IMPACT OF NEW AND PROPOSED LEGISLATION ON ADR AT THE FEDERAL AND STATE LEVELS

ADR Section Program

Sherrie R. Abney Law Offices of Sherrie R. Abney

2840 Keller Springs Road, Suite 204 Carrollton, Texas 75006

(972) 417-7198 sherrie.abney@att.net

John K. Boyce, III

Law Offices of John K. Boyce, III Trinity Plaza II, 745 E. Mulberry Avenue, Suite 460

San Antonio, Texas 78212-3154 (210) 736-2224

jkbiii@boycelaw.net

John C. Fleming Hayes & Owens

807 Brazos, Suite 500 Austin, Texas 78701

(512) 472-3993

Thursday, June 10, 2010 4:00 p.m. – 4:45 p.m.

JOHN K. BOYCE, III Trinity Plaza II

745 E. Mulberry, Suite 460 San Antonio, Texas 78212-3166 (210) 736-2224 (210) 735-2921 (f) Experience 30 years in a commercial transaction and litigation practice in state and federal trial and appellate courts. Extensive experience in the formation, maintenance, merger, and acquisition of a variety of business entities: corporations, limited liability corporations, limited partnerships and preparation of various agreements connected therewith: cross-purchase, buy-sell, redemption, sale and leaseback transactions; preparation of securities memoranda and related compliance work; extensive commercial litigation for both lenders and borrowers involving financial transactions, lending agreements, guaranties, mortgages, and contracts; creditors’ rights representing large publicly-held equipment lessors and financiers in collection matters; representing oil and gas independent producers in lease, title, contract, and regulatory disputes; AV rated by Martindale-Hubbell Alternative Dispute Resolution Experience arbitrator since the early nineties; participated in hearings lasting several days to several weeks; over the last five years has handled cases including: served as panel chairman in multimillion dollar dispute involving 80+ parties growing out of the sale of series of interrelated limited partnership interests in high tech ventures which turned on issues of federal and state securities laws, breach of fiduciary duty, and complex accounting claims; panelist on three person panel in case involving fiduciary negligence and fraud in connection with investment management firm’s failure to perform due diligence over hedge fund investments; member of three person panel involving claims between former owners and management team under a leveraged buy-out and redemption agreement concerning issues of breach of contract, breach of fiduciary duty, officer and director liability and accounting claims; sole arbitrator in case involving claims of breach of contract and FDA regulations in the manufacturing of oncology drugs by pharmaceutical firm; panelist on three person panel to determine "fair value" of dissenting minority interest in bank holding company resulting from "squeeze out" and involving technical issues of appraisal methodology; sole arbitrator in claims involving breach of contract, fiduciary duty, and accounting between physicians under limited partnership agreement; chair of panel to determine breach of covenant not to compete between physician and radiology group; panelist to determine claims of fraud, breach of contract, professional negligence, and conspiracy in connection with “abusive” tax shelters; and, extensive additional experience involving negotiable instruments, investment securities, including initial public offerings, lending agreements, guaranties, foreclosures, real estate, oil and gas operations and other contract and partnership disputes, accounting fraud, and customer and investment manager disputes as well as construction and products liability claims

Presentations and Publications (in the last year only) February, 2010 speaker and author, “Arbitration Roundtable”, ADR Section, State Bar of Texas

(Houston) January, 2010 speaker and author, “Arbitration Roundtable”, ADR Section, State Bar of Texas

(Austin) July, 2009 panelist, “Arbitration: Point & Counterpoint”, State Bar of Texas, College of the Bar

Summer School June, 2009 speaker and author, “Trends in Arbitration Law”, State Bar of Texas, Annual

Meeting May, 2009 speaker, “Bench Trial v. Arbitration: Motions to Compel/Motions to Vacate

Award”, San Antonio Bar Association Bench-Bar Conference January, 2009 course director and moderator, “Advanced Mediation: Skills & Techniques”, Alternative Resolution Section, State Bar of Texas Professional Licenses Admitted to Texas Bar, 1978; U.S. District Court: Western, Southern, and Northern Districts of Texas; U.S. Court of Appeals: Fifth Circuit; former Registered Investment Advisor, Texas Securities Board (Series 65 license)(currently inactive) Professional Associations Immediate Past Chair, Alternative Dispute Resolution Section, State Bar of Texas; San Antonio Bar Association; College of the State Bar; Fellow, Texas Bar Foundation; arbitration and mediation panelist, commercial panel, Large Complex Case and Securities panels, American Arbitration Association (AAA), Financial Industry Regulatory Panel (FINRA), International Institute for Conflict Prevention and Resolution (CPR Institute), National Arbitration Forum (NAF), and American Health Lawyers Association(AHLA), Chartered Institute of Arbitrators. Education University of Texas at Austin (BA, Economics, with high honors, Phi Beta Kappa, 1975 and Juris Doctor, 1978) Other Associations: Christ Episcopal Church; President, Christ Episcopal Church Endowment

John C. Fleming

 

Mr. Fleming practices in the area of banking, financial services, regulatory and administrative law, governmental relations, commercial litigation and arbitration. His clients include banks, thrift institutions, life insurance companies, investment advisers and securities firms. Prior to joining Hays & Owens, Mr. Fleming served four years as General Counsel to the Texas Department of Savings and Mortgage Lending which oversees and regulates state chartered thrift institutions, mortgage brokers and mortgage bankers. He is an adjunct professor at the University of Texas School of Law and a frequent speaker on arbitration, banking and mortgage law topics. Mr. Fleming is Vice-Chair of the Regulatory and Compliance Committee of the Texas Mortgage Bankers Association, and is a nominee to become a new director of the Texas Association of Bank Counsel. The American Arbitration Association honored him with the 2008 President's Award for Leadership in Conflict Management in recognition for his work in arbitration, mediation, and education; he also serves on the Commercial Arbitrator Roster. Mr. Fleming is a past Chair of the State Bar of Texas Alternative Dispute Resolution Section. He is admitted to practice by the State Bar of Texas; the U.S. Eastern District of Texas; and the U.S. 5th Circuit Court of Appeals. Prior to moving to Austin, Mr. Fleming practiced law for over 23 years with the East Texas firm of Zeleskey Cornelius.  

ABA DISPUTE RESOLUTION SECTION, COLLABORATIVE LAW COMMITTEE

ETHICS SUBCOMMITTEE POSITION PAPER

INTRODUCTION The practice of Collaborative Law has become a major addition to the field of alternative dispute resolution in the United States, Canada, and several countries overseas. In the U.S., three states (California, North Carolina, and Texas) have enacted statutes authorizing the use of Collaborative Law, and in 2007 the National Conference of Commissioners on Uniform State Laws (NCCUSL), the organization responsible for drafting such uniform laws as the Uniform Commercial Code, Uniform Arbitration Act and Uniform Mediation Act, created a Drafting Committee to promulgate a uniform law authorizing the use of Collaborative Law. In 2007, the American Bar Association Section of Dispute Resolution created a Collaborative Law Committee.1

Collaborative law is a process in which all parties attempt to settle matters without resorting to litigation or even threatening to resort to litigation. All parties are represented by counsel and agree to keep discovery informal and cooperative, and to negotiate in good faith. If any party seeks intervention from a court, all attorneys must withdraw from representation.

Numerous law review articles and state ethics opinions have addressed the question whether Collaborative Law practice is consistent with ABA Model Rules of Professional Conduct (and the various versions of those rules in the fifty states).2 The predominant view is that the Collaborative Law practice is totally consistent with the Model Rules. Ethics opinions in Minnesota (1997), North Carolina (2002), Maryland and Pennsylvania (2004), Kentucky and New Jersey (2005), have approved the use of Collaborative Law. Only one state, Colorado (2007) has said otherwise. In August 2007, the ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 07-477 which rejects the conclusions reached in the Colorado Opinion and squarely approves Collaborative Law practice.

1 The American Bar Association (“ABA”) has published the leading text on Collaborative Law (Pauline Tesler’s “Collaborative Law: Achieving Effective Resolution in Divorce Without Litigation”) and awarded Pauline and the founder of the Collaborative Law movement, attorney Stuart Webb, the ABA’s first “Lawyer as Problem Solver” Award in 2002. The International Academy of Collaborative Professionals (“IACP”), the leading organization in the Collaborative Law field, with more than 3,000 members, estimates that more than 10,000 lawyers and other professionals throughout the world have received Collaborative Law training. 2 Many references are made to the ABA Model Rules of Professional Conduct, but it is important to note that the laws, regulations, Rules of Professional Conduct, court rules and opinions promulgated in the individual jurisdictions are controlling.

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The purpose of this paper is to address ethical issues that these ethics opinions have considered, including (1) limited scope representation, informed consent, and restriction on practice, (2) competence and diligence, (3) mandatory withdrawal provisions, including withdrawal due to client behavior and withdrawal requiring the court’s permission, (5) zealous representation, (6) confidentiality and disclosure, and (7) communications, advertising, and collaborative non-profit organizations. The Committee concludes, for the reasons set forth below, that Collaborative Law practice is consistent with the canons of ethics for lawyers and provides an important method for clients and attorneys to achieve fair settlements without the expense, delay, and acrimony that are, unfortunately, all too common when cases are litigated.

LIMITED SCOPE REPRESENTATION The ABA Committee on Ethics and Professional Responsibility has concluded that Collaborative Law represents a permissible limited scope representation under ABA Model Rule 1.2(c),3 which states “[a] lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.”4 Advisory ethics opinions from the states of New Jersey,5 North Carolina,6 Kentucky,7 Pennsylvania8 and Minnesota9 have all addressed limited scope representation

3 See Formal Opinion 07-447, Ethical Considerations in Collaborative Law Practice, ABA Standing Committee on Ethics and Professional Responsibility, August 9, 2007 at p. 3. Accessed on-line at http://www.collaborativelaw.us/articles/Ethics_Opinion_ABA.pdf - last accessed January 2008. 4 ABA Model Rules of Professional Conduct – accessed on-line at http://www.abanet.org/cpr/mrpc/mrpc_toc.html - last accessed January 2008. 5 Opinion 699, Advisory Committee on Professional Ethics, Collaborative Law, 182 N.J.L.J 1055, 14 N.J.L 2474, December 12, 2005 at p. 6 (lawyers are permitted to impose some limitations on the nature of their practice). Accessed on-line at http://bostonlawcollaborative.com/documents/NJ_Ethics_Opinion2.pdf – last accessed January 2008. 6 2002 Formal Ethics Opinion 1, North Carolina State Bar, 2002 WL 2029469 (N.C.St.Bar) at p. 2. (“Rule 1.2(c) permits a lawyer to limit the objectives of a representation if the client consents after consultation”). Accessed on-line at http://bostonlawcollaborative.com/documents/NC_Ethics_Opinion.doc - last accessed January 2008. 7 Kentucky Bar Association Ethics Opinion KBA E-425, June 2005 at p. 7 (under the collaborative law agreement, the parties agree to a limited representation. Rule 1.2 recognizes limited representations …). Accessed on-line at http://bostonlawcollaborative.com/documents/Kentucky_Bar_Ethics_Opinion.pdf - last accessed January 2008. 8 Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility, Ethics Opinion (the version of Rule 1.2 now pending would permit a lawyer and client to agree on a limited scope of representation, provided the limitation is reasonable and the client gives informed consent). Accessed on-line at http://bostonlawcollaborative.com/documents/PA_Bar_Ethics_Opinion_5-04.doc - last accessed January 2008. 9 Advisory Opinion to the Collaborative Law Institute, Minnesota Judicial Center - Office of Lawyers Professional Responsibility, March 12, 1997 at p. 1 (materials properly stress that a lawyer may limit the

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as an integral component of the collaborative law process. Even Colorado, which deemed collaborative law impermissible on other grounds, has agreed that advance agreements to limit representation are ethical.10 A two-pronged analysis is essential to ascertain whether a limited scope of representation is appropriate for a particular situation. The first prong involves a determination whether the proposed limitation in scope is reasonable under the circumstances. The second prong addresses whether informed consent has been properly achieved.

Is the scope reasonable under the circumstances? The state advisory opinions are highly cautionary and provide extensive guidance in determining if a limited scope of representation is appropriate. The New Jersey opinion suggests that whether a limitation is “reasonable” is a determination that must be made in the first instance by the lawyer, exercising sound professional judgment in assessing the needs of the client.11 The limitation is deemed reasonable if the lawyer believes his or her client’s needs are well-served by participation in the collaborative process. The opinion goes on to state, however, that given the harsh outcome in the event of failure, limited representation is clearly not reasonable if the lawyer believes there is a significant possibility that an impasse will result. The Pennsylvania opinion recommends attorneys use case-specific and fact-specific analysis to determine whether the proposed limited scope of representation is reasonable under the circumstances and whether it will permit an attorney to deliver competent representation.12

Has informed consent been achieved? The second prong of the analysis, that dealing with the validity of informed consent, is deemed equally important with respect to collaborative law. ABA Model Rule 1.0(e) defines informed consent as that which “denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.”13

objectives of the representation, but only after the client consents after consultation). Accessed on-line at http://bostonlawcollaborative.com/documents/Minnesota_Ethics_Opinion.doc - last accessed January 2008. 10 Colorado Bar Association Ethics Opinion 115 (Feb. 24, 2007) at p. 6. Accessed on-line at http://bostonlawcollaborative.com/documents/Colorado_Ethics_Opinion.pdf - last accessed January 2008. (a lawyer may also provide a client with some, but not all, of the work normally involved in litigation….Thus, an advance agreement with the client to terminate or limit the representation is ethical). 11 New Jersey opinion, supra note 5, at 7-8. 12 Pennsylvania opinion, supra note 8. 13 ABA Model Rule 1.0(e).

