[House Report 105-487]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     105-487
_______________________________________________________________________


 
               ALTERNATIVE DISPUTE RESOLUTION ACT OF 1998

                                _______
                                

 April 21, 1998.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Coble, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                        [To accompany H.R. 3528]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 3528) to amend title 28, United States Code, with 
respect to the use of alternative dispute resolution processes 
in United States district courts, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

                           TABLE OF CONTENTS

                                                                  

                                                                 Page
The Amendment..............................................           1
Purpose and Summary........................................           5
Background and Need for the Legislation....................           5
Hearings...................................................           6
Committee Consideration....................................           6
Committee Oversight Findings...............................           6
Committee on Government Reform and Oversight Findings......           6
New Budget Authority and Tax Expenditures..................           6
Congressional Budget Office Cost Estimate..................           6
Constitutional Authority Statement.........................           8
Section-by-Section Analysis and Discussion.................           8
Changes in Existing Law Made by the Bill, as Reported......          10

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Alternative Dispute Resolution Act 
of 1998''.

SEC. 2. ALTERNATIVE DISPUTE RESOLUTION PROCESSES TO BE AUTHORIZED IN 
                    ALL DISTRICT COURTS.

    Section 651 of title 28, United States Code, is amended to read as 
follows:

``Sec. 651. Authorization of alternative dispute resolution

    ``(a) Definition.--For purposes of this chapter, an alternative 
dispute resolution process includes any process or procedure, other 
than an adjudication by a presiding judge, in which a neutral third 
party participates to assist in the resolution of issues in 
controversy, through processes such as early neutral evaluation, 
mediation, minitrial, and arbitration as provided in sections 654 
through 658.
    ``(b) Authority.--Each United States district court shall 
authorize, by local rule, the use of alternative dispute resolution 
processes in all civil actions, including adversary proceedings in 
bankruptcy, in accordance with this chapter, except that the use of 
arbitration may be authorized only as provided in section 654. Each 
United States district court shall devise and implement its own 
alternative dispute resolution program by local rule to encourage and 
promote the use of alternative dispute resolution in its district.
    ``(c) Existing Alternative Dispute Resolution Programs.--In those 
courts where an alternative dispute resolution program is in place on 
the date of the enactment of the Alternative Dispute Resolution Act of 
1998, the court shall examine the effectiveness of that program and 
adopt such improvements to the program as are consistent with the 
provisions and purposes of this chapter.
    ``(d) Administration of Alternative Dispute Resolution Programs.--
Each United States district court shall retain or designate an existing 
employee knowledgeable in alternative dispute resolution practices and 
processes to implement, administer, oversee, and evaluate the court's 
alternative dispute resolution program. Such person may also be 
responsible for recruiting, screening, and training attorneys to serve 
as neutrals and arbitrators in the court's alternative dispute 
resolution program.
    ``(e) Title 9 Not Affected.--This chapter shall not affect title 9.
    ``(f) Program Support.--The Federal Judicial Center and the 
Administrative Office of the United States Courts are authorized to 
assist the district courts in the establishment and improvement of 
alternative dispute resolution programs by identifying particular 
practices employed in successful programs and providing additional 
assistance as needed and appropriate.''.

SEC. 3. JURISDICTION.

    Section 652 of title 28, United States Code, is amended to read as 
follows:

``Sec. 652. Jurisdiction

    ``(a) Consideration of Alternative Dispute Resolution in 
Appropriate Cases.--Notwithstanding any provision of law to the 
contrary and except as provided in subsections (b) and (c), each 
district court shall, by local rule, require that litigants in all 
civil cases consider the use of an alternative dispute resolution 
process at an appropriate stage in the litigation. Each district court 
shall provide litigants in all civil cases with a choice of alternative 
dispute resolution processes, including, but not limited to, mediation, 
early neutral evaluation, minitrial, and arbitration as authorized in 
sections 654 through 658. Any district court that elects to require the 
use of alternative dispute resolution in certain cases may do so only 
with respect to mediation, early neutral evaluation, and, if the 
parties consent, arbitration.
    ``(b) Actions Exempted From Consideration of Alternative Dispute 
Resolution.--Each district court may exempt from the requirements of 
this section specific cases or categories of cases in which use of 
alternative dispute resolution would not be appropriate. In defining 
these exemptions, each district court shall consult with members of the 
bar, including the United States Attorney for that district.
    ``(c) Authority of the Attorney General.--Nothing in this section 
shall alter or conflict with the authority of the Attorney General to 
conduct litigation on behalf of the United States, with the authority 
of any Federal agency authorized to conduct litigation in the United 
States courts, or with any delegation of litigation authority by the 
Attorney General.
    ``(d) Confidentiality Provisions.--Until such time as rules are 
adopted pursuant to chapter 131 of this title providing for the 
confidentiality of alternative dispute resolution processes under this 
chapter, each district court shall by local rule provide for the 
confidentiality of the alternative dispute resolution processes and to 
prohibit disclosure of confidential dispute resolution 
communications.''.

SEC. 4. MEDIATORS AND NEUTRAL EVALUATORS.

    Section 653 of title 28, United States Code, is amended to read as 
follows:

``Sec. 653. Neutrals

    ``(a) Panel of Neutrals.--Each district court that authorizes the 
use of alternative dispute resolution processes shall maintain a panel 
of neutrals available for use by the parties for each category of 
process offered. Each district court shall promulgate its own 
procedures and criteria for the selection of neutrals on its panels.
    ``(b) Qualifications and Training.--Each person serving as a 
neutral in an alternative dispute resolution process should be 
qualified and trained to serve as a neutral in the appropriate 
alternative dispute resolution process. For this purpose, the district 
court may use, among others, magistrate judges who have been trained to 
serve as neutrals in alternative dispute resolution processes, 
professional neutrals from the private sector, and persons who have 
been trained to serve as neutrals in alternative dispute resolution 
processes. Until such time as rules are adopted pursuant to chapter 131 
of this title relating to the disqualification of neutrals, each 
district court shall issue rules relating to the disqualification of 
neutrals (including, where appropriate, disqualification under section 
455 of this title, other applicable law, and professional 
responsibility standards).''.

