ADR Process

 

Arbitration

Mediation

Provisional Director/LLC Manager

Arbitration

Arbitration is the most traditional form of private dispute resolution. Arbitration is a binding procedure. It is often "administered" in accordance with the law (Federal Arbitration Act or state arbitration law) or under rules which the parties have mutually agreed upon for conduct of the arbitration. Parties often select an arbitrator on the basis of substantive expertise. 


Arbitration is adjudicatory, as opposed to advisory, because of the fact that the arbitrator renders a decision at the end of an arbitration hearing, and that decision is final and binding, subject only to a very limited court review.

 

Most arbitration is driven by a pre-dispute contract entered into by the parties, in which they agree that if a dispute should arise, it will never get into the court system. By agreeing to arbitration, the parties, perhaps among other things, are waiving their fundamental, constitutional right to a trial by a jury of their peers. They can have no de novo (second trial) after they have gone to arbitration. Unless otherwise agreed, the decision is legally binding and non-appealable, except in extremely limited circumstances, such as in the case of fraud or collusion on the part of the arbitrator. 

In general the arbitrator is an impartial person chosen by the parties. The arbitrator reads briefs and documentary evidence, hears testimony, examines evidence and renders an opinion on liability and damages in the form of an "award of the arbitrator" after the hearing. Once confirmed by a court of appropriate jurisdiction, the award can be subsequently entered as a judgment.

Mediation

Mediation is an impartial, balanced, and safe proceeding.  Participation is voluntary and the parties are free to leave the table at any time.  However, the parties’ consent to commence the mediation process usually indicates a general desire on all sides to resolve the dispute.  Once the parties are ready to put the case behind them, it’s the mediator’s job to do everything is his or her power to make that possible.  As such, the mediator plays a valuable and important role for the parties in a case, and it’s vital that such a critical role is entrusted to a capable professional. 

 

Mediation generally begins with a joint session to set an agenda, define the issues and ascertain the position and/or concerns of the parties. This allows the parties to approach the resolution process either on an issue-by-issue or group-by-group basis. 

The joint session is then followed by a separate caucus between the mediator and each individual party or their counsel. This allows each side to explain and enlarge upon their position and mediation goals in confidence. It also gives the mediator an opportunity to ask questions which may well serve to create doubt in an advocate's mind over the validity of a particular position.  Providing a neutral evaluation of each party’s position can be an important “reality check” if the parties are going to successfully resolve their disagreement without the substantial personal, emotional, and financial cost expended in arbitration or trial.

Provisional Director/LLC Manager

If the Board of Directors of a corporation or the Managers/Members of a limited liability company (“LLC”) are equally divided and cannot agree as to the management of the corporation or the LLC’s affairs, then the deadlocked members can elect to retain a temporary Director or Manager to break the deadlock.  In the context of a corporation only, California law provides that any Director (or shareholders holding not less than 33 1/3% of the voting power) may petition the court to appoint a provisional director.  While there is no comparable law relating to LLC’s, courts have been known to appoint Provisional Managers by applying the law relating to corporations.

 

Where a Provisional Director is appointed by the court (or mutually agreed upon by a deadlocked LLC), that Provisional Director/Manager will have all the rights and powers of a Director (or Manager).  A court appointed Provisional Director shall remain on the Board until the deadlock in the Board is broken or until such Provisional Director is removed by order of the court or by approval of a majority of all directors or shareholders. In the LLC context, the Provisional Manager shall remain active pursuant to the mutual agreement of the Managers or Members of the LLC. 

Eric Sternberger
ADR Solutions

1101 Fifth Avenue, Suite 100

San Rafael, CA 94901

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