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The New Jersey opinion notes that clients must be made fully aware of both the significant limitations of the collaborative law process, as well as the full range of alternatives, including the possibility of litigation. Additionally, the client must clearly understand the consequences if the process fails and the attorney withdraws before the client can truly give informed consent. The Kentucky opinion notes that the kind of information and explanation essential to informed decision-making must include the differences between the adversarial process and collaborative law, the risks and advantages of each, any reasonably available alternatives and the consequences of failure to reach a settlement agreement.14 The opinion notes as well that clients must be provided information about the potential for additional time and costs associated with obtaining new counsel, the potential that one might feel pressured to settle in order to avoid having to seek new representation, and the potential for an opponent to effectively disqualify both counselors.15 To further ensure that clients are fully cognizant of the parameters of the collaborative law representation, at least one ethical opinion recommends that the exact scope of the representation be reduced to a writing.16 Another suggests that lawyers confirm in writing any explanations of the collaborative law process along with the client’s consent to its use.17 These recommendations comport with ABA Model Rule 1.5(b), which recommends the scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing. The various concerns cited in these advisory opinions emphasize the need to proceed with due caution, as is of course required in any attorney-client relationship. ABA Formal Opinion 07-447 makes it clear that an agreement to provide limited scope representation does not eliminate the duty of an attorney to represent his or her client with diligence and competence.18 Similarly, the Pennsylvania ethics opinion stresses that a limitation must not interfere with the ability of an attorney to comply with Rule 1.1 and its obligation to provide competent representation.19

14 Kentucky opinion, supra note 7, at 4 (the opinion further notes that the collaborative law agreement may touch on these concerns but is unlikely on its own to meet the requirements related to informed decision making. The agreement should serve as a starting point but be amplified by fuller explanation and discussion). 15 Kentucky opinion, supra note 7, at 7. 16 Pennsylvania opinion, supra note 8 (although the Pennsylvania proposed version of 1.5(b) does not require a writing at this point … it is preferable to specify in writing the scope of representation). 17 Kentucky opinion, supra note 7, at 4. 18 Formal Opinion 07-447, supra note 3, at 4. 19 Pennsylvania opinion, supra note 8.

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ABA Model Rule 1.2(a) provides that the client has the right to make certain decisions regarding his or her case and that a lawyer shall abide by the client’s decision concerning the objectives of representation.20 This of course includes the right to retain a lawyer for a limited purpose such as settlement of a dispute without litigation. As determined in ABA Formal Opinion 07-447, as long as a limitation is reasonable under the circumstances and a client has given informed consent, nothing in Rule 1.2(c) or its Comment suggests that limiting representation to a collaborative effort is per se unreasonable. On the contrary, a limited representation may be entirely appropriate when a client has limited objectives for representation.21 The Committee notes that obligations concerning limited representation and informed consent are not new considerations for attorneys. It is well established that attorneys must always act with due diligence and in the best interests of their clients, no matter what the scope of representation entails. Expectations already exist that attorneys will examine the facts of each case to determine whether a particular process is appropriate for a client and whether they, as attorneys, are competent to handle the issues at hand.

Rule 5.6 Restrictions on Practice Distinguished The limitations in scope of representation that are contemplated under Model Rule 1.2 are distinct from those contemplated under the restrictive covenants of Model Rule 5.6, which addresses the relationship amongst law firms and associations. 22 The Kentucky opinion notes that agreements contemplated under its Rule 5.6 are meant to apply to lawyers practicing together and settlement agreements between parties to litigation.23 The Committee agrees and posits that, like the Kentucky rule, ABA Model Rule 5.6 should be similarly distinguished on the same grounds.

20 ABA Model Rule 1.2(a) reads: (a) Subject to paragraphs (c) and (d), a lawyer shall abide by a client's decisions concerning the objectives of representation and, as required by Rule 1.4, shall consult with the client as to the means by which they are to be pursued. A lawyer may take such action on behalf of the client as is impliedly authorized to carry out the representation. A lawyer shall abide by a client's decision whether to settle a matter. In a criminal case, the lawyer shall abide by the client's decision, after consultation with the lawyer, as to a plea to be entered, whether to waive jury trial and whether the client will testify. 21 ABA Formal Opinion 07-447, supra note 3, at 3. 22 ABA Model Rule 5.6 Restrictions on Right to Practice reads: A lawyer shall not participate in offering or making: (a) a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement; or (b) an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a client controversy. 23 Kentucky opinion, supra note 7, at 7.

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CONFLICT OF INTEREST

ABA Formal Opinion 07-447 directly refutes the Colorado opinion, which deemed collaborative practice impermissible on conflict-of-interest grounds. The Colorado opinion determined that the four-way agreement created a non-waivable conflict of interest under Rule 1.7(a)(2).24 The ABA opinion does not disagree with the proposition that the contractual obligation to withdraw creates a “responsibility to a third party” on the part of each lawyer, but directly disagrees with the view that this responsibility creates a conflict of interest under Rule 1.7(a)(2).25 Rule 1.7(a)(2) states that a conflict exists between a lawyer and client if there is a significant risk that representation will be materially limited by a lawyer’s responsibilities to a third person or by a personal interest of the lawyer. The ABA Opinion notes that a self-interest conflict can be resolved if the client gives informed consent, but only if the lawyer believes he or she is able to provide competent and diligent representation. Responsibilities towards third parties constitute conflicts only if there is a significant risk these responsibilities will materially limit the lawyer’s representation of the client. The ABA opinion disagrees with the Colorado view that agreements to withdraw impair an attorney’s ability to represent a client: rather, it views the limited-scope representation as consistent with the client’s goal of collaborative settlement.26 That is, no conflict arises from the foreclosing of the litigation alternative, because the client has chosen to limit the collaborative attorney’s representation to negotiating a settlement.27 The parties to the dispute may end the process at any time and continue their case in litigation, mediation, arbitration, or any other form of dispute resolution the parties choose. The Pennsylvania Opinion states that a conflict would exist under Rule 1.7(a)(2) if a lawyer concludes that there is a significant risk that the representation will be materially limited by the lawyer’s own interests. The opinion suggests, for example, a conflict might arise because the lawyer is interested in practicing collaborative law only.28 That a

24 ABA Model Rule of Professional Conduct 1.7(a)(2) reads: (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer. 25 See ABA Formal Opinion 07-447, supra note 3, at 3. 26 See ABA Formal Opinion 07-447, supra note 3, at 4. 27 The Committee agrees and further notes that litigation is at all times an alternative to the collaborative process. 28 See Pennsylvania opinion, supra note 8.

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collaborative lawyer is engaged for the limited purpose of collaborative law should not impair the lawyer’s judgment or ability to advise a client to consider terminating the collaborative process and proceed to litigation. The Committee notes this consideration is not unique to collaborative law. The desire to limit one’s practice to a specific area is a consideration for all attorneys when accepting employment. Collaborative lawyers must believe that they can provide competent and diligent representation to each client that they agree to represent just as trial attorneys must be cautious when accepting clients who wish to settle their disputes rather than move to the courtroom where the trial attorneys’ talents and interests lie.

COMPETENCE AND DILIGENCE The Pennsylvania Opinion on Collaborative Law considered the competence of the collaborative lawyer under Pennsylvania Rule of Professional Conduct 1.1, which states that “a lawyer owes a duty of competence to each of the lawyer’s clients.” The Opinion continues by stating that, “Although many of the Rules of Professional Conduct permit client waivers, Rule 1.129 contains no such exception.” The opinion writer went on to agree with the conclusion that

Anyone considering collaborative family law should have the necessary experience and knowledge to handle any family law matter and has a duty to seek the services of, or associate with, another lawyer or professional who is competent to handle those areas for which he may not be fully prepared.

The Pennsylvania opinion is in keeping with the common understanding of the rule that lawyers must be competent in a particular area of the law or, if they are not, they must properly educate themselves or engage the assistance of another attorney who is competent to assist them in their representation of a client. In this respect, collaborative lawyers are under the same ethical requirements as any other members of the Bar. There is no reason to believe that collaborative lawyers will assume there is less of a duty of competence placed upon them than attorneys in any other types of attorney-client relationships. Collaborative attorneys, like all others, must have the legal knowledge, skill, thoroughness and preparation necessary to provide competent representation. A collaborative attorney can obtain subject matter competence the same way as any other attorney – through experience, special training, study or association with another lawyer with the necessary expertise.30 The skill of collaborative negotiation is also an area in 29 ABA Model Rule 1.1 reads: A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. 30 Comment to Rule 1.1 reads: [1] In determining whether a lawyer employs the requisite knowledge and skill in a particular matter, relevant factors include the relative complexity and specialized nature of the matter, the lawyer's general

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which the practitioner must be competent, since it represents a “paradigm shift” from adversarial, positional bargaining. However, as the Rule contemplates, there are many ways for an attorney to attain the necessary skills and even a newly admitted lawyer can be as competent as an attorney with long experience.31 To further define competent representation, the Pennsylvania Opinion makes clear that in representing a client, competence should not necessarily be equated with a maximum dollar settlement. The client may have other considerations, as set out in Rule 2.1, “such as moral, economic, social and political factors that may be relevant to the client’s situation.” These factors may include concerns regarding ongoing family or business relationships that could possibly be destroyed by the rigors of deposition or cross- examination in an adversarial setting. Moreover, these factors are precisely the reason that the collaborative process was originally developed. In many situations, the parties place higher importance on interests other than tangible assets. Open discussions between participants in the collaborative process explore the interests and goals of the parties and create opportunities to consider and resolve factors that might become secondary or completely ignored if the emphasis of the dispute remains on “how much the case is worth.” Despite the rapid growth of collaborative practice and the unique negotiation skills it requires, there is no evidence that the collaborative process compromises a client’s right to competent representation.32 Parties who have no desire to resolve their problems in court should be given the opportunity to use collaborative law for the limited purpose of settling their dispute. By retaining collaboratively trained lawyers, clients employ attorneys that are better equipped to guide the parties through the settlement process with

experience, the lawyer's training and experience in the field in question, the preparation and study the lawyer is able to give the matter and whether it is feasible to refer the matter to, or associate or consult with, a lawyer of established competence in the field in question. In many instances, the required proficiency is that of a general practitioner. Expertise in a particular field of law may be required in some circumstances. 31 Comment to Rule 1.1 at paragraph 2 reads: [2] A lawyer need not necessarily have special training or prior experience to handle legal problems of a type with which the lawyer is unfamiliar. A newly admitted lawyer can be as competent as a practitioner with long experience. Some important legal skills, such as the analysis of precedent, the evaluation of evidence and legal drafting, are required in all legal problems. Perhaps the most fundamental legal skill consists of determining what kind of legal problems a situation may involve, a skill that necessarily transcends any particular specialized knowledge. A lawyer can provide adequate representation in a wholly novel field through necessary study. Competent representation can also be provided through the association of a lawyer of established competence in the field in question. 32 The collaborative law community has grown in such a way as to assist attorneys to obtain and refine their skills. For instance, the IACP minimum standards for collaborative attorneys provide that an attorney wishing to hold himself out as collaborative obtain at least 12 hours of basic collaborative training, at least one 30 hour training in client centered, facilitative conflict resolution training, and 15 aggregate hours of further skills training. (See IACP Minimum Standards section 2.2-2.4.) Many local practice groups impose similar initial and ongoing training requirements.

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the use of interest-based negotiations rather than positional bargaining.33 Empirical research has validated that a problem-solving negotiation approach is more effective than an adversarial approach.34 Studies have also shown that in traditional negotiations, attorneys have difficulty using more effective interest-based negotiation strategies because of mistrust in the other side’s good faith.35 Collaborative law provides a structure and process that maximizes an attorney’s ability to develop an atmosphere of trust and to safely engage in a more effective form of negotiation.

WITHDRAWAL

A. Mandatory Withdrawal ie: Limited Representation The term “mandatory withdrawal” refers to withdrawal by the attorneys pursuant to the written agreement for limited scope representation. It generally occurs when an impasse is reached or when one or both parties wish to terminate the Collaborative Law process. The term “withdrawal” is actually somewhat of a misnomer since the process is more accurately described by the term “limited-scope representation.” There are some basic factors that must be considered as an attorney disengages from the process. Clients should always be informed regarding all options for resolving disputes during any initial interview with an attorney. For the collaborative process to be successful, collaborative practitioners are advised to screen potential participants by thoroughly explaining the collaborative process with emphasis on the necessity of honesty and good faith, voluntary disclosure, and mandatory withdrawal of counsel in the event that the dispute does not settle. If these requirements are not completely comprehended by clients during the screening process, they will have a second opportunity to become fully informed when they read

33 Collaborative lawyers are not faced with the dual tasks of adversarial behavior one week and attempts to settle the next. The collaborative lawyers’ focus is one hundred percent on settlement. Forcing collaborative attorneys to continue to represent their clients at trial could, in many instances, be a disservice to clients since some collaborative lawyers are either not experienced in serious litigation or have simply lost the desire to be adversarial to the extent required to competently try a case. For some collaborative lawyers the continued representation of a client would make no more sense than employing extremely adversarial trial lawyers to settle all client disputes through interest-based negotiation or telling a transactional lawyer, “You wrote the contract, so now you have to litigate the law suit.” 34 Lande, Principles for Policymaking About Collaborative Law and Other ADR Processes, 22 OHIO ST. J. ON DISP. RESOL. 619, n. 247 (2007) (citing Andrea Kupfer Schneider, ShatteringNegotiation Myths: Empirical Evidence on the Effectiveness of Negotiation Style, 7 HARV. NEGOT. L. REV. 143, 167 (2002)). This survey of lawyers revealed that 54% rated opposing counsel using a problem-solving approach as effective and 4% as ineffective compared with 9% of lawyers who rated an adversarial approach as effective and 53% as ineffective. 35 Lande, Principles for Policymaking About Collaborative Law and Other ADR Processes, 22 OHIO ST. J. ON DISP. RESOL. 619, 673-74 and n. 247 (2007); see also Scott R. Peppet, Lawyers’ Bargaining Ethics, Contract, and Collaboration: The End of the Legal Profession and the Beginning of Professional Pluralism, 90 IOWA L. REV. 475, 483 and nn. 22-24 (2005).

