Eligibility Standards for FDIC/RTC Roster of Neutrals

FEDERAL DEPOSIT INSURANCE CORPORATION

Eligibility Standards for FDIC/RTC Roster of Neutrals

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC or

Corporation) herewith publishes for comment the recommendations of the

FDIC/Resolution Trust Corporation (RTC) Roster Qualifications Panel

(Panel) regarding the standards to be used to determine eligibility for

the FDIC/RTC Roster of Neutrals. The RTC is considering the Panel's

recommendations separately. The purpose of the Panel was to give in-

depth consideration to the issues raised by roster qualifications and

to recommend criteria to be used for the FDIC/RTC National Roster. The

recommendations to be adopted will assist in the development of a

roster to be used to provide a list of neutrals which disputants can

use for selecting a neutral in all cases where the FDIC or the RTC is

involved in a matter which warrants the use of independent outside

neutrals. The need for a FDIC/RTC National Roster is the result of the

increase in demand for outside neutrals in Alternative Dispute

Resolution (ADR) cases involving the Corporation.

DATES: Comments must be submitted on or before May 31, 1994.

ADDRESSES: Send comments to Robert E. Feldman, Acting Executive

Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW.,

Washington, DC 20429. Comments may be hand-delivered to room F-402,

1776 F Street, NW., Washington, DC 20429, on business days between 8:30

a.m. and 5 p.m. Comments may also be inspected in the FDIC's Reading

Room, room 7118, 550 17th Street, NW., Washington, DC 20429, between 9

a.m. and 4:30 p.m. FAX number: (202) 898-3838.

FOR FURTHER INFORMATION CONTACT: Charlotte Kaplow, Counsel, Legal

Division, Federal Deposit Insurance Corporation, 1717 H Street, NW.,

room H-11083, Washington, DC 20006, (202) 736-0248.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background

The Administrative Dispute Resolution Act (the Act), Public Law

101-552, authorizes and encourages agencies to use mediation and other

consensual methods of dispute resolution as alternatives to traditional

dispute resolution processes. The Corporation has been committed to the

use of alternative dispute resolution (ADR) methods since 1989, when

the Legal Division began using ADR in disputes among FDIC- and RTC-

controlled entities. Following the passage of the Act, the Corporation

established the ADR Unit which was tasked with developing, implementing

and coordinating ADR programs across the FDIC. The program for

resolution of disputes between controlled entities was so successful

that the FDIC expanded the use of ADR to disputes with outside parties,

including commercial matters, creditor claims and professional

liability cases.

Since the implementation of the ADR program at the FDIC, the

Corporation has maximized recoveries, quickened resolutions and reduced

legal fees and expenses. For example, in 1993, the FDIC saved an

estimated $9.3 million in legal fees and expenses through the use of

formal ADR. The FDIC's success with the program shows that ADR is an

effective dispute resolution mechanism and litigation management tool.

II. Establishment of Roster of Neutrals

One of the main components of the FDIC's ADR programs is the

development of a joint roster of neutrals with the RTC which contains

the names of the qualified outside service providers (attorneys, as

well as non-attorneys) around the country who have a minimum threshold

level of ADR experience. The need for a FDIC/RTC National Roster is the

result of the increase in demand for outside neutrals in ADR cases

involving the Corporations. There was a need for access to a nationwide

roster of qualified outside neutrals with experience relevant to the

types of disputes in which the Corporations were involved. As a result,

the Corporations jointly decided to develop a nationwide roster which

could be utilized in all cases where the FDIC or RTC was involved in a

matter which warranted the use of independent outside neutrals.

The Corporations had a number of reasons for establishing a minimum

level of qualifications for the Roster:

The FDIC/RTC case load is nationwide and involves a wide range

of cases, from small and simple to large and very complex, which

requires qualified experienced neutrals.

The attorneys in the field who would be doing the neutral

selection on behalf of the FDIC and RTC may be relatively

unsophisticated in ADR, as may be the other party(ies).

Because ADR is relatively new to the FDIC/RTC, use of an

inexperienced neutral for a case could jeopardize the entire

program.

Due to significant congressional oversight and a high public

profile, successful experiences with the ADR process and

accountability for the expenditure of funds is imperative.

Following a joint effort by the FDIC and the RTC to develop

criteria to be used in qualifying neutrals, the Corporations requested

that a panel of dispute resolution experts be formed to give in-depth

consideration to the issues raised by roster qualifications and to make

recommendations for criteria to be used for the FDIC/RTC National

Roster. Members of the Panel were: Linda Singer, Executive Director,

Center for Dispute Settlement, who acted as facilitator for the Panel;

Michael Lewis, President, ADR Associates; Frank E.A. Sander, Professor,

Harvard Law School; Philip Harter, mediator; Charles Pou,

Administrative Conference of the United States; Sheldon Guttmann,

Dispute Resolution Specialist, Federal Communications Commission; and

Deborah Dalton, Deputy Director, Consensus and ADR Project, United

States Environmental Protection Agency.

The Panel convened on March 25, 1992 in Washington, DC. As a result

of the meeting the Panel issued a report summarizing the discussions

held and the recommendations which resulted.

The FDIC/RTC procedure for disputants' selection of a neutral for a

particular case contemplates that the Roster will be available to FDIC/

RTC attorneys through an on-line computer database. Through the

database, the parties will be given panels of neutrals with the

experience and ADR expertise that the disputants themselves deem to be

relevant. The disputants will then select a mutually acceptable

neutral.