SEC. 5. ACTIONS REFERRED TO ARBITRATION.

    Section 654 of title 28, United States Code, is amended to read as 
follows:

``Sec. 654. Arbitration

    ``(a) Referral of Actions to Arbitration.--Notwithstanding any 
provision of law to the contrary and except as provided in subsections 
(b) and (c) of section 652 and subsection (d) of this section, a 
district court may allow the referral to arbitration of any civil 
action (including any adversary proceeding in bankruptcy) pending 
before it, except that referral to arbitration may not be made where--
            ``(1) the action is based on an alleged violation of a 
        right secured by the Constitution of the United States;
            ``(2) jurisdiction is based in whole or in part on section 
        1343 of this title; or
            ``(3) the relief sought consists of money damages in an 
        amount greater than $150,000.
    ``(b) Safeguards in Consent Cases.--Until such time as rules are 
adopted pursuant to chapter 131 of this title relating to procedures 
described in this subsection, the district court shall by local rule 
establish procedures to ensure that any civil action in which 
arbitration by consent is allowed under subsection (a)--
            ``(1) consent to arbitration is freely and knowingly 
        obtained; and
            ``(2) no party or attorney is prejudiced for refusing to 
        participate in arbitration.
    ``(c) Presumptions.--For purposes of subsection (a)(3), a district 
court may presume damages are not in excess of $150,000 unless counsel 
certifies that damages exceed such amount.
    ``(d) Existing Programs.--Nothing in this section is deemed to 
affect any action in which arbitration is conducted pursuant to section 
906 of the Judicial Improvements and Access to Justice Act (Public Law 
100-102), as in effect prior to the date of its repeal.''.

SEC. 6. ARBITRATORS.

    Section 655 of title 28, United States Code, is amended to read as 
follows:

``Sec. 655. Arbitrators

    ``(a) Powers of Arbitrators.--An arbitrator to whom an action is 
referred under section 654 shall have the power, within the judicial 
district of the district court which referred the action to 
arbitration--
            ``(1) to conduct arbitration hearings;
            ``(2) to administer oaths and affirmations; and
            ``(3) to make awards.
    ``(b) Standards for Certification.--Each district court that 
authorizes arbitration shall establish standards for the certification 
of arbitrators and shall certify arbitrators to perform services in 
accordance with such standards and this chapter. The standards shall 
include provisions requiring that any arbitrator--
            ``(1) shall take the oath or affirmation described in 
        section 453; and
            ``(2) shall be subject to the disqualification rules under 
        section 455.
    ``(c) Immunity.--All individuals serving as arbitrators in an 
alternative dispute resolution program under this chapter are 
performing quasi-judicial functions and are entitled to the immunities 
and protections that the law accords to persons serving in such 
capacity.''.

SEC. 7. SUBPOENAS.

    Section 656 of title 28, United States Code, is amended to read as 
follows:

``Sec. 656. Subpoenas

    ``Rule 45 of the Federal Rules of Civil Procedure (relating to 
subpoenas) applies to subpoenas for the attendance of witnesses and the 
production of documentary evidence at an arbitration hearing under this 
chapter.''.

SEC. 8. ARBITRATION AWARD AND JUDGMENT.

    Section 657 of title 28, United States Code, is amended to read as 
follows:

``Sec. 657. Arbitration award and judgment

    ``(a) Filing and Effect of Arbitration Award.--An arbitration award 
made by an arbitrator under this chapter, along with proof of service 
of such award on the other party by the prevailing party or by the 
plaintiff, shall be filed promptly after the arbitration hearing is 
concluded with the clerk of the district court that referred the case 
to arbitration. Such award shall be entered as the judgment of the 
court after the time has expired for requesting a trial de novo. The 
judgment so entered shall be subject to the same provisions of law and 
shall have the same force and effect as a judgment of the court in a 
civil action, except that the judgment shall not be subject to review 
in any other court by appeal or otherwise.
    ``(b) Sealing of Arbitration Award.--The district court shall 
provide by local rule that the contents of any arbitration award made 
under this chapter shall not be made known to any judge who might be 
assigned to the case until the district court has entered final 
judgment in the action or the action has otherwise terminated.
    ``(c) Trial de Novo of Arbitration Awards.--
            ``(1) Time for filing demand.--Within 30 days after the 
        filing of an arbitration award with a district court under 
        subsection (a), any party may file a written demand for a trial 
        de novo in the district court.
            ``(2) Action restored to court docket.--Upon a demand for a 
        trial de novo, the action shall be restored to the docket of 
        the court and treated for all purposes as if it had not been 
        referred to arbitration.
            ``(3) Exclusion of evidence of arbitration.--The court 
        shall not admit at the trial de novo any evidence that there 
        has been an arbitration proceeding, the nature or amount of any 
        award, or any other matter concerning the conduct of the 
        arbitration proceeding, unless--
                    ``(A) the evidence would otherwise be admissible in 
                the court under the Federal Rules of Evidence; or
                    ``(B) the parties have otherwise stipulated.''.

SEC. 9. COMPENSATION OF ARBITRATORS AND NEUTRALS.