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the contract which all participants and their lawyers must sign before the collaborative process commences. Collaborative law requires the use of a contract referred to as the Participation Agreement. There are several versions of the Participation Agreement, but they are all basically similar in content.36 These agreements plainly state, more than once, that the collaborative lawyer will not continue to represent the client if the dispute goes to litigation. The collaborative process has been criticized for the possibility of leaving clients in a precarious position due to the withdrawal of their collaborative lawyers.37 The Colorado opinion notes that, “Where the client is of relatively meager means, the lawyer’s withdrawal may be materially adverse to the client. Under such circumstances, the lawyer’s withdrawal may be unethical.” As discussed elsewhere, careful screening by the collaborative lawyer to determine if the dispute is a candidate for the collaborative process will reduce the likelihood of taking on the client’s dispute and then failing to settle it.38 Furthermore, if the client is of very modest means, it is highly unlikely the client is in a position to finance litigation, whether or not the client attempted to resolve the dispute in the collaborative process. Moreover, the Colorado opinion fails to account for the potential economic benefit of starting collaboratively. The process requires voluntary disclosure of all information that is relevant to settling the dispute. This eliminates much of the cost that goes with traditional discovery, a process that is often financially and emotionally costly.

36 This document may be equated to the “instructions” or a “manual” describing the operation of the collaborative process. One such Agreement may be viewed on the Texas Collaborative Law Council (TCLC) website at www.collaborativelaw.us. Page one of TCLC’s Agreement lists the “Essential Elements of the Collaborative Process.” This list includes, “Full and Complete Disclosure of Relevant Information.” The requirements for disclosure of relevant information are discussed in detail on page three of the Agreement. Page two of the Agreement addresses “Understandings” which explains that collaborative lawyers must withdraw if the dispute goes to litigation: A Lawyer and any lawyer associated in the practice of law with that Lawyer may not serve as a litigation lawyer in the Dispute or in any other adversarial proceedings among any of the Parties; and this prohibition may not under any circumstances be modified. All other terms of this Agreement may be modified by written agreement signed by all Parties and Lawyers. Page four reiterates, “The Lawyers' representation of the Parties is limited to the collaborative process. Once the process is terminated, the Lawyers cannot participate in any manner in an adversarial proceeding....” 37 Concern regarding the parties being able to obtain new representation is addressed in the TCLC Participation Agreement on page seven. Upon notice to all Lawyers of termination of the collaborative process, the Parties will observe a thirty day waiting period, unless there is an emergency, before requesting any court hearing, to permit all Parties to engage other lawyers and make an orderly transition from the collaborative process to litigation or any other adversarial proceeding. 38 The mandatory withdrawal provision places a greater burden on both collaborative lawyers and clients to settle. When a collaborative lawyer’s case does not settle, it is the equivalent of a litigator losing a case at trial. This potential situation has given rise to the question, “Will the collaborative lawyer attempt to force the client to settle to prevent losing the case?” That possibility exists just as there is the possibility that a litigation lawyer will give a client the choice of accepting an offer to settle or paying an additional retainer for the attorney to prepare for trial. However, in the collaborative situation, the client has been involved in each step of the process, participated in all settlement discussions, actively gathered information, and as a result is better informed to make decisions regarding whether or not settlement is reasonable or affordable.

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Withdrawal Due to Client Behavior The Kentucky opinion notes that “the lawyer is encouraged to withdraw from the collaborative process if his or her client fails to comply with the provisions of the agreement by withholding or misrepresenting information or otherwise acting in bad faith.” The opinion then examines this question in light of Rule 1.16, which permits withdrawal if the “client insists upon pursuing an objective that the lawyer considers repugnant or imprudent” or if “other good cause for withdrawal exists.” The Kentucky opinion concludes that if the client is in violation of one of the core provisions of the collaborative agreement, “which both the lawyer and the client have signed,” then the lawyer has the right to withdraw. The Committee agrees that withdrawal would be the correct action on the part of the lawyer since it would potentially end the collaborative process and prevent the client from committing breach of contract and possibly fraud while seemingly being aided by the client’s attorney.39 The Kentucky opinion also discussed the sudden withdrawal of a collaborative lawyer without explanation, noting, “If the collaborative law agreement, signed by the parties and lawyers, requires full disclosure by all, the withdrawal without explanation may violate the spirit of the agreement, unless the agreement also makes clear that the withdrawal may be ‘silent.’”40 The Committee notes that silent withdrawal involves two responsibilities that must be reconciled. Collaborative lawyers have a duty of full disclosure, but they also must not violate attorney-client privilege. It is highly unlikely that a client who is acting in bad faith will give the collaborative lawyer permission to explain the reason for withdrawal. The very act of a silent withdrawal should signal the other collaborative lawyer that good cause exists. This situation is similar to withdrawal by litigation counsel when the motion for withdrawal states that the attorneys and clients have irreconcilable differences. No one asks what those differences might be. Moreover, in the collaborative process the parties are not communicating only by letter, e-mail, fax, and telephone. They sit in face-to-face meetings directly discussing their dispute. If one party is not acting in good faith, it is likely that the other participants will realize this much more readily than they would in a litigated dispute, and the withdrawal of the other lawyer will not be much of a surprise.

Withdrawal with the Court’s Permission The opinions of Kentucky, Pennsylvania and Minnesota address Rule 1.16(c) which protects the clients’ interests by requiring lawyers to seek the courts’ permission to withdraw if the lawyers are attorneys of records in a collaborative case that does not settle. As noted above, the Participation Agreement generally provides protection for the collaborative participants in that there is a 30-day moratorium on court intervention 39 In regard to the Colorado Opinion’s concern that “withdrawal would have a ‘material adverse effect’ on the client,” withdrawal appears to be a two-edged sword. On the one hand, withdrawal has the potential to harm the client’s interests; on the other hand, withdrawal to prevent a client from committing fraudulent acts, may prevent an adverse effect on the client’s interests. 40 Kentucky opinion, supra note 7, at 5.

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unless an emergency exists. This waiting period is designed to give the parties sufficient opportunity to obtain litigation counsel.

ZEALOUS REPRESENTATION The Kentucky opinion addresses the issue whether a lawyer’s participation in the Collaborative Law process may be inconsistent with the duty of zealous representation.41 The current Kentucky Rules of Professional Conduct no longer impose a duty of zeal, but rather impose duties of competence and diligence. The opinion notes that although many current rules focus on the litigation aspects of lawyering and even mention “zeal” in their comments, this does not mean the rules must be read to preclude non-adversarial representation. The opinion cites Rule 2.1 as describing the attorney as an advisor and states that a lawyer may refer not only to the law, but also to other considerations such as moral, economic, social and political factors that may be relevant to a client’s situation. The Kentucky opinion goes on to cite a recent article on collaborative family law42 that stresses that the collaborative lawyer has the same ethical obligations to a client as any other lawyer to represent clients competently and diligently.. Due diligence includes consideration of a client’s best interests, including the well-being of the children, family peace and economic stability. If the collaborative law process is not in the client’s best interests, the attorney is charged to advise the client to choose a different system tailored to his or her needs.43

CONFIDENTIALITY OF INFORMATION AND DISCLOSURE The North Carolina opinion raises the issues of client confidentiality and voluntary disclosure with regard to providing information about topics such as the finances of divorcing parties or information about adultery. The opinion notes that attorneys must take these factors into consideration when advising clients and then use professional judgment to analyze the risks and benefits for each individual client.44 The opinion goes on to say that a lawyer may represent a client in the collaborative family law process if it is in the best interest of the client, if the client has an opportunity to make informed decisions about the representation, if the disclosure requirements do not involve dishonesty or fraud, and if all parties understand and agree to the specific disclosure requirements. The lawyer must examine the totality of the situation and advise the client of the benefits and risks of participation in the process, including the benefits and risks of making and receiving certain disclosures (or not receiving those disclosures).45

41 Kentucky opinion, supra note 7, at 4. 42 Kentucky opinion, supra note 7, at 5. (citing Sheila M. Gutterman, Collaborative Family Law – Part II, 30 Colaw 57 (2001). 43 Kentucky opinion, supra note 7, at 5. 44 North Carolina opinion, supra note 6, at 3. 45 North Carolina opinion, supra note 6, at 4.

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The Committee notes that disclosure in the collaborative process is limited to information that is relevant to settling a dispute.46 If there is other information that a party does not want to deliver during the collaborative process, the person receiving the request may refuse to deliver the information but he or she may not lie about it.

COMMUNICATIONS ABA Model Rules 7.1 et seq.47 mandates that lawyers not make false or misleading communications about themselves or the specific legal services they will provide. Advisory ethics opinions from Maryland,48 North Carolina49 and Kentucky50 address

46 This limitation on discovery requests will often eliminate searching many boxes of documents that normally would be exchanged during the litigation process. 47 ABA Model Rules of Professional Conduct – accessed on-line at http://www.abanet.org/cpr/mrpc/mrpc_toc.html - last accessed January 2008. Rule 7.1 Communications Concerning A Lawyer's Services A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading. Rule 7.2 Advertising (a) Subject to the requirements of Rules 7.1 and 7.3, a lawyer may advertise services through written, recorded or electronic communication, including public media. (b) A lawyer shall not give anything of value to a person for recommending the lawyer's services except that a lawyer may (1) pay the reasonable costs of advertisements or communications permitted by this Rule; (2) pay the usual charges of a legal service plan or a not-for-profit or qualified lawyer referral service. A qualified lawyer referral service is a lawyer referral service that has been approved by an appropriate regulatory authority; (3) pay for a law practice in accordance with Rule 1.17; and (4) refer clients to another lawyer or a nonlawyer professional pursuant to an agreement not otherwise prohibited under these Rules that provides for the other person to refer clients or customers to the lawyer, if (i) the reciprocal referral agreement is not exclusive, and (ii) the client is informed of the existence and nature of the agreement. (c) Any communication made pursuant to this rule shall include the name and office address of at least one lawyer or law firm responsible for its content. Rule 7.3 Direct Contact With Prospective Clients (a) A lawyer shall not by in-person, live telephone or real-time electronic contact solicit professional employment from a prospective client when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain, unless the person contacted: (1) is a lawyer; or (2) has a family, close personal, or prior professional relationship with the lawyer. 48 Maryland State Bar Ethics Opinion (MSBA Ethics Docket 2004-23) at pp. 1-3. Accessed on-line at http://www.abanet.org/dch/committee.cfm?com=DR035000 – last accessed January 2008. 49 North Carolina opinion, supra note 6, at 1-3.

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various issues related to communications, advertising, and direct contact with prospective clients as applied to the collaborative law process. ABA Formal Opinion 07-447 makes clear that providing limited scope representation carries with it duties related not only to diligence and competence, but also to communication.51 A lawyer must communicate adequate information about the rules and terms governing the collaborative process, including advantages, disadvantages, alternatives, and the requirement that the collaborative lawyer must withdraw if settlement does not occur and litigation is the only recourse.52 This is important not only to obtain informed consent, but also to comport with Model Rule 7.1. The North Carolina opinion applies Rule 7.1 to written communications in that it assesses the propriety of brochures that describe the collaborative law process and its differences from litigation and other methods of dispute resolution. The opinion notes it is appropriate to include the names of lawyers, along with a description of their training and commitment to the process as long as brochures comply with the Rules of Professional Conduct, including the duty to be truthful and not misleading.53 The Kentucky opinion defers to its Advertising Commission to evaluate whether specific content and methods of dissemination are appropriate in communications with the public.54 Similarly, the Maryland opinion does not address advertising head-on, but recommends attorneys review a corresponding ethics opinion and its Rules 7.1 through 7.5 to ensure that their activities do not run afoul of these specific requirements.55

ADVERTISING The reader is advised to review the advertising rules in his or her state, as the ABA Model Rules cited herein may differ significantly from those adopted by individual states. Indeed, the ABA just released a 118-page document outlining the differences.56

50 Kentucky opinion, supra note 7at p. 8. 51 Formal Opinion 07-447, supra note 3, at 3. 52 Formal Opinion 07-447, supra note 3, at 3. 53 North Carolina opinion, supra note 6 ,at 2. 54 Kentucky opinion, supra note 7 at p. 8. 55 Maryland opinion, supra note 48, at 2. 56 See Differences Between State Advertising and Solicitation Rules and the ABA Model Rules of Professional Conduct (Updated January 1, 2008). Accessed on-line at http://www.abanet.org/cpr/professionalism/state-advertising-jan08.pdf - last accessed January 2008.

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COLLABORATIVE NON-PROFIT ORGANIZATIONS The Kentucky opinion discusses Rule 6.2 concerning membership in legal services organizations. It notes that lawyers are free to join law-related organizations that advance their professional development as long as activities do not violate the Rules of Professional Conduct.57 This opinion distinguishes the “legal services organizations” that fall under its Rule 6.3 as those meant to apply to public or charitable organizations serving the poor, such as Legal Aid and the Public Defender.58 The Committee agrees, and posits that, as in the Kentucky opinion, ABA Model Rule 6.3 comes under the heading “Public Service” and should be similarly distinguished on these grounds.59 The Maryland opinion addresses the potential for formation of collaborative dispute resolution non-profit organizations that also include mental health professionals and investment advisers. The Maryland ethics committee approves of non-profit organizations whose purpose is to educate the public and promote the legal profession. However, the opinion advises caution when it comes to the “marketing activities” of such organizations. The Maryland committee expresses concern about the potential to use this type of organizational structure purely as a means to feed one’s own law practice. It also cautions about the potential to become a referral service, particularly if the organizational set-up does not fall within Maryland’s safe harbor provisions.60 The North Carolina opinion states that is possible for an attorney member of a collaborative family law organization to send brochures and information about the collaborative law process to the other spouse, provided the lawyer complies with the limitations on communications with unrepresented persons set forth in its Rule 4.3.61 The

57 Kentucky opinion, supra note 7, at 8. (the opinion further notes that it is impossible to assess whether activities are permissible without knowing what the organization plans to do). 58 Kentucky opinion, supra note 7, at 8.

