The Journal of The DuPage County Bar Association

Back Issues > Vol. 10 (1997-98)

An Overview of Ethics in ADR
by R. Wayne Thorpe

As mediation, arbitration and other ADR processes become more a way of life in litigation, it becomes increasingly important that everyone involved — parties, lawyers, and neutrals — be knowledgeable about ethical issues that relate to ADR processes. Several different bodies of rules may apply, including separate sets of rules for lawyers and for neutrals (whether or not they are lawyers).

What Ethics Rules Apply?

Every state has some form of detailed code of professional responsibility for lawyers, but normally these direct little or no attention to participation by lawyers as neutrals in ADR processes. Most such rules make no explicit reference to lawyers acting as neutrals. Therefore, it is not clear whether or how these kinds of rules apply to participation by lawyer-neutrals in ADR processes. Whether and how these rules apply to lawyers acting as neutrals may turn on whether acting as a neutral constitutes the practice of law; this issue is discussed more fully in the next section. Most state rules on professional responsibility also regulate conduct of lawyers, to some degree, outside the practice of law. Many lawyer duties, however, are plainly inapplicable to neutrals and even inconsistent with neutrality, e.g., the duty of zealous representation; does that make the entire state code of professional conduct inapplicable to lawyer/neutrals?

Illinois does not have uniform rules that govern professional conduct of neutrals in ADR processes. Some ethical issues are addressed within the rules of various ADR programs in Illinois. Some states do have more detailed standards that govern the ethical conduct of neutrals. For example, the Georgia Alternative Dispute Resolution Rules contain ethical standards for all neutrals, whether or not they are lawyers, in court-annexed or court-referred mediations. Also, several sets of uniform model rules of conduct provide some guidance on various questions of ADR ethics for neutrals. The most widely recognize of these include the ABA/AAA Code of Ethics for Arbitrators in Commercial Disputes and ABA/AAA/SPIDR Model Standards of Conduct for Mediators.

Various ADR programs in Illinois have established local rules for ADR, some of which directly relate to the ethical conduct of a mediator. For example, the Eighteenth Judicial Circuit has established its own local rules for court-annexed mediation (the "18th Circuit Rules"), effective May 1, 1996. These rules are quite similar to those previously adopted in the Seventeenth Judicial Circuit’s pilot program (the 17th Circuit Rules"). In addition, there is a mediation program in the Eighteenth Circuit for family law, effective March 1, 1998 (the "18th circuit Family Program Rules").

Is a Mediator Practicing Law?

The first reason licensed lawyers should know more about ADR ethical issues is fundamental to the lawyer’s very right to practice law. In short, service as a neutral may constitute the practice of law. If it does, then an Illinois lawyer’s conduct as a neutral is regulated by the Illinois Bar. It would then follow that misconduct in a neutral role could lead to discipline by the Bar. Moreover, even if neutral service is not itself the practice of law, the Bar may be able to regulate the conduct of those ADR neutrals who are lawyers. In many jurisdictions the presence – legally – of many non-lawyer mediators, makes it reasonably clear that some forms of mediation do not amount to practicing law. In some jurisdictions, a majority of mediators in court programs are non-lawyers.

Academics and practitioners have debated relentlessly the question of whether mediation is the practice of law. E.g. Carrie Menkel-Meadow, "Ethics in Alternative Dispute Resolution: New Issues, No Answers from the Adversary Conception of Lawyers’ Reponsibilities," 38 So. Tex. L. Rev. 407, 421 (1997); Bruce Meyerson, "Mediation and the Practice of Law," 3 Dispute Resolution Mag. No.2, p.11 (1996); Geoffrey C. Hazard, Jr., "When ADR is Ancillary to a Legal Practice, Law Firms Must Confront Conflicts Issues," 12 Alternatives No.12, p.25 (Dec. 1994). In Virginia, a non-lawyer divorce mediator was held to have engaged in the unauthorized practice of law. Steinberg v. Commonwealth, Cir. Ct. Henrico County, Unpub. Ruling, Sept. 17, 1996 (discussed in Geetna Ravindra, "When Mediation Becomes the Unauthorized Practice of Law," 15 Alternatives No.7, p.94 (July/August, 1997)). Courts in other states have held lawyer/mediators to lawyer standards of conduct in certain instances in resolving conflict of interest issues. E.g. Poly Software Int’l, Inc. v. Yu Su, 880 F. Supp. 1487 (D.Utah 1995).

