Study Guide - Business Law PDF

Chapter 1: Today’s Business Environment: Law and Ethics The Modern Environment of Business Law & the Key functions of the Legal Systems​ Sources of Law in the U.S.​ Classifications of Law​ Business Ethics & Social Responsibility Key Functions of the Legal System No Generally Best Accepted Definit...

Chapter 1: Today’s Business Environment: Law and Ethics The Modern Environment of Business Law & the Key functions of the Legal Systems​ Sources of Law in the U.S.​ Classifications of Law​ Business Ethics & Social Responsibility Key Functions of the Legal System No Generally Best Accepted Definition of Law​ Law: May be viewed as a collection of rules or principles that limit and direct human behavior.​ Productive for business if it creates predictability and some uniformity of acceptable social conduct.​ Improving Social Stability by Influencing Behavior – Legal system helps define social behavior; restricts activities that damage 'public interest;' restricts business practices believed outside of ethical norms; & encourages certain social and political goals.​ Laws in different jurisdictions reflects other social norms. Improving Social Stability and Change Law reflects the social values and customs, which may change.​ Ex: Growing & selling marijuana illegal under federal law; some states now legalize production and use.​ Ex: Sale of alcohol illegal in U.S. from 1919-1933. In Saudi Arabia, alcohol production/sale/consumption violates Sharia law, which is part of national law. Conflict Resolution Courts are one mechanism for resolving disputes.​ Businesses turning to formal private settlement techniques – alternative dispute resolution systems outside the courts. Sources of Law in the United States Constitutions U.S. Constitution & State Constitutions​ Fundamental law of the land​ Establishes the limits and power of government​ U.S. Constitution is the oldest written constitution in force in the world.​ Establishes Legislative, Executive and Judicial Branches of government​ Creates the 'Separation of Powers'​ Like U.S. Constitution, they create Legislative, Judicial and Executive Branches of state governments​ Often long and detailed​ Amending a state constitution usually much easier than amending the U.S. Constitution. Legislatures & Statutes Legislatures create statutory law.​ Federal Laws​ State Laws​ Municipal Laws​ Example: 1972 Congress enacted Clean Water Act, setting standards for national water quality and giving EPA authority to adopt necessary regulations.​ Judges interpret.​ Laws must pass Constitutional 'muster'​ Example: State statutes regulate insurance industry, usually giving authority to state insurance commissions to assist in regulation. Administrative Agencies and Regulations Congress creates a statute.​ Statute names administrative agency.​ Agency makes regulations.​ Sometimes both Congress and states enact regulations in the same area of concern.​ Ex: Environmental regulations​ Agencies and Regulations – Major affects on the legal environment of business The Judiciary and Common Law Comes from old English system.​ Judge follow earlier decisions that resolved similar disputes.​ Legal principles from cases is called 'precedent.'​ Cases published in case reporters.​ Use of precedent is Stare Decisis.​ A new issue? Judge makes new common law based on logic from existing law.​ Common law varies by state; but there is consistency.​ Provides stability but allows change as technology and social attitudes evolve. Case Study: Davis v. Baugh Industrial Contractors, Inc. Overview of the Case Glacier Northwest hired Baugh to build a facility that included an underground pipe system.​ 3 years later, Glacier suspected a pipe leak. Davis assigned to uncover the leak. While he was in a hole to get to the pipes, a wall collapsed, killing him.​ Pipes should last 100 yrs. These were likely damaged during installation, causing the leak. Davis’ daughter sued Baugh for negligence in her father’s death. Court Proceedings Trial court used precedent: When a contractor finishes work and owner accepts it, the contractor (Baugh) no longer liable; only the property owner could be liable. But Glacier did nothing wrong. Suit dismissed by trial court.