59 ABA Model Rule 6.3 - Membership In Legal Services Organizations reads: A lawyer may serve as a director, officer or member of a legal services organization, apart from the law firm in which the lawyer practices, notwithstanding that the organization serves persons having interests adverse to a client of the lawyer. The lawyer shall not knowingly participate in a decision or action of the organization:(a) if participating in the decision or action would be incompatible with the lawyer's obligations to a client under Rule 1.7; or (b) where the decision or action could have a material adverse effect on the representation of a client of the organization whose interests are adverse to a client of the lawyer.

60 Maryland opinion, supra note 48, at 1-3.

61 ABA Model Rule 4.3 Dealing With Unrepresented Persons reads: In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.

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communication is not considered a prohibited solicitation under Rule 7.3(a) if a lawyer will receive no financial benefit from the collaborative law organization as a result of the other spouse’s employment of another collaborative family law organization lawyer.62 However, the opinion cautions that lawyers must not give advice to unrepresented spouses other than general descriptions of the process and advice to secure a lawyer. They may also provide a list of lawyers who ascribe to the process but may not refer the spouse to a specific lawyer. Additionally, a lawyer may not give an unrepresented spouse specific advice about the risks or benefits as they apply to his or her situation.

CONCLUSION Most of the ethical questions raised to date by collaborative practice are the same as those in more traditional practice. Where collaborative law does require the application of the ethics rules to new facts and a new dynamic, applying the ethics rules consistent with their underlying principles has presented no insurmountable conflicts. In sum, it is the opinion of this Committee that the practice of collaborative law is consistent with the canons of ethics and adds an alternative in the legal system that offers an efficient, cost-effective and, for those who prefer it, a potentially more satisfying method to resolve their disputes.

62 North Carolina opinion, supra note 6, at 3.

T E X A S

Wesleyan UNIVERSITY

TEXAS WESLEYAN

LAW REVIEW

The Evolution of Civil Collaborative Law

Sherrie R. Abney

VOLUME 15 SUMMER 2009 NUMBER 3

ARTICLES

The Evolution of Civil Collaborative Law

By Sherrie R. Abney

The alternative dispute resolution family has experienced a number of changes over the last century. Litigation, the great grandfather of modern day dispute resolution, has been the procedure chosen by the majority of people to resolve their problems for literally thousands of years-primarily because it was the only legal choice available to most parties. Litigation has been tweaked by lawmakers and courts, but it is basically conducted in the same manner that it was conducted before the Pilgrims landed at Plymouth Rock. The only other institu­tions that have survived with little change over the centuries are reli­gions. Litigation may appear to have become just as important as religion for some lawyers, because it has allowed them to earn ex­traordinary income and exercise an enormous amount of control over their clients' . affairs; however, that situation is changing. The public has begun looking for alternative ways to achieve the resolution of disputes in order to give individuals and companies more control over the dispute resolution process as well as a greater voice in the final outcome of their disputes.

ARBITRATION

History reveals that arbitration, the grandfather of dispute resolu­tion, is practically as old as litigation. I Although arbitration gives par­ties control over scheduling and the ability to choose the trier of fact, decisions regarding handling cases and the ultimate disposition of is­sues are still made by the parties' lawyers and third parties. Arbitra­tion hearings are generally less formal than litigation, but the expense of formal discovery, hearings on motions, 'and experts' fees may be no less in arbitration than they are in litigation. Add to that the cost of the arbitrator and arbitration may exceed the cost of litigation; never­theless, arbitration gives the parties more control than litigation.

1. Records of arbitration are found in early Egyptian and Greek history. The Modern Arbitration System and Its Origins, ARBlTRATION-AND-MEDIATION.COM, http://www.arbitration-and-mediation.com/articles/define-arbitration/index.php (last visited May 29, 2009). The modern history of International Arbitration began with the Jay Treaty between the United States and Britain in 1794. International Court of Justice, The Court History, http://www.icj-cij.org/court/index.php?pl=1&p2=1 (last visited May 29, 2009).

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MEDTATION

The next generation of dispute resolution was not born until the twentieth century. Family lawyers began attempting to alleviate the pain that parties and their children experienced during divorce pro­ceedings by using third party neutrals called mediators to assist law­yers in resolving their clients' issues and working out a basis for both parties to maintain their relationships with their children. Mediation provides the parties opportunities to resolve matters off the record and outside of the courtroom. Although mediation allows parties to avoid trial, it often does not occur until after litigation is initiated, and the parties have already become entrenched in positions that are gen­erally based on emotions more than the facts of the case. Mediation usually is conducted in a single session that will last between four to eight or more hours. Ordinarily, there will be a brief opening session after which the parties will adjourn to separate rooms and the media­tor will go from one party to the other carrying offers back and forth. Rather than concentrating on the concerns of the parties, many mediators will use statutes and case law along with their opinions, which are based on the judge's past decisions in the court in which the parties' cases are pending, to pressure the parties into settling. Al­though. this approach may settle some cases, the parties may be set­tling due to feeling threatened rather than because they feel that their concerns have been met. When parties settle for the wrong reasons, they do not feel that they possess any ownership in the final order, and this may eventually result in one or more trips back to the court­house and the mediator.

Because the need to avoid litigation is not confined to family mat­ters, it was not long before the public recognized the value of the me­diation process. Although mediation originated in family law, it is now an accepted form of dispute resolution in all areas of civil law as well as some criminal cases involving first time offenders and crimes against property. Today, parties often will ask their lawyers to submit their disputes to mediation. Many companies have replaced arbitra­tion clauses with mediation clauses in their contracts, so parties to the contracts will be obligated to submit their disputes to mediation prior to proceeding with arbitration or litigation. Mediation has been shown to be a tremendously improved tool for dispute resolution, but there are still difficulties that mediation has not cured.

Having been incorporated into the litigation process, mediation has quite naturally assumed many of the adversarial features found in po­sitional bargaining. Lawyers are still concerned about preparing for trial in the event their clients do not settle. Litigation hangs like the sword of Damocles over the lawyers' heads, and they are unable to focus 100% of their skills on settlement. Mediation generally employs positional bargaining that seldom addresses the concerns of the par­ties, and the process often involves marathon sessions which are more

2009]THE EVOLUTION OF CIVIL COLLABORATIVE LAW 497

successful in exhausting the parties into submission than they are in providing long-term solutions. Since courts began ordering cases to mediation, lawyers, who do not participate in good faith and only "show up to get their tickets punched on the way to the courthouse," are often ill prepared and unfamiliar with their clients' files when they appear to mediate their clients' cases. Excessive amounts of time and money continue to be spent on discovery. Experts must be able to support the clients' positions and also appear superior to the other parties' experts. The blame game is still on, and lawyers have little opportunity for creative thinking due to their preoccupation with de­fending their clients and attacking the other party in an attempt to intimidate them into submission.

COLLABORATIVE FAMILY LAW

In the latter part of the 1980s, the most recent generation of dispute resolution came into being. Family lawyer, Stu Webb, discovered it when he was searching for ways to overcome many of the drawbacks found in adversarial models of dispute resolution procedures. Mr. Webb's quest was two-fold: 1) ,to bring about a more peaceful and economical process for addressing his clients' disputes; and 2) to be able to take off the litigator's mask and be himself. After several years of experimentation, he came up with what he calls Collaborative Law. Collaborative Law makes use of interest-based negotiation, which al­lows the parties to determine what is important to them rather than relying on their lawyers to put a price tag on the value of their disputes.

The collaborative process overcame the adversarial aspects of the existing dispute resolution procedures; however, it also put some de­mands on participants, which have proved to be difficult for some par­ties and lawyers to meet. Anyone who is not willing to proceed honestly and in good faith, fully disclose all relevant information, and seek solutions that will be beneficial to all parties to the dispute are not candidates for Collaborative Law, and they should not attempt to participate in the process. In addition, lawyers whose primary con­cern is exercising control over their clients should avoid the collabora­tive process, because the process is client driven and no final decisions are made outside of the clients' presence. Nevertheless, those who are able to meet the requirements for the collaborative process will find that the process offers advantages that cannot be found in any other dispute resolution procedure.

Civil Collaborative Law

During the twentieth century, the world saw marvelous improve­ments in medicine, communication, transportation, and quality of life. In the legal community, family law was able to find a sane, non-adver-

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sarial approach to dispute resolution. It is now the twenty-first cen­tury, and it is time for all areas of civil law to emerge from the dark ages and join the less painful, more efficient, client-centered dispute resolution evolution. The fundamental approach employed in family Collaborative Law cases is easily adapted to civil and commercial dis­putes. The requirements of civil collaborative participants are similar to those in family collaborative disputes, and the advantages for cli­ents and lawyers are grand in scale.

Participation in the Process

Not every party or lawyer is suited to participate in the collabora­tive process. Not every party or lawyer is suited to participate in the collaborative process. The repetition of the foregoing statement is not a typographical error; it is a fact that must be recognized and remembered. A litigation lawyer's client may have little or no need to participate directly in the day-to-day handling of a lawsuit. Parties in litigation are able to turn everything over to their lawyers, which allow the lawyers to tell them what must be done. Their lawyers will deter­mine what areas of the law will support their positions. The lawyers will determine whether experts are necessary, and if experts are neces­sary, the lawyers will determine which experts will be used. Lawyers will decide what information is necessary to argue their clients' posi­tions, and what methods they will use to gather the information. Trial strategies will be determined by the lawyers, and often lawyers will conduct negotiations outside the presence of their clients.

The clients' role in the collaborative process is almost the exact op­posite of the role they play in litigation. Collaborative clients must be able to participate in every stage of the collaborative process. While litigation is lawyer driven, the collaborative process is client driven. In the collaborative process lawyers are there to advise their clients and guide the parties through the steps of the process, and decisions are never made outside the presence of the parties or without their in­formed consent. If experts are needed, the parties will take part in their selection. Furthermore, the paTties, with the assistance of their lawyers, decide what information is necessary and how it will be ob­tained. It is the parties who negotiate and resolve their disputes, not the lawyers.

Parties should not attempt to participate in the collaborative pro­cess unless they are prepared to accept responsibility for any part they have played in creating the dispute, be present at all face-to-face meetings, engage in full voluntary disclosure of relevant information, express their interests and concerns to the other parties, listen to and take into consideration the interests and concerns of the other parties, and work toward solutions that do not take unfair advantage of any of the other parties. Unless parties assume the foregoing responsibilities,

2009]THE EVOLUTION OF CIVIL COLLABORATIVE LAW 499

the chances of the collaborative process being successful are greatly diminished.

Many lawyers have received training in family collaborative law and hold themselves out as being collaborative lawyers; yet, they continue to exhibit old habits, which may be difficult to break. These lawyers will take over negotiations and attempt to explain their clients "posi­tions" rather than allowing the parties to communicate with each other. Rather than allowing the parties to reach solutions on their own, these lawyers will jump to conclusions and suggest solutions or give reasons why an option will not work prior to all of the informa­tion being gathered. Many lawyers are accustomed to taking charge, and they do not have the patience to sit back and allow the parties to proceed at their own speed.

Good collaborative lawyers listen more than they speak. They do what good mediators have learned. They "Live in the question." They do not direct the parties, but they constantly ask questions re­garding the parties' choices and decisions. They understand that they are not in their clients' shoes and cannot possibly know for certain what is best for their clients, b~t they can help them explore options and discover what their clients believe will be the best solution for their situation. Furthermore, instead of saying, "In six months you will be sorry you did this," the collaborative lawyer will ask, "How do you think you will feel about this decision in six months?" "Do you think this agreement will hold up and keep working over the long term?" "Is there anything else we could do to ensure that this agree­ment will still be working six months from now?"

Preservation of Ongoing Relationships

Many aspects of the collaborative process readily transfer to civil disputes. Families are not the only units that benefit from the preser­vation of ongoing relationships. Additionally, businesses have dis­putes with suppliers and customers that have the potential to end relationships that are not only profitable, but necessary for the busi­nesses' survival. While litigation can permanently damage or destroy these relationships, the collaborative process can redefine, clarify, and reestablish relationships allowing the disputing entities to mend their fences and move forward. Companies must also deal with disputes with their employees. These matters may be resolved in private meet­ings which can result in employers retaining valuable employees as well as reducing the costs of training replacements. Fair treatment of employees also is an excellent way to improve employee morale, which in turn increases productivity. The opportunities for improving and preserving relationships in business and commercial disputes are limitless.

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Cost Containment

The ability to contain the costs of litigation is extremely important to both large and small businesses. Litigation can bankrupt small businesses while large corporations pass their litigation costs onto their consumers in the form of higher prices for their products and services. Everyone who has purchased any item from floor wax to a new automobile has paid fees associated with litigation for the compa­nies that manufacture and market these products-just as a part of each patient's medical bills goes to pay for their physician's malprac­tice insurance. Passing litigation costs onto consumers results in higher prices and reduces the entities' ability to be competitive in the market place. Realizing the need to cut litigation costs, a number of large corporations have opted to settle their disputes outside the courtroom. These companies have saved millions of dollars in litiga­tion fees and managed to retain positive relationships with the other parties to disputes.

Medical Error

An important example of the use of interest-based negotiation to reduce litigation costs may be found in the area of healthcare. Tradi­tionally, malpractice insurance carriers and defense attorneys will di­rect medical professionals to "deny and defend" any allegation of medical errors. Doctors, nurses, and hospital staff are instructed to not speak to patients or the patients' families regarding these alleged incidents. This often infuriates, or at the very least frustrates, the pa­tients and their families. It makes no difference whether or not an error has occurred; when communication suddenly stops, patients and their families believe it is because there is something to hide. The result is a lawsuit.

