Further Thoughts on Armstrong Arbitration Award

Kristen Blankley, who has written on the issue of perjury in arbitration and teaches dispute resolution and ethics courses at the University of Nebraska College of Law, offers additional thoughts (at my request) on the Armstrong arbitration award issued yesterday. From Kristen:

Earlier this week, SCA Promotions, a Texas company, filed a motion in Texas State Court to confirm an award of $40 million in its favor against Lance Armstrong and a former company associated with him, Tailwind Sports as a sanction for their repeated perjury in arbitration. The procedural history of this case is particularly complicated, and it makes sense to spend a minute to outline it.
Lance Armstrong was named the winner of the Tour de France in 2002, 2003, and 2004. When Armstrong won in 2004, considerable speculation existed regarding whether he had won cleanly. SCA Promotions, the prize insurer, was reluctant to pay the prize money given the speculation, and ultimately SCA, Armstrong, and Tailwind Sports arbitrated the case. After extensive discovery and presentations to the arbitrators, the parties agreed to settle the case with SCA paying Armstrong and Tailwind $7.5 million. The settlement agreement contained its own arbitration agreement, which was broader than the original arbitration agreement among the parties. The arbitration agreement required arbitration of “any dispute or controversy . . . arising under or in connection with” the settlement agreement. The parties also agreed to “submit to the jurisdiction” of the currently named panel. The panel included party-appointed arbitrators for SCA and Armstrong/Tailwind, as well as a neutral arbitrator. In the first 2 years after the settlement was reached, Lance Armstrong invoked the jurisdiction of the panel, seeking sanctions against SCA for what was likely a failure to timely pay the settlement agreement.
In 2013, Armstrong admitted on national television that he used performance-enhancing drugs during each of his Tour de France wins, and the US Anti-Doping Agecy stripped him of his titles. Thereafter, SCA sought to convene the jurisdiction of the panel to seek sanctions for Armstrong’s perjury and other wrongdoing in the original arbitration and thereafter.
Despite Armstrong’s strong objections on the grounds of functus officio (i.e., the work of the panel is over when the award is issued), a 2-1 majority found that they had jurisdiction over the issue given the broadly worded language in the settlement agreement. They summarily dismissed the functus officio argument and claimed that the parties brought forth a new claim under the settlement agreement. The majority found Armstrong’s conduct during the first hearing reprehensible and fined Armstrong and Tailwind $10 million in sanctions. Armstrong’s party-appointed arbitrator dissented.
This opinion raises a series of interesting questions, including issues of ethics. I have spent much of the last five years considering issues of party and attorney misconduct in arbitration, see Lying, Stealing, and Cheating: The Role of Arbitrators as Ethics Enforcers, 52 U. LOUISVILLE L. REV. 443 (2014); Advancements in Arbitral Immunity and Judicial Review of Arbitral Awards Create Ethical Loopholes in Arbitration, in JUSTICE CONFLICT & WELL-BEING (2014); and Taming the Wild West of Arbitration Ethics, 60 KANSAS L. REV. 925 (2012). One of the issues I spent considerable time on was the consequences for lying under oath or otherwise tampering with the process.
In this case, the real question for the panel was this: How do we correct rampant perjury that occurred 10 years ago? If the parties had not settled the case and the arbitrators issued an award, the answer would likely have been simple: Nothing. Arbitrators generally have no continuing jurisdiction under the grounds of functus officio. In addition, the applicable statutes of limitation for vacating an award (90 days under Texas law) and perjury (three years under Texas law) had all passed. This case was different in that the parties had settled the first case, included an arbitration agreement in the settlement, and then had the arbitrators issue the settlement as an award.
Assuming that the arbitrators had jurisdiction to hear the dispute under the settlement agreement after learning of Lance Armstrong’s perjury, what could the arbitrators or SCA do? I strongly believe that unethical conduct in arbitration should be subject to some sort of sanction, and I also believe that arbitrators have the inherent authority to sanction such conduct. If the arbitration occurred under JAMS rules, the arbitrators would explicitly have the power to make certain monetary sanctions, such as award of forum fees, attorney fees, and other reasonable fees.
Was the sanction in this case warranted? Ten million dollars for perjured testimony appears quite high, and it appears to be an outlier of a case. The arbitrators noted that this was, however, an exceptional case that warranted an exceptional sanction. The arbitrators based the sanction on the implied duties of good faith and fair dealing inherent in their agreement to arbitrate. I’ve often wondered whether the inherent duties of contracts would be sufficient to warrant sanctions or other types of damages for parties’ bad behavior. This opinion might be just what I need to jump start that project!
At its heart, this sanction award appears to be the arbitrator’s way of undoing the previous settlement agreement and awarding SCA attorney’s fees associated with the first arbitration. As the dissenting arbitrator noted, the $10 million looks and feels a lot like the panel wanted to undo the $7.5 million settlement, recoup $2 million in attorneys’ fees, and add in a little extra for the bad conduct. It makes me wonder whether SCA could have simply sought to rescind the settlement agreement and seek attorneys’ fees before the arbitration panel, rather than asking for sanctions. Rescission with sanctions of attorneys’ fees would likely be more palatable to the parties, the courts, and the public.
There is no doubt that Lance Armstrong will move to vacate this award. My guess is that he will say that the arbitrators exceeded their powers in making the sanctions award. Although Armstrong has a colorable argument, the likelihood of overturning an arbitration award is always slim, and the award will likely be upheld in the Texas courts.

