Category Archives: Arbitration

October 14, 2013

An Old Idea Is New Again

by C. Jean Stewart

When he died in December of 1799, George Washington left a will that was remarkable in many ways. Shortly after his death, the will was printed in Virginia, and was then circulated throughout the country in pamphlet form.  In concluding the dispositive part of his handwritten will, Mr. Washington inserted an arbitration clause that provided, in part:

            “ . . . I hope, and trust, that no disputes will arise . . . ; but if, contrary to expectation, the case should be otherwise . . . My Will and direction expressly is, that all disputes (if unhappily any should arise) shall be decided by three impartial and intelligent men, known for their probity and good understanding; two to be chosen by the disputants—each having the choice of one—and the third by those two.  Which three men thus chosen, shall, unfettered by Law, or legal constructions, declare their sense of the Testators intention; and such decision is, to all intents and purposes to be as binding on the Parties as if it had been given in the Supreme Court of the United States.”

            The mandatory arbitration provision in wills and trusts has not been without controversy in this country in recent times although, as Mr. Washington’s example reveals, it clearly was used previously.  It is sometimes argued that the arbitration provision would be unenforceable in modern times where state law did not specifically provide for its use in the context of a will or trust dispute because of arbitration’s inherently contractual nature.  

This makes the recent decision from the Supreme Court of Texas hopeful in that the Texas Arbitration Act (modeled on the Uniform Arbitration Act in force in 22 states and the District of Columbia) provides that an arbitration clause in an “agreement” is enforceable and the Texas Supreme Court held that the trust in question was an agreement. Hence, the Court enforced the arbitration provision against the Beneficiary/Plaintiff.

In my view, the most significant holding in the opinion in terms of Alternative Dispute Resolution, is the Court’s use of the “doctrine of direct benefits estoppel” to find that a beneficiary/plaintiff who had accepted the benefits of the trust and had filed a suit to enforce its terms had exhibited the degree of assent required to form an enforceable agreement to arbitrate under Texas state law. 

I continue to urge estate planners to include ADR language in their wills and trusts and to share with their clients the advantages of avoiding protracted and expensive litigation over estate and trust disputes.  Perhaps Colorado will soon have an appellate decision enforcing one of those arbitration provisions? 

June 24, 2013

Mediator Moment – Finis Origine Pendet

by C. Jean Stewart

I have spent the last few days at the Straus Institute for Dispute Resolution at Pepperdine University in Malibu, California participating in one of their excellent advanced mediation courses with alternative dispute resolution practitioners from around the world.  We devoted plenty of class time to the discussion and appreciation of designing dispute resolution scenarios that will yield success. 

Spending the time and effort to design an appropriate alternative dispute resolution model can pay handsome dividends. I have always observed that cases that are rushed into mediation, without adequate attention paid to the design and preparation phase, frequently yield dissatisfaction in one or more dimensions. I thought I would report here on a satisfying result that recently came from a thoughtfully planned process.

Counsel in a contested trust matter approached me to design an arbitration/mediation session that has persuaded me to encourage parties and their counsel to consider this idea when faced with a certain kind of dispute.

Here’s how it worked:  In preparation for Stage One of the session, counsel presented statements that were NOT confidential, but were shared with me and with each other.  Counsel included some stipulated exhibits and pleadings. The engagement included an understanding that there would be NO ex parte communications with me until Stage One of the session was completed. The parties had agreed to abide by whatever award/decision I made on the issues, but more importantly, agreed that before I informed them of that award/decision, they would participate in good faith mediation.

On the day the session began, Stage One was an arbitration in the form of a mini-trial complete with opening statements, direct and cross examination of a witness on each side of the case, admission of the stipulated exhibits and closing arguments. At the end of the mini-trial, I took a brief recess, recorded my decision in a brief written summary, placed it in a sealed envelope that I signed and laid aside. 

We then adjourned to Stage Two, which was a mediation, including private caucuses, where the parties made confidential disclosures to me and participated in meaningful, good faith negotiations leading to a settlement of the issues which was reduced to written form and signed by the parties. Ultimately the sealed envelope containing the award/decision was shredded without being revealed to either party or to counsel.

This model is appropriate in cases where the parties want a final and definitive resolution without additional litigation in a case with discrete, identifiable issues.  It addresses the several ethical issues that have prevented me from agreeing to participate in arbitration after a mediation session for the same parties.  Some of the other factors that contributed to the success of this model were: These attorneys were both excellent, presenting crisp and efficient arguments and witness examinations. Their clients were attentive and engaged and left me with a clear understanding of the issues. I applaud these attorneys for creating this opportunity for dispute resolution that I will surely recommend again when the occasion arises.

 

I also appreciate the opportunity to apply the Latin expression that was emphasized in our sessions at the Straus Institute, Finis Origine Pendet -  “the end depends on the beginning.”