Archives for February 2024

February 27, 2024

 FINRA amended its Code of Arbitration Procedure, introducing changes to the arbitration list selection process and clarifying procedural requirements.

The revisions make changes to the arbitration list selection process, which include codifying manual review of arbitrators for conflicts of interests, mandating written explanations for challenges to remove an arbitrator, and clarifying the timing and procedures for such challenges.

The revisions also clarify requirements for prehearing conferences, hearings, claims and motions practice, case dismissals and hearing records. These amendments address the following areas:

• Number of Hearing Sessions Per Day
• Redacting Confidential Information
• Update Submission Agreement When Filing a Third Party Claim
• Amending Pleadings or Filing Third Party Claims
• Combining Claims
• Motion Practice
• Virtual Prehearing Conferences
• In-Person Hearings
• Virtual Option for Special Proceeding
• Witness Lists Shall Not Be Combined with Document Lists
• Hearing Records
  • Parties’ Responsibilities for Distributing the Official Record of a Hearing
  • Executive Sessions
• Dismissal of Proceedings for Insufficient Service
• Dismissal of Claimant’s Claims Requires Issuance of an Award

The amendments were based on an independent review of FINRA’s Dispute Resolution Services in 2022.

These amendments are effective for arbitration cases filed on or after March 4, 2024.

To read how Castaybert PLLC can assist you in arbitration matters, click here.

February 22, 2024

Most mediations conclude with a settlement agreement, which may be oral or written, binding or non-binding, based on the parties’ commitment levels. Typically, a binding written agreement, a legally enforceable contract, is produced, signed by all parties, their counsel, and if pertinent by relevant insurers. Oral agreements are discouraged due to potential legal insufficiency and difficult enforcement. A non-binding written agreement, or a “memorandum of understanding,” may have no legal effect.

Lawyers usually draft settlement agreements, with one party’s attorney taking the lead if the parties are represented by counsel. Mediators, sometimes do draft agreements with the parties and may offer guidance during the drafting process but should not introduce new terms (and are prohibited from doing so in some jurisdictions).

A settlement agreement should include:

• Full name of the parties;
• Effective date of the agreement;
• Reference to the transaction or conflict;
• Clear delineation of parties’ duties and responsibilities;
• Details of any payments, including payer, payee, amount, timing, and form;
• If applicable, reference by caption and docket number to litigation dismissed as consequence of mediated agreement; and
• Signatures of the parties.

When drafting a settlement agreement, counsel should:

1. Define the document’s scope, purpose, legal status, enforcement, and monitoring.
2. Write in plain English, using clear language and defining terms with special meaning.
3. Organize content logically with headings, subheadings, and transitions.
4. Address potential contingencies and risks like non-compliance or breach consequences, dispute resolution procedures, modifications, termination, or expiration.
5. Thoroughly review and revise the draft.
6. Confirm the agreement.

Given the range of permitted, authorized, or prohibited settlement drafting practices in mediation, it is essential for mediators and attorneys representing clients to review the rules of the jurisdiction.

To read how Castaybert PLLC can assist you with mediation, click here.

February 21, 2024

On January 22, 2024, the Second Circuit held, in The Resource Group International Ltd. v. Chishti, No. 23-286 (2d Cir. Jan. 22, 2024), that a forum selection clause in a later settlement agreement could supersede a prior agreement to arbitrate, even without explicit language addressing arbitration. The ruling highlights the importance of precise drafting in contractual agreements, especially when multiple agreements are involved, to avoid unintentionally overriding preexisting arbitration agreements.

The case concerned Muhammad Ziaullah Khan Chishti’s resignation as chairman of The Resource Group International (TRGI) and a dispute with TRGI and its affiliates. Initially, a stock purchase agreement (SPA) between TRGI and outside investors included an arbitration provision. Upon Chishti’s departure, a release agreement was executed, containing a forum selection clause specifying New York courts’ jurisdiction and a merger clause expressly superseding all prior arrangements.

Chishti initiated arbitration against TRGI, prompting the TRGI Parties to seek a preliminary injunction in the Southern District of New York to halt arbitration on the basis that the release agreement’s forum selection clause superseded the SPA’s arbitration agreement. The district court denied the TRGI Parties’ request, reasoning that the release agreement did not explicitly mention prior arbitration agreements and therefore did not supersede the SPA’s arbitration agreement.

The Second Circuit reversed, holding that a forum selection clause could nullify previous arbitration agreements, even without express mention of arbitration, and that “an agreement to arbitrate is superseded by a later-executed agreement containing a forum selection clause if the clause specifically precludes arbitration.” Because the release agreement’s language contained both a forum selection clause granting exclusive jurisdiction to New York courts and a merger clause superseding prior arrangements, it was deemed sufficient to override the SPA’s arbitration clause.