Conflict Resolution Quarterly Call for Papers

Here’s a call for papers from Susan Raines (Kennesaw State), the editor-in-chief of the Conflict Resolution Quarterly (CRQ).

CRQ focuses on the role of the neutral in conflict resolution, the processes of conflict resolution, and the causes/cures of conflict at every level from the interpersonal to the international. Our journal prides itself on the importance interplay between theory and practice. Therefore, the articles published in our pages hold practical information for both practitioners and scholars of Conflict Resolution.

Please see the two attached Calls for Papers.  [One is a general call for papers and the other is “Shaking the Tree: Criticisms, Commentary and Analysis about Needed Changes in the Practice, Teaching, and Conceptualization of ADR/CR.”]

We encourage you to share these broadly and consider submitting. We are committed to an efficient review process, with most authors receiving a decision within 6 weeks, while also receiving detailed feedback from 2 or more experts in their chosen subject area. We use a double-blind peer review process and are one of the oldest and most widely distributed journals in the fields of Conflict Resolution and Dispute Resolution. We accept submissions on a rolling basis through our online portal: https://mc.manuscriptcentral.com/crq.

You can also use our website to search by keywords to find previously published work on any CR topic here:
http://onlinelibrary.wiley.com/journal/10.1002/%28ISSN%291541-1508.

If you have an abstract and wish to know if the topic is of interest to CRQ, feel free to email me.

Registration Now Open for ODR 2015 at Pace

I am pleased to announce (parroting Ethan Katsh from the DRLE listserv) that registration is now open for the 2015 International ODR conference, hosted by Pace Law School.   The conference will take place from June 3-5, 2015 at Pace University’s downtown Manhattan campus (One Pace Plaza).   The principal keynote speakers are Richard Susskind, Esther Dyson, Colin Rule and others.  I will moderate one of the panels, and several FOI will be attending and speaking on panels.   Registration and other program information is accessible at www.odr2015.org.

Please join us.

