ADR ADR Commercial & Consumer Dispute Resolution 2 — Questions and Answers
Question 1: What is a 'class action waiver' in consumer arbitration agreements?
- A clause waiving the right to appeal an arbitration award
- A provision requiring consumers to arbitrate individually and prohibiting participation in class actions (Correct answer)
- A fee waiver for low-income consumers in arbitration
- A waiver of the right to select a neutral
Correct answer: A provision requiring consumers to arbitrate individually and prohibiting participation in class actions
Class action waivers in arbitration agreements require each consumer to bring claims individually, preventing collective litigation that might otherwise be economically viable.
Question 2: In B2B commercial disputes, why do parties often prefer arbitration over litigation?
- Arbitration awards are always larger than court judgments
- Arbitration offers confidentiality, speed, finality, and the ability to choose industry-expert neutrals (Correct answer)
- Courts refuse jurisdiction over commercial disputes between businesses
- Arbitration is required by the Uniform Commercial Code
Correct answer: Arbitration offers confidentiality, speed, finality, and the ability to choose industry-expert neutrals
Commercial parties value arbitration for keeping disputes private, resolving them faster than crowded court dockets, selecting neutrals with industry expertise, and obtaining a binding final award.
Question 3: What is a 'mini-trial' in commercial ADR?
- A short bench trial before a magistrate judge
- A non-binding structured settlement process where senior executives hear presentations and negotiate after receiving a neutral's advisory opinion (Correct answer)
- A small claims court proceeding
- A preliminary evidentiary hearing to determine arbitrability
Correct answer: A non-binding structured settlement process where senior executives hear presentations and negotiate after receiving a neutral's advisory opinion
A mini-trial involves lawyers presenting condensed cases to senior business executives who then negotiate; a neutral may provide a non-binding assessment to guide settlement.
Question 4: Under the Magnuson-Moss Warranty Act, what restriction applies to mandatory arbitration for written consumer product warranties?
- Arbitration is completely prohibited for all warranty claims
- Class action waivers are automatically void for warranty disputes
- The FTC's Magnuson-Moss rules historically restricted mandatory pre-dispute binding arbitration clauses in written warranties, though this area continues to evolve (Correct answer)
- Consumers must pay all arbitration costs regardless of outcome
Correct answer: The FTC's Magnuson-Moss rules historically restricted mandatory pre-dispute binding arbitration clauses in written warranties, though this area continues to evolve
FTC regulations interpreting Magnuson-Moss have historically restricted mandatory pre-dispute arbitration in written warranties, though enforcement and interpretation remain ongoing.
Question 5: What is 'early neutral evaluation' (ENE) in commercial ADR?
- An arbitrator's preliminary ruling on liability before full hearing
- A process where a neutral expert evaluates the strengths and weaknesses of each side's case early in the dispute to promote settlement (Correct answer)
- A government-mandated pre-litigation review
- A binding determination of damages before hearing on the merits
Correct answer: A process where a neutral expert evaluates the strengths and weaknesses of each side's case early in the dispute to promote settlement
ENE gives parties an objective, experienced assessment of their case early on, helping them calibrate settlement expectations and potentially resolve the dispute without a full hearing.
Question 6: What is the 'baseball arbitration' or 'final offer arbitration' method?
- An ADR process used exclusively in Major League Baseball salary disputes
- A form of arbitration where each party submits a final number and the arbitrator must choose one without modification (Correct answer)
- A negotiation technique where parties alternate making offers
- A binding process where the arbitrator splits the difference between the parties' positions
Correct answer: A form of arbitration where each party submits a final number and the arbitrator must choose one without modification
In final offer (baseball) arbitration, each party submits their best final number and the arbitrator must select one of the two offers exactly as submitted, incentivizing reasonable positions.
ADR ADR Commercial & Consumer Dispute Resolution 2
What is a 'class action waiver' in consumer arbitration agreements?