​ Appealed to Supreme Court of Washington. Supreme Court Decision HELD: Reversed and remanded. Court rejected previous common law rule and adopted a new approach:​ The contractor (Baugh) is liable for injury to 3rd parties as a result of negligent work, even if the work was accepted by the property owner (Glacier).​ Construction has become highly complex. Landowners rely on a contractor’s expertise. Property owners (Glacier) often do not know of poor performance by the contractor.​ Liability may be imposed on contractor when it is 'reasonably foreseeable' that injury could occur due to negligence in construction. Classifications of Law Public and Private Law Public – Legal relationships between members of society and the government​ Imposes legal constraints​ Bring about social change​ Private – Legal relationships among members of society​ Resolves disputes​ Primarily common law Civil & Criminal Law Criminal​ Most criminal statutes also have lesser civil charges resulting in fines​ The guilty can be fined, imprisoned or both​ Creates either a felony or a misdemeanor​ Legal requirement for guilt: 'beyond a reasonable doubt'​ Civil​ Wrongdoer pays money, but no jail time​ Requirement for guilt: 'preponderance of the evidence' Substantive vs. Procedural Law Substantive: Defines legal rights and regulates behavior​ Procedural: How legal matters are processed through the court or other systems and how it is to be enforced (the 'nuts and bolts') Business Ethics and the Law Overview of Business Ethics Public perception of many businesses is low (i.e. big banks and Wall Street).​ Ethics: The rules or standards governing conduct of members of a profession​ Integrity: Living by a moral code and standards of ethics​ International business and corruption – duping investors and bribing government officials​ Morality: Conformity to rules of correct conduct within the context of a society, religion or other institutional belief​ Campaign contributions to influence public officials​ Practical consequence includes high jury awards against large corporations in litigation. Case Study: Lamson v. Crater Lake Motors Lamson was sales manager for car dealership. Good employee who liked the company’s reputation for integrity.​ Company hired sales firm, Real Performance Marketing (RPM) to run a company 5-day sales promotion.​ Lamson saw 'unethical or unlawful' activities:​ RPM video said 'all vehicles' cut in price – but only video vehicles were on sale. RPM tried to 'pack the payments'– providing life insurance and service contracts in purchase agreements without customers’ knowledge. Legal Proceedings in Lamson v. Crater Lake Motors Lamson complained to general Manager (GM). Was told 'go home.' GM told Lamson that another sales manager was making $600 profit per sales. (Lied: Lamson found out it was only $100.)​ GM hired RPM to run another sale; GM & Lamson argued. GM told Lamson to cooperate with RPM. Lamson gave company owner a letter saying RPM violated sales ethics and he needed to rethink 'profit at any cost mentality.' Outcome of the Case Lamson did not cooperate and was fired. Sued for wrongful discharge because he complained about violation of company’s code of ethics.​ Jury held for Lamson. Company appealed.​ HELD: Reversed. Lamson lost. No wrongful discharge.​ Lamson was not directed to participate in unlawful activities.​ Internal complaints (not external) of unethical sales practices are not a societal duty protected at law. Lamson not discharged for fulfilling a public duty protected at law.​ No evidence that company tried to 'silence' Lamson to conceal illegal activities.​ Lamson’s concerns about RPM’s tactics were laudable. HOWEVER, wrongful discharge is narrowly defined – this discharge was not unlawful. Overview of the Court Systems Introduction Overview of the court systems​ How an injured party can seek relief in court​ Jurisdiction: Which court has the power and the authority to decide the case?​ Relations between court systems Organization of the Court Systems Structure of Court Systems Both state and federal court systems have​ Lower courts: Courts of Original Jurisdiction​ Where disputes are initially brought and tried​ Generally known as trial courts​ Determine issues of fact​ Apply law to the facts for resolution​ Appellate Courts: Courts of Appellate Jurisdiction​ Where lower court decisions are reviewed​ Look at issues of law Judges and Judicial Immunity Federal Judges Federal judges are nominated by the President.