Dr. Steve Kraman began a policy of full disclosure, apology, and acceptance of responsibility if a medical error had actually occurred at the Lexington, Kentucky VA Hospital some twenty years ago. If there was no medical error, the hospital provided proof and refused to pay the claim. The results of the program drew considerable attention.

At the Lexington VA, during a seven-year period, the hospital sank to the lowest quartile of a comparative group of similar hospitals for settlement and litigation costs. The Lexington VA's average payout was $16,000 per settlement, versus the national VA average of $98,000 per settlement, and only two lawsuits went to trial during a lO-year period.2

2. Doug Wojcieszak et aI., The Sorry Works! Coalition: Making the Case for Full Disclosure, 32 .TOINT COMM'N .T. ON QUALITY & PATIENT SAFETY 344, 346 (2006), available at http://sorryworks.net/pdf/Sorry_Works_White_Paper.pdf.

2009]THE EVOLUTION OF CIVIL COLLABORATIVE LAW 501

The success of Dr. Kraman's program was instrumental to the Depart­ment of Veteran's Affairs issuing a directive mandating the creation of similar programs in all VA Hospitals.3

Voluntary Full Disclosure

The family collaborative process requires full disclosure, and as the VA Hospitals' program demonstrates, this feature of the family col­laborative process is also applicable to other areas of civil law. Many litigation lawyers are extremely uncomfortable with the idea of volun­tary full disclosure and have severely criticized the idea by saying it is impossible to submit to full disclosure in commercial disputes and properly represent the interests of their clients. These lawyers believe that the other parties must be put under oath in depositions or swear to written discovery responses before lawyers can rely on the other parties' answers. However, since there is evidence that people have engaged in perjury, putting parties under oath does not appear to guarantee a truthful response or prevent someone from concealing relevant information. Even when parties are truthful, they are gener­ally coached by their litigation lawyers prior to deposition, and discov­ery responses more often than not are reduced to writing by the lawyer or a·legal assistant and are seldom the actual words of the cli­ents. It would appear that a series of face-to-face negotiations in an informal atmosphere allows collaborative participants better opportu­nities to determine the credibility of the information provided by the other parties.

Due to formal discovery being conducted according to the rules of civil procedure, parties must wait no less than two months after cases are filed before they can expect to receive any documents or informa­tion from any of the other parties. This is not a problem in the collab­orative process due to the parties having the ability to jointly agree on what information is necessary to resolve the dispute and to agree on when the information will be delivered. If parties are aware that they will need an expert, they may wish to agree on a person qualified to provide an opinion prior to their first face-to-face meeting, so when the parties actually do meet, they will already have a portion of the information that they know is going to be necessary to arrive at a solu­tion. For example, in a construction dispute involving a defective foundation, the parties may agree on an engineer and have a report available at the first face-to-face meeting. The meeting will begin by addressing each parties' interests and concerns and deciding what, if any, additional information will be necessary to repair the defect and any damages caused by the defect. With proper preparation, the par-

3. See DEP'T OF VETERANS AFFAIRS, VHA DIRECTIVE 2008-002: DISCLOSURE OF ADVERSE EVENTS TO PATIENTS (2008), available at http://wwwl.va.gov/vhapubli cationslView Publica tion.asp ?pub _1D= 1637.

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ties will be well on their way to developing options and determining exactly what immediate remedial measures should be taken, what work will be necessary, who will do the work, and who will pay for the work. If remedial measures are necessary, they may be taken immedi­ately to stop any further damages to the property. The actual work on repairs can begin within days or weeks instead of months or years provided that the lawyers stay out of the way of progress.

Privacy

A number of famous couples have been parties to collaborative di­vorces and have taken advantage of the privacy that the process af­fords. 4 Negotiations are conducted off the record and away from the courthouse. Pleadings are jointly filed, and there are no hearings. The complaints filed with the court state only that the parties have a dispute, and that they are attempting to resolve the matter in the col­laborative process. There are no lengthy statements of allegations, de­fenses, or denials. Many parties to commercial disputes would prefer not to air their disputes in public. The employer who has been ac­cused of discrimination, sexual harassment, or retaliation would likely welcome private negotiations with no public record of the allegations. Intellectual-property disputes, sports- and entertainment-contract dis­putes, and medical-error investigations can be conducted without at­tracting the media. Dispensing with inflammatory pleadings prevents disclosure of the nature of the dispute to the public, and it keeps the parties concentrating on resolution rather than wasting time being an­gry over the other parties' allegations and statements of blame regard­ing the issues in dispute.

Rapid Results

When time is of the essence, collaborative law can move toward resolution as fast as the parties can progress through the steps of the process. Family lawyers have found that final orders in collaborative cases are entered within a few weeks or months of commencing the collaborative process instead of a few years. Some civil disputes can be resolved in a matter of days. When contractors have money tied up in a project and property owners are scheduled to move in by a certain date, time is of the essence. Parties who have construction disputes do not want to wait years or even months to resolve their issues and get paid or take possession of the completed structure. Employment dis­putes are able to be resolved within days or weeks, relaxing tensions

4. See Associated Press, Roy E. Disney Files for Divorce in LA to End 52-Year Marriage, M1CKEY NEWS, Jan. 22, 2007, www.mickeynews.com/News/DisplayPress Release.asp_Q_id_E_1227Divorce; see also Williams Thanks His Wife for Easy Di­vorce, CONTACTMuS1C.COM, July 5, 2008, http://www.contactmusic.com (follow hyper­links to "news," "Robin Williams," "Robin Williams News," "Williams Thanks His Wife for Easy Divorce").

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and allowing employees to concentrate on their work instead of won­dering what is going to happen next. Whether the dispute concerns a construction project or an office staff, the ability to quickly resume normal activities not only saves the parties legal fees, but it also saves the collateral expenses that are associated with the unwelcome inter­ruptions of ongoing business activities. Most parties would prefer to resolve their differences as quickly as possible, and the collaborative process provides that opportunity.

Scheduling

Another one of the primary reasons the collaborative process can move the parties to resolution more quickly than litigation is that the parties are in charge of scheduling. When parties must rely on court clerks to schedule hearings, they are competing with every other dis­pute assigned to that court for time in front of the judge. It may take weeks or months to obtain a setting for a hearing, and even longer to get a trial date. If the docket is overcrowded and one party objects to a visiting judge, or a party or lawyer is unable to attend a hearing, the parties must wait longer before the case can be fit into the next availa­ble slot in the court's docket. Parties in the collaborative process may occasionally ·have to postpone a meeting due to illness or emergency, but their schedules are not controlled by an arbitrary scheduling order or the availability of a judge. Scheduling is done according to the con­venience of the parties and the amount of time needed to proceed through the steps of the process. Resolution of disputes may require as few as one meeting or as many as ten depending on the nature and complexity of the issues; but at all times, the parties maintain control over scheduling and the pace that they move through the process.

Since the location of face-to-face meetings is not restricted to court­rooms or any particular place, disputes involving parties, experts, or counsel from different states or countries may be scheduled at any place the participants wish to meet and rotated from one city to an­other. There is no necessity to be concerned about jurisdiction or choice of law because that is not a consideration in the collaborative process; however, prior to beginning the process, the parties may agree that any issues that have not been resolved will be decided in arbitration. They may also agree on the lawyers who will represent them at arbitration, the arbitrator, and choice of law. This will allow the parties to know what their alternatives are if they are unable to settle all of the issues in the collaborative process.

Transparency Replaces Hide the Ball

The collaborative process relies on transparency to eliminate un­wanted surprises and to provide a safe environment for the partici­pants. In a multiparty case, a communication sent to one party is

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copied to all other parties. If a client desires a second opinion, the other parties are informed prior to the party who desires the second opinion contacting an expert. Keeping all parties informed avoids conflicts of interests and mistaken impressions regarding each others' motives. The only communications not shared are those between the lawyer and client that the client desires to remain privileged. How­ever, if a client asserts attorney-client privilege concerning any infor­mation that is relevant to the outcome of the matters in dispute and refuses to allow that information to be disclosed, that party's collabo­rative lawyer has a duty to terminate the process. Unlike litigation, all communications and information important to the issues in dispute must be shared, and parties must volunteer the information whether or not it has been requested.

Responsibility Replaces the Blame Game

The collaborative process never fails, but the parties or their law­yers may if they do not abide by the letter and spirit of the participa­tion agreement. Parties must be willing to accept responsibility for their own actions rather .than spending time trying to blame each other. Litigation relies on .blame to determine the outcome. Eliminat­ing the. blame game will save a great deal of time by focusing the par­ties on the future and positive solutions instead of the past and fault; however, focusing on the future may be easier for the parties than for the lawyers who are accustomed to thinking in terms of liability and legal consequences. When parties accept responsibility for their ac­tions and behaviors, blame, excuses, and rationalizations are no longer the topics of discussion. Avoiding blame not only saves time, it also avoids inflammatory comments and unproductive arguments.

Family lawyers have managed to direct the parties' conversations away from futile arguments by using mental health professionals (MHP) to assist the parties in the face-to-face meetings. There is a good chance that lawyers and parties to business and commercial dis­putes will be repelled by the idea of a mental health professional's "touchy feely" approach; however, the use of MHPs should not be rejected without examination. It is not uncommon for heads of com­panies and organizations to enlist the help of coaches to advise them on dress, etiquette, and communications. A MHP can be valuable in assisting the parties and lawyers in developing better listening skills as well as expressing themselves in a clearer, more concise and less of­fensive manner. A communications coach is able to assist collabora­tive participants in developing the habit of always speaking in the first person which is an important skill for interest-based negotiators.

Beginning negotiations by parties stating what they think the other parties did and why they think the other parties did it can put the accusers in the position of making assumptions which may be incor­rect as well as inflammatory. However, when parties relate what they

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believe, how they feel, and how their lives and the lives of their associ­ates and families have been affected by the dispute, no one can con­tradict or argue against their statements. If a party begins statements in the first person, "This is how 'I' feel," or, "This is what 'I' believe," without accusations or blame directed at the other parties, the other parties may not understand or agree with the speakers' beliefs or opinions, but the listeners will be able to hear what is said without becoming defensive and angry. The value of the speaking-in-the-first­person approach was exemplified in the following employer/employee dispute.

Laura's Story

Laura worked for a marketing company. While visiting the com­pany's print shop to check on a project, the shop manager approached Laura and made several lewd comments. Laura turned to walk away, but she was stopped by another employee with a question. Before she was able to leave the shop, the manager called her to his office telling her that proofs were ready. When she entered his office, the manager again made comments and attel1lPted to pull her toward him. Laura immediately left the print shop and returned to the main office where she reported. the incident to Matt, the company's legal counsel. Matt told Laura that the shop manager would be reprimanded. The follow­ing week another employee was approached by the shop manager in the parking lot. The employee told Laura about the incident, but the woman did not want to report what had happened. She said that the shop manager and the owner of the company were friends, and she feared retaliation. Laura decided that she would report the incident to Matt without revealing the other woman's identity. The following week Laura was told that she did not qualify for the company's new standards. Laura was surprised because she believed that she was about to be promoted. After 30 days, Laura was terminated, and three months later she sued for sexual harassment and retaliation.

Laura went to an attorney who explained the litigation process to her and then told her about collaborative law. Laura knew that in litigation the lawyers would make accusations regarding who was to blame for the harassment incident and her termination. The accusa­tions would include comments regarding any behavior of Laura's that might be construed as inviting male attention, the fact that the man­ager and the owner spent time together socially, and Laura's skills and lack of qualifications that had resulted in her termination. Laura did not want to go to litigation and relive the incidents that had upset her life. She wanted the dispute over as quickly as possible. When Laura's collaborative lawyer contacted her former employer, the com­pany was also receptive to the idea of using the collaborative process because it did not want the media or employees in its other offices to be aware of the dispute.

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The parties were made to understand that instead of talking about why the other party was at fault, they would discuss how the issues in the dispute had affected each of them and what options were available for the future. The first face-to-face meeting began with Laura ex­pressing her interests and concerns. She said that when the harass­ment incident occurred, the first thing she thought about was what she might have done to cause the incident. She thought she must have done something to cause the shop manager to think she wanted to hear his derogatory comments or receive his advances, but Laura could think of nothing. Nevertheless, she feIt cheap and wondered if other people viewed her in the same light the shop manager did. Laura said that when she began looking for another position, she knew the job interviewers would want to know why she had left her last employment. She could not say she was terminated due to sexual harassment because she did not want to be viewed as a source of trouble. She also believed that if anyone asked her former employer why she had left, the human relations department would say that she was terminated due to her failure to meet company standards-which she did not believe was true. No one would want to hire her if she said what she believed to "be true, and she did not think that anyone would hire her if she said she was terminated due to not meeting com­pany standards.

Laura became upset to the point that her health was affected, and she was required to seek medical treatment that involved a short hos­pital stay. She firmly believed the shop manager should be punished for his behavior, but instead, she felt that she was the one who had been punished. She also believed that the company had tried to make it appear as if her termination was her fault. Laura finished relating her concerns by saying that she really did not know if the company had done anything to stop the shop manager's behavior or not. She was too humiliated and embarrassed to talk to her former co-workers, so she did not know what the other employees believed or what they were saying about her since she left. Laura believed that everyone at the company must have a poor opinion of her because no one had even apologized regarding the shop manager's behavior.

