Alternative Dispute Resolution

THERE IS A BETTER WAY THAN GOING TO COURT

Reproduced with the Permission of Miles L. Kavaller

With the abolition of the Interstate Commerce Commission and elimination of field offices, there is no longer a governmental agency which will assist shippers and carriers in informally resolving various disputes. The Surface Transportation Board, the ICC’s successor, has a far smaller staff and, more importantly, significantly less authority under the new law, the Interstate Commerce Commission Termination Act, to regulate the practices of motor carriers.

The ICC did not and could not resolve all forms of shipper-carrier disagreements. As with any other ordinary commercial dispute, the shippers and carriers resorted to court actions. Most frequently shippers and carriers wound up in court litigating freight loss and damage claims and freight charge disputes. Proceedings in the courts, whether federal or state, are extraordinarily expensive and complicated. Moreover, few if any of the judges or magistrates are familiar with the transportation business and even the most basic principles of transportation law. It is no wonder, then, that the parties are frequently frustrated.

While disputes can be resolved in court using public facilities and judges, the parties are also free to adopt a dispute resolution mechanism in their transportation contracts. Arbitration and mediation are alternatives to court litigation to which many companies have turned. For example, many health care providers including HMO’s, hospitals and doctors have provided that any disputes must be resolved by arbitration. Disputes between employers and employees are often required to be resolved through arbitration. It is more than likely that your bank requires disputes to be arbitrated. Disputes between stockbrokers and their customers are typically subject to resolution by arbitration rather than in court. Of course, many union contracts contain arbitration provisions.

Arbitration is recognized as a favored dispute resolution mechanism by the United States Supreme Court and the California Supreme Court and has been growing by leaps and bounds. The parties can easily schedule times for hearings, operate under less stringent rules of evidence and can resolve their disputes in less formal surroundings than in court. Moreover, the parties can select the arbitrators who will hear and determine these disputes and/or the mediators who will facilitate a settlement between the parties. Arbitration is a trial-like process where the arbitrator makes a decision after hearing evidence. A mediator, on the other hand, does not conduct a trial-type proceeding but rather listens to the positions of the parties and attempts to mediate their differences toward a settlement.

Probably the most significant advantage of using arbitration or mediation as a dispute resolution procedure for transportation issues is the ability to select the arbitrator or mediator rather than taking chances with judges who are assigned to court cases. There are now several firms consisting primarily of retired court judges who act as arbitrators or mediators. They are paid by the hour (some rather handsomely at rates of $250.00 per hour and higher). But those sources for arbitrators or mediators would be no different than court judges.

Those in the transportation industry, however, now have two sources for securing arbitrators or mediators who are intimately familiar with transportation law issues. The Transportation Lawyers Association (“TLA”), an organization in which I have been a member for 20 years, now sponsors the ADR Council, Inc. It utilizes TLA (and Canadian TLA) members as arbitrators or mediators. The administrative cost for obtaining a decision based solely on a written submission by the parties is $200.00. If the parties wish to submit written materials and also have a conference call, the cost is $250.00. If the parties want an evidentiary hearing the charge is $300.00. There is an additional charge of $50.00 for each additional unrepresented party or additional separately represented party beyond two. The parties are also required to bear the actual costs of long distance telephone calls, fax charges and the like. Further, the arbitrator or mediator will be paid $500.00 for a one-half day session (4 hours) or for a written submission; $1,000.00 for a full day arbitration (8 hours) and a prorated fee for time in excess of half or full days or for time expended on conference calls. Further, the arbitrator or mediator will charge reasonable costs for transportation, meals and lodging if required. Further information or arrangements for an arbitrator can be made by contacting Richard Routman, Midwest Arbitration & Mediation, Inc., Post Office Box 26064, Kansas City, MO 64196 (telephone: 816/221-4079; FAX816/221-4078).

Shippers and carriers who wish to resolve disputes through arbitration or mediation must agree to do so by written contract. The written contract term can be included in a bill of lading or a transportation contract. A typical provision in a bill of lading or transportation agreement is as follows:

“Any controversy or claim arising out of, or relating to, this Agreement or the breach thereof, shall be resolved by arbitration or mediation in accordance with the rules then obtaining of the [ADR Council, Inc.] [Interstate Dispute Resolution, LLC] and judgment upon the award rendered may be entered in any court having jurisdiction thereof. The arbitrator(s) shall have no authority to award punitive or exemplary damages. Each party shall be responsible for its pro-rata share of costs.”

A number of years ago I served as an arbitrator for a dispute between a carrier and a shipper concerning transportation which occurred here in California. The fees for the entire proceeding which was done in writing and through telephone conference calls, cost $1,000.00. I issued a written decision of some eight or nine pages. It was an efficient, time-saving and cost-saving method to resolve the parties’ dispute particularly in view of the claim which was for not more than $6,000.00. Court litigation of such matters is often less than economical.

I am a staunch advocate of arbitration and mediation. In my 25 years of practice I have found few cases which could not be better resolved by such procedures rather than court litigation. You might give it a try.