    Section 658 of title 28, United States Code, is amended to read as 
follows:

``Sec. 658. Compensation of arbitrators and neutrals

    ``(a) Compensation.--The district court shall, subject to limits 
set by the Judicial Conference of the United States, establish and pay 
the amount of compensation, if any, that each arbitrator or neutral 
shall receive for services rendered in each case under this chapter.
    ``(b) Transportation Allowances.--Under regulations prescribed by 
the Director of the Administrative Office of the United States Courts, 
a district court may reimburse arbitrators for actual transportation 
expenses necessarily incurred in the performance of duties under this 
chapter.''.

SEC. 10. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated for each fiscal year such 
sums as may be necessary to carry out chapter 44 of title 28, United 
States Code, as amended by this Act.

SEC. 11. CONFORMING AMENDMENTS.

    (a) Limitation on Money Damages.--Section 901 of the Judicial 
Improvements and Access to Justice Act (28 U.S.C. 652 note) is amended 
by striking subsection (c).
    (b) Other Conforming Amendments.--(1) The chapter heading for 
chapter 44 of title 28, United States Code, is amended to read as 
follows:

            ``CHAPTER 44--ALTERNATIVE DISPUTE RESOLUTION''.

    (2) The table of contents for chapter 44 of title 28, United States 
Code, is amended to read as follows:

``Sec.
``651.  Authorization of alternative dispute resolution.
``652.  Jurisdiction.
``653.  Neutrals.
``654.  Arbitration.
``655.  Arbitrators.
``656.  Subpoenas.
``657.  Arbitration award and judgment.
``658.  Compensation of arbitrators and neutrals.''.
    (3) The item relating to chapter 44 in the table of chapters for 
Part III of title 28, United States Code, is amended to read as 
follows:

``44. Alternative Dispute Resolution........................     651''.

                          Purpose and Summary

    H.R. 3528 is designed to address the problem of the high 
caseloads burdening the federal courts. This legislation will 
provide a quicker, more efficient method by which to resolve 
some federal cases when the parties or the courts so choose. 
H.R. 3528 directs each federal trial court to establish some 
form of alternative dispute resolution (``ADR''), which could 
include arbitration, mediation, mini trials, or early neutral 
evaluation or some combination of those for certain civil 
cases. The bill also provides for the confidentiality of the 
alternative dispute resolution process and prohibits the 
disclosure of such confidential communications. It also directs 
the courts to establish standards for the neutrals and 
arbitrators to follow, and authorizes the Judicial Conference 
and the Administrative Office of the United States Courts to 
assist courts with their programs.
    This legislation will provide the federal courts with the 
tools necessary to present quality alternatives to expensive 
federal litigation.

                  Background and Need For Legislation

    Over the past years, the Article III Federal Courts have 
witnessed an explosion in the number of cases brought before 
them. On March 10, 1998, the Administrative Office of the U.S. 
Courts issued a report which indicated the caseload of the 
Federal Judiciary increased in fiscal year 1997 to historic 
levels in nearly every category. Filings in the courts of 
appeals rose 1 percent to reach an all-time high. Total filings 
in the district courts rose 2 percent, with civil case filings 
increasing for the fourth consecutive year, with criminal case 
filings reaching their highest levels since 1933. Bankruptcy 
filings climbed 23 percent to a record level and the number of 
persons under the supervision of the federal probation system 
increased 3 percent. The number of civil and criminal cases 
filed in district courts totaled 322,390 in 1997, a 2 percent 
increase over 1996. The increase sent filings per authorized 
judgeship up from 490 to 498.
    The burdens of these sky-rocketing numbers have not been 
lost on the Congress, particularly because such numbers reflect 
directly on citizens' ability to have their day in court. This 
bill incorporates various suggestions of a number of witnesses 
who testified at the Subcommittee hearing, and suggested courts 
should be able to decide which alternative dispute resolution 
(``ADR'') method is best suited for that particular court. The 
legislation expands the current arbitration programs operating 
in twenty districts throughout the country by requiring each 
District Court to establish some form of ADR.

                                Hearings

    The provisions of this legislation were considered during a 
legislative hearing on H.R. 2603, the ``Alternative Dispute 
Resolution and Settlement Encouragement Act'' on October 9, 
1997. Testifying at the hearing on the issue of alternative 
dispute resolution were Peter R. Steenland, Senior Counsel for 
ADR, United States Department of Justice; Judge E. Brock 
Hornby, United States Chief District Judge for the District of 
Maine; Professor E. Allan Lind of the Fuqua School of Business, 
Duke University; and Mitchell F. Dolin on behalf of the 
American Bar Association.

                        Committee Consideration

    The Subcommittee on Courts and Intellectual Property 
conducted a markup on a Committee Print of this legislation on 
March 18, 1998. The Subcommittee reported the Committee Print 
to the Full Committee for further consideration by voice vote. 
The print introduced as H.R. 3528 on March 23, 1998, by 
Subcommittee Chairman Howard Coble. On March 24, 1998, the 
Committee met in open session and ordered reported favorably 
the bill H.R. 3528, as amended, by voice vote, a quorum being 
present.

                      Committee Oversight Findings

    In compliance with clause 2(1)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of Rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(1)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(1)(3)(B) of House Rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(C)(3) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 3528, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, April 20 16, 1998.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    The Congressional Budget Office has prepared the enclosed 
cost estimate for H.R. 3528, the Alternative Dispute Resolution 
Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Susanne S. 
Mehlman (for federal costs), who can be reached at 226-2860, 
and Leo Lex (for the state and local impact), who can be 
reached at 225-3220.
            Sincerely,

                                           June E. O'Neill, Director.  
    Enclosure.
    cc: Honorable John Conyers, Jr.,
         Ranking Minority Member.