​ Confirmed by a majority vote by U.S. Senate​ Lifetime appointment​ May be removed from office only if Congress impeaches them (rarely happens)​ Job security guarantees that judges are independent and free from political pressure. State Judges Judges chosen by variety of methods:​ Elected, appointed or mixture of both​ Unlike federal court, most state judges serve fixed terms.​ Evidence indicates that with elected judges the average in tort cases are larger and out-of-state companies are treated more poorly than in states with appointed judges. Judicial Immunity A judge is absolutely immune from suit for damages for judicial acts taken within his/her jurisdiction.​ Without this, judges may fear being sued by unhappy party to a lawsuit.​ Purpose: Protects judges from personal abuse by parties who appear in court.​ Extends to parties (such as court employees) performing services related to judicial functions. Case Study: Martin v. Smith Case Overview McFadden was given conditional release from prison due to a mental disease. He was remanded to the care of an organization run by Dr. Smith, a psychiatrist.​ A few years later, McFadden murdered Brown, and his daughter sued Dr. Smith contending that his inadequate treatment rendered him liable for her father’s death.​ The trial court dismissed the suit, holding that Dr. Smith was treating McFadden under a court order and was subject to judicial immunity. Brown appealed.​ Arkansas Supreme Court affirmed dismissal by state trial court. Judicial immunity extends to nonjudicial actors who perform certain functions intimately related to the judicial process. Federal Court System Federal District Courts Courts of original jurisdiction​ Use juries or judge as 'trier of fact'​ Trial courts deal in issues of fact.​ Federal trial courts also use judicial officers called 'magistrates' who are under supervision of district judge.​ 94 federal districts in the court system; over 600 federal district judges, so many districts have several judges. U.S. Courts of Appeals 12 geographically based courts; 11 numbered circuits and 1 for D.C.​ Usual rule: There is a right to appeal to the relevant appeals court from district court.​ 3 judge panels deal in issues of law and review most decisions.​ En banc proceeding means all active judges in a circuit will hear a case (small number of cases done this way). Specialized Federal Courts Have limited jurisdiction​ Such as U.S. Bankruptcy Courts​ Court of Appeals for the Federal Circuit - takes appeals from​ U.S. District Courts in patent, trademark and copyright cases​ U.S. Court of Federal Claims​ U.S. Court of International Trade​ U.S. Tax Court The U.S. Supreme Court Overview Highest court in the country​ Cases usually heard by 9 justices​ Term begins First Monday in October in Washington, D.C. followed by one in March​ Receives thousands of petitions each year​ Issues about 70-80 opinions per term​ Reviews cases from​ U.S. District Courts​ U.S. Courts of Appeals (primary source of cases)​ Highest Courts of the States​ Review is through Writ of Certiorari​ Often deal with Constitutional decisions​ If writ not granted, lower court decision is final. State Court System Structure of State Courts State court of 'Original Jurisdiction'​ Where case is first brought; deals in issues of fact​ Often called District Court​ In NY, is called the Supreme Court​ State court of Appellate Jurisdiction (1/2 states do not have)​ Deals with appeals and issues of law​ Usually called Court of Appeals​ Can have different names (District Court of Appeals in FL; Appellate Division in NY)​ State Supreme Court​ Second appellate review dealing with issues of law​ Usually called Supreme Court (but in NY, is called 'Court of Appeals') Small Claims Courts Characteristics Court of limited jurisdiction.​ In most states claims may not exceed $5,000.​ In California amount is $10,000. SC is $7,500.​ Good for collecting small debts.​ Procedure is less formal.​ Representation by attorney not necessary and not permitted in some.​ Faster and less expensive than district courts.​ Websites guide parties through procedures. Rules of Civil Procedure Overview Federal Rules of Civil Procedure: Govern procedural aspects of litigation​ Pleadings​ Discovery​ Trial procedures​ Relevant motions​ States are free to develop their own procedural rules.