Arbitration Panel Sanctions Lance Armstrong for Lying Under Oath in Previous Arbitration

Today, a tri-partite arbitration panel sanctioned Lance Armstrong $10 million, ordering him to pay that amount to a prize insurer (who insures price incentives for athletes), as punishment for lying under oath about doping during a previous arbitration among the same parties. SCA Promotions, Inc., the insurer, seeks confirmation of the award in a Texas state court.
According to the Wall Street Journal, “The prize insurer SCA Promotions Inc. asked a Texas state judge to confirm the arbitration award against Armstrong, in a filing Monday. It wants the court to enter a $10 million judgment against Armstrong and former team owner Tailwind Sports, a move which it believes will enable it to collect payment.”
As we all know, overturning an arbitration award is extremely difficult to do. The question here is whether this arbitration award represents the resolution of a new dispute or is the re-opening of a dispute that had previously been settled. Several years ago, after Armstrong testified in a previous arbitration that he was not involved in doping, the parties settled their dispute, which resulted in SCA paying 7.5 million dollars to Armstrong. This settlement agreement represented Armstrong’s bonuses, interests and attorney fees. In addition, the agreement stated that, “[n]o party may challenge, appeal or attempt to set aside” the settlement. It also said the agreement was “fully and forever binding.” The settlement agreement also conferred jurisdiction on the arbitration panel to resolve any disputes that might arise out of the settlement agreement.
After it learned that Armstrong was involved in doping, SCA sued, demanding over $12 million. Armstrong rejected this demand and claimed that Texas law did not permit the company to reopen the original settlement agreement. Characterizing the issue as sanctions for fraud, the arbitration panel agreed to conduct a second arbitration. The majority of arbitrators issued an award that requires Armstrong and Tailwind Sports to pay SCA $10 million as punishment for lying under oath and frustrating the arbitral proceedings.
It seems unlikely that the arbitration award will be overturned. Failing to correctly interpret Texas law is not a basis for overturning the award. The question whether the arbitrators exceeded their authority when they issued a sanction to Armstrong for lying under oath in the previous arbitration hearing also seems a long shot (although not impossible since this case appears to be unique). To protect the integrity of the arbitration process, arbitrators should be able to sanction a party who deliberately lied under oath about a material issue in dispute. The previous settlement agreement was based on fraud and thus should not be binding on the parties. As a side note, for those who do not typically read arbitration awards, it is not at all surprising to see the third arbitrator dissent from the panel’s decision. That arbitrator was party-appointed – appointed to the panel by Lance Armstrong and his company, Tailwind. To see the arbitrators’ opinions, go to http://online.wsj.com/public/resources/documents/armstrong02162015.pdf

Building Best Practices…and Some Baseball too

I posted two articles on SSRN this past week–an oldie but goodie (as John has phrased them) and a new book chapter with co-bloggers Jill Gross and John Lande.

The oldie is an article I wrote in 2001 called Baseball Diplomacy examining how Major League Baseball was involved with Cuba (trying to play games there, recruiting, etc.) and the evolution of U.S.-Cuban relations vis-a-vis the sport.  Now that we are normalizing relations, I expect that much more baseball diplomacy will occur.

The book chapter, Teaching Students to Be Problem-Solvers and Dispute Resolversis part of the Building on Best Practices anthology due to be published this spring by Lexis.  As editor Deborah Maranville posted last month on the Best Practices for Legal Education blog:

The book is a follow up to CLEA’s Best Practices for Legal Education, the 2007 volume by Roy Stuckey and others that inspired this blog.  Like Best Practices, this book will be distributed for free to legal educators.  Lexis has promised to make it available in electronic format through their e-book library and to provide print copies on request.  Look for it in four to six months — if all goes smoothly perhaps in time for the AALS Clinical Legal Education Conference in early May.

The coverage of Building on Best Practices is wide-ranging.  To quote from the Introduction, “[t]his volume builds on the call to link mission and outcomes; emphasizing the themes of integrating theory, doctrine and practice, developing the broader spectrum of skills needed by lawyers in the twenty-first century, and taking up the question how best to shift law school cultures to facilitate change.”

