system, says Robert Gnaizda of the San Francisco public-interest group Public Advocates. Mr. Gnaizda recognizes the value of ADR in many instances, but says the public courts will survive as a viable institution "only if the leaders of the bar ... recognize that they have a responsibility beyond the narrow self-interest of their clients." Otherwise, "there is no reason why the judicial system will not totter toward the same bankruptcy as the S&Ls, albeit for somewhat different reasons," he says. Proponents are divided over who is most qualified to administer ADR. Firms like JAMS and Judicate use only retired judges and justices to resolve disputes, while CPR utilizes lawyers and "specialists" as well as former judges. m not at all certain that retired judges are best qualified as mediators," says CPR's Mr. Henry. "After all, that hasn't been their job description." "The notion that you have to be a judge to settle a case is totally absurd," agrees Justice Kline. Such a requirement, he says, not only excludes lawyers and others who may be qualified to administer ADR, but also creates a monopoly by a tiny number of retired judges, artificially raising the cost of ADR. Justice Callow counters that a prime selling point for ADR firms is a reputation for integrity. "There's a certain objectivity you have when you get a judge," he says. But according to Kline, there may be subtle forces within ADR itself impugning the integrity of judges. In the interests of retaining customers, a judge may tend to favor repeat clients, he says. As an example, he cites a private judge who now handles cases for a former employer and has ruled in its favor in eight of the last 10 cases. There is currently no requirement for disclosure of such past relationships between private judges and clients. The issue of qualification is leading into a debate on whether - or, according to some, how - the industry will be regulated. Any move toward regulation of ADR providers will likely begin in California, where "there are big turf wars," says Professor Menkel-Meadow. "A lot of big professions want to control the credentialing. So you've got lawyers fighting psychologists and social workers." "Frankly, my fear is that since it only takes a calling card and stationery to get into the business, the role could erode to a vast, unregulated, uncontrolled sort of industry," says Henry, who expects future standards, but not certification. And the stakes can be high. While ADR settlements of cases originally filed in the public court system generally are appealable through that same system, most cases settled strictly through private ADR cannot be appealed, although details vary from case to case. m doing the best I can to be right," says Callow, "because if I'm wrong, there isn't any appeal from me. That's kind of an awesome responsibility." Alternative forms of dispute resolution are trickling beyond private firms into the public sector. New federal laws include the Administrative Dispute Resolution Act and the Civil Justice Reform Act, which direct governmental agencies and district courts, respectively, to adopt policies that include experimentation with alternative forms of dispute resolution. Because these policies are still being worked out, observers say, it is too early to know their full impact. With government, big business, and the public all enthusiastic, ADR's popularity shows no sign of abating. "We have barely touched the full potential of ADR," says Freyer. She adds, though, that "it's very important to be sensitive to when it's appropriate and when it isn't.... ADR, with all its advantages, is not a panacea."

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