​ Most adopt the Federal Rules of Civil Procedure or very similar rules. Jurisdiction Definition and Importance Jurisdiction: Right of a court to hear and decide the case. The power to speak the law.​ A number of courts may have jurisdiction over a given case.​ Court needs jurisdiction over the person OR property (focus on the defendant) and needs jurisdiction over the subject matter (type of case).​ If jurisdiction is lacking, judgment is null and void. Personal Jurisdiction In Personam Jurisdiction Over the person, usually​ Out of state defendants through​ Jurisdiction is more difficult​ Summons through service of process or substituted service​ Serve them while in the state​ May not 'trick' them​ Residency relevant​ Doing business in the state​ Submission to the jurisdiction​ Businesses active in a public or private process server will serve summons. Jurisdiction Over Out-of-State Business Defendants Long-arm Statutes Aimed at non-resident businesses​ Protects states’ citizens from business defendants who do business in the state and then leave Jurisdiction over Corporations State in which corporation is established​ State where has business headquarters or main plant​ State in which entity is doing business Jurisdiction and the Internet Business Engagement Jurisdiction: Where defendant has engaged in business in the state.​ Not Appropriate: When defendant’s business contact with state is only informational.​ Even if it is an interactive website. Website Interactivity If website provides information and allows customers to make orders:​ Provides an e-mail address for inquiries​ Probably enough to subject defendant to jurisdiction Case Study: Schoenbeck v. Masterlink Concrete Pumping, LLC Case Details Schoenbeck owned property in Illinois and hired Masterlink Concrete, an Indiana company, to deliver concrete.​ Masterlink bought a concrete truck used from CPM, an Indiana company.​ CPM had modified the hook and hitch of the truck.​ A Masterlink employee got the truck stuck in the mud and Schoenbeck hooked a tow strap to his tractor to try to pull the truck free. The hook and bracket holding the strap broke and Schoenbeck was killed when the parts hit him in the head. Legal Proceedings Schoenbeck’s heirs sued all parties involved in Illinois.​ CPM filed a motion to be dismissed for lack of personal jurisdiction. The trial court claimed PJ over CPM. It appealed.​ CPM sold truck to Masterlink in Indiana and its business operations were confined exclusively to Indiana.​ HELD: Reversed. Not sufficient minimum contacts to hold CPM subject to jurisdiction in Illinois. Jurisdiction Over Property In Rem Jurisdiction In rem jurisdiction​ In rem (rem means “the thing”)​ The dispute between the parties is over property.​ Where property is located creates jurisdiction.​ Whether the defendant-property owner is within the jurisdiction does not matter.​ Tangible property creates in rem jurisdiction – i.e. real estate.​ Intangible property also creates in rem – i.e. bank accounts, stocks.​ If property is removed to another state, no in rem jurisdiction. Subject Matter Jurisdiction Federal Courts Federal court jurisdiction is derived from the U.S. Constitution.​ Federal courts may hear cases involving federal questions.​ Cases in which the U.S. is a party to the suit.​ Cases involving citizens of different states or from another nation:​ Called Diversity of citizenship jurisdiction:​ Amount in Controversy is more than $75,000​ No $ amount needed for cases involving federal law. State Courts A particular court may resolve a particular subject matter:​ Wills & Trusts: Probate Court​ Divorces, Child Custody: Domestic/Family Court​ Municipal Matters: Municipal Court​ Small Claims Court - Limited claims of usually $5000 or less, sometimes up to $7,500 will be heard.​ If there is not a particular subject matter, case goes to general trial court.​ Courts of original jurisdiction – where case is first brought.​ Courts of appellate jurisdiction – where lower court decisions are reviewed.​ If there is no jury, judge decides the facts and applies the law.​ General right to appeal to at least one higher court. Exclusive and Concurrent Jurisdiction Exclusive Jurisdiction Federal courts have exclusive jurisdiction over some matters.​ State courts have exclusive jurisdiction over some matters.