Advance praise for the book has included:

  • “[M]ilestone in legal education . . . that legal educators will rely on as much as . . . on the first Best Practices book.”  (Patty Roberts, William & Mary)

  • “Educational for folks who don’t know much about experiential education and insightful for those who do. . . .Really something to be proud of . . . an invaluable resource to schools as they go to work on implementing the ABA’s new requirements for learning outcomes and assessment. . .The perfect product coming out at the perfect time.” (Kate Kruse, Hamline)

I wrote the first part of the chapter on Best Practices in Teaching ADR and Jill and John wrote the second half of the chapter focusing on Practical Problem-Solving.  Our abstract is:

No matter what area of law students might end up practicing, dispute resolution and practical problem solving (ADR and PPS) will play a central role. Litigators resolve far more cases through voluntary processes than through trial. Transactional lawyers negotiate the terms of a deal. Government lawyers often are called to resolve interagency disputes and claims against the government. Defense attorneys and prosecutors routinely negotiate plea arrangements. In-house counsel work both internally and externally to resolve conflicts on behalf of their company.

Reports on what lawyers should know, including the MacCrate Report and Educating Lawyers, regularly list problem-solving, negotiation, and dispute resolution as skills that lawyers should have. Best Practices for Legal Education called for law schools to educate students in problem-solving and in practical wisdom, in order to solve clients’ problems effectively and responsibly.

Law schools can, and many do, educate future lawyers in the knowledge, skills, and values inherent in the problem-solving approach in two ways. The first is to develop a specific and distinct Alternative Dispute Resolution curriculum. It is a best practice for every law school to make such courses available to every law student. The second is to incorporate the problem-solving orientation and skills throughout the curriculum. This is an emerging best practice. Both are addressed.

Hope that our colleagues find these helpful.  Happy reading!

Was the Mitchell-Hamline Negotiation a “Win-Win”?

As Art reported, William Mitchell and Hamline Law Schools plan to merge.

Best wishes to all our friends at both schools. Both have wonderful DR colleagues and have been great innovators in legal education.

Hopefully, people there will like the new arrangements. Of course, even positive change can be stressful and some people may not experience this as positive change. Most obvious are people who lose their jobs. Some people who retain their jobs may find that their jobs have changed, they have less control and status, relationships with school leaders and colleagues are not as good, the quality of education suffers in some ways, etc. Students may find that their expectations are disrupted. So I don’t assume that implementing this merger will be easy or positive for everyone and I hope that all the stakeholders do as well as possible under the circumstances.

In his good-natured joking, Art apologized for using the traditional “win-win” paradigm to describe the negotiation. Although he was joking, this situation provides a useful opportunity to illustrate some problems with the traditional paradigm.

First, part of the problem is that we don’t have a generally-recognized alternative language for talking about negotiation. So it is completely understandable to rely on familiar concepts even when we think that they’re problematic, especially in casual conversations. However, these concepts do create real problems when we really do need to rely on them for clarity and shared understandings in scholarship, teaching, and practice.

What does “win-win” mean? It could simply mean that both sides gained some value as compared with the situation if they didn’t reach agreement. It implies that both sides gain substantial value, possibly roughly equal amounts of value.

In this and other negotiations, one could analyze the extent to which this is the case. Since the parties here were organizations, one could consider this for various constituencies of each party such as the governing bodies, top administrators, faculty, staff, and students, among others. Some may have “won” more than others – and some may have “lost.”

Often, “win-win” is a shorthand for a general process called by various names such as problem-solving, integrative, principled, interest-based, and cooperative negotiation. People often use these terms referring to a combination of various elements such as a process of explicitly identifying parties’ interests and options for satisfying those interests, seeking solutions that satisfy both parties’ interests, treating each other respectfully, and/or restraining the use of power.

In the Mitchell-Hamline situation, how much did the negotiators use an interest-and-option process as opposed to relying on exchanges of counteroffers? How much did each side try to maximize the joint interests of both sides (rather than maximizing their partisan interests, offering just enough for the other side to accept as preferable to its BATNA)? How much did the parties engage in respectful, cooperative discussion as opposed to hard bargaining based on determined use of power?