Matt was attentive to everything that Laura said. It was obvious that this was the first time he had truly considered the impact of these events on Laura's life. It took a moment for Matt to collect himself. When he finally spoke, the first thing Matt said was that he had no knowledge of any behavior by Laura that could have been construed as an invitation for the impropriety she had experienced from the shop manager. Matt also stated that he was genuinely sorry for what had happened to her, and that the shop manager had been told in no uncertain terms that if any incidents occurred in the future, no matter how important he was to the company's operation, he would be imme­diately terminated. Matt went on to explain that because of what hap-

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pened the company hired a human-relations consultant to come in and conduct a program that addressed all forms of harassment and discrimination issues. The program would be mandatory for all com­pany employees-including him. He also explained that the company was in the midst of reorganization. The person who led Laura to be­lieve that she was being promoted took a position in another company and was no longer part of management. The reorganization resulted in several jobs being eliminated and people were let go according to their education, experience, and seniority. Laura did not have a col­lege education, her position was being eliminated, and there were no lateral openings. Matt stated that Laura reporting the shop manager and her termination were unrelated incidents, but after hearing what Laura had to say, he said that he could certainly understand why she would have thought they were related.

The end result was that the company paid Laura her salary and her medical bills until she found other employment. The company also paid her collaborative lawyer's fees. As it turned out, Laura was able to find a better paying position with greater opportunities for ad­vancement than she had with her former employer. Had Laura played the blame game, it is doubtful Matt would have been inclined to work things out with her. If Matt had not given Laura a genuine apology that she could accept, it is likely the case would not have set­tled. If the case had gone to litigation the company would have spent a great deal more on attorneys' fees than the amount that it took to resolve the dispute in the collaborative process, and Laura mayor may not have received financial assistance when she needed it. It is reasonable to conclude that there would have been no apology.

Family and Probate Law - Kissin' Cousins

Probate lawyers have long claimed that will contests are similar to multiparty divorces, and guardianship disputes are the equivalent of custody battles. There is often the need for continuing relationships in probate disputes as well as a desire for privacy. All parties should be in favor of not spending the funds in the decedents' estates on legal fees, and most parties would prefer getting disputes over as soon as possible. The collaborative process appears to be a very attractive ve­hicle for probate, medical error, construction, labor, and many other civil disputes; however, very little is heard about collaborative law probate cases. The reasons are several. First of all, the cases that have been done generally remain confidential because the parties do not wish to have their disputes publicized. Secondly, most of the pub­lic is not aware that the collaborative process exists; and thirdly, many litigation lawyers will not tell their clients that there is a more reason­able and economic way to resolve disputes of parties who are willing to submit to the process. Lawyers believe that they will have to give up their estate planning clients if they represent them in a collabora-

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tive case that fails. This is not true. Estate planning is not an adver­sarial proceeding, and that relationship is able to continue whether or not a probate dispute settles in the collaborative process.

Informed Consent

The legal community has expressed concern that clients will not be fully informed when they submit their disputes to the collaborative process, and that they will not understand that if the disputes are not resolved it will be necessary for them to retain litigation lawyers to go forward with their case.s Disclosure of this requirement should not be a concern due to the fact that all parties sign a contract6 that states that their lawyers will withdraw in the event the collaborative process terminates without resolution and collaborative lawyers' employment agreements state that they will not litigate the dispute if it does not settle. However, litigation lawyers claim that although clients receive notice of the withdrawal provision in the participation agreement and collaborative lawyers discuss this with their clients, the clients really do not understand that their lawyers will withdraw if they do not set­tle. If a client is unable to understand this provision after a written and verbal explanation, the lawyer should consider petitioning the court to have a guardian ad litem appointed to assist the client in pur­suing resolution of the dispute because that person certainly will not understand all that will be involved in litigation.

Concern has also been expressed that clients will be forced to ac­cept settlements due to spending all of their funds on the collaborative process and not being able to retain litigation lawyers. This does not seem to be a valid reason to avoid the collaborative process because many litigation lawyers have been known to recommend that their

5. See generally Letter from Patrick R. Burns, Senior Assistant Director, Office of Lawyers Professional Responsibility, Minnesota Judicial Center, to Laurie Savan, Esq. (Mar. 12, 1997), available at http://www.collaborativelaw.us/articIes/Ethics_ Opinion_Minn_CL_1997.pdf; N.C. State Bar, Formal Ethics Op. 1, 2002 WL 2029469 (2002); Pa. Bar Ass'n Comm. on Legal Ethics and Prof'l Responsibility, Informal Op. 2002-24, 2002 WL 2758094 (2004); Md. Bar ASS'n, Ethics Op. 2004-23 (2004), availa­ble at http://www.collaborative!aw.us/articIes/Ethics_Opinion_Maryland_2004.pdf; Ky. Bar Ass'n Ethics Comm., Op. E-425 (2005), available at http://www.kybar.org/docu ments/ethics_opinions/kba_e-425.pdf; Collaborative Law, N.J. Sup. Ct. Advisory Comm. on Prof'l Ethics, Op. 699, 182 N.J.L.J 1055 (2005); Ethical Considerations in Collaborative and Cooperative Law Contexts, Colo. Bar Ass'n, Ethics Op. 115 (2007), available at http://www.col\aborativelaw.uslarticIesIEthics_Opinion_Colorado.pdf; Collaborative Law, Mo. Sup. Ct. Advisory Comm., Formal Op. 124 (2008), available at http://www.courts.mo.gov; Ethical Considerations in Collaborative Law Practice, A.B.A. Standing Comm. on Ethics & Prof'! Responsibility, Formal Opinion 07-447 (2007), available at http://www.abanet.org/media/youraba/200801l07-447.pdf. Links to these opinions may also be found at http://www.collaborativelaw.us/resources.html.

6. Texas Collaborative Law Council, Participation Agreement, available at http:// www.collaborativelaw.us/articlesITCLC_Participation_Agreement_ With_Addendum. pdf (last visited May 29, 2009).

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clients settle or pay substantial additional retainers for the lawyers to prepare for trial.

Considering the amount of information given to clients by litigation lawyers, collaborative lawyers are more than meeting the requirement of obtaining the informed consent of their clients prior to their clients' participation in the collaborative process. In view of the importance placed on informed consent by the various ethics opinions, one won­ders what steps are being taken by trial lawyers to inform their clients regarding the litigation process. How many trial lawyers tell their cli­ents that due to the rules of civil procedure the parties will not be able to tell the judge or jury everything they want them to hear or that clients will not be able to have the trier of fact consider every piece of evidence that the clients may think should be heard or seen? Moreo­ver, it is doubtful litigation lawyers inform their clients regarding dis­covery, depositions, the cost of experts, the fact that their experts might be disqualified, motion hearings, delays, temporary restraining orders, and any number of other expenses and delays that can occur over a period of years in litigation. Clients seldom will understand that a court cannot order an apology, a change in product design, or a change in patient safety procedures. And, although clients should re­alize this, how many clients truly understand that after everything is said and done in trial, the parties must abide by the decisions of third parties or appeal their cases to a higher court? There are many differ­ences in the litigation and collaborative processes, but when it comes to obtaining clients' informed consent, the primary difference is that the parties will generally know what to expect in collaborative law while many parties to litigated disputes do not have an inkling about what to expect.

Unlike litigation, the collaborative process is very predictable. The contract the parties and their lawyers sign outlines the steps of the process. The face-to-face meetings are conducted according to an agenda, so there are no surprises or ambushes. There are no expert battles because experts are jointly agreed upon and hired by the par­ties to deliver objective opinions rather than hired to bolster one party's position and attack the other parties. The process is not about winning, but about what will resolve the dispute in the most advanta­geous manner for all parties concerned. Because decisions in the col­laborative process are not governed by statutes or case law, parties can receive apologies, manufacturers can agree to change the design of a product, and hospitals can commit to new patient safety proce­dures. These promises and agreements can be reduced to writing and made enforceable in the form of final orders and contracts. Moreo­ver, the parties are free to enlist the assistance of third parties that are not under the jurisdiction of a court to cooperate in carrying out op­tions that can provide resolution for their disputes. When all parties to a dispute place their problem in the center of the table and work as a

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team by attacking the problem instead of attacking each other, incred­ible results will happen, and usually parties discover solutions that are superior to any decisions that a court would have the power to order.

The Collaborative Law Myths

Most trial lawyers' objections to collaborative law are primarily based on misinformation, and the fear that they will lose their clients, ergo their incomes, to collaborative lawyers. Just as there are many parties and disputes that are not appropriate for litigation, there are parties and disputes that are not appropriate for the collaborative pro­cess. These parties will still require litigation lawyers to represent them, so those who understand collaborative law do not believe that all disputes will eventually be settled in the collaborative process. In addition, there is no guarantee that all parties that are appropriate for the collaborative process will choose to use it. Because the process is voluntary, at least two parties must agree to participate before it can be considered as a viable choice. Litigation lawyers insist that when a statute is passed supporting collaborative law, the collaborative pro­cess will become compulsory in some courts due to many judges re­quiring mediation before the parties are able to proceed to trial; however, it is impossible for the collaborative process to be court or­dered. It would be unconstitutional for a judge to order parties to sign a contract that requires them to proceed in good faith and temporarily give up their rights to formal discovery and the ability to unilaterally petition the court. Moreover, no collaborative lawyer should agree to accept a case that has been ordered into the collaborative process without the voluntary agreement of the parties because it is impossi­ble to believe that any party forced into the collaborative process will actually abide by the spirit of the process and the participation agree­ment. Due to all of the above reasons, there is no need to assume that collaborative lawyers are attempting to take over the legal commu­nity. There are many people who will continue to litigate, and many clients that collaborative lawyers will refer to litigators due to the par­ties not being candidates for the collaborative process.

The Real Reason for Trial Lawyer Opposition

When parties choose collaborative law, the result is a substantial reduction in the number of billable hours for their lawyers, which in turn results in a decrease in per case revenue. Voluntary disclosure eliminates depositions and hours of searching through production documents. Many hours normally billed for research are not neces­sary since the collaborative process is not dependent on statutes or case law for solutions. Clients are present during negotiations, so they are aware of the number of hours actually spent on their cases which eliminates the possibility of inaccuracies or mistakes in billing.

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Objections by litigation lawyers in the United States focus on the withdrawal provision in the collaborative participation agreement re­quiring the collaborative lawyer to hand the case over to a litigation attorney if the dispute fails to settle in the collaborative process. Trial lawyers are fearful that if they act as collaborative lawyers and they must withdraw, their clients will not only have contact with lawyers outside their firms, implying the possibility that clients may not return, but there is also the fear that additional income from trial preparation will be lost. Solicitors in the United Kingdom have suggested that they would be required to charge a premium or substantially increase their hourly rate to persuade their firms to allow them to offer the collaborative process to clients. 7 These fears have caused trial lawyers to reject the collaborative process without knowing or understanding how it works, and they have shown little interest in discovering the benefits collaborative law holds for some of their clients. Many law­yers also believe that once they have represented a client in the col­laborative process, they would never be able to represent that client in litigation in the future. That is not true.

One aspect of collaborative law that did not transfer from family disputes into other areas of civil law is the requirement that a collabo­rative lawyer is never able to represent a collaborative client in an adversarial proceeding once that lawyer and client have participated in the collaborative process. A collaborative lawyer may represent a client in a collaborative proceeding and later represent the client in an adversarial proceeding so long as the adversarial proceeding does not concern the same subject matter and the same parties that were in­volved in the prior collaborative case.

Example: ABC Company and XY Company choose the collabora­tive process to resolve their dispute regarding a patent infringement. ABC must decide who will represent it in the collaborative process. ABC has two options: its in-house lawyer, Mary, can represent the company in the collaborative process, or ABC can retain a collabora­tive lawyer outside of the company with the understanding that if the dispute does not settle in the collaborative process, Mary or a litiga­tion lawyer chosen by ABC will handle t,he litigation. If ABC decides that Mary will represent it in the collaborative process, Mary will be barred from representing ABC in any adversarial proceeding against XY regarding the same subject matter. However, if ABC has a dis­pute with XY over issues that are not related to the issues dealt with in the collaborative matter, Mary may represent ABC in an adver­sarial proceeding against XY involving the new issues. Should ABC and XY be successful in resolving their original dispute in the collabo­rative process, it is unlikely that they will resort to litigation for any

7. 1l1e author interviewed solicitors in Oxford in 2005 and in Washington, D.C., in 2006.

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future matters because they will have created a dispute resolution model that can be used to resolve any future issues that may arise.

The fear of being forced to give up clients with whom lawyers have had long standing relationships is highly exaggerated. Whether the parties are in litigation or collaboration, more than 95% of all cases settle and never go to trial.s Consequently, it is probable that lawyers who properly screen their collaborative clients will settle, and the col­laborative lawyers will not be required to withdraw. It is true that lawyers will not earn as much revenue from a collaborative case as they will from a case that is litigated, but the collaborative process allows lawyers to handle a greater number of cases in less time and enjoy a better quality of life. It is also true that collaborative lawyers must have skills that many trial lawyers do not possess. Collaborative lawyers must exercise discipline, patience, and instead of arguing­they must learn to listen. If the lawyer or their clients become dissat­isfied, they cannot throw up their hands, walk out of settlement nego­tiations, and continue to work on cases with the intent, or pretense, of going to trial. Trial is not an option that is considered during the col­laborative process. Developing creative solutions is difficult and chal­lenging, and not every client or lawyer will be capable of effectively participating in the collaborative process.

Another feature of civil and commercial collaborative cases that is different from family cases are the "allied professionals."9 Family col­laborative cases employ models having various combinations of mental health professionals and financial experts. There are family collaborative lawyers who refuse to work without a full team while other lawyers work with only the allied professionals that they and their clients believe are absolutely necessary. Many lawyers not trained in the collaborative process have heard that family collabora­tive lawyers will not work without a team, and the untrained lawyers have concluded that participation in the collaborative process is not possible without a family-type team in place. That is not true. "Law­yers only" is the way that the process began, and it is still a collabora­tive model. There are many benefits derived from having a full team in a family dispute, but it is not mandatory for any collaborative case, family or civil, to have anyone more than the lawyers and clients par­ticipate. The family interdisciplinary team certainly will not transfer intact to civil cases. What would a parenting coordinator or divorce coach do in a construction dispute? The answer is, "Nothing."

8. Depending on the data source, settlement rates will vary from 90% to 9S.5% of all cases filed. See Dick Price, An Overview of Texas Collaborative Law, TEX.