H.R. 3528--Alternative Dispute Resolution Act of 1998
    CBO estimates that implementing H.R. 3528 would result in 
no significant net costs to the federal government. Because 
this bill would not affect direct spending or receipts, pay-as-
you-go procedures would not apply. The legislation contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act of 1995. The bill would only 
affect the budgets of state, local, or tribal governments if 
those governments were parties to a case in federal district 
court and if they chose to participate in an alternative form 
of dispute resolution. In those cases, state, local, and tribal 
governments might realize some savings from lower litigation 
costs.
    Enacting H.R. 3528 would require all 94 federal district 
courts to establish an alternative dispute resolution (ADR) 
program for resolving certain civil cases. An ADR program could 
include such processes as arbitration, mediation, neutral 
evaluation, and mini-trials. Under the bill, the courts could 
mandate that litigants in a civil case use an ADR process, 
except arbitration, which would require the consent of all 
parties to the case. According to the Administrative Office of 
the United States Courts (AOUSC), about 75 federal district 
courts presently have some form of ADR in operation.
    Based on information from the AOUSC, CBO expects that under 
H.R. 3528 the district courts without an ADR program (fewer 
than 20) would establish some type of program beginning in 
fiscal year 1999. Because the bill also would require that an 
existing employee in each district administer the ADR program, 
CBO expects that additional appropriations would be required 
only to fund the expenses of arbitrators and other neutral 
parties that would be used in the various ADR processes for 
those district courts without an existing program. Based on 
current costs required to support a typical program's expenses, 
CBO estimates that such expenditures would average about $6,000 
(in 1998 dollars) per district each year. Costs in subsequent 
years could increase if participation in the ADR programs 
increases as courts become more accustomed to using 
alternatives to trials. In any case, CBO estimates that added 
costs would be less than $500,000 annually, subject to the 
availability of appropriated funds.
    CBO expects that expanding the use of ADR processes to all 
district courts could yield some net savings in the costs of 
court administration. However, CBO expects that any such 
savings would not be significant over the next five years.
    The staff contacts for this estimate are Susanne S. Mehlman 
(for federal costs), who can be reached at 226-2860, and Leo 
Lex (for the state and local impact), who can be reached at 
225-3220. This estimate was approved by Robert A. Sunshine, 
Deputy Assistant Director for Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to Rule XI, clause 2(1)(4) of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article III, section 1 of the Constitution.

               Section-by-Section Analysis and Discussion

Section One:
    The short title of the act will be the ``Alternative 
Dispute Resolution Act of 1998.''
Section Two: Alternative Dispute Resolution
    This section requires all Federal district courts to 
establish an alternative dispute resolution (ADR) program, 
which in the discretion of the court could be either voluntary 
or mandatory. Under no circumstances shall a court be able to 
mandate a party to participate in arbitration. Alternative 
dispute resolution may include such processes as early neutral 
evaluation, mediation, mini trials, and arbitration. This will 
provide more options for litigants, while reducing cost, delay, 
and court burdens. In those courts where an ADR program is 
already in place, the court will examine that programs 
effectiveness and make such improvements as are consistent with 
this legislation. Each District Court shall designate or retain 
an employee to administer the court's ADR program. The Federal 
Judicial Center and the Administrative Office of the United 
States Courts shall assist the courts in the establishment and 
improvement of ADR programs.
Section Three: Jurisdiction
    Each District Court shall provide litigants in all civil 
cases a choice of alternative dispute resolution processes. If 
a court requires the use of ADR by local rule, it may only do 
so with respect to mediation or early neutral evaluation. 
Courts may not require litigants to participate in mini trials 
or arbitration. Each District Court may exempt specific cases 
or categories of cases in which the use of ADR would not be 
appropriate. Nothing in this legislation would conflict with 
the authority of the Attorney General to conduct litigation on 
behalf of the United States, or with the authority of any 
federal agency to conduct litigation in the United States, or 
with any delegation of litigation authority by the Attorney 
General. Until adopted pursuant to the Rules Enabling Act, each 
District Court shall enact local rules to provide for 
confidentiality of the ADR processes and to prohibit disclosure 
of confidential dispute resolution communications.
Section Four: Mediators and Neutral Evaluators
    Each court which authorizes the use of alternative dispute 
resolution processes shall maintain a panel of neutrals 
available for use by litigants. Each District Court shall 
promulgate its own procedures and criteria for selecting 
neutrals. Each neutral shall by qualified and trained to assist 
in the ADR process. Each District Court may use trained 
Magistrate Judges, professional neutrals from the private 
sector, and persons trained to serve the ADR process. Each 
District shall issue rules relating to the qualifications of 
neutrals, until such rules are adopted pursuant to the Rules 
Enabling Act.
Section Five: Actions Referred To Arbitration
    This section, and several of the succeeding sections, 
address the use of arbitration as a method of alternative 
dispute resolution. A District Court may allow the referral to 
arbitration of any civil action pending before it, except that 
referral to arbitration may not be made where (1) the action is 
based on an alleged violation of a right secured by the 
Constitution of the United States, or (2) jurisdiction is based 
in whole or in part on section 1343 of this title, or (3) the 
relief sought consists of money damages in an amount greater 
than $150,000. Where consent to arbitration is required, the 
District Court shall establish procedures to ensure that 
consent to arbitration is freely and knowingly obtained, and no 
party or attorney is prejudiced for refusing to participate in 
arbitration. A District Court may presume damages are not in 
excess of $150,000 unless counsel certifies that the damages 
exceed that amount. Nothing in this section is effects the 
operation of existing mandatory arbitration programs conducted 
pursuant to section 906 of Title IX of Public Law 100-702.
Section Six: Arbitrators
    An arbitrator to whom an action is referred shall have the 
power within the judicial district of that District Court to 
conduct arbitration hearings, to administer oaths and 
affirmations, and to make awards. Each court shall establish 
standards for the certification of arbitrators which shall 
include provisions requiring that any arbitrator take the oath 
or affirmation described in section 453, and shall be subject 
to the disqualification rules of section 455. All individuals 
serving as arbitrators are performing quasi-judicial functions 
and are entitled to the immunities and protections that the law 
accords those serving in such capacity.
Section Seven: Subpoenas
    This section clarifies that Rule 45 of the Federal Rules of 
Civil Procedure applies to subpoenas for the attendance of 
witnesses and the production of evidence at an arbitration.
Section Eight: Arbitration Award and Judgment
    An arbitration award made by an arbitrator shall be filed 
promptly after the hearing is concluded with the appropriate 
clerk of the district court. After time has expired for 
requesting a trial de novo, the award shall be entered as the 
judgment of the court. By local rule, the district court shall 
provide that the contents of any arbitration award shall not be 
made known until the final judgment has been entered by the 
court. Any party may file a written demand for a trail de novo 
within thirty days after the filing of an arbitration award. 
That action shall be restored to the court's docket as if it 
had not been referred to arbitration. No evidence from the 
arbitration proceeding shall be admissible at the trial de 
novo, unless otherwise admissible under the Federal Rules of 
Evidence or unless the parties stipulate.
Section Nine: Compensation of Arbitrators and Neutrals
    The district court shall establish and pay the amount of 
compensation, if any, that each arbitrator or neutral shall 
receive for services rendered. This compensation shall be 
subject to limits set by the Judicial Conference of the United 
States. The court may also reimburse arbitrators for the actual 
transportation expenses incurred in the performance of their 
duties.
Section Ten: Authorization of Appropriations
    This section authorizes the annual appropriations of such 
sums necessary to carry out the provisions of this legislation.