Even if the result of the negotiation did create substantial value for both sides, that doesn’t answer the preceding questions. This is especially significant considering that the “off-again, on-again” negotiations extended over a period of time and presumably involved quite a number of negotiators.

In sum, I suspect that this may not have simply been a win-win negotiation – or that using any of the traditional models would neatly fit this negotiation. Indeed, although I am not a gambling man, I would bet a nickel that the traditional models don’t help very much in understanding the process overall.

The (two-)model structure of negotiation theory has been helpful in moving us forward in recent decades. But simply saying that something was a interest-based or positional negotiation not only doesn’t convey things clearly, but it actually can be misleading. I think that this example illustrates why we, as DR experts, need to refine our conceptual tools for the future, as I have argued recently.

Hamline and William Mitchell Law Schools to Merge

Today’s big law school news is the merger of Hamline and William Mitchell Law Schools into the Mitchell/Hamline School of Law to be located on Mitchell’s St. Paul campus. This is of particular interest to us here because of Hamline’s strong ADR program with wonderful faculty who are good friends. In the true win-win nature of negotiation (sorry John for bringing up the old paradigm) this seems like one of those situations. Even though William Mitchell’s dean “acknowledged that combining the two schools will result in some cuts in faculty and staff,” the ADR faculty certainly are well positioned being an area of strength.  Congratulations friends and good luck with the new school

For more information some links

Minneapolis Star Tribune

Hamline announcement

William Mitchell announcement

Hat Tip – The Faculty Lounge

Bauer Fellowship at Northwestern Law

From our friends at Northwestern comes the following announcement about the newly created Bauer Fellowship in the Center for Negotiation and Mediation.  Announcement below.

—————–

Northwestern University School of Law invites applications for the Bauer Fellow, a two-year, renewable, clinical fellowship.  The fellowship will commence on August 1, 2015 and is expected to end July 31, 2017.

The Center on Negotiation and Mediation (CNM) at Northwestern Law is a national leader in negotiation and mediation and was named a Top Ten Dispute Resolution Program by U.S. News & World Report (2014). The CNM provides a host of opportunities for students to explore concepts in dispute resolution. The CNM offers a minimum of 13 sections of the basic negotiation workshop each year.  In addition, the CNM teaches on topics including Mediation, Mediation Advocacy, International Business Negotiation, Dispute Resolution Survey, Dispute Resolution in Sports, Conflict Management in Legal Practice, Restorative Justice, and Advanced Negotiation.  The CNM provides unparalleled depth and breadth in its curricular choices for students.

The CNM seeks a compassionate and entrepreneurial individual who will design and teach a restorative justice curriculum that includes a collaboration with partners to develop and provide restorative justice services. Tasks will include identifying partnerships in the Chicago area, as well as other administrative aspects of managing projects.

The Bauer Fellow will be trained to teach the basic negotiation workshop and will provide support for other CNM initiatives – including the 1L Lawyer as Problem Solver curriculum and coaching ADR competition teams.

Ideal candidates must have a J.D and significant experience in restorative justice.  Preferably, applicants will also have training and experience in negotiation and mediation and be licensed to practice law in Illinois. The applicant must be comfortable supervising, mentoring and teaching law students. A willingness to engage in academic writing and research is desirable.

The Fellowship comes with an annual salary of $60,000 and benefits package.

Applicants should email letters of interest and resumes to the CNM Administrative Coordinator Nancy Flowers at n-flowers@law.northwestern.edu.  No letters of recommendation are required, but up to three letters will be accepted. The deadline for applications is March 15, 2015.

Northwestern University School of Law is an equal opportunity, affirmative action employer and encourages nominations of and applications from women and minority candidates.

Linking Dispute Resolution Scholarship, Education, and Practice