Dispute Settlement: Arbitration at 50 Paces

By Andelman, David A. | Management Review, January 1995 | Go to article overview

Dispute Settlement: Arbitration at 50 Paces


Andelman, David A., Management Review


When Rhone-Poulenc Rorer got into a dispute a year ago with Immune Response Corp. over who would control the clinical trials of an AIDS vaccine, they turned not to a federal court in St. Louis but to the local office of the American Arbitration Association. It was a big investment for both sides ($50 million each), and ultimately an even bigger issue for the medical world. Too big and too urgent for the courts, they believed, but just right for alternative dispute resolution. What could have been an endless and costly trial was resolved within just three months. (The end result turned out to be a compromise--Rhone-Poulenc Rorer got the marketing and distribution rights; Immune Response Corp. got contractual rights to control all R&D, including all clinical and regulatory activities.) Rhone-Poulenc Rorer spokesman Bob Pearson had this to say: "We're all adults. [ADR] allowed us to move on and do business."

ADR is becoming a hot topic these days in the legal world. It's the focus of the nation's judicial and legal system, a favorite of Attorney General Janet Reno, the subject of a number of bills (most died in the 103rd Congress, but it should be high on the 104th's agenda), and above all the focus of endless debate in corporate boardrooms and union bargaining tables, in court houses, laboratories and on assembly lines. And it's even becoming a big business in its own right with a wide range of for-profit clones of the AAA springing up across the country.

The two most commonly used ADR techniques are mediation and arbitration, though there are now scores of line extensions, including fact-finding, mini-trials, conciliation, neutral evaluation and private judging. Basically, the difference is in degree of compulsion. Mediation carries no compulsion. A mediator's mission is simply to bring together two or more parties in a dispute and try to find some middle ground that will resolve it short of litigation or coming to blows. An arbitration is one step short of a trial.

An arbitrator--or quite often in high-stakes corporate issues a threeperson panel of arbitrators--will listen to arguments and witnesses from both sides, examine the evidence, then render a binding decision. In most jurisdictions, an arbitration ruling carries the same force as a court ruling--and may even be appealed to the courts.

With no centralized database, no national system of registration, regulation or tabulation, it's difficult to estimate just how big the market has become. But a survey by the litigation services group of Deloitte & Touche showed that among a sample of 246 corporations and litigators, some 3,248 ADR procedures had taken place from 1990 to 1992. And in the past two years, specialists believe the pace may have even doubled.

"Most of the world want their day in court," says Richard Naimark, corporate senior vice president of the American Arbitration Association, which bills itself as the largest arbitration organization in the United States. "These processes give you a chance to tell your story, often in your own words, often uninterrupted. You don't get that anywhere else. Even if you wind up on the losing end, you have some assurance you were listened to and that your viewpoint was taken into consideration, so you tend to buy into the result."

There are many other reasons that arbitration and mediation have become such hot properties. Court calendars have become so crowded in some parts of the country that a matter of civil litigation may take a decade or longer to get to trial. Moreover, it can take weeks, even months to educate a judge or jury on, say, the subtleties of software computer codes or genetic transformations. Indeed, what most ADR cases have in common is that they are highly complex, often technical areas that seem to cry out for specialized expertise and arbitrators are often expressly selected for their expertise in the specific area in dispute. "Judges tend to be experts in process, not subjects," says Naimark. …

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