Volume 11, Issue 3 - March 2013

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VOLUME 11, ISSUE 3: FROM OUR FRIENDS

GOLF INDUSTRY DISPUTE RESOLUTION: RECOMMENDED BEST PRACTICES

Henry DeLozier, Kent Frandsen,

Robert Harris, Greg Nathan

and Michelle Tanzer*

Originally Published by the American Arbitration Association; www.adr.org.

The business world increasingly is finding litigation to be an unsatisfactory method for the resolution of commercial disputes. Litigation costs are substantial (increasingly so with the expansion of electronic discovery), key personnel are distracted from their companies’ core business activities, and judicial decisions and jury verdicts are uncertain and often destructive of ongoing business relationships. Perhaps the ultimate irony of litigation as a dispute resolution method is that, as data repeatedly show, more than 95 per cent of civil actions are resolved by means other than an actual trial.

Recent years have seen the increased use of “alternative dispute resolution” (ADR), most notably mediation and arbitration.[1]  The increasing popularity of ADR invites consideration of the question: should golf, as an industry, embrace ADR? We answer this question with an enthusiastic “yes”, as we believe the golf industry is particularly well-suited for ADR.

The golf industry is not monolithic. It includes course owners, course managers, builders, manufacturers, distributors, retailers, instructors, club members and other players, media, travel providers, professional service providers and others—each with their own legal relationships, requirements and concerns.

The diverse constituencies of the golf industry are held together by institutional structures that cut across the industry. Major trade shows bring all segments of the industry together. Strong industry associations provide educational resources and information to all industry constituencies.

Moreover, these constituencies, embodying the breadth, diversity and richness of the golf industry, fit under an umbrella of common culture, characteristics and values of golf as a pastime and competitive sport—including individual responsibility, civility, integrity, foresight and respect. Notably, these values are reflected in the goals of ADR, i.e. resolution methods that address conflict knowledgably, proactively, efficiently and non-destructively.

The values, commonality and structural institutions of the golf industry create an environment conducive to the promotion of ADR as the preferred method for the resolution of disputes. Just as other industries have adopted ADR as a compelling alternative to litigation of commercial disputes, golf-related businesses can equally benefit from the advantages offered by mediation and arbitration.

Industries Increasingly Are Turning To ADR

While ADR is not new,[2] education, awareness and use of ADR methods is on the rise. Law schools now routinely offer courses on ADR, and a number of law schools have created programs devoted to ADR studies.[3]     State courts provide a myriad of court-annexed ADR alternatives, with some states mandating that disputes be submitted to mediation before the court will permit the litigation to continue or a trial to be scheduled.[4]

In certain industries, ADR methods are firmly established as preferred alternatives to litigation. The construction industry, for example, long has used as templates the contract documents generated by the American Institute of Architects. These documents call for disputes to be submitted to mediation and/or arbitration.

Similarly, the securities industry routinely resolves disputes via ADR. Virtually all brokerage agreements contain provisions requiring that claims by customers be submitted to mediation and/or arbitration. Moreover, as a matter of regulatory policy, employment disputes within the securities industry are channeled to ADR.

The healthcare industry presents another example where ADR is gaining an increasing foothold. Since 1992, the American Health Lawyers Association has offered an Alternative Dispute Resolution Service with dispute resolvers who have subject matter expertise in the healthcare arena. More recently, the American Arbitration Association (AAA) launched a new set of arbitration rules to resolve reimbursement disputes between payors and providers in the healthcare industry. To complement these Rules, the AAA established a National Healthcare Panel comprised of arbitrators and mediators that possess many years of experience across the spectrum of the healthcare industry.

Current State Of Golf-Related ADR

The golf industry’s adoption of ADR will be accomplished, over time, by individual companies making individual decisions to channel their disputes to mediation and/or arbitration. Whether a particular golf-related business should pursue ADR as its preferred dispute resolution method is a business decision for that entity to make based upon its individual circumstances.

Several months ago the American Arbitration Association created a National Golf Advisory Committee. The Committee considered the issue of whether the golf industry would benefit from the existence of a specialized panel of mediators and arbitrators

knowledgeable and experienced with the types of issues encountered by golf-related businesses.[5] Concluding that the industry would be receptive to a National Golf Industry Panel, the AAA adopted criteria for panel membership which it has begun to implement.

The existence of a specialized panel of golf mediators and arbitrators provides a valuable resource for those golf-related businesses who determine that ADR offers a more attractive alternative than litigation to the resolution of disputes.

Recommended Best Practices

A golf-related business’s consideration of whether to utilize ADR should be predicated upon the same type of analysis and business judgment that companies bring to other business decisions.  Key factors include an understanding of the nature and benefits of mediation and arbitration, and how ADR can best be utilized by golf-related businesses. To help frame the issues, we offer for consideration the following recommended best practices:

Knowledge of Dispute Resolution Methods. A precondition for the prudent selection of dispute resolution methods is knowledge of the available alternatives. Too often, disputes are channeled into an inappropriate forum by default, because provisions are inserted into, or omitted from, contractual agreements with no consideration or understanding of the ramifications. Similarly, when disputes arise, a golf-related business may miss opportunities to productively address the controversy due to lack of experience with alternatives.