H.L.C.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

TITLE 28, UNITED STATES CODE

           *       *       *       *       *       *       *


                 PART III--COURT OFFICERS AND EMPLOYEES

Chap.                                                               Sec.
     * * * * * * *
[44. Arbitration..................................................  651]
44. Alternative Dispute Resolution................................   651
     * * * * * * *

                        [CHAPTER 44--ARBITRATION

Sec.
[651.  Authorization of arbitration.
[652.  Jurisdiction.
[653.  Powers of arbitrator; arbitration hearing.
[654.  Arbitration award and judgment.
[655.  Trial de novo.
[656.  Certification of arbitrators.
[657.  Compensation of arbitrators.
[658.  District courts that may authorize arbitration.

[Sec. 651. Authorization of arbitration

    [(a) Authority of Certain District Courts.--Each United 
States district court described in section 658 may authorize by 
local rule the use of arbitration in any civil action, 
including an adversary proceeding in bankruptcy. A district 
court described in section 658(1) may refer any such action to 
arbitration as set forth in section 652(a). A district court 
described in section 658(2) may refer only such actions to 
arbitration as are set forth in section 652(a)(1)(A).
    [(b) Title 9 Not Affected.--This chapter shall not affect 
title 9.

[Sec. 652. Jurisdiction

    [(a) Actions That May Be Referred to Arbitration.--(1) 
Notwithstanding any provision of law to the contrary and except 
as provided in subsections (b) and (c) of this section, and 
section 901(c) of the Judicial Improvements and Access to 
Justice Act, a district court that authorizes arbitration under 
section 651 may--
            [(A) allow the referral to arbitration of any civil 
        action (including any adversary proceeding in 
        bankruptcy) pending before it if the parties consent to 
        arbitration, and
            [(B) require the referral to arbitration of any 
        civil action pending before it if the relief sought 
        consists only of money damages not in excess of 
        $100,000 or such lesser amount as the district court 
        may set, exclusive of interest and costs.
    [(2) For purposes of paragraph (1)(B), a district court may 
presume damages are not in excess of $100,000 unless counsel 
certifies that damages exceed such amount.
    [(b) Actions That May Not Be Referred Without Consent of 
Parties.--Referral to arbitration under subsection (a)(1)(B) 
may not be made--
            [(1) of an action based on an alleged violation of 
        a right secured by the Constitution of the United 
        States, or
            [(2) if jurisdiction is based in whole or in part 
        on section 1343 of this title.
    [(c) Exceptions From Arbitration.--Each district court 
shall establish by local rule procedures for exempting, sua 
sponte or on motion of a party, any case from arbitration in 
which the objectives of arbitration would not be realized--
            [(1) because the case involves complex or novel 
        legal issues,
            [(2) because legal issues predominate over factual 
        issues, or
            [(3) for other good cause.
    [(d) Safeguards in Consent Cases--.In any civil action in 
which arbitration by consent is allowed under subsection 
(a)(1)(A), the district court shall by local rule establish 
procedures to ensure that--
            [(1) consent to arbitration is freely and knowingly 
        obtained, and
            [(2) no party or attorney is prejudiced for 
        refusing to participate in arbitration.

[Sec. 653. Powers of arbitrator; arbitration hearing

    [(a) Powers.--An arbitrator to whom an action is referred 
under section 652 shall have, within the judicial district of 
the district court which referred the action to arbitration, 
the power--
            [(1) to conduct arbitration hearings,
            [(2) to administer oaths and affirmations, and
            [(3) to make awards.
    [(b) Time for Beginning Arbitration Hearing.--An 
arbitration hearing under this chapter shall begin within a 
time period specified by the district court, but in no event 
later than 180 days after the filing of an answer, except that 
the arbitration proceeding shall not, in the absence of the 
consent of the parties, commence until 30 days after the 
disposition by the district court of any motion to dismiss the 
complaint, motion for judgment on the pleadings, motion to join 
necessary parties, or motion for summary judgment, if the 
motion was filed during a time period specified by the district 
court. The 180-day and 30-day periods specified in the 
preceding sentence may be modified by the court for good cause 
shown.
    [(c) Subpoenas.--Rule 45 of the Federal Rules of Civil 
Procedure (relating to subpoenas) applies to subpoenas for the 
attendance of witnesses and the production of documentary 
evidence at an arbitration hearing under this chapter.

