Multi-Tier Commercial Dispute Resolution Processes in the United States

Abstract

This chapter examines the landscape of commercial dispute resolution in the United States. Commercial contracts often include tiered or stepped dispute resolution schemes that comprise multiple, varied mechanisms for resolving conflict through an interplay of processes. Contractual relationships are particularly suitable for tiered processes that accommodate the priorities of business. These processes involve increasingly robust intervention by third parties. However, critiques of contractual stepped dispute resolution provisions include concerns about necessity, utility, and enforceability. The treatment of tiered process in U.S. courts is far from uniform; where courts have found contractual negotiation or mediation provisions to be valid and enforceable, the manner in which they address non-compliance under such agreements is inconsistent across different jurisdictions. A growing body of federal and state court decisions addresses questions of enforceability of the arbitration agreement when a party to a multi-step process fails or refuses to participate in preliminary contractually-mandated processes. Despite being conventionally disfavored in the U.S., the circumstance where a single neutral plays the role of mediator and arbitrator in the course of resolving disputes does arise, adding an additional layer of complexity. Guidelines for the use of multi-tier processes take into account the uncertainties associated with judicial handling of stepped agreements as well as their inherent complexities, while recognizing potential benefits.

Keywords: negotiation, mediation, arbitration, dispute resolution, stepped clause, escalation clause, med-arb, commercial, ADR, mixed mode, alternative, contract, contractual, enforceability, guidelines