  • Recommended Best Practice: All owners and senior management personnel responsible for the financial and/or reputational well-being of the enterprise should have a general, working knowledge of the features, advantages and disadvantages of the major dispute resolution methods, including litigation, arbitration, mediation and senior level negotiation.
  • Recommended Best Practice: In designing standardized, template contractual documents and/or prior to entering into a contractual relationship that is not predicated on a pre-approved standardized template, an enterprise should consult with advisors who have expertise in dispute resolution methods as they relate to particular types of transactions.
  • Recommended Best Practice: When a dispute poses a risk of imperiling a relationship, escalating to a formal proceeding or causing other material impact, an enterprise should consult with advisors who have dispute resolution expertise.

Dispute Resolution Compliance Plan. The nature of commercial activity—involving employee, client, supplier, partner, lender, real estate and governmental relationships— carries with it the inherent risk of conflict.

Just as golf-related enterprises anticipate other business contingencies (e.g. through financial planning, shareholder agreements, insurance, employee manuals and leasehold options), a prudent enterprise will proactively address the possibility of conflict.

  • Recommended Best Practice: An enterprise, using appropriate internal or external resources, should develop a Dispute Resolution Compliance Plan (DRCP) that anticipates the possibility of disputes and how to address them should they arise. The specifics of a DRCP will vary based on the characteristics of the enterprise, but they should include the following elements: 
    1. The inclusion of appropriate dispute resolution provisions in contractual documents.
    2. Protocols for reviewing existing contractual agreements and seeking appropriate revisions of their dispute resolution provisions.
    3. Preferred dispute resolution procedure(s) for the various functional relationships of the enterprise (e.g., human resources, customer / clients, suppliers, IT and other service providers, shareholders / partners).
    4. Appropriate mechanisms for bringing the existence of a dispute to senior level personnel.
    5. Protocols for engaging outside counsel.
    6. Suggested protocols for interacting with the opposing party(ies) to the dispute.
    7. Consideration of insurance coverage regarding dispute risks.
  • Recommended Best Practice: The DRCP should be reviewed and approved by the enterprise’s senior management and/or board of directors.
  • Recommended Best Practice: The DRCP should be reviewed and revised periodically (at least annually). 

Use of a “Stepped” Dispute Resolution Method. Dispute resolution methods can be viewed on a “less to more formal” continuum, with the less formal methods, when successful, generally involving faster resolution, fewer transaction costs, less disruption to the enterprise and reduced likelihood of damage to an ongoing business relationship. Unless business objectives warrant a more formal adjudicative method, a golf-related enterprise should consider a more informal, series of steps toward resolution, in accordance with the following Recommended Best Practices:

  • Recommended Best Practice: When a dispute arises, those directly involved should escalate the dispute to senior management (including, in appropriate circumstances, the CEO and/or chairman of the board), making them aware of all relevant information.
  • Recommended Best Practice: Upon escalation of a dispute, senior management should proceed as follows:
    1. Senior management should seek to negotiate the dispute with his or her counterpart at the other organization.
    2. If negotiation between senior management proves unsuccessful, the enterprise should pursue mediation of the dispute with the assistance of a qualified and experienced mediator.
    3. If mediation proves unsuccessful, the enterprise should consider the relative merits of arbitration and litigation, to determine the appropriate forum.
    4. Arbitration, if used, should follow the principles set forth in the College of Commercial Arbitrators’ “Protocols for Expeditious, Cost‐Effective Commercial Arbitration.”[6]
  • Recommended Best Practice: Unless specific circumstances warrant otherwise, an enterprise should endeavor to include in its contractual documents dispute resolution provisions consistent with the “stepped” method described above.
  • Recommended Best Practice: Unless specific circumstances warrant otherwise, if a dispute arises and contractual provisions either are absent, silent or inconsistent with the “stepped” method described above, an enterprise nonetheless should seek the consent of the other party(ies) to proceed in such fashion.

Skilled, Experienced Neutrals. There are a number of well-regarded organizations that provide mediation and arbitration administration services, including overseeing the selection of mediators and arbitrators. These organizations provide candidates who have the requisite process skills and experience. Sometimes, mediators and arbitrators will also have specialized subject matter expertise.

  • Recommended Best Practice: A golf-related enterprise should pursue the selection of experienced and skilled mediators and arbitrators, who also have demonstrable experience with the golf industry and/or the type of dispute at issue. 

Industry Reinforcement of Best Practices. Since disputes definitionally involve more than one party, the efficacy of ADR as an industry initiative will increase as golf-related enterprises continue to adopt them. Various industries have encouraged industry participants to express their written commitment to consider using ADR in the event that a dispute arises. To enhance industry adoption of ADR, golf-related businesses should consider affirming their commitment to ADR methods by subscribing to the following:

The characteristics and values of golf as a pastime and competitive sport— including individual responsibility, civility, integrity, foresight and respect—are reflected in dispute resolution methods that address conflict knowledgably, proactively, efficiently and non-destructively.