[Sec. 654. Arbitration award and judgment

    [(a) Filing and Effect of Arbitration Award.--An 
arbitration award made by an arbitrator under this chapter, 
along with proof of service of such award on the other party by 
the prevailing party or by the plaintiff, shall, promptly after 
the arbitration hearing is concluded, be filed with the clerk 
of the district court that referred the case to arbitration. 
Such award shall be entered as the judgment of the court after 
the time has expired for requesting a trial de novo under 
section 655. The judgment so entered shall be subject to the 
same provisions of law and shall have the same force and effect 
as a judgment of the court in a civil action, except that the 
judgment shall not be subject to review in any other court by 
appeal or otherwise.
    [(b) Sealing of Arbitration Award.--The district court 
shall provide by local rule that the contents of any 
arbitration award made under this chapter shall not be made 
known to any judge who might be assigned to the case--
            [(1) except as necessary for the court to determine 
        whether to assess costs or attorney fees under section 
        655,
            [(2) until the district court has entered final 
        judgment in the action or the action has been otherwise 
        terminated, or
            [(3) except for purposes of preparing the report 
        required by section 903(b) of the Judicial Improvements 
        and Access to Justice Act.
    [(c) Taxation of Costs.--The district court may by rule 
allow for the inclusion of costs as provided in section 1920 of 
this title as a part of the arbitration award.

[Sec. 655. Trial de novo

    [(a) Time for Demand.--Within 30 days after the filing of 
an arbitration award with a district court under section 654, 
any party may file a written demand for a trial de novo in the 
district court.
    [(b) Restoration to Court Docket.--Upon a demand for a 
trial de novo, the action shall be restored to the docket of 
the court and treated for all purposes as if it had not been 
referred to arbitration. In such a case, any right of trial by 
jury that a party otherwise would have had, as well as any 
place on the court calendar which is no later than that which a 
party otherwise would have had, are preserved.
    [(c) Limitation on Admission of Evidence.--The court shall 
not admit at the trial de novo any evidence that there has been 
an arbitration proceeding, the nature or amount of any award, 
or any other matter concerning the conduct of the arbitration 
proceeding, unless--
            [(1) the evidence would otherwise be admissible in 
        the court under the Federal Rules of Evidence, or
            [(2) the parties have otherwise stipulated.
    [(d) Taxation of Arbitrator Fees as Cost.--(1)(A) A 
district court may provide by rule that, in any trial de novo 
under this section, arbitrator fees paid under section 657 may 
be taxed as costs against the party demanding the trial de 
novo.
    [(B) Such rule may provide that a party demanding a trial 
de novo under subsection (a), other than the United States or 
its agencies or officers, shall deposit a sum equal to such 
arbitrator fees as advanced payment of such costs, unless the 
party is permitted to proceed in forma pauperis.
    [(2) Arbitrator fees shall not be taxed as costs under 
paragraph (1)(A), and any sum deposited under paragraph (1)(B) 
shall be returned to the party demanding the trial de novo, 
if--
            [(A) the party demanding the trial de novo obtains 
        a final judgment more favorable than the arbitration 
        award, or
            [(B) the court determines that the demand for the 
        trial de novo was made for good cause.
    [(3) Any arbitrator fees taxed as costs under paragraph 
(1)(A), and any sum deposited under paragraph (1)(B) that is 
not returned to the party demanding the trial de novo, shall be 
paid to the Treasury of the United States.
    [(4) Any rule under this subsection shall provide that no 
penalty for demanding a trial de novo, other than that provided 
in this subsection, shall be assessed by the court.
    [(e) Assessment of Costs and Attorney Fees.--In any trial 
de novo demanded under subsection (a) in which arbitration was 
done by consent of the parties, a district court may assess 
costs, as provided in section 1920 of this title, and 
reasonable attorney fees against the party demanding the trial 
de novo if--
            [(1) such party fails to obtain a judgment, 
        exclusive of interest and costs, in the court which is 
        substantially more favorable to such party than the 
        arbitration award, and
            [(2) the court determines that the party's conduct 
        in seeking a trial de novo was in bad faith.

[Sec. 656. Certification of arbitrators

    [(a) Standards for Certification.--Each district court 
listed in section 658 shall establish standards for the 
certification of arbitrators and shall certify arbitrators to 
perform services in accordance with such standards and this 
chapter. The standards shall include provisions requiring that 
any arbitrator--
            [(1) shall take the oath or affirmation described 
        in section 453, and
            [(2) shall be subject to the disqualification rules 
        of section 455.
    [(b) Treatment of Arbitrator as Independent Contractor and 
Special Government Employee.--An arbitrator is an independent 
contractor and is subject to the provisions of sections 201 
through 211 of title 18 to the same extent as such provisions 
apply to a special Government employee of the executive branch. 
A person may not be barred from the practice of law because 
such person is an arbitrator.

[Sec. 657. Compensation of arbitrators

    [(a) Compensation.--The district court may, subject to 
limits set by the Judicial Conference of the United States, 
establish and pay the amount of compensation, if any, that each 
arbitrator shall receive for services rendered in each case.
    [(b) Transportation Allowances.--Under regulations 
prescribed by the Director of the Administrative Office of the 
United States Courts, a district court may reimburse 
arbitrators for actual transportation expenses necessarily 
incurred in the performance of duties under this chapter.

