The Texas Appeals Court in El Paso had denied an employer’s motion to compel arbitration in an employment dispute that arose with an employee who was unable to read English. In Delfingen US-Texas, LP v Valenzuela, No. 08-12-00022-CV (Tex. App. 8th February 6, 2013), Guadalupe Valenzuela was hired to work as a temporary employee at Delfingen in El Paso, Texas. In 2008, the woman was offered a permanent position with the company. Following a company orientation that was conducted entirely in Spanish, Valenzuela signed a number of documents that were written in English including a “Dispute Resolution and Arbitration Policy and Agreement.” The agreement included a clause that required all disputes related to Valenzuela’s employment be submitted to binding arbitration. After Valenzuela was terminated, she filed a lawsuit against Delfingen alleging she was fired because she claimed workers’ compensation benefits following an injury that took place at work. Delfingen then filed a motion to compel arbitration based on the agreement Valenzuela signed during orientation. Valenzuela argued against arbitration by stating the agreement was “procedurally unconscionable” and said she was rushed to sign the agreement despite that it was written in English. She also alleged the agreement was not fully explained to her. Delfingen challenged Valenzuela’s assertions and argued that her inability to read English did not invalidate the agreement. Following an evidentiary hearing, a district court denied Delfingen’s motion to compel arbitration and the company then filed an interlocutory appeal with Texas’ Eighth District. On appeal, Delfingen’s sole contention was that Valenzuela failed to meet her burden of proving the arbitration agreement was procedurally unconscionable. After stating that the Federal Arbitration Act applied to the case, the appellate court said agreements to arbitrate employment disputes “are generally enforceable under Texas law.” The court also stated Texas recognizes procedural unconscionability which “refers to the circumstances surrounding adoption of the arbitration provision.” Next, the court said, Delfingen met its initial burden of showing that an agreement to arbitrate exists and Valenzuela has never disputed that her claim falls within its scope. Consequently, the presumption favoring arbitration attached and the burden shifted to Valenzuela to establish her defense of procedural unconscionability. The court continued by addressing the proper standard of review as Delfingen filed the company’s interlocutory appeal pursuant to Section 51.016 of the Civil Practice and Remedies Code which became effective in 2009. According to the court, The Texas Supreme Court has not specifically addressed the appropriate standard of review for interlocutory appeals under Section 51.016 of an order denying a motion to compel arbitration. After examining recent case law, the El Paso court decided, Given that unconscionability, like waiver, is a legal question which is reviewed de novo by the appellate court, we conclude that the appropriate standard of review in this case is the abuse of discretion standard. Next, the appellate court examined Valenzuela’s unconscionability claims, Under the FAA, unequal bargaining power does not establish grounds for defeating an agreement to arbitrate absent a well-supported claim that the agreement resulted from the sort of fraud or overwhelming economic power that would provide grounds for revocation of any contract. In re AdvancePCS Health L.P., 172 S.W.3d at 608. Likewise, claims of unsophistication and inability to understand do not establish procedural unconscionability. In re Palm Harbor Homes, 195 S.W.3d at 679. The appeals court continued, Standing alone, Valenzuela’s illiteracy in English is insufficient to establish that the Agreement is unconscionable. A person who signs a contract must be held to have known what words were used in the contract and to have known their meaning, and he must be held to have known and fully comprehended the legal effect of the contract. Finally, the Eighth District affirmed the lower court’s decision to deny arbitration by stating, Delfingen knew that Valenzuela did not understand English and it required her to attend an orientation session during which a company representative told her that she was going to translate the important parts of the documents. Accepting as we must the trial court’s finding that Guzman did not explain, discuss, or translate the Arbitration Agreement, we recognize that the trial court could have also found that Delfingen affirmatively misled Valenzuela about the importance of the Agreement. Based on the totality of the circumstances, we conclude that Valenzuela carried her burden of proving that the Arbitration Agreement is procedurally unconscionable.

The United States Fifth Circuit Court of Appeals has affirmed a lower court’s order to confirm an arbitrator’s decision in an employment dispute. In Haag v. Infrasource Services, Inc., No. 12-60159, (5th Cir. February 20, 2013), an employee, Fred Haag, was terminated from his position with Infrasource Services, Inc. for alleged gross misconduct. Following his termination, Haag filed a lawsuit in the Southern District of Mississippi and the company compelled the dispute to arbitration pursuant to Haag’s employment contract. After an arbitrator dismissed Haag’s claims and determined that Haag improperly accepted reimbursements for expenses Haag should have known he was not entitled to receive, the district court confirmed the arbitral decision. Haag then appealed the matter to the Fifth Circuit. First, the Appellate Court stated that the grounds for vacating and modifying an arbitral award rendered pursuant to the Federal Arbitration Act are extremely limited. Next, the Fifth Circuit dismissed Haag’s argument that the arbitrator’s award should be vacated because the arbitrator committed a material mistake. According to Haag, the arbitrator incorrectly found that Haag submitted false housing reimbursement claims because the housing reimbursements were automatically deposited into his account. The Court, however, found that Haag’s misconduct was demonstrated by his failure to stop the deposits. The Fifth Circuit said although Haag did not technically submit the housing claims, there was no indication the arbitrator made a distinction between improperly submitted claims and Haag’s failure to stop the reimbursements. The court then added, “There was neither an unambiguous factual mistake by the arbitrator about submission of claims, nor strong or material reliance on any mistaken understanding of those facts.” Finally, the Fifth Circuit affirmed the lower court’s decision by stating, “The arbitrator’s finding is not inconsistent with the determination of “cause,” which under the employment agreement only required a finding of “willful engaging . . . in gross misconduct materially and demonstrably injurious to the Company.”

