In addition to the bills discussed in our recent post, the U.S. Congress is considering a major financial reform legislation. The Restoring American Financial Stability Act of 2010. As it relates to ADR, this legislation would give the SEC the power to ban or limit mandatory arbitration in certain agreements. House Versions: H.R. 4173 and Status; Senate Versions: S.3217 and Status. The most recent version of H.R. 4173 states, SEC. 921. AUTHORITY TO ISSUE RULES RELATED TO MANDATORY PREDISPUTE ARBITRATION. (a) AMENDMENT TO SECURITIES EXCHANGE ACT OF 1934.—Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o), as amended by section 918, is amended by adding at the end the following: ‘‘(l) AUTHORITY TO RESTRICT MANDATORY PREDISPUTE ARBITRATION.—The Commission may conduct a rulemaking to reaffirm or prohibit, or impose or not impose conditions or limitations on the use of, agreements that require customers or clients of any broker, dealer, or municipal securities dealer to arbitrate any dispute between them and such broker, dealer, or municipal securities dealer that arises under the securities laws or the rules of a self regulatory organization, if the Commission finds that such reaffirmation, prohibition, imposition of conditions or limitations, or other action is in the public interest and for the protection of investors.’’ (b) AMENDMENT TO INVESTMENT ADVISERS ACT OF 1940.—Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–5) is amended by adding at the end the following: ‘‘(f) AUTHORITY TO ISSUE RULES RELATED TO MANDATORY PREDISPUTE ARBITRATION.—The Commission may conduct rulemaking to reaffirm or prohibit, or impose or not impose conditions or limitations on the use of, agreements that require customers or clients of any investment adviser to arbitrate any dispute between them and such investment adviser that arises under the securities laws, as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c), or the rules of a self-regulatory organization, if the Commission finds that such reaffirmation, prohibition, imposition of conditions or limitations, or other action is in the public interest and for the protection of investors.’’. H.R. 4173 already passed the House and the Senate (in lieu of S. 3217). On June 9, 2010, the bill moved into a House-Senate conference committee to reconcile differences. Stay tuned to Disputing for more legislative updates. Technorati Tags: arbitration, ADR, law

By Holly Hayes American Medical News posted a review of some of the tort alternatives being considered as part of health reform that were discussed at the Physician Insurers Association of America in May: experts gave insurers a glimpse into four possible alternatives to be tested under the health reform law: health courts, early offers, apology programs and medical review panels. They detailed how the options could alleviate pressures within the current liability system by reducing claims and costs, and by improving efficiency and fairness for physicians and patients. The Patient Safety and Liability Demonstration program discussed here on Disputing, was enacted in March and designates “$50 million in incentive payments to encourage states to test alternatives to damage caps and other more traditional tort reform. The provisions expanded on a separate $25 million patient safety and liability demonstration program approved by the Obama administration in 2009. The deadline for those grants, overseen by the Dept. of Health and Human Services, was in January. Awards have yet to be announced.” Douglas B. Wojcieszak, founder of Sorry Works! Coalition argues, the problem with the current liability system is more than just a legal issue. The problem is a relationship issue where litigation can stem from communication barriers between patients and doctors that can arise after an adverse event. Mr. Wojcieszak says discussing these incidents with “patients and empathizing with them — which does not mean admitting liability — changes the conversation from anger to what’s fair … and you only change the discussion when you inject honesty and accountability. It won’t stop every lawsuit. But we know it stops a lot of lawsuits.” For more on the patient/physician relationship and communication, see our post here. Holly Hayes is a mediator at Karl Bayer, Dispute Resolution Expert where she focuses on mediation of health care disputes. Holly holds a B.A. from Southern Methodist University and a Masters in Health Administration from Duke University. She can be reached at: holly@karlbayer.com.

We would like to welcome the Franklin Solutions Blog to the ADR blogosphere. The blog is hosted by Jeanne F. Franklin, a certified mediator and lawyer from Virginia. The Franklin Solutions Blog has a focus on health care mediation and conflict resolution. Check out their June 1 post here. We look forward to reading more of your posts, Jeanne. The Disputing Team, Karl Bayer, Alyson Chaky, Holly Hayes & Victoria VanBuren

The Court of Appeals of New York [the highest court in the State of New York] held that an employee challenging the enforceability of a fee-splitting provision in a pre-dispute arbitration agreement is entitled to a factual hearing to establish that her inability to pay arbitration costs precluded her from vindicating her statutory rights. In Brady v. Williams Capital Group, L.P., 2010 N.Y. LEXIS 49 (N.Y., Mar. 25, 2010) Lorraine Brady was employed as of January 1999 by Williams Capital Group (Williams), an investment bank and securities broker-dealer. In 2000, Williams issued a manual for all of its employees requiring arbitration of all disputes and equal sharing of the fees and costs of arbitration. The agreement included the following provision: The Company and I agree that, except as provided in this Agreement, any arbitration shall be in accordance with the then-current Model Employment Arbitration Procedures of the [AAA] before an arbitrator who is licensed to practice law in the state in which the arbitration is convened (‘the Arbitrator’). The arbitration shall take place in or near the city in which I am or was last employed by the Company. In February 2005, Williams terminated Brady’s employment. By then, Brady had earned $100,000 in 1999, $137,500 in 2000, $324,000 in 2001, $356,000 in 2002, $405,000 in 2003 and $204,691 in 2004. Brady filed a discrimination complaint with the New York State Division of Human Rights (DHR). After 8 months of discovery, however, Brady withdrew her complaint. Shortly thereafter, Brady filed for arbitration by the AAA seeking damages against Williams for discrimination termination. After the parties engaged in extensive pre-hearing discovery, the AAA sent Williams a bill for $42,300 which represented the entire advance payment for the arbitrator’s fees pursuant to the AAA’s “employer pays” rule. Williams refused to pay and demanded that Brady pay her portion, citing their arbitration agreement. Similarly, Brady refused to pay her portion, and the AAA canceled the arbitration in October, 2006. Brady sued relying on the AAA’s rule that requires an employer to pay the arbitrator’s fee. The New York Supreme Court [a trial court] held that the parties’ Arbitration Agreement, requiring Brady to pay half ($21,150) governed. Brady appealed. The issue before the New York Court of Appeals was whether Brady met her burden of demonstrating that an arbitration agreement’s provision for the equal sharing of arbitration fees and costs precluded her from pursuing her statutory rights in the arbitral forum. The court noted that despite Brady’s earning history ranging from $100,000 to $400,000 annually during her employment with Williams, Brady had established that her finances were “precarious” as a result of her lack of gainful employment during the 18-month period following her employment termination. The court held that: the issue of a litigant’s financial ability is to be resolved on a case-by-case basis and that the inquiry should at minimum consider the following questions: (1) whether the litigant can pay the arbitration fees and costs; (2) what is the expected cost differential between arbitration and litigation in court; and (3) whether the cost differential is so substantial as to deter the bringing of claims in the arbitral forum. Accordingly, the court remanded the case for a hearing to determine whether Brady was financially able to share equally in the arbitration fees and costs. Technorati Tags: ADR, law, arbitration