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Litigation Forum: Litigation vs. ADR – Practical Issues from

Drafting to Enforcement

© Ifrah PLLC (202) 524-4140 / ifrahlaw.com 1

Sean Gordon Senior Legal Counsel Airbus Americas, Inc.

George Calhoun Member Ifrah PLLC

SPEAKERS

Ken Reiss Corporate Director, Assistant General Counsel Northrop Grumman


AGENDA

Pros and Cons Litigation Arbitration Mediation & Discussions

Strategic Considerations Risk Management Negotiation Leverage Enforcement

Drafting Considerations

Conclusion Final Thoughts


LITIGATION v. ADR – THE BASICS

Dispute resolution should be considered as part of every meaningful contract

– Litigation – Court Supervised Dispute Resolution

– Arbitration – Voluntary, Binding Resolution through a ‘Neutral’

– Mediation – Voluntary settlement discussions with a trained facilitator


ARBITRATION BASICS

Arbitration

• Arbitration is a voluntary, consensual process through which parties agree to submit disputes to one or more third parties for resolution.

Worldwide Commercial Acceptance / Growing Disfavor in Consumer Contexts

• The United States has long had a federal policy favoring the enforcement of arbitration provisions. In recent years, Congress, federal agencies, and states have begun to limit the use of arbitration in certain consumer contexts. Arbitration remains popular worldwide, especially in commercial settings.


MEDIATION BASICS

Mediation Defined

• Mediation is a voluntary, consensual process that uses a trained, neutral third party to facilitate the negotiation of disputes. The goal is to reach a binding settlement agreement.

Growing Popularity

• Companies are increasingly turning to mediation to avoid further litigation expenses and the uncertainty of litigation and to reach a resolution. Mediation is available through agreement or through many court-supervised mediation programs.


WEIGHING THE PROS AND CONS: LITIGATION

© Ifrah PLLC (202) 524-4140 / ifrahlaw.com

Advantages More Efficient

Immediate Injunctive Relief

Readily Enforceable Domestically

Fulsome Discovery

Availability of Jury

Precedential

Disadvantages Costly

Uncertain Judicial Expertise

Availability of Jury

Fulsome Discovery

Public

Less Efficient

Uncertain Enforcement Internationally

7

WEIGHING THE PROS AND CONS: ARBITRATION


ADVANTAGES Confidentiality

More controllable

International enforcement

No Appeal Rights

Lack of Discovery

DISADVANTAGES Costly if Protracted

No Appeal Rights

May Want Publicity

Lack of Discovery

8

WEIGHING THE PROS AND CONS: MEDIATION


ADVANTAGES More Efficient

Assistance of Mediator

Less Formal, Adversarial

Learn Opponent’s Perspective

Confidentiality

Free Discovery

DISADVANTAGES Costly if Protracted

Effect of Trial Judge Mediator

No Precedential Value

Usually Non-binding

Delays Discovery

Free Discovery

9

STRATEGIC CONSIDERATIONS

Risk Management

– Early consideration will shape future disputes

Negotiation Leverage

– Do you have sufficient leverage to get what you want?

Enforcement

– What remedies and provisions will best ensure that you have an enforceable resolution of any dispute that is most favorable to your company?


RISK MANAGEMENT

• Performed up front - Dispute Resolution critical to every contract

• Regardless of decision on ADR, proper to incorporate provisions to shape future disputes

• Maximize portfolio consistency

• ADR and Litigation have different strengths and weaknesses: There is no “right” answer for every case.


MAJOR RISK MANAGEMENT CONSIDERATIONS

• Limiting the issues in dispute: Who decides it, where, under what rules, and with what available remedies

• Privacy (public v. confidentiality)

• Scope

– Arbitration clause only covers disputes that the parties agree to arbitrate

– Limits on class litigation

• Portfolio consistency


MAJOR RISK MANAGEMENT CONSIDERATIONS (Cont’d)

• Cost

– Mediation and Discussions will always be least expensive

– Arbitration and Litigation have competing cost variables

– Litigation may be more expensive but you may have to do it less often

• Speed

– Discussions and mediation; delays or off-ramps

– Arbitration speed depends on the agreement, rules, venue, and nature of dispute

– Litigation speed depends on venue and nature of dispute


MAJOR RISK MANAGEMENT CONSIDERATIONS (Cont’d)

• Availability of Remedies

– International vs. Domestic

– Treaties Applicable

• Expertise – Judge vs. Expert vs. Jury


NEGOTIATING LEVERAGE

• “Boilerplate” Provisions

– Raise issues of enforceability in some contexts, but also allow consistent dispute management

• Leverage to resolve or shape disputes may be highest before a dispute has arisen


ENFORCEMENT

Litigation

– Immediate access to judicial remedies

– More effective prejudgment injunctive relief

– Precedential

Arbitration

– More easily enforceable in international situations • United Nations Convention on the Recognition and Enforcement of

Foreign Arbitral Awards of 1958 (the "New York Convention")

• No equivalent treaty for enforcement of U.S. judgments (there are EU and some other regional agreements)

– May be preferable to foreign country court processes for speed, cost, or predictability


