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Overview | Referral of a Case | Nature of the ADR Proceedings | Confidentiality and Ethical Standards for Neutrals | Stay of Proceedings | Choosing the Neutral | Initiating the ADR Process | Submissions to the Neutral | Deadlines | Follow-up on ADR Sessions | Report of the Neutral | Binding Arbitration after Mediation | Later ADR | Further Information; Comments and Suggestions
The Alternative Dispute Resolution Program of the Commercial Division ("the Program") is governed by rules issued by the Administrative Judge of the Civil Branch of the Supreme Court in the First Judicial District ("the Rules"), a copy of which is appended. This Guide explains the Program’s operations.
A. ADR in the Division -- An Overview
Alternative dispute resolution ("ADR") refers to a variety of mechanisms for the resolution of legal disputes other than by litigation. ADR offers the possibility of a settlement that is achieved sooner, at less expense, and with less inconvenience and acrimony than would be the case in the normal course of litigation. The principal forms of ADR are the following:
1) Mediation - A process in which a Neutral attempts to facilitate a settlement of a dispute by conferring informally with the parties, jointly and in separate "caucuses," and focusing upon practical concerns and needs as well as the merits of each side’s position.
2) Neutral Evaluation - A process in which an expert Neutral receives a presentation about the merits from each side and attempts to evaluate the presentations and predict how a court would decide the matter.
3) Arbitration - A process in which the parties present evidence to a Neutral or panel of Neutrals, who then issues a decision determining the merits of the case. An arbitration may be binding or advisory, depending upon the agreement of the parties. If binding, the decision of the arbitrator(s) ends the case, subject only to circumscribed review pursuant to Article 75 of the Civil Practice Law and Rules.
Evaluation or mediation by an informed, skilled and disinterested outsider can cause the parties to re-examine their positions, thereby bridging differences. Almost 60 % of the matters referred to the Program settle during the ADR process and an additional percentage settle shortly afterward as a result of the Program.
Cases may be referred to the Program by a Justice of the Division, the Administrative Judge, or a non-Commercial Division Justice who is authorized by the Administrative Judge to make referrals. The Administrative Judge may make referrals of new cases after the purchase of a Request for Judicial Intervention and before motions are fully briefed, as well as in other circumstances. The Program is mandatory. Volume permitting, cases can also be referred on consent of the parties. In order to facilitate ADR, the Program’s Rules provide a brief window of opportunity during which discovery is stayed. Parties ordered into the court-annexed Program may use its resources or pursue ADR through a private service if they prefer. Parties who take part in the Program may choose the form of ADR they wish to pursue and select their own Neutral from a very extensive Roster of Neutrals. The Program imposes no charge on litigants for the standard ADR service. These and other features of the Program are explained hereafter.
B. The Referral of a Case
The Program will accept referrals on consent from parties in any eligible case as defined in the Rules. Parties should advise the assigned Justice of their desire to participate in the Program either at a conference or by presentation of a stipulation. After joinder of issue, any party anxious to proceed to ADR but unable to convince the other side to agree is encouraged to file an RJI and a request for a preliminary conference with the Commercial Division Support Office and to raise the ADR question at the conference. The Rules empower the Court, if it determines that ADR might be useful, to order the parties to proceed to ADR>. The experience of those who have taken part in the Program confirms that cases that are perceived by the parties to be incapable of settlement and which might not be brought into ADR on a voluntary basis in fact often do settle, to the satisfaction of all concerned.
The Justices will direct ADR at the earliest practical point in a case; as a general rule, the earlier a case is referred, the better. Discovery of course is a source of considerable delay in litigation and causes great expense and frustration for litigants. The Court will attempt whenever practicable to promote resolution by ADR before the wheels of discovery commence their expensive turning. The Court recognizes that some cases may require focused discovery before they realistically can be resolved by ADR; it may often be possible, though, for that discovery to take place most efficiently and expeditiously under the guidance of the ADR Neutral, on consent of the parties and subject to any disclosure order previously issued by the Justice assigned. The Rules encourage Neutrals and parties to pursue just such information exchange.
Whenever a Justice decides to direct ADR, whether on consent of the parties or without it, he or she will sign an Order of Reference.