[Sec. 658. District courts that may authorize arbitration

    [The district courts for the following judicial districts 
may authorize the use of arbitration under this chapter:
            [(1) Northern District of California, Middle 
        District of Florida, Western District of Michigan, 
        Western District of Missouri, District of New Jersey, 
        Eastern District of New York, Middle District of North 
        Carolina, Western District of Oklahoma, Eastern 
        District of Pennsylvania, and Western District of 
        Texas.
            [(2) Ten additional judicial districts, which shall 
        be approved by the Judicial Conference of the United 
        States. The Judicial Conference shall give notice of 
        the 10 districts approved under this paragraph to the 
        Federal Judicial Center and to the public.]

               CHAPTER 44--ALTERNATIVE DISPUTE RESOLUTION

Sec.
651.  Authorization of alternative dispute resolution.
652.  Jurisdiction.
653.  Neutrals.
654.  Arbitration.
655.  Arbitrators.
656.  Subpoenas.
657.  Arbitration award and judgment.
658.  Compensation of arbitrators and neutrals.

Sec. 651. Authorization of alternative dispute resolution

    (a) Definition.--For purposes of this chapter, an 
alternative dispute resolution process includes any process or 
procedure, other than an adjudication by a presiding judge, in 
which a neutral third party participates to assist in the 
resolution of issues in controversy, through processes such as 
early neutral evaluation, mediation, minitrial, and arbitration 
as provided in sections 654 through 658.
    (b) Authority.--Each United States district court shall 
authorize, by local rule, the use of alternative dispute 
resolution processes in all civil actions, including adversary 
proceedings in bankruptcy, in accordance with this chapter, 
except that the use of arbitration may be authorized only as 
provided in section 654. Each United States district court 
shall devise and implement its own alternative dispute 
resolution program by local rule to encourage and promote the 
use of alternative dispute resolution in its district.
    (c) Existing Alternative Dispute Resolution Programs.--In 
those courts where an alternative dispute resolution program is 
in place on the date of the enactment of the Alternative 
Dispute Resolution Act of 1998, the court shall examine the 
effectiveness of that program and adopt such improvements to 
the program as are consistent with the provisions and purposes 
of this chapter.
    (d) Administration of Alternative Dispute Resolution 
Programs.--Each United States district court shall retain or 
designate an existing employee knowledgeable in alternative 
dispute resolution practices and processes to implement, 
administer, oversee, and evaluate the court's alternative 
dispute resolution program. Such person may also be responsible 
for recruiting, screening, and training attorneys to serve as 
neutrals and arbitrators in the court's alternative dispute 
resolution program.
    (e) Title 9 Not Affected.--This chapter shall not affect 
title 9.
    (f) Program Support.--The Federal Judicial Center and the 
Administrative Office of the United States Courts are 
authorized to assist the district courts in the establishment 
and improvement of alternative dispute resolution programs by 
identifying particular practices employed in successful 
programs and providing additional assistance as needed and 
appropriate.

Sec. 652. Jurisdiction

    (a) Consideration of Alternative Dispute Resolution in 
Appropriate Cases.--Notwithstanding any provision of law to the 
contrary and except as provided in subsections (b) and (c), 
each district court shall, by local rule, require that 
litigants in all civil cases consider the use of an alternative 
dispute resolution process at an appropriate stage in the 
litigation. Each district court shall provide litigants in all 
civil cases with a choice of alternative dispute resolution 
processes, including, but not limited to, mediation, early 
neutral evaluation, minitrial, and arbitration as authorized in 
sections 654 through 658. Any district court that elects to 
require the use of alternative dispute resolution in certain 
cases may do so only with respect to mediation, early neutral 
evaluation, and, if the parties consent, arbitration.
    (b) Actions Exempted From Consideration of Alternative 
Dispute Resolution.--Each district court may exempt from the 
requirements of this section specific cases or categories of 
cases in which use of alternative dispute resolution would not 
be appropriate. In defining these exemptions, each district 
court shall consult with members of the bar, including the 
United States Attorney for that district.
    (c) Authority of the Attorney General.--Nothing in this 
section shall alter or conflict with the authority of the 
Attorney General to conduct litigation on behalf of the United 
States, with the authority of any Federal agency authorized to 
conduct litigation in the United States courts, or with any 
delegation of litigation authority by the Attorney General.
    (d) Confidentiality Provisions.--Until such time as rules 
are adopted pursuant to chapter 131 of this title providing for 
the confidentiality of alternative dispute resolution processes 
under this chapter, each district court shall by local rule 
provide for the confidentiality of the alternative dispute 
resolution processes and to prohibit disclosure of confidential 
dispute resolution communications.

Sec. 653. Neutrals

    (a) Panel of Neutrals.--Each district court that authorizes 
the use of alternative dispute resolution processes shall 
maintain a panel of neutrals available for use by the parties 
for each category of process offered. Each district court shall 
promulgate its own procedures and criteria for the selection of 
neutrals on its panels.
    (b) Qualifications and Training.--Each person serving as a 
neutral in an alternative dispute resolution process should be 
qualified and trained to serve as a neutral in the appropriate 
alternative dispute resolution process. For this purpose, the 
district court may use, among others, magistrate judges who 
have been trained to serve as neutrals in alternative dispute 
resolution processes, professional neutrals from the private 
sector, and persons who have been trained to serve as neutrals 
in alternative dispute resolution processes. Until such time as 
rules are adopted pursuant to chapter 131 of this title 
relating to the disqualification of neutrals, each district 
court shall issue rules relating to the disqualification of 
neutrals (including, where appropriate, disqualification under 
section 455 of this title, other applicable law, and 
professional responsibility standards).

