Dispute systems design is an emerging part of the broader discipline of dispute resolution, as evidenced by, among other things, the conference on dispute systems design at Harvard last year featuring Andrea and Michael, among many others.  When scholars in the dispute resolution community think of concrete examples of domestic dispute systems design, we often think first of the September 11 Victim Compensation Fund administered by Ken Feinberg.  That process clearly succeeded, probably beyond expectations, and for that reason it is a frequent reference point.  But the fund paid so generously, it may not provide much guidance for the design of future dispute systems.  Enough money solves most problems.

At the recent conference ADR Meets Bankruptcy at St. John’s, Professor Bill Woodward offered a description and analysis of another dispute resolution process that may deserve more study by dispute resolution professionals interested in dispute systems design.  The process arose out of the Chapter 11 bankruptcy of the Piper Aircraft Company (see 162 Bankr. 619 (Bankr. S.D. Fla. 1994)), which was struggling under the burden of products liability lawsuits relating to its 50,000 planes in service.

To make a “clean” sale of the company, a process had to be put in place to handle the many future claims that were certain to be filed.  After an adversarial proceeding, the “class” of future claimants, represented by David G. Epstein, entered into a settlement that created a trust for the payment of future claims.  The procedure established to distribute the trust funds included mediation and arbitration components, as well as a right to litigation.  So far, however, no claim has even gone to arbitration, much less to litigation.  The mediation process has been an amazing success.  Here’s how it works:

A claimant against Piper is channeled to the trust process and instructed to file fairly extensive documentation, including an expert report and evidence of damages.  The trustee then responds either with a settlement offer or a demand for mediation.  Mediation is conducted by Resolute Systems, Inc. The cost of the mediator and any facility fees are paid by the trust.  The trustee attends the mediation personally with the claimant (typically a decedent’s representative), and the mediation is normally held near the claimant’s location.  After mediation, the claimant can proceed to bracketed arbitration or litigation.  Again, every single claim to date has been resolved through the mediation or earlier.

Some features that Bill suggested may have played a role in the extraordinary success of this process:

• The trustee, who sits on the other side of the table from the claimants, is actually a fiduciary for the claimants.  There is no real “enemy” at the table—Piper is long gone.  The trustee can, and in practice does, present himself as an empathetic problem-solver “on their side.”  He can explain the limitations of the fund in a way they may be more likely to accept, while acknowledging their suffering.
• The fact that the trust pays the mediation expenses is probably significant, both in promoting “buy-in” from the claimants and in sending the signal that the trust takes its obligation to the claimants seriously.
• The early mandatory information exchange may help focus claimants and serve as a kind of reality-testing mechanism prior to the mediation; the costs of producing the required documentation may also deter claimants with weak claims from proceeding.

The absence of a real adversary is obviously a significant factor here, and one that will not often be replicated in non-bankruptcy situations.  But some of the other features of the Piper Trust mediation could prove instructive in the design of other types of dispute systems.  The fact that the party with the money pays the expenses and travels to the claimant seems important, as does the trustee’s actual practice of encouraging the claimant to participate and express emotions.  By the same token, requiring the claimant to document the claim, while undoubtedly burdensome in some cases, may go a long way toward both establishing the claimant’s credibility and focusing the claimant on the real merits of the claim.