I.     ADR DEFINED – any procedure which replaces or supplements the traditional litigation process. Binding Arbitration is, by far and away, the most commonly used method of ADR.

Differences from Litigation – essentially, ADR is used to avoid a jury trial on the issues of liability or damages. In this regard, the procedures are generally less formal, more expedient and less costly. There is typically no judge or jury. Most technical procedural rules and evidentiary rules are waived or suspended, discovery tends to be less structured and the hearing itself is much shorter than a jury trial.

Typically, a three-step process may occur:

Negotiation – generally conducted directly between the parties.

Case Evaluation – a Case Evaluator with no power to bind the parties attempts amicable settlement.

Arbitration – an arbitrator with power to bind the parties receives evidence and renders an award.

Advantages:

1. Reduced costs and expense.

2. Early resolution (as compared with litigation).

3. Flexibility (both in scheduling and procedures)

4. Finality (appellate review is limited).

5. Confidentiality (there is no public record).

6. The parties are forced to critically evaluate the claim early on.

7. Claims personnel remain more actively involved in the process.

8. Parameters of the award can be negotiated to avoid the uncertainty of a jury trial.

Disadvantages:

1. Appellate review is limited.

2. It is difficult to find truly "neutral" Case Evaluators.

3. Technical or procedural objections may be lost.

4. Typically, the respondent loses; it is simply a matter of how much.

5. There is not as much opportunity to thoroughly present the case (this typically  is less formal than a full-blown trial).

6. Removes the threat of a jury trial.

7. Negotiations tend to stall once the claim is in arbitration.

II.   TYPES OF ADR

Case Evaluation (Binding and non-binding)

Procedure

Attempt at voluntary settlement – not binding resolution of claim

Private discussions with each of the parties

Extremely informal

Settlement rate is very high

No appeal of evaluation (decision is non-binding)

Required in all Circuit Court Civil Litigation

Sanctions

Arbitration (Statutory and Contractual)

See statute

UM claims

Voluntary – removes claims from litigation

Arbitrator does have the power to bind the parties

More formal than Case Evaluation

Resolution of the claim is certain

Limited appellate review

Fact Finding – useful when negotiations cannot begin until disputed issues of fact have been resolved. The fact finder simply makes a binding finding on the disputed issues and the parties then begin the three step process.

Binding Case Evaluation - the case evaluator does have the power to bind the parties but does so only after attempts to settle have failed.

Advisory jury – not binding but does provide insight as to what a real jury might decide.

Mini-trial – may be binding or non-binding. Usually involves attorneys for both sides. More formal than the typical arbitration.

III.   ARBITRATION

Statutory – see statute. May be entered as a judgment in Circuit Court. Costs and interest may be assessed.

Contractual – UM claims

Voluntary – claim removed from litigation by agreement of the parties

Propriety of arbitration - factors to consider before agreeing to arbitrate:

        1.     Is there a liability defense?

        2.     Is there a SIBF defense?

        3.     Have negotiations reached an impasse?

        4.     Would case evaluation before arbitration be helpful?

        5.     Is the threat of a jury trial significant to the claimant?

        6.     Is there a potential for an excess verdict?

        7.     Are claimant's expectations unrealistic?

        8.     Will the costs of litigation exceed the value of the claim?

Timing of arbitration – arbitration is generally appropriate when sufficient information has been collected to properly evaluate the claim and after negotiations and/or Case Evaluations have proven unsuccessful.

Arbitration Panel

    Single arbitrator

    Three Arbitration system

    Retired Judges – MCLS 600.557a

            Claims may be assigned to senior judges in non-jury cases by stipulation 

            of the parties.

            Requires approval of the chief judge – the Supreme Court then appoints 

            the judge to the claim.

            The senior judge has the same powers as the trial  judge.

            The decision of the senior judge cannot be appealed.

            The parties deposit the estimated costs of trial and the judge's fees into an account 

            maintained by the Circuit Court.

            The parties must agree as to the amount of compensation the judge may receive.

No requirement that a defense of plaintiff arbitrator be unbiased. Corruption and misconduct are grounds for disqualifying an arbitrator, however, the Court may appoint arbitrators if the parties cannot agree.

Arbitration agreements

Negotiating an agreement to arbitrate

High/Lows

All or nothing

Disclosure of settlement offers

Disclosure of arbitration terms

Sample arbitration agreement

Venue

Costs of Arbitration (arbitrators fees)

Formality (rules of procedure, rules of evidence, discovery)

American Arbitration Association

Discovery – governed by the Michigan Court Rules unless otherwise agreed.

Rules of Evidence – apply unless modified or waived.

Procedural Rules – governed by Michigan Court Rules unless otherwise agreed.

Venue – generally the following priority exists:

    County in which respondent resides

    County in which claimant resides

    Any county to which the parties agree.

Issues subject to arbitration – liability and damages, only. Coverage issues are not subject to arbitration as a general rule.

Presentation of the case at arbitration

    Live testimony

    Arbitration briefs

    Exhibits

    Affidavits

    Recording proceedings

Vacating the arbitration award – only upon a showing of an error of law, so substantial that, but for the error, the award would have been substantially different.

Modification or correction of the award – generally is for clerical errors.