COLLABORATIVE L. BLOG, 'J[ 3, Aug. 19, 2007, http://texascollaborativelaw.blogspot. com/2007/0S/overview-of-texas-collaborative-law.html.

9. "Allied professionals" is the label that some family collaboraLive lawyers use Lo idenLify mental health and financial professionals who form the family collabora­tive team. Carrie D. Helmcamp, Collaborative Family Law: A Means to a Less De­structive Divorce, 70 TEX. BJ. 196, J 96-97 (2007).

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In civil and commercial cases, allied professionals are referred to as experts. Experts are retained according to the nature of the dispute and the needs of the parties. If the facts of the dispute present a need for expertise that the parties and their collaborative lawyers do not possess, the parties, with the help of their lawyers, should select pro­fessionals qualified to assist them. In some instances, an expert will be necessary in order to provide information that the parties simply do not possess but must have before the dispute can be settled. This type of information would include a determination as to whether or not a patient's complication was the result of medical error or natural causes, or whether or not the mechanical failure of a product was due to misuse or a flaw in the design or materials. In other situations, experts will not be absolutely necessary, but their opinions would be extremely beneficial to reassure the parties regarding technical deci­sions or to actually assist the parties in participating in the collabora­tive process. Experts can often reduce costs rather than increasing them because the parties and their lawyers will be able to move for­ward more quickly and efficiently with the assistance of the other pro­fessionals. There will be opportunities for MHPs to assist in a number of different roles, including communication coaches or facilitators, and in highly emotional disputes an MHP is able to provide grief counseling or anger management. Financial experts will include many areas of expertise that are not involved in family cases such as opin­ions on economic damages, business planning, and special needs trusts.

So WHERE Do WE Go FROM HERE?

Our law schools prepare students to participate in an adversarial dispute resolution process. Some schools have alternative dispute res­olution courses, but currently there are few, if any, courses for stu­dents interested in collaborative law. When young lawyers pass the bar, they go to firms that require them to generate an extraordinary number of billable hours. In an effort to survive, the new hires will mimic the behavior of the older associates and partners because the primary goal of every associate is to be_on track to become partner. Firms parade their trial lawyers before the public in television com­mercials and magazine ads and brag about their warriors' abilities to win large sums for their clients. Trial lawyers are portrayed as brave knights who ride through the difficulties of their clients' cases on white horses. The young lawyers have been taught in school and on the job to be adversarial; consequently, it is usually trial lawyers who become their heroes. Young associates are eager for their turn to ap­pear as knights in shining armor. Few will consider that it is their clients who will be left to clean up after their horses if things go awry due to the white knights making faulty or detrimental decisions on behalf of their clients.

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Not all clients are made "whole" by a dollar amount, so despite the fact their lawyers are able to get a money judgment for them, their concerns are still not met. Clients may desire apologies or changes in product designs or medical procedures to prevent a similar incident from harming another person. Trial lawyers seldom consider an apol­ogy or change in design or procedure to be important because 40% of an apology or change does nothing for the firm's balance sheet. Even when lawyers win at trial, it is clear that the adversarial system that is currently in place is incapable of providing appropriate results for many of its participants.

Some clients look upon their trial lawyers as heroes, but those not suited to litigation may come away from the experience disillusioned because it will not give them the kind of relief that they anticipated. Many parties will not have their cases accepted by litigation lawyers because their disputes do not have the potential to generate enough income to pay for the experts and discovery costs that are required to advance their causes. If the collaborative process is made available, a number of these parties could be served, but currently there are not enough trained collaborative lawyers and the public is not aware that there is an option other tha"n litigation to resolve their disputes.

Currently trial lawyers are instrumental in determining the ap­proach that parties will take to resolve their disputes, and few liti­gators will recommend the collaborative process. If clients ask about collaborative law, most trial lawyers will emphasize the fact that the parties will be required to hire a second lawyer "when" the dispute does not settle. Without explaining all of the pitfalls inherent in litiga­tion, trial lawyers will guide their clients toward the process with which they are most familiar and that coincidentally happens to be the most lucrative for the lawyers.

Critics of the collaborative process that are unable to make the par­adigm shift away from adversarial approaches to dispute resolution have stated that it is impossible to use collaborative law to resolve civil and commercial disputes. This type of attitude brings to mind the proverb, "Those who say it is impossible, should not get in the way of those doing it." Cases involving contracts, partnership and corporate dissolutions, probate, and sexual harassmentlretaliation disputes have already been successfully resolved in the collaborative process. Al­though litigation lawyers claim that it is impossible to use a contin­gent-fee contract or in-house counsel to participate in collaborative cases, an in-house lawyer has participated in a successful collaborative case along with another collaborative lawyer who provided his ser­vices by way of a contingent fee agreement. These examples should dispel the myth that it is impossible for in-house counsel to participate in the collaborative process as a collaborative lawyer and that no law­yer is able to take a collaborative case on a contingent-fee basis.

2009]THE EVOLU110N OF CIVIL COLLABORA11VE LAW 515

When parties and their lawyers are willing to execute and abide by the participation agreement, the collaborative process' only limitation is the creative ability of the participants. Parties may agree to solu­tions and options without concern over the rules of civil procedure, case law, or the statutes of any jurisdiction. Unfortunately our legal system relies on stare decisis which appears to have been interpreted as a mandate that lawyers must stand by the things that have already been decided and not have a new thought or pursue a new course of action regardless of the damage done to the relationships and pocket­books of their clients. The legal community has not yet recognized that the world is round.

Collaborative law is here. It is a tried and true method of dispute resolution that is able to provide relief for parties that they cannot obtain from an arbitrator or judge whose authority is limited by the law. Collaborative supporters are currently writing texts and working on outlines for courses in the collaborative process. Collaborative law courses must be made available at law schools, so that young lawyers will have the option of choosing peacemakers as their role models and the public may be better served. Advertising campaigns are being mounted to make the public aware that there are options for resolving conflict that ~re less time consuming, more economical, and less dam­aging to relationships. When the public knows about the collaborative process, they will demand it; however, until collaborative law becomes a household word, it will be the responsibility of those who believe in the collaborative process to promote it at every opportunity. Positive change never comes easily. It will take time before litigation becomes the alternative dispute-resolution process in America. Other coun­tries have already begun a move away from litigation. Mary McAleese, President of the Irish Republic, has announced that collab­orative law is Ireland's first option for dispute resolution,lO and Rob­ert McClelland, the Attorney General of Australia, recently stated, "I believe that a key obligation of a government lawyer should be to examine the potential to resolve a dispute without recourse to litiga­tion. And, of course, that should not occur on the steps of the court." I I Change is never easy, but it is always possible when people commit to support a solution that is superior to the status quo. The question remains, "Who have you talked to about collaborative law today?"

10. See Carol Coulter, AG Says Family Disputes Need Alternative Resolution Pro­cess, fRISH TIMES, May 3, 2008, available at http://www.acp.ie/conference_artic\es.php (citing statements made by Mrs. McAleese at the Collaborative Law Conference in Cork, Ireland, May 1-4,2008).

11. Robert McClclland, Att'y Gcn. Austl., Spcech at the ADR in Government Forum (June 4, 2008), available at http://www.attorneygeneral.gov.au/www/ministers/ RobertMc.nsf/Page/Speeches_2008_ 4Junc2008-AlternativeDispllteResolutioninGov ernmentForllm.

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HR 1020 IH

111th CONGRESS

1st Session

H. R. 1020

To amend chapter 1 of title 9 of United States Code with respect to arbitration.

IN THE HOUSE OF REPRESENTATIVES

February 12, 2009

Mr. JOHNSON of Georgia (for himself, Mr. MILLER of North Carolina, Ms. SCHAKOWSKY, Mr. BISHOP of Georgia, Ms. LEE ofCalifornia, Mr. LOEBSACK, Mr. NADLER of New York, Mr. CHANDLER, Mr. PATRICK J. MURPHY of Pennsylvania, Mr. SCOTT ofVirginia, Mr. PASTOR of Arizona, Mr. LATOURETTE, Mr. DOGGETT, Mr. CONYERS, Mr. DELAHUNT, Mr. STUPAK, Ms.WASSERMAN SCHULTZ, Ms. MCCOLLUM, Mr. COURTNEY, Ms. BALDWIN, Mr. DEFAZIO, Mrs. LOWEY, Mr. HIGGINS, Ms. EDDIEBERNICE JOHNSON of Texas, Mr. GUTIERREZ, Mr. BRALEY of Iowa, Mr. MARKEY of Massachusetts, Mrs. MALONEY, Mr. WATT,Mr. CARSON of Indiana, Mr. GEORGE MILLER of California, Ms. JACKSON-LEE of Texas, Mr. BOSWELL, Mr. SKELTON, Mr.BARROW, Mr. STARK, and Ms. LINDA T. SANCHEZ of California) introduced the following bill; which was referred to theCommittee on the Judiciary

A BILL

To amend chapter 1 of title 9 of United States Code with respect to arbitration.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Arbitration Fairness Act of 2009'.

SEC. 2. FINDINGS.

The Congress finds the following:

(1) The Federal Arbitration Act (now enacted as chapter 1 of title 9 of the United States Code) was intended toapply to disputes between commercial entities of generally similar sophistication and bargaining power.

(2) A series of United States Supreme Court decisions have changed the meaning of the Act so that it now extendsto disputes between parties of greatly disparate economic power, such as consumer disputes and employmentdisputes. As a result, a large and rapidly growing number of corporations are requiring millions of consumers andemployees to give up their right to have disputes resolved by a judge or jury, and instead submit their claims tobinding arbitration.

(3) Most consumers and employees have little or no meaningful option whether to submit their claims to arbitration.Few people realize, or understand the importance of the deliberately fine print that strips them of rights; andbecause entire industries are adopting these clauses, people increasingly have no choice but to accept them. Theymust often give up their rights as a condition of having a job, getting necessary medical care, buying a car, openinga bank account, getting a credit card, and the like. Often times, they are not even aware that they have given uptheir rights.

(4) Private arbitration companies are sometimes under great pressure to devise systems that favor the corporaterepeat players who decide whether those companies will receive their lucrative business.

(5) Mandatory arbitration undermines the development of public law for civil rights and consumer rights, becausethere is no meaningful judicial review of arbitrators' decisions. With the knowledge that their rulings will not beseriously examined by a court applying current law, arbitrators enjoy near complete freedom to ignore the law andeven their own rules.

(6) Mandatory arbitration is a poor system for protecting civil rights and consumer rights because it is nottransparent. While the American civil justice system features publicly accountable decision makers who generallyissue written decisions that are widely available to the public, arbitration offers none of these features.

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(7) Many corporations add to their arbitration clauses unfair provisions that deliberately tilt the systems againstindividuals, including provisions that strip individuals of substantive statutory rights, ban class actions, and forcepeople to arbitrate their claims hundreds of miles from their homes. While some courts have been protective ofindividuals, too many courts have upheld even egregiously unfair mandatory arbitration clauses in deference to asupposed Federal policy favoring arbitration over the constitutional rights of individuals.

SEC. 3. DEFINITIONS.

Section 1 of title 9, United States Code, is amended--

(1) by amending the heading to read as follows:

`Sec. 1. Definitions';

(2) by inserting before `Maritime' the following:

`As used in this chapter--';

(3) by striking `Maritime transactions' and inserting the following:

`(1) `maritime transactions';';

(4) by striking `commerce' and inserting the following:

`(2) `commerce';

(5) by striking `, but nothing' and all that follows through the period at the end, and inserting a semicolon; and

(6) by adding at the end the following:

`(3) `employment dispute', as herein defined, means a dispute between an employer and employee arising out ofthe relationship of employer and employee as defined by the Fair Labor Standards Act;

`(4) `consumer dispute', as herein defined, means a dispute between a person other than an organization whoseeks or acquires real or personal property, services, money, or credit for personal, family, or household purposesand the seller or provider of such property, services, money, or credit;

`(5) `franchise dispute', as herein defined, means a dispute between a franchisor and franchisee arising out of orrelating to contract or agreement by which--

`(A) a franchisee is granted the right to engage in the business of offering, selling, or distributing goods orservices under a marketing plan or system prescribed in substantial part by a franchisor;

`(B) the operation of the franchisee's business pursuant to such plan or system is substantially associated withthe franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symboldesignating the franchisor or its affiliate; and

`(C) the franchisee is required to pay, directly or indirectly, a franchise fee; and

`(6) `pre-dispute arbitration agreement', as herein defined, means any agreement to arbitrate disputes that hadnot yet arisen at the time of the making of the agreement.'.

SEC. 4. VALIDITY AND ENFORCEABILITY.

Section 2 of title 9, United States Code, is amended--

(1) by amending the heading to read as follows:

`Sec. 2. Validity and enforceability',

(2) by inserting `(a)' before `A written';

(3) by striking `, save' and all that follows through `contract', and inserting `to the same extent as contractsgenerally, except as otherwise provided in the title'; and

(4) by adding at the end the following:

`(b) No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of--

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`(1) an employment, consumer, or franchise dispute; or

`(2) a dispute arising under any statute intended to protect civil rights.

`(c) An issue as to whether this chapter applies to an arbitration agreement shall be determined by Federal law. Exceptas otherwise provided in this chapter, the validity or enforceability of an agreement to arbitrate shall be determined bythe court, rather than the arbitrator, irrespective of whether the party resisting arbitration challenges the arbitrationagreement specifically or in conjunction with other terms of the contract containing such agreement.

`(d) Nothing in this chapter shall apply to any arbitration provision in a collective bargaining agreement.'.

SEC. 5. EFFECTIVE DATE.

This Act, and the amendments made by this Act, shall take effect on the date of the enactment of this Act and shallapply with respect to any dispute or claim that arises on or after such date.

END

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S 931 IS

111th CONGRESS

1st Session

S. 931

To amend title 9 of the United States Code with respect to arbitration.