Litigants whose case is referred to the Program are at liberty to opt for the free market. That is, the parties to a referred case are free to pursue ADR through the good offices of an individual selected by the parties or a private ADR service. However, the Court's Rules contain deadlines and confidentiality provisions that will be binding on all parties who proceed to ADR, whether inside or outside the Program run by the court. In order to avoid later controversy, other terms of a private retention should be put in writing before the process begins. If the parties elect to proceed to ADR outside the Court, they should so advise the Program Administration in the Commercial Division Support Office immediately after the signing of the Order of Reference. The Office will closely monitor the progress of the ADR proceeding to ensure compliance with the Order of Reference.
C. Nature of the ADR Proceedings
The ADR Program will accommodate any form of ADR that parties are interested in pursuing. If the parties do not agree otherwise, the process will be mediation>.
After execution, the Order of Reference will promptly be delivered to the Commercial Division Support Office. Often the Justice will direct the parties at a conference to proceed immediately to the Support Office. In other cases the Office will immediately contact parties and will transmit a copy of the Order to them. The parties should then confer and decide upon the kind of ADR process they wish to undergo. Unless the Program Administration indicates that it will select the Neutral, the parties should also designate a Neutral in the manner explained in Section F. The parties should then submit to the Program Administration an ADR Initiation Form (copy attached), which will start the ADR process.
Of course, Neutrals ought not to have vague or fluctuating functions. The Neutral will be chosen to fulfill a specific, designated role, one that can change only within set limits, and will confirm that role with the parties at the outset of the proceeding.
D. Confidentiality and Ethical Standards for Neutrals
The Rules provide for complete confidentiality of the ADR process (binding arbitration apart). No use may be made of the information generated or communicated in the process for any purpose other than resolution of the matter, whether in that case or any other case. Nothing about the substance of the proceeding (e.g., the nature of the strengths of the parties' cases, whose "fault" it was that the parties could not agree to settle) will be revealed to the assigned Justice by the Neutral or the Program Administration. The Neutral will communicate only with the Program Administration. The Neutral will merely discuss necessary administrative details with the Administration and at the end report to the Administration the outcome of the process (success in whole or in part, failure, non-compliance with the Rules). The Program Administration will convey that information to the assigned Justice (again, only success, failure, or non-compliance). Thus, if the case remains alive, the parties can rest assured that there will be no risk of the Justice’s receiving confidential, out-of-court communications.
The Rules provide that the prospective Neutral shall at the outset make a review for possible conflicts of interest and shall disqualify himself/herself if unable to function in a completely fair, impartial, objective, and disinterested manner. The Neutral shall also avoid the appearance of a conflict. The Neutral is obliged to disclose all potentially disqualifying facts to the parties and, where such facts exist, shall not serve unless the parties consent. The Neutral shall adhere to ethical principles set out in the Division’s Code of Ethical Standards for Neutrals, currently in preparation.
E. Stay of Proceedings
Unless otherwise directed by the Justice assigned, the Order of Reference will stay all proceedings in the case in this court, including discovery and motions, from the issuance of that Order until 45 days from the date on which the availability of a specific Neutral is confirmed. See Section G. This stay of course will have no effect upon the appellate process. However, notwithstanding the stay, if the Neutral believes that some limited exchange of information will be productive in bringing the matter to a conclusion in ADR and the parties consent, the Neutral may, and indeed should, direct that that exchange take place during the stay period. (Of course, any such disclosure must be consistent with any previous discovery directives of the assigned Justice.)
F. Choosing the Neutral
The qualifications required of those who would join the Division’s Panel of Neutrals in the future are as follows. These persons must be (i) attorneys who have been admitted to practice for, and have had substantial commercial law experience for, seven years; (ii) accountants with a comparable level of experience; and (iii) persons with substantial executive or similar business experience. In addition, all such persons must have had at least 24 hours of training in mediation (training in arbitration is not the equivalent of mediation training). Each person who joins the Panel undertakes to handle on a pro bono> basis two-three matters each year.
In cases of administrative necessity, the Program Administration will advise the parties upon issuance of an Order of Reference that it will select the Neutral. Within three business days from the date on which notification is given of the issuance of the Order, the parties shall submit a completed and signed Initiation Form (Neutral selections omitted). The completed Form is required, among other things, so that a tentatively selected Neutral can conduct a complete conflicts check. Failure to submit the Form will delay the process.
In other cases, upon execution of an Order of Reference, the parties shall attempt to agree on the names of three or more prospective Neutrals. The Roster of Neutrals identifies each Neutral and indicates the Neutral's admissions, education, professional background, and ADR training and experience. The Roster is available on the Division’s home page on the Unified Court System’s Internet website (at http://ucs.ljx.com), in the Commercial Division Support Office, and on Datacase.