Several Illinois mediation rules include admission to the Illinois State Bar in the list of qualifications necessary to mediate under a particular program. For example, the Seventeenth Judicial Circuit requires that in order to become a certified mediator for court-annexed cases, one must be a member in good standing of the Illinois Bar with at least seven years of practice or be a retired judge. IL 17th Cir. R. 3.09(IV)(A)(3). By contrast, the 18th Circuit Family Program rules make it clear that training in fields other than law will suffice. IL 18th Cir. Fam. Prog. Rules §B(1)(b).

These intriguing academic and public policy questions find themselves illustrated in countless, repeated day-to-day relationships between litigants and lawyers. For example, domestic cases are among the most frequently mediated cases. Often in domestic mediations, neither party is represented, or only one party is represented. The properly trained mediator will explain very carefully to the litigants that he or she is not there to serve as counsel to any of the parties, and that like all participants in a mediation, the litigants are there to make their own decisions about resolving or continuing their litigation. But, when all is said and done, can we really expect that litigants in such circumstances, who sit through a mediation with a trained and experienced mediator, who is often, and in some jurisdictions always, a lawyer — without benefit of their own counsel — will walk away really believing they got no legal advice from the mediator?

Does a Lawyer Have a Duty to Advise About ADR?

Lawyers in some states have an explicit duty to advise clients about alternative dispute resolution processes. States such as Colorado, Texas, Georgia, Hawaii, Arkansas, and California have enacted rules that deal with this duty. For example, a Georgia rule states:

A lawyer as advisor has a duty to advise the client as to various forms of dispute resolution. When a matter is likely to involve litigation, a lawyer has a duty to inform the client of forms of dispute resolution which might constitute reasonable alternatives to litigation.

The Georgia rule is especially broad, because it creates a duty both in the context of litigation and counseling. To some this may seem too broad, if the rule has implications for bar discipline or attorney liability. In any event, it would be hard to dispute these two basic propositions, however, as aspirational goals:

• Litigation counsel should thoughtfully assess the viability of mediation, arbitration, and a variety of other ADR processes (in addition to litigation) from their first encounter with a dispute until the end, and advise their clients accordingly, and they should do so from a good working base of knowledge about ADR processes.

• Transactional counsel should more thoughtfully evaluate the types of ADR processes included in various contract documents, including whether to include requirements for negotiation and mediation along with arbitration, and whether it might be appropriate to alter the "standard" arbitration clauses on such issues as selection of arbitrators, arbitrator qualifications, evidentiary rules, discovery rules, attorney fees, finality of award, etc.

Does Anyone Have a Conflict of Interest?

Among the most difficult ethical issues in ADR are those relating to conflicts of interest. Lawyers in law firms, with hundreds, thousands and maybe tens of thousands of client relationships and adversarial relationships imputed to them, can find daunting even the "routine" conflict of interest questions that arise from traditional lawyer relationships with clients and adversaries. Those problems become utterly nightmarish when complicated further by an ADR neutral’s relationships with all the parties to an ADR process.

When a lawyer serves as mediator or arbitrator, do all the parties to the process become clients — or adversaries — or something else — for purposes of evaluating conflicts of interest? What of the "downstream" conflicts when the lawyer/mediator — or a partner or employee — wants to represent or sue one of the parties to the ADR process? This issue has been hotly debated by legal scholars. E.g. Menkel-Meadow, supra, at 432; Hazard, supra.

Lawyers, of course, have rules, clarified by case law, for evaluating whether a conflict exists. But the rules really were written for client relationships and adversarial relationships. Should those rules even apply to a lawyer serving as a mediator or arbitrator? Some courts have said they do. E.g., Poly Software, supra. Regulatory agencies in Florida, Georgia and Texas have engaged in similar analysis.

