No topic seems to breed more angst than the question of added regulations and practice requirements in a host of diverse settings.
The Connecticut Bar has now completed its first year of mandatory Continuing Legal Education requirements. Want to guarantee a spirited discussion of pros and cons whenever a few lawyers get together? Just raise the issue of mandatory CLE.
On a national level, political parties are at each others’ throats over the issue of how much regulation is needed in just about every aspect of government. Just one case in point: The Consumer Financial Protection Bureau (CFPB) has been under siege for what opponents call unwarranted intrusions by the watchdog agency. In fact, high on the list of criticisms has been the agency’s opposition, under its former head, to the very use of arbitration in connection with numerous financial transactions.
As ADR is considered to be a voluntary process, the presumption is that it may be utilized whenever disputing parties choose to do so. ADR is based on the principle that parties should be able to control their own destinies and design processes which they choose. Self-determination has long been the mantra in ADR. Unless there is a violation of public policy, we were told, ADR in the private setting should be left to the determination of the parties.
The enactment of the Federal Arbitration Act some 90 years ago was an effort to promote ADR—specifically arbitration—by providing legitimacy in the face of perceived judicial hostility. Similarly, state versions of the Uniform Arbitration Act sought not to limit arbitration but rather to ensure the enforceability of pre-dispute arbitration agreements and to set forth limited grounds for vacating or modifying awards. Those statutes, together with the FAA, have been successful in doing so, while at the same time providing protections and opportunities to challenge arbitration results based on limited grounds. The acts demonstrated a strong public policy in favor of party-controlled ADR subject to specifically delineated limitations.
Despite the general agreement that private parties may freely contract as to how to resolve disputes, a number of types of ADR regulation and control have been imposed or attempted over the years. They have generally involved two specific areas: When its use may be limited and proscribed; and who may serve as a neutral.
Objections were raised about ADR’s applicability, particularly in specific arbitration settings. While the principle of self-determination was still encouraged, greater and greater attention was focused on whether or not the parties entering into an agreement to utilize an ADR process had equal bargaining power, were making decisions based upon adequate knowledge and were in fact making the decision knowingly. ADR has been regulated by the legislature, the courts and administrative agencies.
Legislators at the state and federal level continue to seek a measure of protection by providing guidance as to when arbitration can be utilized, particularly in the consumer and employment areas where the concept of party selection of and control over the process is sometimes considered to be a myth. An example here is the Fairness in Arbitration Act, which is regularly introduced at the national level.
Courts also have regularly looked at whether parties get a fair shake in arbitration as they opine on many aspects of the processes including whether certain clauses and processes are unconscionable.
The CFPB’s antipathy to arbitration in consumer financial transactions and the initial on-again, off-again prohibition of arbitration in nursing home agreements by the Centers for Medicare & Medicaid Services are but two examples of administrative agency wariness of ADR use and efforts to limit the use—efforts that were both challenged.
But regulation of how ADR is to be utilized is by no means limited to legislatures, the courts and administrative agencies. Decades ago, two professional organizations, the ABA and the American Medical Association, concluded that binding pre-dispute agreements to forego litigation in connection with medical claims was unfair to the patient/consumer. Moreover, provider organizations have adopted due process protocols in which cases will not be accepted unless certain guidelines have been met, ensuring protection to the consumer.
Despite all of this, cries for stricter and more widespread regulation continue as evidenced by a series of articles in The New York Times in recent years.
Next week I will discuss the second critical area of ADR regulation—specifically, efforts to limit who may serve as a neutral in ADR proceedings.
Harry N. Mazadoorian is a commercial arbitrator and mediator and a member of the American Arbitration Association’s master mediator panel. He is the distinguished senior fellow in the Center on Dispute Resolution at Quinnipiac University School of Law.