As suggested earlier, because the Neutrals in the Court's ADR program are volunteers, there will be limits on the number of matters that each can accept on a pro bono >basis. Parties thus may not be able to obtain the Neutral of their choice. However, the Roster is extensive and is filled with the names of practitioners with sterling backgrounds and substantial experience in a wide variety of fields. In addition, if the Neutral of choice is unavailable due to limits on pro bono> workload, the parties may be able to obtain that Neutral’s services for a fee acceptable to all concerned.
The prospective Neutrals selected should be listed on the ADR Initiation Form in the order of preference; following the order of preference, the Program Administration will endeavor to obtain the services of a Neutral. More than one name is required because a particular Neutral may be unavailable at the moment needed or be required to disqualify himself/herself. Whenever the parties fail to agree upon a group of prospective Neutrals or all those chosen are unavailable on a pro bono basis or at all, the Program Administration itself shall designate the Neutral. >
Except in cases in which the Program Administration selects the Neutral, the parties will be afforded time to arrive at a selection of a satisfactory group of prospective Neutrals; this must be done within five business days> from the day on which notification is given of issuance of the Order of Reference. In the event of failure to comply with this deadline, the Program Administration will choose the Neutral. This deadline will not be extended>. This deadline is necessary and must be adhered to because experience has shown that without it, cases, at their very inception, will fall behind the schedule fixed by the Rules. The Program must and will avoid delays that might prejudice any party.
G. Initiating the ADR Process
In addition to designating prospective Neutrals, counsel for the parties must set forth on the ADR Initiation Form the names of all parties involved in the matter, the names of all corporate parents, subsidiaries or affiliates of each party, and a brief description of the nature of the case. This is required so that the prospective Neutral may make a thorough conflicts check. The Support Office will immediately contact the proposed Neutral by fax or phone and attempt to obtain a response as soon as possible as to the availability of the Neutral.
Once the Neutral has indicated his or her willingness and ability to serve, the parties will be so notified by the Program Administration. Counsel for plaintiff shall immediately telephone the Neutral to arrange a conference call with all parties at which initial issues and scheduling can be addressed. ADR sessions will usually take place in the office of the Neutral but may also be conducted in the courthouse. Parties seeking the latter venue should contact the Program Administration.
H. Submissions to the Neutral
Under the ADR Rules, each side must submit copies of its pleadings and a memorandum on the case (maximum ten pages) directly to the Neutral at least ten days prior to the first ADR session. This memorandum should include a statement as to the facts and issues that are not in dispute, the party's views about liability and damages, and any opinions the party may have about the terms on which the matter might be resolved. This memorandum shall not be served upon the other side nor filed in court, shall be held in confidence by the Neutral, shall be read by no one else, and shall be destroyed by the Neutral upon completion of the process. >
I. Deadlines
The first ADR session must take place within 30 days of the Confirmation Date >( the date of notification by the Program Administration that a specific Neutral is available and willing to serve in the matter). Further ADR sessions may follow if needed. The entire ADR proceeding should be completed within the 45-day period during which other proceedings in the case (discovery, motion practice, etc.) are usually stayed. At the end of the 45-day period, the stay will automatically expire and the litigation will resume. Even after a stay expires, however, ADR may continue if unusual circumstances make compliance with the 45-day deadline impossible. See Section K below. The stay is designed as a window of opportunity, not a bottomless pit.
The initial ADR session is mandatory. Furthermore, if the Neutral believes that an additional ADR session will be productive, he or she may schedule one and attendance is again required>. Failure of parties or counsel to appear at a mandatory session or otherwise to comply with the Rules will require the Neutral to submit a report so stating to the Program Administration, which will advise the assigned Justice, and this may result in the imposition of sanctions.> At the conclusion of the mandatory session(s), any party or the Neutral may bring the ADR process to an end. No report will be made to the court as to who ended the ADR process unless there has been non-compliance with the Rules.
If a party is represented by counsel, counsel must attend all ADR sessions and must be fully informed about all aspects of the case. In addition, unless exempted by the Neutral for good cause (e.g., residence of a defendant in a foreign country in a matter involving a modest sum), the party must attend all mandatory sessions in person or, in cases involving corporations or other entities, by a representative (or more than one if necessary) who is both in possession of all pertinent facts and empowered to settle the case without consultation>. Experience has demonstrated that the presence of the decision-maker with knowledge of the facts very greatly increases the likelihood of a successful outcome for mediation.