Local rule 5-10 in the U.S. District Court for the Northern District of Illinois which covers the Voluntary Mediation Program for Lanham Act cases (the "Northern District Rules") states that "[t]he neutral shall disqualify himself or herself in any case in which the circumstances listed in 28 U.S.C. §455 exist. . .." This is the statute relating to disqualification of federal judges; and it has not been construed expansively. This rule does not provide for disqualification, but rather handles conflicts of interest as a disclosure problem.

Also, the 18th Circuit Family Program Rules require the mediator to decline appointment or disclose the nature of the relationship if the mediator, has or has had any possible conflict of interest, including, but not limited to, a current or previous therapeutic, personal or economic relationship with either party, any child, step-parent, other relative, counsel or anyone else involved in the case. IL 18th Cir. Fam. Rules § I(D)(1). Moreover, attorney-mediators are prohibited from representing either party "in any matter during the mediation process or in a dispute between the parties after the mediation process." Id. at § I(D)(2).

Has the Neutral Made Sufficient Disclosures?

As described above, the 18th Circuit Family Program Rules are fairly broad on certain disclosure issues. Under these rules, the neutral must also advise the parties of other factors at the initial mediation session. The mediator must explain to the parties that no legal advice or counseling will be provided, that it would be wise for each party to obtain independent legal counsel to advise them throughout the mediation, and that the parties have the right to suspend or terminate the mediation after three hours.

Arguably, concerns for disclosures about possible conflicts should be greater in arbitration (where the arbitrator decides the case), than in mediation where actual bias or partiality is less likely to actually harm someone. In arbitration cases, courts have invalidated awards when adequate disclosures were not made.

Is Evaluative Mediation Proper?

Like the first question, this one has incited bonfires of academic debate. E.g. Kimberlee K. Kovach, "What Is Real Mediation, and Who Should Decide," 3 Dispute Resolution Mag. No.2, p.5 (1996). Some argue that a mediator should only "facilitate" negotiations, and that any form of "evaluation" is directly contrary to the purpose and meaning of mediation. Others consider evaluation, at least in most forms, to be merely a form of "reality testing" for the parties and their counsel. This question is really more than an ethical question. It goes to the very heart of whether mediation is adjudicative or facilitative in nature - or some form of mixed creature.

For many practicing mediators in civil litigation, and the litigation lawyers who work with them, the academic debate has little practical meaning. They recognize the importance to parties and counsel alike of seeing and hearing a mediator engaged in serious analysis of the merits of a case, and for these people at least, the issue may often resolve into a question of nothing more than the style in which the mediator delivers an evaluation. Even most adherents of the "facilitative-only" school recognize the propriety and importance of some degree of "reality testing" — which can seem awfully "evaluative" when delivered through incisive rhetorical questions carefully designed to expose weaknesses in a party’s position.

While an evaluative style of mediation may be suitable for litigation in which parties are ably represented by counsel, it might raise more than a mere academic debate in other kinds of cases. Troublesome situations often arise in other courts, such as family courts, juvenile courts, probate courts, magistrate courts, and a variety of other settings in which one or both parties to the mediation are unrepresented by counsel. An evaluative mediation in that context, unbuffered by independent counsel for each party, can much more easily be seen as problematic. Could it constitute the practice of law even if mediation is generally thought not to be the practice of law?

The Northern District Rules define mediation as "a flexibly, non-binding and confidential dispute resolution process in which an impartial and qualified neutral facilitates negotiations among the parties in an attempt to help them reach settlement." U.S.Dist.Ct.Rules N.D.Ill., R.5.10(B)(IV)(A). These rules provide that the neutral cannot "rule upon questions of law or fact," or "render any final decision in the case," but "may provide an opinion" on all aspects of the case "if requested or if desirable." Id. at R.10(B)(IV)(B). This latter terminology reflects a heavily evaluative approach. It not only permits a mediator to render an "opinion," but to do so even if not requested, so long as it is "desirable," presumably, in the eyes of the mediator.

