Mixing Your Modes: The Pitfalls and Pluses of Med-Arb

May a mediator or arbitrator ethically take on the other role in sequence in the same matter, in a switch that seeks to resolve a dispute?

The answer is, “it depends.”

The Thursday, March 2, 2023 CPR Annual Meeting Session, Mixed Mode Dispute Resolution Processes: Ethical Considerations, acknowledged that ethical rules permit the switch, with qualifications, but also uncovered the potential pitfalls, and the ways to avoid them. The principal problem is that the mediation stage, whenever it takes place, produces confidential information from a party that can be hard for a neutral to ignore when crafting an arbitration award.  That makes the med-arb role switch ethically and practically difficult.

But the move can't happen without significant preparation and cautious steps first, before the parties and the neutral proceed on the effective, but potentially problematic, alternative dispute resolution path.

In some countries, the Annual Meeting panel noted, it is fairly common for a neutral to “switch hats” in assisting resolution of a dispute.  It is prohibited in others.

In the United States, switching roles in a single dispute is an ethically complex matter on which neutrals hold varying views and which has generated considerable scholarship.

Generally speaking, and while other formulations to this issue may vary, “switching hats” may be possible in a particular matter only when several conditions and suggested practices are met.

Moderator Alexandre de Gramont, a partner in the Washington, D.C., office of Dechert LLP, set the stage noting that the move has come into focus in recent years, but with tensions between the parties’ intentions to get past the dispute efficiently and ethics.  He asked why an arbitrator can’t make the move to mediator.

There is no bar to arbitrators encouraging settlement and mentioning to parties the possibility of mediation under ethics rules, replied panelist Ellen Waldman, who is Vice President for Advocacy & Educational Outreach at the CPR Institute [which provides this blog].

But the arbitrator’s suggestion that he or she mediate the dispute?

“That,” said Waldman, is problematic on a number of levels, . . . [and is] “a move that should only be triggered by the parties’ request” and should include a discussion of all of the ethical implications. 

Waldman discussed provisions  of the Code of Ethics for Arbitrators in Commercial Disputes, promulgated by the American Arbitration Association and the American Bar Association. The five canons she cited concern upholding the integrity and fairness of the arbitration process; disclosing any interest likely to affect impartiality or create the appearance of impartiality; avoiding impropriety or the appearance of impropriety; conducting proceedings fairly and diligently, and being faithful to the relationship of trust and confidentiality.

All of this, Waldman explained, are designed to protect the arbitration process.

Arbitration information is safeguarded by an opportunity for rebuttal, she said, “but of course, mediation is guided by imperatives of that process” focusing on confidentiality.

The biggest problem for an arb-med mixed-mode move by the same neutral, said Waldman, is if the mediation fails and the mediator reverts back to being an arbitrator and issues a ruling in that dispute. That structure can strain the Code canons.

Moderator De Gramont asked why, since the canons permit a switch, it doesn’t happen more often.

Panelist Steven M. Bierman, who heads his own New York firm, Bierman ADR, and co-chair of the CPR Mediation Committee, said that in some parts of the world, it occurs more frequently than in the United States, citing Switzerland, Japan, Israel, and most prominently, Germany, where judicial involvement in settlement has moved to private ADR practice.

The long-running U.S. skepticism is yielding to a more permissive use of mixed mode processes, he said.

The changes, explained Bierman, are because in the past 15 years, there is more recognition that, among the dispute resolution tools, it’s more appropriate to pair the processes;  and  “very robust legal scholarship over the past 10-15 years . . . has been liberalizing.”

But there are obstacles:

1) Some provider organizations have rules applicable to particular matters and processes that say neutrals can’t do it.

2) State and local law—mostly likely, state caselaw—may affect the use of mixed-mode ADR steps.

3) “They are distrinct processes with distinct skills,” explained Bierman, and many neutrals prefer to “stay in one lane or another.”