​ Examples:​ Divorce​ Adoption​ Matters controlled by state government​ Federal crimes​ Bankruptcy​ Patents​ Copyrights​ Federal questions​ Supremacy of federal law—state jurisdiction cannot infringe on federal jurisdiction.​ Congress can specify by statute exclusive jurisdiction in federal courts. Concurrent Jurisdiction Federal and state courts have exclusive jurisdiction over some matters; HOWEVER,​ Sometimes both state & federal courts have concurrent jurisdiction.​ Plaintiff may bring suit in either court system.​ If plaintiff chooses state court, defendant may have right to remove to federal court (right of removal in diversity of citizenship cases).​ If plaintiff files suit in defendant’s home state court, defendant cannot move case to federal court.​ Sometimes Congress gives federal courts exclusive jurisdiction over an area of law. Case Study: Erie RR Co. v. Tompkins (1938) Case Background On “a dark night” a protruding object from train owned by Erie RR hit Tompkins as he stood next to the tracks in Pennsylvania.​ He claimed accident caused by negligent operation of train.​ Tompkins: Pennsylvania citizen​ Erie: Incorporated in NY​ Accident: In Pennsylvania​ If federal common law applies: Erie is liable.​ If Pennsylvania common law: Tompkins trespassed & Erie is not liable. Court Proceedings Federal district court in NY applied federal common law. Jury awarded $30,000 to Tompkins. Affirmed by the Court of Appeals.​ Erie appealed to the Supreme Court.​ Held: Concept of federal common law in diversity of citizenship cases is ended. Courts will apply a state’s law.​ Pennsylvania law applies as PA has most interests in the matter.​ Tompkins is a trespasser. Erie is not liable. Applying Appropriate Law in State Court Conflict of Laws Incidents of the case take place in more than one state.​ Conflict of laws or choice of law rules apply.​ Rules vary according to nature of dispute, i.e.​ Contract cases: Laws of state in which contract was made will be applied, if contract did not specify the governing law.​ Tort cases: Laws of state where tort takes place.​ States try to look at interests of the parties, government, policies. General Rule General rule: Laws apply for state that has the most “significant interest”.​ Doctrine of forum non conveniens – a special venue doctrine: Either party may request a change of venue to a more convenient court that could hear the case. Venue Considerations In well-publicized cases,​ Court considers such issues as defendants will ask for change of venue.​ Will be in same court where actions of case take place, where witnesses are located, and unfair burdens to parties. Chapter 3 Chapter Issues Key Topics Basic Trial Procedures​ Procedures and Processes of Litigating a Dispute​ Remedies in Civil Litigation​ Appellate Stage​ Enforcement Stage​ Alternative Dispute Resolution (ADR) The Judicial System Overview The court system is adversarial in nature.​ Court applies legal rules to facts presented.​ Parties have the responsibility for bringing a lawsuit, shaping issues, and gathering evidence.​ Trials are often costly and uncertain.​ Complex facts, extensive evidence, mountains of business records involved.​ Lawyers represent the parties’ claims in court.​ Judges do not investigate.​ Juries tend to be less sympathetic to businesses. Basic Trial Procedures Stages of Trial Pleading Stage​ Discovery Stage​ Pretrial Stage​ Trial Stage​ Appellate Stage​ Enforcement Stage The Pleadings Stage Formal Statements Formal statements made to the court by the parties.​ Jurisdiction needed over subject matter & parties.​ Notice given of lawsuit by service of process through summons. Complaint Alleges facts for jurisdiction and basic facts.​ Requests remedy(ies). Responses to Complaint Motion to Dismiss (Demurrer) by defendant.​ Answer (may include affirmative defenses – usually by defendant).​ Counterclaim.​ Reply. Purpose of Discovery Legal Tools to Obtain Evidence Rules of Civil Procedure set guidelines to the process.​ Purposes to 1) preserve evidence, 2) limit element of surprise, 3) encourage settlement.​ Depositions of parties and witnesses (including experts) – sometimes videotaped.​ Interrogatories of the parties.​ Use of Expert Witnesses.​ Requests for Admissions.​ Orders of Production of Documents.​ Physical/Mental Examinations.