The 17th Circuit Rules set out the role of the mediator as involving assistance in "identifying the issues, reducing misunderstanding, clarifying priorities, exploring areas of compromise, and finding points of agreement. Any agreement reached by the parties is to be based on autonomous decisions of the parties and not the decisions of the mediator." IL 17th Cir. R. 3.09. This reflects a much more facilitative approach. Some jurisdictions do not require counsel to attend, and judges sometimes direct counsel not to attend unless all parties are represented.

What is the Requisite "Full Authority" for Mediation?

Illinois’s 18th Circuit Rules provide that a party must be represented at a mediation by: "(1) the party or its representative having full authority to settle without further consultation; and (2) the party’s counsel of record, if any; and (3) a representative of the insurance carrier for any insured party who is not such carrier’s outside counsel and who has full authority to negotiate and recommend settlements to the limits of the policy or the most recent demand whichever is lower without further consideration." IL 18th Cir. R.14.08(a). Court rules and orders in other jurisdictions frequently contain similar requirements, except that for the particular requirement respecting the authority of the insurer.

Just what is this "full authority"? The words themselves could be interpreted in the abstract to mean, for example, that a defendant’s representative satisfies this requirement so long as he has the authority to reject any settlement other than an unqualified dismissal with prejudice for no compensation. At the opposite extreme, the language could theoretically mean that a defendant’s representative must be present with authority to pay the plaintiff’s last demand. In part, the 18th Circuit is very nearly that extreme in its handling of insurance representatives. It seemingly permits a frivolous high demand by a plaintiff to compel an insurer to appear at a mediation through a representative having far more authority than it believes reasonably necessary. No such requirement is applied to an uninsured defendant or to a plaintiff entity.

What should "full authority" mean? At a minimum, it should include power to make an agreement on the basis of the party’s current, pre-mediation evaluation of the case. It might also include certain other, somewhat subjective requisites, for example, that the representative understands the party’s current evaluation, that he will participate in the mediation with an open mind towards changing his evaluation, and that he will report back to the person who really controls the money with a view toward determining if the party’s bargaining position should change, perhaps with that person readily available by telephone during the mediation. See, Edward F. Sherman, "Court-Mandated ADR: What Form of Participation Should be Required?," 46 SMU L. Rev. 2079 (1993). both on "full authority" and on the "good faith" issue discussed below.

This "full authority" concept, at bottom, is a fuzzy moving target, largely dependent in reality upon the subjective good faith of parties. A party truly interested in settling the case should be represented at a mediation by someone with real authority to deal with the problem. If a party would play games with the "full authority" concept by sending someone without real authority, the mediation likely is doomed. Under such circumstances, some would say court-ordered mediation is a waste of effort. Indeed, some would say there should be no court-ordered mediation, because it destroys party independence and self-determination. But, does it really do so if parties are no more than ambivalent about mediation or perhaps want to be ordered to mediate?

Is Good Faith Required in Mediation?

Rules and court orders in other jurisdictions speak of a duty to participate in mediations in good faith. What does the requirement mean? Academics have vigorously debated even the need for such a requirement. E.g., Kimberlee Kovach, "Good Faith in Mediations - Requested, Recommended or Required? A New Ethic," 38 So.Tex. L. Rev. 575 (1997); Edward F. Sherman, " ‘Good Faith’ Participation in Mediation: Aspirational, National, Not Manditory," 4 Dispute Res. Mag. No.2, p.14 (Winter 1997). What’s the fuss about? There are at least two issues: how can we enforce such a subjective standard, and how can we enforce any standard of conduct when everything said or done in mediation is confidential?

The 17th and 18th Circuit Rules both explicitly require parties and their representative "to mediate in good faith," as do the new 18th Circuit Family Program Rules. The 17th Circuit takes a step further and clarifies the rule by adding that this good faith requirement does not necessarily mean that the parties "are compelled to reach an agreement." IL 17th Cir. R. 3.09. Additionally, the 17th Circuit Family Rules allow the mediator to suspend or terminate the mediation if either party is acting in bad faith or appears not to understand the negotiations. IL 17th Cir Med. R.4(5)(a).

