December 1999 

 Whither ADR?

by Wood R. Foster Jr.

There was a time not so very long ago when the concepts of mediation and arbitration were viewed as threats by the organized bar. In 1952, MSBA President Charles Howard worried publicly about this subject, urging that "[w]e cannot sit still and watch these movements spread; not alone because our livelihood is endangered but because lawyers are convinced that our court system has stood the test of time and that tampering with our legal system may result in undermining our form of government and our democratic liberties."

Mr. Howard would hardly recognize today's civil litigation practice. While there have been many quantum changes in the legal profession in the last 30 years, none has been more sudden or more dramatic than the growth of mediation and arbitration. Statistics as to exact numbers might be sketchy, but how many lawyers can you remember who held themselves out as full-time mediators/arbitrators even ten years ago? Today at least 500 lawyers list this as a primary specialty area. Arbitration clauses in contracts have become the rule rather than the exception. Courts experiment freely with mandatory mediation and/or arbitration.

Indeed, it is hardly an exaggeration to say that certain areas of law are moving almost entirely out of the court system into the private sector resolution system. Securities law and commercial contracts come to mind, but there are many others.

Like many unstructured changes, this one may be subject to a "pendulum" effect, whereby a new phenomenon will swing well-past a balanced middle more than once before finding equilibrium. Twice in the last two months I have heard from judges who feel the ADR phenomenon has already gone too far. To my surprise, a prominent Minnesota federal judge has told me that the reason case loads in federal court have become so low is because of the loss of commercial disputes to private resolution. A retired district court judge from outside the Twin Cities recently told me in strong terms that he feels the movement toward arbitration and mediation is a "cop out" that is going to ruin our justice system.

Before I air what I consider to be some of the dangers of going "too far" with ADR, let me hasten to add that I have personally been a strong proponent of ADR, particularly mediation. Mediation has served me extremely well in large commercial cases and class actions during the past eight years. I have been privileged to work with some of the best mediators in the country. I have seen the process at its best, and I believe mediation has had a visibly positive effect on professionalism and civility in dispute resolution. But blind adherence to the concept of ADR is not without its dangers, and perhaps it would be a good idea for all of us to keep some of those dangers in mind as the private dispute resolution process matures.

ADR was once a cost-saving process. Today, it is not so clear that that is true. Many cases cannot meaningfully be arbitrated or mediated without extensive discovery; the biggest difference is that the process of resolving discovery disputes and the rules governing discovery are much fuzzier than they are in the courts.

Lawyers often find that the very cost of mediation and arbitration is becoming prohibitive. The filing fee for a large commercial arbitration with a leading arbitration association will shock you if you have not experienced it. Thousands or tens of thousands of dollars must be laid out in advance. Private mediators, particularly the good ones, now charge $200 to $300 an hour in many cases.

In areas such as securities law and commercial law we are experiencing a significant loss of contemporary precedent; in other words, there are fewer and fewer reported cases giving guidance to disputants in these areas, because nearly all of the significant decisions are being made in a private and unreported forum. This is particularly distressing in commercial law, because the nature of commerce itself is changing rapidly due to technological advances. Even the best arbitrators will be hard put to make decisions in these areas when only a very few of them ever reach the appellate courts.

Danger lurks in a system that ultimately relies on a "gut" call by an arbitrator, however talented. And while market forces are generally at work in private sector dispute resolution, there really is no "quality control" among mediators and arbitrators. Everyone knows that there are both effective and ineffective people in this field, like any other.

Contractual arbitration clauses are blind to the complexity of disputes that might arise. While there are undoubtedly many disputes that can and should be resolved by arbitration, there are others in which the issues involve complex and nuanced issues of statutory and common law, as well as intricate and important procedural questions. The arbitration clause is indifferent to these distinctions, and the parties can do nothing to get the matter before an experienced judge.

At the same time, courts continue in many cases to force mediation between parties who are either unwilling or unready to mediate. This results in "going through the motions" at additional expense, and often gives lawyers the feeling that if they fail to settle, the judge will somehow find a way to punish them for it.

There is another unintended consequence of the rush to ADR. Civil trial lawyers are simply trying many fewer cases. I think of myself as a "commercial litigator." It's been over two years since I last tried a case to a jury. Before that, it was another two years. We are losing the opportunity to hone the skills that make the profession great; we are losing the all-important opportunity to generate "war stories."

Plainly, there are some cases that do not belong in court, and some cases that do. The current system has not yet sorted out exactly how to distinguish between the two, and how to point each type in the right direction. Eventually, equilibrium will be found. I don't think we're there yet.

Wood R. Foster Jr. is president of the Minnesota State Bar Association. A partner in the firm of Siegel, Brill, Greupner, Duffy & Foster, PA, he concentrates his practice in commercial litigation and class action. He is a graduate of Amherst College (1965) and of the University of Michigan Law School (1968).