One of the principles set forth in the Report of the Society of

Professionals in Dispute Resolution (SPIDR) Commission on

Qualifications (SPIDR Report) is that the greater degree of choice the

parties have over the dispute resolution process, program or neutral,

the less mandatory the qualifications should be. It was suggested that

an open, unqualified roster where the parties could make their search

request very narrow might be most suitable for the FDIC/RTC. However it

was suggested that a nationwide, open and unqualified roster could very

well result in a roster much too large for the FDIC/RTC purposes and

that the larger the roster, the more difficult to get neutrals who are

qualified.

III. Method for Qualifying Neutral for the FDIC Roster

The Panel discussed the balance between the need to ensure some

minimum objective qualifications and the need for flexibility to meet

the specific needs (substantive and procedural) of the disputants in a

particular matter. There was a general consensus that the discretion of

the FDIC to qualify neutrals through application of subjective criteria

should be minimized and that objective criteria and rating standards

should be developed and applied systematically. Subsequently, the Panel

narrowed the discussion to the minimum threshold qualities of a

neutral, the information required to qualify neutrals, and the

standards and criteria that should be used to qualify neutrals.

The Panel focused on the possible methods and specific paradigms of

qualifying neutrals. The SPIDR Report strongly recommended that

performance criteria be the basis for qualifying neutrals. The FDIC and

RTC determined that, due to time, geographic and cost constraints,

performance-based testing for the FDIC/RTC National Roster is not

possible. In the alternative, the SPIDR Report suggested using

experience-based criteria as a screening tool for neutrals.

The Panel generally agreed that some combination of quantity of ADR

experience, complexity of issues handled and diversity of types of

disputes was important as a minimum threshold. The Panel discussed the

relevance of substantive expertise, and whether such expertise should

be a minimum threshold for the parties themselves in their choice of an

individual neutral. Given the variety of cases handled by the FDIC/RTC,

it was determined that such experience was more appropriately

considered as a selection factor by the disputants, not a qualification

factor determined by the FDIC/RTC.

The Panel discussed specific experience-based criteria and ranking

systems that could be utilized, acknowledging that one of their chief

concerns in designing and implementing an experience-based

qualification system was the ability to adequately qualify neutrals

with diverse experience. The Panel agreed that some method for

establishing equivalencies and variably weighing different types of ADR

processes and complexity of substantive issues was necessary in order

to permit an accurate evaluation of a neutral's experience. Six

categories or qualifying factors were listed as essential to providing

a quantifiable measurement of a neutral's experience: The hours or time

as a neutral (Hours/Time), the total number of cases (Number of Cases),

the diversity of ADR processes (Diversity), the dollar amounts in

controversy (Dollar Amount), the number of multi-party cases (including

the number of parties) (Multi-Party), and the nature of the issues

involved (Complexity). The Panel decided that there should be some

ranges for equivalencies between different types within the same

categories of qualification factors.

Aware of the mandate of the FDIC/RTC to encourage participation by

minorities and women in all aspects of its contracting and hiring, the

Panel decided that ten points should be awarded for the neutral's

status as a female or a member of a minority. (Women/Minority).

In addition to establishing a criteria to qualify applicants for

the Roster of Neutrals, the Panel discussed the revision of the FDIC's/

RTC's questionnaire to potential neutrals, the possibility of the

disputants selecting a neutral who is not on the roster, the

dissemination of qualification standards, and the future review and

revision of the qualification process.

IV. Recommendation

At the conclusion of the meeting the FDIC/RTC Roster Qualifications

Panel recommended that:

1. The FDIC/RTC use experience-based criteria for qualifying

applicants for the Roster of Neutrals.

2. The FDIC/RTC send a follow-up request for information to those

who have already applied to obtain needed information and revise the

questionnaire to obtain that information in the future.

3. A certification requirement replace the notarization requirement

on the questionnaire.

4. The specific factors and points should be:

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Factors Points

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Hours/Time..................................................... 25

Number of Cases................................................ 10

Diversity...................................................... 15

Dollar Amount.................................................. 10

Multi-Party.................................................... 15

Complexity..................................................... 15

Women/Minority................................................. 10

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5. The minimum score necessary to qualify for the FDIC/RTC Roster

be 60 points.

6. To encourage participation by minorities and women, ten points

be awarded for a neutral's status as a female or member of a minority.

7. A limited ad hoc procedure be offered to afford the opportunity

to select a neutral who is acceptable to the parties to a dispute, but

who is not on the roster. The FDIC/RTC should develop internal

guidelines to determine when such a procedure would be appropriate.

8. The selection of qualified applicants be done by the FDIC/RTC

under the supervision of a committee, either the Panel itself, or a

group of inter-government agency personnel.

9. The proposed qualification procedures and standards be published

for notice and comment in the Federal Register and circulated to major

industry groups through press release.

10. A reconvening of the Panel and review of the process take place

at specified intervals.

Following the period of notice and comment, the Corporation plans

to incorporate appropriate comments and proceed with the qualification

of applicants.

Dated at Washington, DC, this 22nd of March 1994.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Acting Executive Secretary.

[FR Doc. 94-7700 Filed 3-30-94; 8:45 am]

BILLING CODE 6714-01-P