DRAFTING CONSIDERATIONS - ALL CONTRACTS

• Choice of Forum

– Consent to jurisdiction

– Exclusive

– Non-exclusive

– Waiver of forum non conveniens


DRAFTING CONSIDERATIONS - ALL CONTRACTS (Cont’d)

• Choice of Law

– Nexus to contract or parties

– Waiver of conflict of law principles

• Limitations on Damages / Remedies

– Exclusions

– Liquidated damages

– Injunctive Relief


DRAFTING CONSIDERATIONS - ARBITRATION

• Must be in writing

• Must be signed

– Incorporation by reference

• Capacity

• Clarity (saves you lots of time and trouble)

– What disputes to arbitrate

– Rules or Ad Hoc

– Arbitrators/Forum/Language/Judgment


Sample Clause

Any controversy or claim arising out of or

relating to this contract, or the breach

thereof, shall be settled by arbitration

administered by the American Arbitration

Association in accordance with its

Commercial Arbitration Rules, and

judgment on the award rendered by the

arbitrator(s) may be entered in any court

having jurisdiction thereof.

19

DRAFTING CONSIDERATIONS – ARBITRATION (Cont’d)

• Key Choices

Institutional vs. ad hoc arbitration

Rules

Number/Selection of Arbitrators

Seat

Applicable law

Language

Finality & Entry of Judgement


SAMPLE ARBITRAL BODIES

• AAA/ICDR – American Arbitration Association / International Centre for Dispute Resolution

• ICC – International Chamber of Commerce - International Court of Arbitration

• London Court of International Arbitration (LCIA)

• JAMS

• British Columbia International Commercial Arbitration Centre (BCICAC, Canada)

• DIAC – Dubai International Arbitration Centre

• Hong Kong International Arbitration Centre

• ICISID - International Centre for the Settlement of Investment Disputes (focused on investor-state disputes)

• International Arbitration Institute (Paris, France)

• International Institute for Conflict Prevention and Resolution (CPR)


COMMON RULES

• UNCITRAL Arbitration Rules

• ICC Rules

• ICDR Rules

• AAA Rules

• JAMS

• Specialty Rules – FINRA

– NASD

– Construction

– Labor / Employment

– Consumer

– Family (often judicial)


CHOOSING THE SEAT

• Local arbitration procedural law governs

• Procedural law in some jurisdictions provides greater flexibility vs. less-arbitration friendly venues

• UNCITRAL Model Law (over 60 countries)

• New York Convention (important for enforceability)

• Expertise and availability of arbitrators

• Admission of counsel

• Convenience


CONFIDENTIALITY CONSIDERATIONS

General Rules Court is almost always public Arbitration governed by

agreement and rules Materials and

communications State law considerations for

mediation confidentiality

Exceptions Signed written waiver Evidence otherwise subject

to discovery Certain subsequent

proceedings Threats and criminal activity


Additional Considerations Mandatory Reporting

Corporate Reports Regulatory Filings

Potentially Shared with Trial Judge Pre-mediation discussions Parties’ attitudes about

mediation

244

DISCOVERY AND APPEAL

Arguably the biggest differences between ADR and litigation:

• Discovery – Do you need it or want to avoid it?

– Arbitrators do not have power to compel discovery in same manner as courts

– Less extensive discovery often results in significant cost savings

– Subject to limits in arbitration agreement

• Appeal – Often available as of right in litigation

– Arbitration awards very difficult to set aside and not subject to appeal

• Exceptions if agreements provide for use of relatively new ADR appeal process under many applicable rules


ARBITRATOR LIMITS & POWERS

General Rules

• Qualifications

• Number of arbitrators

• Reasoned decision

• Required timelines (be careful – if not realistic, you may invalidate award)


DRAFTING CONSIDERATIONS - ARBITRATION

Other Provisions

– Consolidation

– Power to decide arbitrability

– Review of award or reasoned decision provisions

– Notice


SPECIAL ISSUES

Binding Third Parties

1. Incorporation by reference

2. Assumption

3. Agency

4. Veil-piercing or alter ego

5. Estoppel


SPECIAL ISSUES (Cont’d)

Tort Claims

– Conflicting Case Law – State Law Dependent

– Modifications to standard language can draw in tort claims, but often lead to litigation over enforceability of the clause


Sample Clause

Any controversy or claim arising out of or relating to this contract, or

the breach thereof, including any tort claim related to the contract, or

negotiation thereof, or the parties’ performance, shall be settled by

arbitration administered by the American Arbitration Association in

accordance with its Commercial Arbitration Rules, and judgment on

the award rendered by the arbitrator(s) may be entered in any court

having jurisdiction thereof.

299

SPECIAL ISSUES (Cont’d)

Class action arbitration

– Consolidation

– By rule (i.e. AAA Supplementary Rules for Class Arbitration)

Class action waivers

– Pick an arbitral institution that does not have class procedural rules

Limits on consumer arbitration

– AT&T Mobility LLC v. Concepcion

– CFPB

– Mortgage

– Student Loans


OTHER ADR ALTERNATIVES

• Negotiation Provisions

– Benefits

– Drawbacks


Sample Clause

The Parties will attempt in good faith to resolve any dispute or claim

arising out of or in relation to this Agreement through negotiations

between an officer of each of the Parties with authority to settle the

relevant dispute. If the dispute cannot be settled amicably within thirty

(30) days from the date on which either Party has served written notice

on the other of the dispute then the remaining provisions of this

Clause [ ] shall apply.