​ Impacts on business – expensive & time-consuming.​ Court may sanction a party who fails to comply with discovery requirements. Sanctions Default Judgment.​ Contempt of court (fines, pay costs to the other party). Case Study: McGill v. BP Exploration & Prod. Case Overview McGill worked 2 ½ months on the cleanup of the Deepwater horizon oil spill in the Gulf of Mexico in 2010.​ Eight years later, he sued BP claiming he suffered from several illnesses due to his exposure during the cleanup.​ Dr. Stogner, a pulmonologist was put forth as his expert. The district court excluded his testimony and the case was dismissed. McGill appealed.​ 5th Circuit Court of Appeals affirmed the dismissal. Expert Testimony Standards Daubert v. Merrell Dow is the precedent the court must follow.​ Expert testimony must be based on 'sufficient facts or data' and must be product of 'reliable principles and methods.'​ The trial court judge determines relevance and reliability of expert testimony – its admission or exclusion. Factors in Assessing Reliability (1) Whether scientific theory/technique can be (has been) tested.​ (2) Whether theory/technique has been subjected to peer review & publication.​ (3) Whether there is a known or potential error rate.​ (4) Whether the theory/technique is generally accepted in the relevant scientific community. Conclusion of Case In this case, the trial court judge did not err in determining Dr. Stogner was not a qualified expert. Pretrial Stage Summary Judgment Either party may request summary judgment.​ Judge renders it. Pretrial Conference Either party or court may request a pretrial conference.​ Usually attorneys and judge attend.​ Simplify issues, plan course of the trial.​ Judges get parties to drop non-key parts of the case.​ Helps to focus on key issues.​ Judges may encourage parties to reach out-of-court settlement. Jury Selection Jury Rights 6th and 7th Amendments give right to a jury in criminal and common law cases.​ If no jury is used, judge becomes trier of fact. Selection Process Selection of jury involves voir dire.​ Attorneys allowed limited number of challenges to reject prospective jurors without stating reason – peremptory challenges.​ Often 12 persons on jury panel but not uncommon to have smaller juries, such as 6 jurors. Trial Stage Trial Process Opening Statements by attorneys.​ Presentation of Direct Testimony.​ Direct Examination, Cross Examination, Redirect Examination, Re-Cross Examination.​ Closing arguments. Motions Motions For A Verdict.​ Motion For A Directed Verdict/Motion For Judgment As A Matter of Law/Judgment on the Pleadings.​ Before going to jury, either party requests entering judgment in its favor. Jury Instructions and Verdict Instructions to jury (charges).​ Verdict by Jury.​ Motion for Judgment As A Matter of Law/Motion For Judgment Notwithstanding the Verdict (N.O.V.). Remedies in Civil Litigation Types of Remedies Equitable remedies.​ Monetary damages.​ Specific performance.​ Temporary Restraining Order.​ Compensatory, Punitive or Exemplary, Nominal damages. Injunctions Permanent injunction.​ Temporary injunction.​ Preliminary injunction. Jury Instructions and Verdicts Instructions to Jury Instructions to jury (charges) Verdict by Jury Verdict by Jury Motions Motion for Judgment As A Matter of Law/Motion For Judgment Notwithstanding the Verdict (N.O.V.) Case Study: Clark v. Enchanted Hills Community ***’n Case Overview Clark owned two lots in Enchanted Hills subdivision in Ohio.​ She sued HOA claiming its actions in not letting her use her lots as a camp site or for a mobile home limited her ability to earn income from her property in the amount of $60,400.​ The trial court denied her claim and she appealed.​ Court of Appeals of Ohio affirmed. Legal Principles Once a right to damages has been established, that right cannot be denied because damages are incapable of being calculated with mathematical certainty.​ HOWEVER, the amount of damages must be susceptible of ascertainment in some manner other than by mere speculation, conjecture or surmise.​ Here, Clark presented no evidence of her alleged damages. Appellate Stage Appeal Process Outcomes of decisions​ Arguments before the court​ Written Briefs​ Oral Arguments​ Decisions by the court​ Affirmed​ Modified​ Reversed​ Remanded Opinions Majority opinion​ Concurring opinions​ Dissenting opinions Enforcing Judgments Finality of Judgment If no further appeal is available, judgment is final.