Many rules and court orders in other states contain similar requirements. Georgia takes almost the opposite approach, premised on the dual notions of confidentiality and party self-determination. The Commentary to Georgia’s Ethical Standards for Neutrals comes very close to expressly acknowledging the lack of a requirement to bargain in good faith:

When a mediator realizes that a party is not bargaining in good faith, he or she often experiences an understandable frustration and a desire to report the bad faith to the court. The pledge of confidentiality extends to the question of conduct in the mediation, excepting of course threatened or actual violence. The possible damage to the process by reporting more than offsets the benefit in a given case. Further, if the lodestar of mediation is the principle of self-determination, the unwillingness of a party to bargain in good faith is consistent with that party’s right to refuse the benefits of mediation.

Are All Elements of Mediation Confidential?

The rules concerning confidentiality of mediation settlement agreements are very similar in the 17th and 18th Circuit Court Ordered Mediation Programs. Specifically, 18th Circuit Rule 14.04c states:

All oral or written communications made throughout the mediation process, shall be confidential, exempt from discovery, and inadmissible as evidence in the underlying cause of action unless all parties agree otherwise in writing. Evidence with respect to settlement agreements shall be admissible in proceedings to enforce the settlement. Subject to the foregoing, the mediator may not disclose any information obtained during mediation.

Rule 14.10f adds that the mediator may not comment even if the mediation does not result in an agreement. Northern District Rule 5.10C closely resembles the 18th and 17th Circuit Rules:

All mediation proceedings, including any statement made by any party, attorney or other participant, shall, in all respects, be privileged and not reported, recorded, placed in evidence, made known to the trial court or jury, or construed for any purpose as an admission. No party shall be bound by anything done or said at the conference unless a settlement is reached, in which event the settlement shall be reduced to writing and shall be binding upon all parties.

These rules suggest an issue whether unwritten or partially written settlement agreements are enforceable. Superficially it would seem not. The combination of desire for confidentiality and the express requirement of a writing would likely lead to the conclusion that unwritten and partially written agreements are not enforceable, but the rules do not as explicitly so provide as a similar statute in Florida. See Hudson v. Hudson, 600 So.2d 7 (Fla. App. 1992). Some courts have concluded that confidentiality should preclude enforceability of an unwritten or partially written mediation agreement. E.g., Ali Haghighi v. Russian-American Broadcasting Co., 945 F.Supp. 1233 (D.Minn.1996); Hudson, supra; Ryan v. Garcia, 27 Cal. App. 4th 1006 (1994). Other courts have ruled the other way. Datapoint Corp. v. Picturetel Corp., 1998 WL 25536 (N.D. Tex 1998); Vo v. Honeywell, 1998 WL 15909 (Minn. App. 1998).

Another important aspect of confidentiality is covered by 18th Circuit Family Rule I(E) and 17th Circuit Family Rule 7 (and curiously not the other rules), wherein they provide for an exception to confidentiality for certain threats of violence. This is an important twist to mediation confidentiality that is found in many confidentiality rules.

There are lots of tough ADR ethical issues. These issues affect parties, lawyers, and neutrals, and they arise at many different points at the commencement and in the conduct of an ADR process.

The various sets of rules discussed above do not provide definitive answers to most of these issues. Likewise, the case law and regulatory opinions from various states, and various model ethical rules do not provide enough guidance. These issues need to be resolved as ADR processes evolve.

R. Wayne Thorpe is a Professor of Law–Adjunct at Georgia State University College of Law. He is a member of the Georgia Supreme Court Commission of Dispute Resolution and serves on its Ethics Committee. He is co-chair of the Ethics Committee of the ABA Section on dispute resolution.

Mr. Thorpe gratefully acknowledges the assistance of Susan Poston, a law student at Georgia State University College of Law, in the preparation of this article.

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