Texas Alternative Dispute Resolution Act

Dispute Resolution System Assumption

• The legal system assumes most cases will reach a settlement out of court

Alternative Dispute Resolution (ADR)

• Supreme Court Justice Sandra Day O'Connor suggested courts should be the final resort after exploring alternative dispute resolutions
• ADR generally uses a neutral third party to facilitate settlements outside formal courts
• In Texas, ADR commonly involves nonbinding settlement procedures under the Texas ADR Act
• ADR encompasses varied procedures, from voluntary to mandatory and binding arbitration

Texas Alternative Dispute Resolution Procedures Act

• The "ADR Act" encourages early resolution of pending litigation through voluntary settlement
• Client participation is mandatory for all ADR procedures under the Act
• ADR procedures can be used before a lawsuit or late in the litigation
• All ADR procedures under the Act are nonbinding, confidential, and flexible, providing an alternative—not a substitute—for jury trials
• Communications and records from ADR proceedings receive confidentiality protection

Federal Arbitration Act and Texas General Arbitration Act

• These acts establish a statutory framework for enforcing prior agreements where parties agree to binding arbitration
• Agreements to arbitrate are enforceable by court order, with binding outcomes subject to limited appeal
• The Federal Arbitration Act preempts the Texas General Arbitration Act in interstate commerce transactions

Settlement Weeks

• Since 1989, Texas counties with populations exceeding 150,000 must conduct two Settlement Weeks annually
• Settlement Weeks involve local bars and courts working cooperatively to resolve pending litigation

Trial by Special Judge Statute

• The "Rent-A-Judge" statute allows for staying pending civil and family law cases for trial by a specially appointed and compensated judge

ADR in Practice

• ADR is a prudent and economical intervention for most civil disputes, excluding cases involving constitutional rights or significant bargaining power disparities
• ADR referrals can be initiated by parties, court order, or the court's own motion in pending litigation
• Courts may withdraw ADR orders if counsel files timely objections with reasonable basis
• ADR is frequently used to settle disputes not in litigation

Confidentiality in ADR

• Communications are protected from disclosure and cannot be used as evidence unless discoverable outside ADR
• Using oral or written materials in ADR does not make them inadmissible if they were originally admissible or discoverable
• Participants and third-party neutrals cannot be compelled to testify or disclose confidential information
• Third-party neutrals must not disclose confidential information unless expressly authorized
• Disclosure issues may be submitted to the court "in-camera" for determination

Third-Party Neutrals

• Neutrals need no specific professional background, but must complete 40 hours of training to qualify for court appointment
• Neutrals facilitating family disputes require additional training
• Courts may appoint neutrals without required training if they possess unique skills or expertise

ADR Procedures in Texas

• Texas offers five ADR procedures: mediation, mini-trial, moderated settlement conference, summary jury trial, and nonbinding arbitration
• Variations and combinations of these procedures can be used if acceptable to the parties and the court
• Selecting the ADR type that best fits the case is the first preparing step

ADR Procedure Usage

• Mediation is commonly used before filing a suit or contacting attorneys
• Mini-trials, non-binding arbitration, and summary jury trials are applied later in case preparation and in a limited scope
• Mini-trials suit corporate or government disputes, while the summary jury trial requires a judge, courtroom, and jurors
• Nonbinding arbitrations often require specialized expertise from neutrals

Third-Party Neutral Selection

• A third-party neutral facilitating ADR must be perceived as objective by all involved parties
• ADR facilitators need distinct skills separate from legal education and experience
• Attorneys serving as third-party neutrals safeguard the objective dispute resolution process
• ADR facilitators can be found through local bar associations and dispute resolution centers

ADR Act on Neutral's Fees

• The ADR Act permits taxing the ADR third-party neutral’s fee as other costs of suit, unless parties agree otherwise
• Some ADR facilitators charge hourly; others charge a flat fee, but most require equal sharing of payment by the parties
• Many ADR third-party neutrals accept pro bono cases or adjust their fees individually for clients with limited resources
• Community dispute resolution centers provide ADR services at minimal or no cost

Success of ADR

• If significant progress is made, ADR is still successful even if the ADR proceeding does not result in formal settlements
• When cases proceed to court, the ADR process can narrow and clarify the contested issues, reducing required court time
• The chance to express oneself has significant value to many clients

Benefits of Informed ADR Use

• Only a small percentage of cases go to trial; the majority settle, usually on courthouse steps
• Informed ADR use conserves time and money, helps secure realistic settlements, and reduces emotional strain
• ADR fosters future constructive communication and returns responsibility for dispute resolution to those directly involved, easing the burden on courts

Enforcement of Settlement Agreements

• The Texas Alternative Dispute Resolution Procedures Act provides for settlement agreement enforcement under section 154.071
• Written settlement agreements are enforceable like any contract
• Courts can incorporate agreement terms into final decrees, but they do not affect outstanding court orders unless included in a subsequent decree
• Considerable litigation exists in Texas regarding enforcing settlement agreements reached at mediation

The Process of Mediation

• Mediation helps in communicating concerns and exploring solutions
• The mediator facilitates information exchange and settlement alternatives instead of making decisions
• Characterized by a business-like, cooperative atmosphere to support constructive future communication
• Family disputes, especially those regarding child custody, and business cases with ongoing relationships frequently use mediation
• Lawyers may attend and represent clients while disputants engage in discussions with each other and with mediators
• Client satisfaction is usually high, dependent on dispute complexity, party commitment, communication skills, and mediator approach
• Mediation can take from two to four hours, but some cases require multiple sessions

