Alternative Dispute Resolution Case Summary

Jenna Doucet (2010).

Alternative Dispute Resolution Case Summary

The Alternative Dispute Resolution process (ADR) is an alternative way for individuals to resolve disputes without the costly procedurals of going to court. Many institutions have mandatory ADR provision agreements in place when establishing contracts with clients or employees (Bereznicki-Korol & Clarke, 2008). In July 2000, Valerie Biggs Sarofim, a client of Trust Company of the West (TCW) exercised her right to make ADR proceedings on the basis of a dispute with the company. The investment contract Sarofim signed with TCW enclosed mandatory arbitration provisions (Sarofim v. TWC, 2006).

Sarofim motioned for arbitrary resolution when she discovered that her portfolio had accumulated a loss of six million dollars in just three years. Among Sarofim’s complaints of TCW was the investment company’s “ breach of fiduciary duty, fraud, unconscionability, constructive fraud, negligent misrepresentation, negligence, and breach of contract” (Sarofim v. TWC, 2006).

Arbitration is the most imposing of the three types of ADR options and in cases in which mandatory arbitration provisions have been made procedurals closely resemble those of a court hearing. Much like a court hearing, lawyers who are responsible for representing parties, present evidence, examine witnesses: and make arguments before the arbitrator (Bereznicki-Korol & Clarke, 2008). Furthermore, “most jurisdictions provide that the decisions reached by arbitrators are binding and enforceable” (Yates, Bereznicki-Korol & Clarke, 2008, p. 89). The major differences between arbitration and a court hearing rest in the ability of the parties to negotiate and choose the arbitrator based on expertise in the nature of the dispute as well as the arbitrator’s ability to make decisions without following precedent of formal evidence rules (Bereznicki-Korol & Clarke, 2008).

In July 2004, Sarofim and TCW’s dispute was heard before a three-member arbitration panel. The Sarofim v. TWC, (2006) document summarized the hearing process and stated that the panel:“ listened to five days of testimony and reviewed more than 200 exhibits. At the request of the parties, the panel issued a “reasoned award. The twenty-page decision held that TCW breached its fiduciary duties to Sarofim by placing her assets in “wholly and negligently unsuitable” investments. The panel found that TCW failed to diversify the investments, failed to educate Sarofim about the risks of investing, and failed to educate itself about Sarofim’s needs as an investor. The panel rejected TCW’s argument that it served merely as a broker, finding that TCW was Sarofim’s financial consultant and adviser” (Sarofim v. TWC, 2006).

The outcome of the case was an award of six million and three hundred thousand in actual damages and denied Sarofim’s request for attorney fees as the arbitration agreement prevented them. The arbitrators: however awarded Sarofim with 2.9 million in punitive damages, roughly the same amount that was requested for attorney fees.
With arbitration, as opposed to mediation and negotiation cases are always solved, even when both parties are dissatisfied with the results. Furthermore, arbitration is generally not appealable ((Bereznicki-Korol & Clarke, 2008). The court still reserves the right to review the decision- making process and under certain conditions parties can bring complaints to the courts of appeal.

TCW filed a motion and sought vacatur on the punitive damages as they argue, “ that instead of applying the law, the panel awarded attorney’s fees disguised as punitive damages” (Sarofim v. TWC, 2006 ). The court denied TCW appeal to vacate punitive damages.

The ADR process was successful in the case of Sarofim v. TCW in that both parties exercised their rights to bring their dispute before a panel of arbitrators and appeal the decisions made in a court of law. Although both parties were not satisfied with the decision the law was practiced fairly, both parties were able to present their arguments and a decision was reached.


References

Valerie Biggs Sarofim v. Trust Company of the West, 05-20309 U.S (2006).

Yates, A., Bereznicki-Korol, T. & Clarke, T. (2008). Business law in Canada (8th ed). Canada: Pearson Education Canada.