We support the principles underlying the Recommended Best Practices for Golf Industry Dispute Resolution. We are willing to consider resolution of disputes in accordance with these principles with any company that similarly did or will express its support for these principles. If either party believes that these principles are not suitable for the dispute, or the parties are not reaching satisfactory results, either party may proceed with litigation or such other action as it deems appropriate.

  • Recommended Best Practice: A golf-related enterprise should encourage other golf industry participants to familiarize themselves with the Recommended Best Practices for Golf Industry Dispute Resolution.
  • Recommended Best Practice. A golf-related enterprise should state its commitment to consider the resolution of disputes in accordance with the principles of the Recommended Best Practices for Golf Industry Dispute Resolution.

Conclusion

Golf, as an industry, offers a culture and environment conducive to the adoption of ADR as the preferred approach to dispute resolution. Golf-related companies should treat the decision of whether to adopt ADR methods as an important business decision that can have substantial impact on the company’s financial resources, use of personnel and business relationships. Companies should avail themselves of available information and educational tools to ensure they pursue the dispute resolution methods that are most appropriate for its particular circumstances.

AUTHORS

Henry DeLozier, a principal at Global Golf Advisors, is considered one of the leading authorities on golf course asset development and financing. Mr. DeLozier has been recognized by Golf Inc. magazine as one of the “Most Influential People in Golf.” He is a Past President of the Board of Directors of the National Golf Course Owners Association, serves on the Employers Advisory Council for the PGA of America. Mr. DeLozier was an All-American golfer at Oklahoma State University.

Kent Frandsen is an attorney who has tried nearly 100 civil jury trials to verdict and a certified civil mediator who has conducted nearly 200 civil mediations. He has served as an arbitrator in both construction and tort disputes. Mr. Frandsen has been the Indiana State Amateur golf champion three times and in 1990 was inducted into the Indiana Golf Hall of Fame. In 2007 he received the Isaac Grainger award for volunteer service to the United States Golf Association.

Robert Harris is an attorney, arbitrator and mediator. He is the founder of Golf Dispute Resolution, a website (and LinkedIn group by the same name) that tracks the intersection of golf and law. Mr. Harris writes a monthly column on legal issues for the National Golf Foundation. He is a recipient of The Honorable Robert C. Zampano Award for Excellence in Mediation.

Greg Nathan is the Senior Vice President for the National Golf Foundation. He oversees the development, publication and distribution of NGF’s member research content, as well as NGF.org , the NGF Dashboard e-Magazine, Golfbizwiki.com, the Golf Business Symposium and the other communication platforms that carry NGF’s independent and objective voice to those that earn their living in the golf business.

Michelle Tanzer is an attorney with extensive experience in the area of real estate development, club membership programs and community association law, representing clients with projects in the United States and internationally. Ms. Tanzer’s practice focuses on structuring and preparing the necessary documents for residential and resort communities, including branded residences and club membership programs.


* The authors are members of the American Arbitration Association’s National Golf Industry Advisory Committee. They gratefully acknowledge the contributions of Lance Tanaka, Vice- President of the American Arbitration Association.

[1] Mediation is a process whereby the disputants and their attorneys meet with a mediator in an effort to negotiate a resolution of their dispute. The parties themselves decide the scope of information they will exchange prior to the mediation, the nature of the presentations to be made to the mediator, the date, time and place of the mediation, and the terms of any resolution. The mediator merely assists in attempting to resolve the dispute and has no power to compel any result to which the parties themselves do not agree. Studies and anecdotal evidence consistently demonstrate that a properly timed and conducted mediation usually results in the resolution of a business dispute.

Arbitration is more akin to litigation in that the parties submit their dispute for decision following an adversarial proceeding, although to a privately–selected, neutral arbitrator instead of a publicly-appointed or elected judge. But unlike mediation, arbitration results in a binding decision made by the arbitrator. Because arbitration is a “creature of contract,” the parties can agree to an arbitrator who has expertise regarding the dispute at issue, and can tailor a process to more directly and expeditiously reach the heart of a business dispute.

[2] The Federal Arbitration Act (9 U.S.C. Section 1 et seq.) was enacted by Congress in 1925, and the American Arbitration Association was founded the following year. The Federal Mediation and Conciliation Service was created in 1947.

[3] See, e.g., the list of ADR programs maintained by the Alternative Dispute Resolution Section of the Association of American Law Schools (http://law.missouri.edu/aalsadr/ADR_programs.htm).

[4] See, e.g., the resources at Resolution Systems Institute’s Court ADR Resource Center (http://courtadr.org/court-adr-across-the-us).

[5] The American Arbitration currently offers specialized panels in other industries, including energy and healthcare.

[6] The Protocols are accessible through the website of The College of Commercial Arbitrators (http://www.thecca.net). They were adopted in response to a concern that, in some instances, arbitration was becoming more “litigation like,” losing its character as an efficient dispute resolution process. The protocols are designed to ensure that arbitration proceeds consistent with its intended purpose.

Posted in: Volume 11, Issue 3

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