​ It is res judicata. Enforcement Mechanisms Enforcement of judgment is through writ of execution.​ Court orders an official (i.e. sheriff) to satisfy judgment through an act (such as seizure of property, garnishment, etc.).​ Each side usually responsible for own costs. Arbitration Overview of Arbitration Most widely recognized form of ADR​ Usually faster and cheaper than trials​ 3rd neutral party or panel (usually expert) is arbitrator or arbiter​ Parties agree upon arbitration in the contract or during a later dispute​ Federal Arbitration Act (FAA) states agreement to arbitrate must be upheld.​ Arbitrator’s decision is binding.​ Arbitration decision is usually final.​ Usual rule: No right to go to trial​ Appeals from these decisions are limited.​ Uniform Arbitration Act (UAA) upholds the integrity of this process. Arbitration Process Decided at time of making the contract or after dispute arises​ Begins when a party files a submission​ Parties agree on arbitrator(s).​ The hearing procedure​ Closed door​ Less restrictive procedural and evidentiary rules than a trial court​ Procedures include on-line arbitration​ Arbitration associations have rules that guide participants/arbitrators​ Good faith cooperation​ Voluntary and prompt exchange of documents​ Uncooperative parties may be required to pay fees and compensation by arbitrator. Award and Appeals The award (decision)​ Usually given in writing within 30 days of arbitration hearing​ Arbitrators have broad powers to decide remedies.​ Arbitrators need not be attorneys—may be expert in relevant field.​ Appealing the award​ Attacks on arbitrators are rarely successful.​ Errors of fact or law usually not reviewable.​ Grounds for overturning appeal: fraud, partiality, serious procedural misconduct, excessive use of power by arbitrator.​ Generally arbitration award is final and parties honor the decision. Case Study: Epic Systems Corp v. Lewis Case Overview This was a consolidated US Supreme Court opinion reviewing the appeals of several lower court decisions.​ Several lower courts held that, for various reasons, arbitration agreements that were to resolve employment disputes could be set aside in favor of litigation.​ US Supreme Court reversed those decisions. Legal Framework Congress adopted the Arbitration Act in 1925, which directed courts to treat arbitration agreements as 'valid, irrevocable, and enforceable.'​ The Act requires courts to 'enforce arbitration agreements according to their terms, including terms that specify with whom the parties choose to arbitrate their disputes and the rules under which that arbitration will be conducted.​ The Act is clear that arbitration agreements are enforceable and the court will not override it. Mediation Overview of Mediation Least formal form of ADR​ Parties decide to perhaps settle matter.​ Often use lawyers or representatives, though not required.​ Representatives are agents of parties to the dispute.​ Negotiated settlement is usually a contract, which is enforceable, like other contracts, by the courts.​ 3rd neutral person (mediator) assists the parties of the dispute.​ Parties mutually decide on a resolution.​ Mediator makes suggestions.​ Mediator’s suggestions not binding on the parties.​ Parties may go to trial after this ADR.​ Mediation may help to maintain the relationship between the parties. The Mediator Generally states do not require mediators to be licensed.​ Most people prefer a trained or experienced person.​ Usually parties agree to maintain confidentiality and suffer legal penalties if violate confidence.​ If mediator fails to act professionally, may be subject to liability to one of the parties. The Mediation Process Mediator collects information, outlines key issues, listens, asks questions, observes the parties, discusses options, and encourages compromise.​ Mediator often helps to draft the settlement agreement.​ The settlement agreement is enforceable in court. Some courts require mediation before going to trial.​ Mediator may assist in deciding the confidentiality of the case.​ If confidentiality is agreed upon, nothing can be said in public.​ Information revealed during negotiation or mediation should not be used as evidence if the dispute goes to a later trial.