Sec. 654. Arbitration

    (a) Referral of Actions to Arbitration.--Notwithstanding 
any provision of law to the contrary and except as provided in 
subsections (b) and (c) of section 652 and subsection (d) of 
this section, a district court may allow the referral to 
arbitration of any civil action (including any adversary 
proceeding in bankruptcy) pending before it, except that 
referral to arbitration may not be made where--
            (1) the action is based on an alleged violation of 
        a right secured by the Constitution of the United 
        States;
            (2) jurisdiction is based in whole or in part on 
        section 1343 of this title; or
            (3) the relief sought consists of money damages in 
        an amount greater than $150,000.
    (b) Safeguards in Consent Cases.--Until such time as rules 
are adopted pursuant to chapter 131 of this title relating to 
procedures described in this subsection, the district court 
shall by local rule establish procedures to ensure that any 
civil action in which arbitration by consent is allowed under 
subsection (a)--
            (1) consent to arbitration is freely and knowingly 
        obtained; and
            (2) no party or attorney is prejudiced for refusing 
        to participate in arbitration.
    (c) Presumptions.--For purposes of subsection (a)(3), a 
district court may presume damages are not in excess of 
$150,000 unless counsel certifies that damages exceed such 
amount.
    (d) Existing Programs.--Nothing in this section is deemed 
to affect any action in which arbitration is conducted pursuant 
to section 906 of the Judicial Improvements and Access to 
Justice Act (Public Law 100-102), as in effect prior to the 
date of its repeal.

Sec. 655. Arbitrators

    (a) Powers of Arbitrators.--An arbitrator to whom an action 
is referred under section 654 shall have the power, within the 
judicial district of the district court which referred the 
action to arbitration--
            (1) to conduct arbitration hearings;
            (2) to administer oaths and affirmations; and
            (3) to make awards.
    (b) Standards for Certification.--Each district court that 
authorizes arbitration shall establish standards for the 
certification of arbitrators and shall certify arbitrators to 
perform services in accordance with such standards and this 
chapter. The standards shall include provisions requiring that 
any arbitrator--
            (1) shall take the oath or affirmation described in 
        section 453; and
            (2) shall be subject to the disqualification rules 
        under section 455.
    (c) Immunity.--All individuals serving as arbitrators in an 
alternative dispute resolution program under this chapter are 
performing quasi-judicial functions and are entitled to the 
immunities and protections that the law accords to persons 
serving in such capacity.

Sec. 656. Subpoenas

    Rule 45 of the Federal Rules of Civil Procedure (relating 
to subpoenas) applies to subpoenas for the attendance of 
witnesses and the production of documentary evidence at an 
arbitration hearing under this chapter.

Sec. 657. Arbitration award and judgment

    (a) Filing and Effect of Arbitration Award.--An arbitration 
award made by an arbitrator under this chapter, along with 
proof of service of such award on the other party by the 
prevailing party or by the plaintiff, shall be filed promptly 
after the arbitration hearing is concluded with the clerk of 
the district court that referred the case to arbitration. Such 
award shall be entered as the judgment of the court after the 
time has expired for requesting a trial de novo. The judgment 
so entered shall be subject to the same provisions of law and 
shall have the same force and effect as a judgment of the court 
in a civil action, except that the judgment shall not be 
subject to review in any other court by appeal or otherwise.
    (b) Sealing of Arbitration Award.--The district court shall 
provide by local rule that the contents of any arbitration 
award made under this chapter shall not be made known to any 
judge who might be assigned to the case until the district 
court has entered final judgment in the action or the action 
has otherwise terminated.
    (c) Trial de Novo of Arbitration Awards.--
            (1) Time for filing demand.--Within 30 days after 
        the filing of an arbitration award with a district 
        court under subsection (a), any party may file a 
        written demand for a trial de novo in the district 
        court.
            (2) Action restored to court docket.--Upon a demand 
        for a trial de novo, the action shall be restored to 
        the docket of the court and treated for all purposes as 
        if it had not been referred to arbitration.
            (3) Exclusion of evidence of arbitration.--The 
        court shall not admit at the trial de novo any evidence 
        that there has been an arbitration proceeding, the 
        nature or amount of any award, or any other matter 
        concerning the conduct of the arbitration proceeding, 
        unless--
                    (A) the evidence would otherwise be 
                admissible in the court under the Federal Rules 
                of Evidence; or
                    (B) the parties have otherwise stipulated.

Sec. 658. Compensation of arbitrators and neutrals

    (a) Compensation.--The district court shall, subject to 
limits set by the Judicial Conference of the United States, 
establish and pay the amount of compensation, if any, that each 
arbitrator or neutral shall receive for services rendered in 
each case under this chapter.
    (b) Transportation Allowances.--Under regulations 
prescribed by the Director of the Administrative Office of the 
United States Courts, a district court may reimburse 
arbitrators for actual transportation expenses necessarily 
incurred in the performance of duties under this chapter.

           *       *       *       *       *       *       *

                              ----------                              


   SECTION 901 OF THE JUDICIAL IMPROVEMENTS AND ACCESS TO JUSTICE ACT

SEC. 901. ARBITRATION AUTHORIZATION BY DISTRICT COURTS.

    (a) * * *

           *       *       *       *       *       *       *

    [(c) Exception to Limitation on Money Damages.--
Notwithstanding section 652 (as added by subsection (a) of this 
section), establishing a limitation of $100,000 in money 
damages with respect to cases referred to arbitration, a 
district court listed in section 658 (as added by subsection 
(a) of this section), whose local rule on the date of the 
enactment of this Act provides for a limitation on money 
damages, with respect to such cases, of not more than $150,000, 
may continue to apply the higher limitation.]