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Still Splitting the Baby: New Rand Report on Why Corporate Attorneys Use ADR (Jan. 18)(UPDATED)

In-house counsel and corporate attorneys still strongly believe that arbitrators split the baby when making awards.  

But they also believe strongly that arbitration gives them what they need in terms of controlling who hears their case, confidentiality, and time and cost savings.

Rand Corp. has just released a first-of-its-kind study on corporate attorneys’ attitudes arbitration and alternative dispute resolution.  It is available here.

The Santa Monica, Calif.-based nonprofit research organization has released an “exploratory study,” that provides a snapshot of the state of commercial arbitration practice, according to researcher Douglas Shontz.

“Business to Business Arbitration in the United States: Perceptions of Corporate Counsel,” posted on the Rand site today, reports the views of 120 in-house counsel who replied to an E-mail and online survey that Rand distributed last year.

The respondents, according to Shontz, a Rand behavioral/social scientist who researched public policy in its Arlington, Va., office, reported a high level of ADR use.  But despite their own sophistication, the view that arbitrators split awards rather than rule strongly in one party’s favor persists strongly, he says.
The study concludes that parties should take better advantage of their ability to control ADR processes by limiting discovery, using appellate processes, and choosing the most applicable method, notes Shontz.

Rand pursued the study because of “chatter in the journals and the trade press that commercial arbitration isn’t as widely used in the domestic [and international] realm[s] as compared with consumer arbitration,” says Shontz.  He adds that the “grumbling” over arbitration getting increasingly like litigation also factored in pursuing the study.
Although there is a belief that “arbitration itself is losing its value in any time and cost savings” among business attorneys, Shontz says that “a slim majority of the people responding to the survey believed that arbitration for business-to-business matters is better, faster and cheaper than litigation.”

That result, he says, “cut[s] against the notion that it’s not an attractive alternative to litigation.” 
The study asks about other factors favoring or disfavoring arbitration use by corporate counsel. Not surprisingly, the ability to have a confidential process encourages the choice of arbitration. A large majority of respondents also said that the ability to control the arbitrator’s qualifications encourages arbitration.

Shontz says that a contract's complexity also encourages arbitration use for a “significant majority, though smaller than the other[]” categories. Also on the list of boosting corporate arbitration use: the ability to avoid an emotionally driven jury award.

There is some support for mediation in the report, too.  A near majority–45%–prefer nonbinding ADR. Another 17% prefer including both a nonbinding ADR clause and an arbitration clause–in other words, a step ADR process--in contracts. 

Shontz reports that 89% of the respondents said they had participated in at least one mediation session.

The report includes a discussion of ADR providers that covers the CPR Institute.  It states that 58% of the respondents said they typically use an arbitration or ADR organization to find an arbitrator. "Of those," the report notes, [the American Arbitration Association] was cited most frequently (81 percent), followed by JAMS (50 percent), and [the CPR Institute] (11 percent). Also, 53 percent of respondents indicated that they typically use an arbitration or ADR organization to obtain arbitration rules or arbitration clause language. Of those, again AAA was cited most frequently (88 percent), followed by JAMS (23 percent), and CPR (9 percent). Respondents were allowed to indicate use of more than one organization.

--Russ Bleemer, Editor, Alternatives