Furthermore, said Bierman, from the parties’ perspectives, and ethics considerations temporarily aside, the parties may want to have someone different for the facilitated negotiations than an arbitrator. He cited Ellen Waldman’s ethics points, noting that they raise questions about the competience, impartiality, fairness and perceptions of fairness, and the treatment of confidentiality, which weigh on the parties process decisions.

The mixed-mode switch, he said, needs to be requested by all parties, ethically, and provider-rules permitted, for a neutral who has the capacity to handle it.

And, he warning, “in the actual real world, it doesn’t end there, frequently.” He said neutrals and counsel must assume that the case won’t resolve going to mediation from arbitration, and may have to return to arbitration if the mediation doesn’t settle. 

“There are crucial issues regarding that return trip,” said Bierman. He said the concern is the prevalent U.S. use of mediation caucuses—that is, mediator-party meetings with just one side where confidential information is conveyed to the neutral to move the case forward to a resolution. 

Bierman said he is worried about “the intimacy of the caucus process” and its effect on a mixed-mode neutral.

Panelist Steven Antunes, of East Rutherford, N.J.-based insurer AEGIS Insurance Services Inc., Senior Litigation Counsel, provided the in-house party view.  “I’m not sure that the ethics of the mediator or arbitrator is anything that enters my consciousness at the beginning of the process,” he said. Antunes added that his employer presumes he understands those implications and issues, and he said he in turns makes the assumption for the outside counsel engaged in the matter.

Ellen Waldman cited the Model Standards Of Conduct for Mediators--also developed by the AAA and ABA, along with the Association for Conflict Resolution--which provide for party self-determination, and informed consent, to guide mediators’ actions in such situations.

It’s the duty to preserve the confidence of the mediator while in that confidentiality role, explained Waldman, but, she asked, in contemplating a switch to arbitrator, “How does one keep a secret from oneself?”

Steven Bierman agreed on the dangers in that scenario, noting that a mediator in normal course “does reality testing, kicking the tires.  . . .  [How] is that going to get scrubbed out of the mediator’s brain, and can any of these bells ever be unrung?” asked Bierman. “Can a mediator go from confidant and an impartial facilitator to an adjudicator?”

The solution to these potential roadblocks, the panel members agreed, is to address it up front.  Bierman suggested agreeing at the outset that any mediation will be conducted entirely in joint session to limit dissemination of confidential communications. In addition, any party or the neutral must be able to opt out at any time if there is discomfort.

“The ethical guardrails have to be in place,” said Alexandre de Gramont.

AEGIS’s Steven Antunes said the idea works as cost containment for in-house attorneys, noting there is no need in such situations to pay someone else to get up to speed on the matter.  But, he said, it’s unusual, and needs to be sold to the business executives even though it’s a legal department issue.

Steven Bierman concluded by citing a recent-vintage CPR tool that touches on mixed-mode with advance planning, the CPR B2B Dispute Resolution Planning program, where the parties create a tailored ADR process after the dispute arises–examining the parties’ needs, interests, and the nature of their dispute, and then deciding which ADR process (or combination) would be best for the parties. (There is no no cost to the parties.)

The panel summarized that the role switch between mediator and arbitration may be possible in a particular matter only when several conditions and suggested practices are met:

(1) the request to switch roles comes from the parties and is unanimous (and does not originate with the neutral);

(2) the neutral is competent by training and experience to perform the second role;

(3) the switch is permitted by the applicable ADR provider’s rules, relevant ethical guidelines applicable to arbitrators and mediators (such as those promulgated by the ABA/AAA), and any applicable case law;

(4) the neutral has fully explained to parties and counsel the risks and implications of the switch;

(5) the parties and the neutral have considered potential procedural changes to mitigate such risks, and

(6) the parties’ request, acknowledgment of risks and implications, and their consent to the switch along with any changes in procedure are memorialized in writing.

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The author edits Alternatives to the High Cost of Litigation for the CPR Institute.

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