Compelling Mediation in the Context of Med-Arb Agreements- Dispute Resolution Journal - Vol. 63, No. 2
David J. McLean is a senior litigation partner at Latham & Watkins LLP and the managing partner of the New Jersey office. He is the former co-chair of the firm’s International Dispute Resolution practice group. Sean-Patrick Wilson is a litigation associate in the New Jersey office of Latham & Watkins LLP. An abbreviated treatment of this subject matter was previously published by the authors in the New York Law Journal, vol. 240, no. 8, July 11, 2008.
Originally from Dispute Resolution Journal
It is obvious to all who work in the alternative dispute resolution (ADR) field that the most important federal statute—the Federal Arbitration Act (FAA)—does not define its key term: “arbitration.” A recent case, Advanced Bodycare v. Thione,1 invited the 11th Circuit to explore which types of ADR processes are considered “arbitration” for purpose of the FAA. The question itself is not a novel one, as several appellate courts have struggled with this issue at one time or another. What is novel is the narrow test the 11th Circuit developed to determine which ADR processes qualify as arbitration, thus making the contract providing for that process subject to the FAA. This gives significant rights to a party who desires to enforce the agreement by seeking a stay of litigation and an order compelling a reluctant party to arbitrate.
Under the 11th Circuit’s narrow test, an agreement to mediate, as well as an agreement to mediate or arbitrate, falls outside of the scope of the FAA. This holding seems uncontroversial in view of the facts in Thione. But its logical extension portends troubling developments for broad-based ADR, particularly for contractually mandated, two-step ADR mechanisms that combine mediation and arbitration in sequence (a process commonly referred to as med-arb).
This article endeavors to assess how the landscape of current arbitration law may be altered by the 11th Circuit’s decision in Thione and how its teachings might apply to the growing use of step mediation/arbitration clauses. We argue that although the FAA may be inapplicable to a contract containing only a mediation agreement, where the final stage of a step clause is binding arbitration, Thione’s holding should not apply so that the FAA’s remedies remain available to the parties throughout the process, including during the mediation phase.