J. Follow-up on ADR Sessions
The Program Administration will closely monitor the ADR process to ensure expedition. Neutrals and parties can expect to receive communications from the Program Administration investigating the status of cases.
K. Report of the Neutral
Using a specific form (and preferably by fax), the Neutral will report the outcome of the ADR proceeding to the Program Administration. This report is due as soon as possible after the completion of the ADR proceeding and in any event within seven days thereof. The Program Administration will report the outcome to the assigned Justice upon receipt of the Neutral's report. If the ADR process has succeeded in completely resolving the case, the case will be marked disposed. If the ADR process has succeeded only in part or not at all, the parties shall contact the Part of the assigned Justice for a conference concerning further proceedings in the case.
There may be unusual instances in which the parties for good reason are unable to reach a conclusion of the ADR process by the end of the 45-day period of the stay. The ADR process may result in substantial, but not complete, progress and the parties may be desirous of continuing. In such instances, the parties are free to and should continue the ADR process. However, all parties should clearly understand this: No stay will be issued for longer than the initial 45-day period even if ADR continues, except where the Justice, upon application of the parties at a conference or otherwise, concludes that truly extraordinary circumstances make such an order both efficient and fair to all parties>. In all cases in which ADR continues beyond the 45-day period, the Program Administration will very closely monitor progress in the case. Even in the absence of a stay, it is vital that the ADR proceeding, should it ultimately prove unsuccessful, not cause prejudice to any party. The Program Administration will do all it can to ensure that that does not occur as a result of any avoidable delay.
L. Binding Arbitration after Mediation
Parties may undergo mediation of a dispute in the Program without resolving the matter but conclude at the end of the effort that it would be in their interests to submit that dispute to binding arbitration before a Program Neutral. Such a course will often be fair, sound, and both less expensive and less time-consuming than proceeding to a trial in court. The Division will gladly accommodate such parties as follows. Upon the written stipulation of the parties to undergo this procedure, the Division will make a Neutral or panel of Neutrals (a maximum of three), as the parties agree, available to serve as arbitrators for a binding arbitration process. The parties must submit with the stipulation the names of three prospective Neutrals from the Roster of Neutrals for each arbitrator position. If the parties are unable to agree, the Program Administration will make the selection. The arbitration shall be completed within 45 days after the selection of the arbitrator(s) is confirmed. An award must be rendered in writing within seven days after the completion of the proceeding. The Neutral shall inform the Program Administration of the issuance of the award. The Program Administration will then mark the case disposed in the court’s records.
In cases of this type, the Program will have already made one Neutral available to the parties without charge. In order not to exhaust the Program and its Neutrals, parties who agree to binding arbitration after mediation will be required to pay each Neutral a fee for his/her services as arbitrator. The maximum rate for each arbitrator in these circumstances will be $ 200 per hour (unless a higher rate is agreed upon), which will cover and apply to time spent reviewing materials in preparation for arbitration hearings, in the hearings themselves, and rendering an award. Even with such a fee, the post-mediation arbitration will often prove very much less expensive than a trial and have other advantages as well. The Program itself will impose no charge upon the parties for this service.
Upon completion of a mediation process in the Program in accordance with the Rules, the parties are free to go outside the Program and pursue an arbitration if they wish.
M. Later ADR
If a reference to the Program does not result in a complete resolution of all outstanding issues, then, as indicated, the case will be remanded to the assigned Justice. Later in the case the Justice may determine that the matter is now likely to settle if returned to ADR and may issue another mandatory Order of Reference, or the parties may consent to a second reference. If the original reference was a mediation, the parties may choose the same mediator, if he/she is available. Any such referral shall be considered and directed at as early a point as is practicable. The procedures described above will apply to second referrals. However, since the Program and its Neutrals will have already devoted time and energy to the case, the parties to all second referrals will be obliged to compensate the Neutral in accordance with the fee standards set forth in Section L.
N. Further Information; Comments and Suggestions
Further information about the ADR Program may be obtained from the Program Administration in the Commercial Division Support Office. The Commercial Division is extremely interested in comments from parties and Neutrals about the Program, especially suggestions for improving it. Please send comments and suggestions to the Clerk-in-Charge of the Commercial Division Support Office.
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