The Process of a Mini-Trial

• Mini-trials serving corporate or government litigation, offer decision-makers an opportunity to protect business/relationship interests while resolving disputes
• In a mini-trial, opposing counsel present their best cases to top decision makers and a third-party neutral
• Decision-makers then negotiate, with or without neutral consultation, focusing on business solutions

The Process of Moderated Settlement Conference

• A moderated settlement conference provides a confidential, nonbinding case evaluation by an impartial panel of experienced attorneys
• Each side’s attorney presents their case to the panel, typically within thirty minutes, followed by panel questions
• Hearing concludes with brief closing statements; the panel assesses strengths and weaknesses to guide further negotiations

The Process of Summary Jury Trial

• The summary jury trial is court-conducted like a regular jury trial but with restricted questioning and evidence presentation
• Relaxed evidence rules and an advisory verdict
• It offers a formal court hearing experience and insight on jury perception, typically completed in a day
• Appropriate for cases involving witness credibility or factual damage disputes
• Jurors (usually six) are selected from the jury panel without knowledge of the advisory verdict nature until rendering

Nonbinding Arbitration

• An impartial third party or panel in an arbitration hearing under the ADR Act listens to facts and laws, issuing a confidential advisory award
• Parties can stipulate in advance that the award will be binding, making it enforceable like a court judgment
• If no stipulation is made, the advisory award offers additional information for further settlement negotiations
• Non-binding arbitration differs from binding arbitration contractually agreed to by parties, the traditional type
• Non-binding arbitration is commonly used for construction, labor, and industrial disputes, governed by the Texas General Arbitration Act or the Federal Arbitration Act; the specified hearing type and relevant statutes should be noted when arranging arbitration procedures

Core aspects of the ADR Act

• ADR refers to a nonbinding confidential process facilitated by a neutral third party
• ADR also includes agreed binding arbitration under the Texas General Arbitration Act or the Federal Arbitration Act
• Five basic nonbinding ADR procedures: mediation, mini-trial, moderated settlement conference, nonbinding arbitration, and summary jury trial, allow creation of new nonbinding ADR procedures via agreement of parties
• Agreed binding ADR is accessible only available under the Texas General Arbitration Act or the Federal Arbitration Act

Benefits of ADR

• ADR processes are typically more informal, quicker, more economical, more flexible, and less traumatic than formal legal proceedings
• ADR provides the opportunity for attorneys to advocate for a process that cultivates relationships and creative solutions
• ADR processes tend to result in voluntary settlements, maintaining confidentiality and non adversarial constructive negotiations

ADR Neutral

• ADR neutral facilitates negotiations, ensuring all viewpoints are considered and establishing procedures
• If a party is unable to pay its share of ADR costs, neutrals may accept pro bono cases or adjust fees on sliding scale
• The appearance of the other side in an ADR procedure can be mandated by personal request or by court order, however the other side is able to make a reasonable and timely objection
• Three-quarters of cases brought to community dispute resolution centers reach agreement nationally, and client satisfaction rises particularly in ADR processes that include client participation

ADR and The Court

• ADR can commence before discovery, streamlining the process, but If discovery is partially complete, the court may pause it or ask that no further discovery be completed while pending the outcome of the ADR process
• Judges are often sensitive in ruling on legal issues before the ADR procedure because they are essential for case evaluations before ADR procedure
• Most civil disputes suit ADR; however, those involving significant disparities in bargaining power or constitutional rights should not use an ADR procedure
• Though ADR might seem like eliminating jury trials, ADR under the ADR Act depends on the parties' right to trial if the negotiations fail.

Role of Attorneys in ADR

• There is settlement initiative based on thorough case research
• No adverse inferences are drawn from participation in a court-ordered ADR proceeding under the ADR Act
• Attorneys should advise clients to comply with court orders for ADR, subject to objection rights
• Under Section 154.022 of the Texas Civil Practice and Remedies Code, attorneys prepare for, participate in, and advise clients during ADR procedures
• Further, there is no rule that ADR participants must present an offer in ADR, and there are no repercussions if they don't

Texas Alternative Dispute Resolution Procedures Act

• The act is codified as Chapter 154 of the Texas Civil Practice and Remedies Code, creating a statutory framework for ADR in Texas
• It empowers courts to refer pending disputes to ADR on a party or court motion and keeps ADR proceedings confidential
• The ADR compels courts to refer ADR but does not make ADR binding to the parties
• Chapter 152 of the Texas Civil Practice and Remedies Code establishes a county-by-county system for creating, funding, and managing alternative dispute resolution systems—known as community dispute resolution centers — funded by civil case court costs
• Chapter 155 of the Texas Civil Practice and Remedies Code requires counties with +150,000 residents to conduct two Settlement Weeks annually, with attorneys submitting cases for ADR facilitated by volunteer attorneys
• Chapter 151 of the Texas Civil Practice and Remedies Code authorizes a trial procedure by a specially appointed and privately compensated judge in civil and family law
• The Texas General Arbitration Act provides a statutory framework for contract enforcement where parties agree to binding arbitration governed by substantive and procedural rules, unless parties specify otherwise
• A Texas statute enacted in 1989 addresses international commercial disputes and the FAA sanctions binding arbitration
• The 1988 Judicial Improvements and Access to Justice Act and the 1998 Alternative Dispute Resolution Act endorse ADR federally
• They authorize local rules for federal district courts for civil cases and framework for court -annexed arbitration where the loosing party may obtain a new trial but could be taxed with certain costs