Question

CASE:

Chris, Matt, and Ian, who live in California, have decided to start a business selling an aftershave lotion called Funny Face over the internet. They contract with Novelty Now Inc., a company based in Florida, to manufacture and distribute the product. Chris frequently meets with a representative from Novelty Now to design the product and to plan marketing and distribution strategies. In fact, to increase the profit margin, Chris directs Novelty Now to substitute PYR (a low-cost chemical emulsifier) for the compound in Novelty Now’s original formula. PYR is not FDA approved. Funny Face is marketed nationally on the radio and in newspapers, as well as on the web and Facebook. Donald Margolin, a successful CEO, and public speaker, buys one bottle of Funny Face over the internet. After he uses it once, his face turns a permanent shade of blue. Donald Margolin and his company, Donald Margolin Empire Inc., filed suit in the state of New York against Novelty Now Inc. and Chris, Matt, and Ian, alleging negligence and seeking medical costs and compensation for the damage to his face and business reputation. It is discovered that PYR caused Margolin’s skin discoloration. The website for Funny Face states that anyone buying their product cannot take Chris, Matt, and Ian to court. Novelty Now’s contract with the three men states that all disputes must be brought in the state of Florida.

Alternative dispute resolution (ADR) may be an option to resolve this dispute.

1. Define ADR.

Assume all parties agree to pursue alternative dispute resolution (ADR). Analyze the advantages and disadvantages of the two types of ADR appropriate for this case. Be sure to define the characteristics of each in your answer.

Answer 1

Alternative Dispute Resolution (ADR) is the procedure for settling disputes without litigation, such as arbitration, mediation, or negotiation. ADR procedures are usually less costly and more expeditious. They are increasingly being utilized in disputes that would otherwise result in litigation, including high-profile labor disputes, divorce actions, and personal injury claims.

One of the primary reasons parties may prefer ADR proceedings is that, unlike adversarial litigation, ADR procedures are often collaborative and allow the parties to understand each other's positions. ADR also allows the parties to come up with more creative solutions that a court may not be legally allowed to impose.

There are many different ADR types that may involve third party’s help and that may be binding as well as non-binding. The two most common types of ADR are mediation and arbitration; however, each has its own variations, too.

-Mediation involves thehelp of a go-between third party, called a "mediator," whose job is to help parties reach some mutual agreement. A mediator cannot force parties to agree and is not even permitted decide the outcome of a dispute. Therefore, while mediating, both parties retain significant control over the course of mediation. Mediation is fully confidential and agreemtns are usually non-binding, so parties may still pursue litigation following the mediation process.

- Arbitration also involves the help of a neutral third party. During arbitration, an "arbitrator" acts a bit analogously to a trial judge by listening to the parties’ grievances. Unlike a mediator, an arbitrator is not a passive go-between facilitator. After listening to the parties, an arbitrator (often a professional in the party’s subject of dispute) actually pronounces a decision. Arbitration is still less formal than a full-blown trial because many rules of evidence don’t apply to arbitration. Arbitration can either be binding or non-binding.