Chishti highlights that a forum selection clause may negate previous agreements to submit disputes to arbitration, even if the clause does not mention arbitration. Parties should be cautious in drafting multiple agreements to avoid inadvertently superseding preexisting arbitration agreements.

To read how Castaybert PLLC can assist you in arbitration matters, click here.

February 14, 2024

After considering options like a mediator’s proposal, conditional offers, alternative demands, or baseball/high-low arbitration, parties may still encounter an impasse during mediation. Advocates should be aware of strategies a mediator might use to break impasse and revive negotiations, as well as ways attorneys can help their client’s case reach resolution during mediation.

Here are strategies a mediator may propose to revitalize negotiations:

• Encourage parties to offer non-monetary concessions, such as apologies, joint press releases, business arrangements, or intellectual property transfers, to aid in reaching a settlement.
• Take a break to allow counsel and clients to gain fresh perspectives upon their return.
• Suggest finalizing a potentially controversial settlement agreement, even with the dollar amount open, to commit both parties to the process and create momentum.
• Temporarily set aside the main issue and focus on resolving a simpler one.
• Establish a deadline (even if flexible) to prompt action.
• Consider separate conferences between lawyers or parties with the mediator.
• Provide each side with a “Mediator’s Cost and Risk Adjusted Analysis” showing probable damages recovery or exposure ranges.
• Request confidential “next to bottom-line numbers” from each party to explore new negotiation angles.
• Encourage each side to role-play the other’s perspective to foster understanding.
• Offer a model settlement agreement as a reference point.
• Use reality-checking to illustrate the emotional, financial, and other costs of litigation and delay.
• As a last resort, suggest ending the mediation, as invested parties often prefer to avoid failure and may reconsider their positions.

Counsel can also help their case reach resolution by employing these strategies:

• Suggest taking a breather to regain professional distance and allow parties to cool down.
• Consider switching the setup, such as directly engaging with the opposing lawyer to spark negotiations.
• Make a move, even if the other side does not, to give the neutral something to work with.
• Discuss non-monetary terms to expand negotiation options.
• Make the proposed settlement amount tangible and real to the client, such as by discussing with the client how they might use the money.
• Clearly communicate your client’s needs to the neutral, such as your client’s need to feel heard, so that the neutral may bolster your advice and effectively deliver tough news to your client.
• Compare immediate versus delayed settlement values by requesting the neutral to guide you through an exercise demonstrating that the lesser amount now has almost exactly the same value to your client as a higher amount from a jury once litigation fees are factored in.
• Self-monitor for emotional involvement and regain professional composure as needed.

With these strategies in mind, counsel can leverage their understanding of the case and client to help overcome impasse and achieve a settlement agreement.

To read how Castaybert PLLC can assist you with mediation, click here.

February 14, 2024

When parties cannot reach an agreement during mediation, advocates and their clients should consider “baseball” or “high-low” offers (often used in baseball arbitrations) to break the impasse and close the deal.

These alternatives are suitable when, at the end of a mediation session, the parties’ numbers are significantly apart, with neither party willing to make further concessions. In such cases, advocates and their clients may agree to settle the lawsuit by submitting the case to an arbitrator or in this case the mediator entering a binding mediation agreement empowering the mediator to decide unresolved issues.

Here is how the “baseball” technique works: both sides make their final offer and demand, and the arbitrator then selects either the demand or offer without modification. There are two types of “baseball” arbitration: “Day Baseball”, where the arbitrator knows the parties’ offers and demands, and “Night Baseball”, where the arbitrator determines the value of the claim without knowing the offers and demands, and the parties agree to accept and be bound by the offer or demand figure closest to the arbitrator’s award. In either case, the mediator agrees not to “split the baby” by awarding an amount between the parties’ offers. Instead, the mediator selects one of the parties’ offers, enters an award in that amount, and if necessary, the court confirms it.

This process discourages extreme positions as there is a higher likelihood that the mediator will choose a reasonable number, incentivizing the parties to move toward the middle. Advocates and their clients should expect to have a brief meeting with the mediator to justify their proposed numbers or to make written submissions.

Another way to break impasse is high-low arbitration, where the parties establish parameters and agree beforehand to limit the award to a pre-set maximum and minimum. Typically, the parties’ parameters are kept confidential from the mediator until the decision is rendered. This approach allows both plaintiff and defendant to mitigate their risk regarding the award. If the plaintiff is awarded a sum above the maximum, they receive the maximum value agreed upon. Conversely, if the defendant prevails, the plaintiff still recovers at least the minimum value, ensuring some recovery while protecting the defendant from an exorbitant award.

Advocates and their clients can use a baseball or high-low agreement to manage risk and guide negotiations toward a more effective and amicable resolution.

To read how Castaybert PLLC can assist you with mediation, click here.

February 14, 2024

When negotiations stall due to high plaintiff demands or low defendant offers, using conditional offers and alternative demands can help break the impasse. These strategies allow parties to adjust their positions without committing firmly to specific figures, keeping the dialogue open and avoiding impasse.