IN THE SENATE OF THE UNITED STATES

April 29, 2009

Mr. FEINGOLD (for himself, Mr. DURBIN, Mr. KERRY, Mr. WHITEHOUSE, Mr. WYDEN, Mr. UDALL of New Mexico, Mr. MERKLEY,and Mr. KENNEDY) introduced the following bill; which was read twice and referred to the Committee on the Judiciary

A BILL

To amend title 9 of the United States Code with respect to arbitration.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Arbitration Fairness Act of 2009'.

SEC. 2. FINDINGS.

The Congress finds the following:

(1) The Federal Arbitration Act (now enacted as chapter 1 of title 9 of the United States Code) was intended toapply to disputes between commercial entities of generally similar sophistication and bargaining power.

(2) A series of United States Supreme Court decisions have changed the meaning of the Act so that it now extendsto disputes between parties of greatly disparate economic power, such as consumer disputes and employmentdisputes. As a result, a large and rapidly growing number of corporations are forcing millions of consumers andemployees to give up their right to have disputes resolved by a judge or jury, and instead submit their claims tobinding arbitration.

(3) Most consumers and employees have little or no meaningful option whether to submit their claims to arbitration.Few people realize or understand the importance of the deliberately fine print that strips them of rights, andbecause entire industries are adopting these clauses, people increasingly have no choice but to accept them. Theymust often give up their rights as a condition of having a job, getting necessary medical care, buying a car, openinga bank account, getting a credit card, and the like. Often times, they are not even aware that they have given uptheir rights.

(4) Private arbitration companies are sometimes under great pressure to devise systems that favor the corporaterepeat players who decide whether those companies will receive their lucrative business.

(5) Mandatory arbitration undermines the development of public law for civil rights and consumer rights becausethere is no meaningful judicial review of arbitrators' decisions. With the knowledge that their rulings will not beseriously examined by a court applying current law, arbitrators enjoy near complete freedom to ignore the law andeven their own rules.

(6) Mandatory arbitration is a poor system for protecting civil rights and consumer rights because it is nottransparent. While the American civil justice system features publicly accountable decision makers who generallyissue public, written decisions, arbitration often offers none of these features.

(7) Many corporations add to arbitration clauses unfair provisions that deliberately tilt the systems againstindividuals, including provisions that strip individuals of substantive statutory rights, ban class actions, and forcepeople to arbitrate their claims hundreds of miles from their homes. While some courts have been protective ofindividuals, too many courts have erroneously upheld even egregiously unfair mandatory arbitration clauses indeference to a supposed Federal policy favoring arbitration over the constitutional rights of individuals.

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SEC. 3. ARBITRATION OF EMPLOYMENT, CONSUMER, FRANCHISE, AND CIVIL RIGHTS DISPUTES.

(a) In General- Title 9 of the United States Code is amended by adding at the end the following:

`CHAPTER 4--ARBITRATION OF EMPLOYMENT, CONSUMER, FRANCHISE, AND CIVIL RIGHTSDISPUTES

`Sec.

`401. Definitions.

`402. Validity and enforceability.

`Sec. 401. Definitions

`In this chapter--

`(1) the term `civil rights dispute' means a dispute--

`(A) arising under--

`(i) the Constitution of the United States or the constitution of a State; or

`(ii) a Federal or State statute that prohibits discrimination on the basis of race, sex, disability, religion,national origin, or any invidious basis in education, employment, credit, housing, public accommodationsand facilities, voting, or program funded or conducted by the Federal Government or State government,including any statute enforced by the Civil Rights Division of the Department of Justice and any statuteenumerated in section 62(e) of the Internal Revenue Code of 1986 (relating to unlawful discrimination);and

`(B) in which at least 1 party alleging a violation of the Constitution of the United States, a State constitution,or a statute prohibiting discrimination is an individual;

`(2) the term `consumer dispute' means a dispute between a person other than an organization who seeks oracquires real or personal property, services (including services relating to securities and other investments), money,or credit for personal, family, or household purposes and the seller or provider of such property, services, money,or credit;

`(3) the term `employment dispute' means a dispute between an employer and employee arising out of therelationship of employer and employee as defined in section 3 of the Fair Labor Standards Act of 1938 (29 U.S.C.203);

`(4) the term `franchise dispute' means a dispute between a franchisee with a principal place of business in theUnited States and a franchisor arising out of or relating to contract or agreement by which--

`(A) a franchisee is granted the right to engage in the business of offering, selling, or distributing goods orservices under a marketing plan or system prescribed in substantial part by a franchisor;

`(B) the operation of the franchisee's business pursuant to such plan or system is substantially associated withthe franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symboldesignating the franchisor or its affiliate; and

`(C) the franchisee is required to pay, directly or indirectly, a franchise fee; and

`(5) the term `predispute arbitration agreement' means any agreement to arbitrate a dispute that had not yetarisen at the time of the making of the agreement.

`Sec. 402. Validity and enforceability

`(a) In General- Notwithstanding any other provision of this title, no predispute arbitration agreement shall be valid orenforceable if it requires arbitration of an employment, consumer, franchise, or civil rights dispute.

`(b) Applicability-

`(1) IN GENERAL- An issue as to whether this chapter applies to an arbitration agreement shall be determinedunder Federal law. The applicability of this chapter to an agreement to arbitrate and the validity and enforceabilityof an agreement to which this chapter applies shall be determined by the court, rather than the arbitrator,irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in

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conjunction with other terms of the contract containing such agreement.

`(2) COLLECTIVE BARGAINING AGREEMENTS- Nothing in this chapter shall apply to any arbitration provision in acontract between an employer and a labor organization or between labor organizations, except that no sucharbitration provision shall have the effect of waiving the right of an employee to seek judicial enforcement of a rightarising under a provision of the Constitution of the United States, a State constitution, or a Federal or State statute,or public policy arising therefrom.'.

(b) Technical and Conforming Amendments-

(1) IN GENERAL- Title 9 of the United States Code is amended--

(A) in section 1, by striking `of seamen,' and all that follows through `interstate commerce';

(B) in section 2, by inserting `or as otherwise provided in chapter 4' before the period at the end;

(C) in section 208--

(i) in the section heading, by striking `Chapter 1; residual application' and inserting `Application';and

(ii) by adding at the end the following: `This chapter applies to the extent that this chapter is not inconflict with chapter 4.'; and

(D) in section 307--

(i) in the section heading, by striking `Chapter 1; residual application' and inserting `Application';and

(ii) by adding at the end the following: `This chapter applies to the extent that this chapter is not inconflict with chapter 4.'.

(2) TABLE OF SECTIONS-

(A) CHAPTER 2- The table of sections for chapter 2 of title 9, United States Code, is amended by striking theitem relating to section 208 and inserting the following:

`208. Application.'.

(B) CHAPTER 3- The table of sections for chapter 3 of title 9, United States Code, is amended by striking theitem relating to section 307 and inserting the following:

`307. Application.'.

(3) TABLE OF CHAPTERS- The table of chapters for title 9, United States Code, is amended by adding at the end thefollowing:

401'.

SEC. 4. EFFECTIVE DATE.

This Act, and the amendments made by this Act, shall take effect on the date of enactment of this Act and shall applywith respect to any dispute or claim that arises on or after such date.

END

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HR 991 IH

111th CONGRESS

1st Session

H. R. 991

To treat arbitration clauses which are unilaterally imposed on consumers as an unfair and deceptive trade practice andprohibit their use in consumer transactions, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

February 11, 2009

Mr. GUTIERREZ introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To treat arbitration clauses which are unilaterally imposed on consumers as an unfair and deceptive trade practice andprohibit their use in consumer transactions, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Consumer Fairness Act of 2009'.

SEC. 2. PROHIBITION ON ARBITRATION CLAUSES IMPOSED ON CONSUMERS WITHOUT THEIRCONSENT.

(a) In General- The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is amended by adding at the end thefollowing new title:

`TITLE X--DISPUTE RESOLUTION

`SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

`(a) Short Title- This title may be cited as the `Consumer Fairness Act'.

`(b) Table of Contents- The table of contents for this title is as follows:

`TITLE X--DISPUTE RESOLUTION

`Sec. 1001. Short title; table of contents.

`Sec. 1002. Definitions.

`Sec. 1003. Prohibition on arbitration clauses imposed on consumers without their consent.

`SEC. 1002. DEFINITIONS.

`For purposes of this title, the following definitions shall apply:

`(1) CONSUMER- The term `consumer' means any individual.

`(2) CONSUMER TRANSACTION- The term `consumer transaction' means the sale or rental of goods, services, orreal property, including an extension of credit or the provision of any other financial product or service, to anindividual in a transaction entered into primarily for personal, family, or household purposes.

`(3) CONSUMER CONTRACT- The term `consumer contract' means any written, standardized form contract betweenthe parties to a consumer transaction.

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`SEC. 1003. PROHIBITION ON ARBITRATION CLAUSES IMPOSED ON CONSUMERS WITHOUTTHEIR CONSENT.

`(a) In General- A written provision in any consumer transaction or consumer contract which requires binding arbitration(whether by the terms of such transaction or contract directly or at the request of any party to the transaction orcontract) to resolve any controversy arising out of or related to the transaction or contract, or the failure to perform thewhole or any part of the transaction or contract shall constitute a violation of this title, shall not be enforceable, andshall be treated as an unfair and deceptive trade act or practice under Federal or State law.

`(b) Post-Controversy Agreements- Subsection (a) shall not apply with respect to a written agreement to determine bybinding arbitration an existing controversy arising out of a consumer transaction or consumer contract if the writtenagreement has been entered into by the parties to the consumer transaction or consumer contract after the controversyhas arisen.

`(c) Compliance- Compliance with the requirements of this title shall be enforced in the same manner as compliance withthe requirements imposed under the preceding title are enforced under section 917 of such title.

`(d) Coordination With Other Law- No provision of this section shall be construed as annulling, altering, affecting, orsuperseding any Federal law, or the laws of any State, relating to arbitration in connection with consumer transactionsor consumer contracts, except to the extent that those laws are inconsistent with the provisions of this section, and thenonly to the extent of the inconsistency.'.

(b) Applicability- The amendments made by this section shall apply to all consumer transactions and consumer contractsentered into on, or after the date of the enactment of this Act, amendments entered into on or after such date ofenactment to any consumer transaction or consumer contract without regard to the date such transaction wasconsummated or such contract entered into, and to all controversies pending or filed on, or arising after, the date ofsuch date of enactment.

END

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HR 1237 IH

111th CONGRESS

1st Session

H. R. 1237

To amend chapter 1 of title 9 of United States Code with respect to arbitration.

IN THE HOUSE OF REPRESENTATIVES

February 26, 2009

Ms. LINDA T. SANCHEZ of California (for herself, Mr. GRIJALVA, Ms. MATSUI, Mr. JOHNSON of Georgia, Ms. LEE of California,Ms. ZOE LOFGREN of California, Mr. STARK, Mr. WATT, and Ms. SCHAKOWSKY) introduced the following bill; which wasreferred to the Committee on the Judiciary

A BILL

To amend chapter 1 of title 9 of United States Code with respect to arbitration.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Fairness in Nursing Home Arbitration Act of 2009'.

SEC. 2. AMENDMENTS.

(a) Arbitration of Certain Controversies- Chapter 1 of title 9, United States Code, is amended by adding at the end thefollowing:

`Sec. 17. Validity and enforceability

`(a) Definitions- For purposes of this section:

`(1) LONG-TERM CARE FACILITY- The term `long-term care facility' means--

`(A) any skilled nursing facility as defined in 1819(a) of the Social Security Act;

`(B) any nursing facility as defined in 1919(a) of the Social Security Act; or

`(C) a public facility, proprietary facility, or facility of a private nonprofit corporation that--

`(i) makes available to adult residents supportive services to assist the residents in carrying out activitiessuch as bathing, dressing, eating, getting in and out of bed or chairs, walking, going outdoors, using thetoilet, or obtaining or taking medication; and

`(ii) provides a dwelling place (which may contain a full kitchen and bathroom) for residents in order todeliver supportive services described in clause (i), that includes common rooms and other facilitiesappropriate for the provision of such services to residents of the facility;

but excludes a facility, or portion of a facility, that either does not provide the services described in clause (i)or has as its primary purpose to educate or to treat substance abuse problems.

`(2) PRE-DISPUTE ARBITRATION AGREEMENT- The term `pre-dispute arbitration agreement' means any agreementto arbitrate a dispute that arises after such agreement is made.

`(b) Invalidity of Pre-Dispute Arbitration Agreements- A pre-dispute arbitration agreement between a long-term carefacility and a resident of such facility (or person acting on behalf of such resident, including a person with financialresponsibility for such resident) shall not be valid or specifically enforceable.

`(c) Application to Agreements- This section shall apply to any pre-dispute arbitration agreement between a long-term

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care facility and a resident of such facility (or a person acting on behalf of such a resident, including a person withfinancial responsibility for such resident), and shall apply to a pre-dispute arbitration agreement entered into either atany time during the admission process or at any time after the admission process.

`(d) Application of Federal Law- A determination as to whether this chapter applies to an arbitration agreementdescribed in this section shall be determined under Federal law. Except as otherwise provided in this chapter, the validityor enforceability of such agreement shall be determined by the court, rather than the arbitrator, irrespective of whetherthe party opposing arbitration challenges such agreement specifically or in conjunction with any other term of thecontract containing such agreement.'.

(b) Conforming Amendment- The table of sections in chapter 1 of title 9, United States Code, is amended by adding atthe end the following:

`17. Validity and enforcement.'.

SEC. 3. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

(a) Effective Date- Except as provided in subsection (b), this Act and the amendments made by this Act shall take effecton the date of the enactment of this Act.

(b) Application of Amendments- The amendments made by this Act shall apply with respect to agreements made,amended, altered, modified, renewed, or extended on or after the date of the enactment of this Act.

END

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