31

OTHER ADR ALTERNATIVES (Cont’d)

• Mediation

– Preserving relationships and avoiding litigation

– Object is a binding settlement


Sample Clause

Any dispute arising out of or in connection with this contract shall, at first instance, be referred to a

mediator for resolution. The parties shall attempt to agree upon the appointment of a mediator, upon

receipt, by either of them, of a written notice to concur in such appointment.

If the parties do not agree on a mediator within 10 calendar days from the commencement of the

mediation they shall select a mediator at random from among 5 candidates chosen by each party, such

candidates to be from among the mediators who are certified by either the Re/Insurance Mediation

Institute, Inc or ARIAS-US. Should the mediator selected by the method be unable to serve because if

business or personal relationships, or otherwise decline to serve, this process shall be repeated using

the remaining candidates until a mediator is selected.

32

MEDIATION CLAUSES

Interpretation and Compliance • Clauses Not Always Clear

− Is mediation permissive or mandatory? − Is formal attempt required or does informal suffice? − How is mediator chosen?

• Consider Trial Judge’s Perspective − Have you made good faith efforts? − Be prepared to submit evidence of good faith

attempts


PREPARING FOR MEDIATION

Attorney-Client Planning Educate the Client

Explain mediation process Outline their side’s strengths and

weaknesses

Discuss Settlement Authority Get authority cleared as necessary

Set Realistic Expectations Length, cost, and likelihood of success Focus on risk assessment, not persuasion

Choose Participants Consider settlement authority, schedules,

personality styles, factual knowledge, and expertise


THANK YOU!

QUESTIONS?

Kenneth M. Reiss www.northropgrumman.com [email protected] 703.280.4085

George Calhoun www.ifrahlaw.com [email protected] 202.524.4147

Sean C. Gordon Airbus Americas, Inc. [email protected] 703-834-3436


George R. Calhoun, V

George is chair of Ifrah PLLC’s Financial Services practice based in Washington D.C., and is a noted commercial litigator specializing in complex commercial disputes, securities litigation, and financial disputes. George has an extensive background in dispute resolution, having appeared in numerous ADR proceedings and before state and federal courts on behalf of clients, including large multi-national corporations, closely held LLCs, and individuals. Recently George has advised commercial and financial sector clients concerning dispute resolution provisions in multi-million dollar international deals and has published multiple articles on changes in consumer arbitration law. George received his J.D. from The University of Maryland Francis King Carey School of Law in 1997 and his Bachelor of Arts from Vanderbilt University in 1994.

George R. Calhoun, V

Member

Ifrah PLLC

Telephone: 202.524.4147

Email: [email protected]


mailto:[email protected]

Sean C. Gordon

Sean Gordon is Senior Legal Counsel for Airbus Americas, Inc., the U.S. based affiliate of Airbus S.A.S., one of the world’s largest aerospace companies. He is a corporate generalist that supports Airbus’ operations throughout North and South America, including support with negotiations, contract drafting, litigation, employment matters, and compliance investigations. He recently completed a form agreement project that incorporated arbitration provisions in relevant form agreements. Sean joined Airbus Americas in September 2012.

Prior to joining Airbus, Sean was an Associate in the Corporate - Aviation Group at Katten Muchin Rosenman LLP in Washington, DC, where he advised manufacturers, lenders, airlines, and leasing companies in the commercial aircraft sector, as well as Fortune 500 companies and high net worth individuals in the business aircraft sector. Sean received his J.D. from The George Washington University Law School, and his Bachelor of Arts from The University of Tennessee, Knoxville.

Sean C. Gordon

Senior Legal Counsel

Airbus Americas, Inc.

Telephone: 703-834-3436

Email: [email protected]



Kenneth M. Reiss

Ken is a Corporate Director and Assistant General Counsel for Northrop Grumman Corporation, where he has worked since 2002. He is responsible for all legal disputes arising in the Eastern U.S. Region, Europe and Middle East, including those in the areas of government contracts, bid protests, False Claims Act, commercial contracts, intellectual property, employment, environment, toxic tort, personal injury, real estate and tax. He also advises management and other Company lawyers on managing legal risks. He has been a Litigation Forum Co-Chair for the ACC National Capital Region since 2012. Prior to joining Northrop Grumman, Ken worked for MCI WorldCom where he provided advice on employment law issues and litigated employment disputes. Ken also litigated employment disputes at the FBI, and litigated commercial and intellectual property cases with Howrey & Simon in Washington, D.C. Ken graduated summa cum laude at Duke University, receiving a Bachelor of Science Degree in Computer Science in 1987. He received his law degree from the University of Virginia School of Law in 1992.

Kenneth M. Reiss

Corporate Director, Assistant General Counsel

Northrop Grumman

Telephone: 703-280-4085

[email protected]



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