Conditional offers are often referred to as bracketed proposals: “I will move to X, but only if you move to Y.” This allows the proposing party to signal a willingness to advance negotiations without committing to a number unless the gesture is reciprocated. If the bracket is accepted, X and Y become fixed numbers (no longer conditional), and the proposing party takes the next step.

When presented with a conditional offer, the receiving party typically has four potential responses:

1. Accept the bracket, moving the bracketed numbers and prompting the proposing party to make the next move.
2. Reject the concept of brackets and request a firm offer instead.
3. Counter with a different bracket, initiating a series of bracketed proposals.
4. Reject the concept of brackets and respond with a firm offer.

While the goal is for parties to accept the conditional offer or bracketing, even if the parties refuse the concept of bracketing, introducing the bracketing strategy may revitalize negotiations. For instance, if parties have been negotiating above ten million dollars and below one million dollars, a conditional offer from the plaintiff could suggest a seven-digit area for the defendant to consider. Once brackets are established, negotiations can proceed within the brackets, leading to expedited agreement.

Another option for advocates and parties to consider is an alternative demand or offer. For instance, if there is an offer of $500,000 in response to a demand of $3 million, the plaintiff can present an alternative demand: the defendant can choose between an unconditional demand of $2.5 million in response to the $500,000 offer, or a conditional demand reducing the demand to $2 million if the defense offers $1 million. Here, the defendant’s options are more limited, but the essence lies in the messaging rather than the specific numbers.

Employing these strategies can inject new energy into negotiations and help you and your client avoid impasse and move towards a resolution.

To read how Castaybert PLLC can assist you with mediation, click here.

February 14, 2024

If all attempts to avoid impasse have failed but the parties are close enough to a deal that both sides see the merit in one final effort, a mediator might suggest a mediator’s proposal.

A mediator’s proposal is a settlement offer made by the mediator to all parties, who are asked to accept or reject it, exactly as proposed, in a confidential communication to the mediator. The mediator suggests a specific dollar amount or terms between the parties’ positions, not based on a legal evaluation of the case, but on the mediator’s judgment of what both sides are likely to accept. A mediator’s proposal is not a mediator’s “recommendation.”

The mediator aims to set the proposal within a “win-win range,” which represents a better outcome for both parties than their alternatives through litigation, even if both parties’ initial stances fall outside of this range. The mediator typically gauges each party’s reactions in caucuses before revealing the proposed amount.

The mediator provides a written settlement proposal to counsel for both sides, outlining key points to break the impasse and setting a deadline for acceptance or rejection. Some mediators prefer simultaneous responses from both parties and may inquire about the time needed for a decision before setting the deadline. Each side can respond with a “Yes” or “No.” If both parties say “Yes,” a settlement is reached. If one or both parties say “No,” the mediator only announces that there is no settlement, without disclosing individual responses. Therefore, you and your client, and the other party and their counsel, may respond “Yes” knowing that your compromise will not be disclosed unless there is a deal.

The mediator’s proposal carries benefits and drawbacks. On one hand, the mediator can propose a figure that neither party felt comfortable suggesting, thus assuming the role of a neutral arbiter and mitigating blame. Knowing the mediator will propose a figure within an objectively determined range increases the likelihood of acceptance by both parties.

There are drawbacks, however. For the defense, it may be disadvantageous as the neutral mediator assigns a value to the case that was not previously on the table. For plaintiffs, the proposal may disappoint if it falls far below inflated expectations. Nonetheless, the mediator’s proposal may yield a more favorable agreement than litigation alternatives.

To read how Castaybert PLLC can assist you with mediation, click here.

February 1, 2024

Once the client and counsel have identified the parties’ interests and considered alternatives, they should develop objective criteria that both sides will reference during the mediation. Examples include market valuations, precedents, scientific or professional opinions, costs, and traditions.

In a pre-mediation conference, the mediator may ask your client to identify the client’s objective criteria and the standards the client anticipates their counterpart to rely upon in the negotiation. In this step, the mediator will try to frame each issue as a joint search for objective criteria to foster a collaborative approach to problem-solving. As part of this approach, the mediator may ask your client for the reasoning behind the other party’s suggestions. The mediator may then seek to have both sides agree to certain criteria and standards applicable to the matter.

Once objective criteria are established, parties and their counsel should brainstorm options to address the other side’s potential concerns and consider possible tradeoffs as part of the negotiation. The mediator will seek to develop “low cost” options that satisfy each side’s concern, thereby creating value in the negotiation.

During preparation, it is not enough to have the facts and information. Advocates and their clients should spend some time thinking about how they will use and present that information. They should also devote significant time to brainstorming a wide range of possible proposals and options before choosing which to lead with in the mediation.

To read how Castaybert PLLC can assist you with mediation, click here.