Part 1 of 3   This is the first installment in a three Part series on the role of Artificial Intelligence in Online Dispute Resolution. Please join the conversation and comment below.   One of arbitration’s principle advantages is the informality with which the process is carried out.[1]  Informality may lead to increased speed of dispute resolution and reduced costs.[2] However, recently arbitration has taken on some of the formal attributes of litigation, and as a result, has reduced its advantages and decreased its desirability.[3] In response to this problem, there is a not-so-conventional answer: Online Dispute Resolution  (ODR). The use of Online Dispute Resolution can help arbitration maintain its traditional informality, cost-effectiveness, and speed through the use of Artificial intelligence (AI) to help streamline processes for an arbitrator and the disputants. ODR originally referred to processes for dispute resolution that relied on Information and Communication Technology (ICT) and were offered through the internet for addressing conflicts that arose online.[4] Subsequently, the use of these processes and mechanisms by ODR systems expanded to include aiding in the resolution of offline disputes.[5] Understood in this way, ODR can mean any number of things, for example: Electronically delivered briefs Videoconference hearings Fully automated online process It is essentially any form of dispute resolution facilitated by ICT. Just like traditional arbitration, ODR has gained popularity as a means of facilitating inexpensive dispute resolution. Disputants can take advantage of ODR’s best features: Disputants do not have to meet face to face The resolution process may occur whenever it is convenient for the parties Asynchronous communication is possible[6] These features make ODR particularly suited for international commerce and e-commerce, where the disputants may be geographically separated or where the amount in controversy may be small. Potential ODR users include internet service providers, data providers, e-commerce websites, and internet payment systems[7]—all sources of disputants with particular need for a quick, efficient resolution system in the same medium in which the dispute arose: the internet.   ODR in Use Cybersettle and eBay’s dispute resolution systems provide particularly good examples of approaches to ODR: Cybersettle has saved New York City, which used the program for personal injury and property damage claims against the City, an estimated $70,167,494 in costs.[8]  Their patent for a “computer executable system and method for dispute resolution”[9] uses an “online, double-blind bid, dispute resolution system[.]”[10] In this online dispute resolution system, offers and demands are matched to reach an agreement.[11] Dispute resolution on eBay—which employs SquareTrade to assist in handling claims—is a little more involved. Customers with a complaint can resolve it in one of two ways: through a free internet forum to negotiate a settlement or with the help of a mediator (subsidized by eBay so that the cost is only $15).[12] eBay has resolved disputes quickly and cheaply, as well as “uncover[ed] common sources of problems and . . . structure[d] information on its site so that these problems do not recur.”[13] These models provide parties with a range of options tailored to the disputants’ needs, unlike simply an online courthouse model like iCourthouse.[14] By combining the connectivity potential of ICT with dispute resolution procedures, clients have a process that can increase efficiency and speed, while lowering costs and providing an easy-to-use dispute resolution system.     Stay Tuned for Part 2 on Digital Disagreements where we discuss examples of AI use with ODR, Concerns raised by AI use in ODR, and the role of People in ODR!   *Grant is a J.D. and Master of Public Affairs candidate at the University of Texas. He will graduate in 2014. In addition to law, Grant enjoys hiking, soccer, and watching Law & Order.

Professor Jennifer W. Reynolds of the University of Oregon School of Law has published a thoughtful article entitled Judicial Reviews: What Judges Write When They Write About Mediation, Penn State Yearbook on Arbitration & Mediation, Vol. 5, 2013. In her publication, Professor Wilson discusses the role of mediation in the legal system from a judge’s perspective. Here is the abstract: Judges are uniquely positioned to comment on the phenomenon of court-connected mediation. Judges design and implement court systems with mediation components; they refer or order litigants into mediation; and they often serve as mediators themselves, either as part of their judicial duties or after retiring from the bench. Yet ironically there are few formal judicial opinions commenting on the procedural, ethical, and substantive issues around court-connected mediation today. When researching mediation, therefore, legal scholars who limit themselves to traditional legal sources will not have much to work with. This Article identifies a new source of “judicial review” of mediation: judge-written scholarship. At least since the beginning of the modern alternative dispute resolution (ADR) era in 1976, judges have been writing about mediation in the courts. These articles run the gamut of narrative, audience, scope, and focus. They are neither accountable to nor constrained by the conventions and standards of academic scholarship or judicial opinions. Like wild horses, judge-written articles on mediation are intelligent and independent, socially aware yet also self-interested. Treating these articles as part of a distinct dataset — a dataset that, to my knowledge, has not previously been recognized before — uncovers a new, possibly treacherous quarry for research about front-line experiences with court-connected mediation. The Article makes the following two contributions to mediation scholarship. One, the Article maps out a (starter) dataset of judge-written scholarship on mediation intended to support research efforts around mediation, court-connected and otherwise. Two, from this mapping exercise, the Article suggests that when it comes to mediation-as-process, judges prioritize efficiency; but when it comes to mediation and professional identities, judges prioritize other values. For reformers, this preliminary finding helps clarify what court-connected mediation looks like today and suggests new discursive spaces and strategies for positive change. This and other scholarly papers authored by Professor Wilson may be downloaded free of charge from the Social Science Research Network.