The story of Canada’s Fruit and Vegetable Dispute Resolution Corp. started long before its inception 10 years ago.

The country’s first solution to handling fresh produce disputes was though a Board of Arbitration under its agriculture department.

“In 1974, a federal ruling supreme court case neutered that,” said Stephen Whitney, president and chief executive officer of the DRC. “In Canada, we had a federal agency making rulings on disputes of grade standards, trade standards, and storage standards. Problem was, contract dispute’s not a federal jurisdiction in Canada.”

DRC stats as of Jan. 15:

Total complaints resolved: 1203

    Resolved without arbitration: 984 (82%)
    Average days to resolve: 41
    Average amount of claim: $24,221

    Resolved with arbitration: 209 (18%)
    Average days to resolve: 184
    Average amount of claim: $23,875

Complaints by country:
    Canada: 377
    U.S.: 759 (727 U.S. vs. Canada)
    Mexico: 41
    Other: 17

Total members: 1289
    Canada: 883
    U.S.: 348
    Mexico: 23
    Other: 35    

Source: DRC

That meant about 40% of the cases could no longer be heard by the board, which led to confusion in the U.S. and Canada and concerns about how to fix the problem, Whitney said. Essentially, U.S. companies doing business in Canada didn’t have the same reassurance Canadian exporters had with the Perishable Agricultural Commodities Act.

When NAFTA was enacted, it provided for establishment of a private dispute vehicle. A group of Canadian produce industry members, including Whitney, who was at the time with the Canadian Produce Marketing Association, had its first meeting in 1997 with representatives from the U.S. and Mexico to find a solution to existing problems.

“We borrowed very heavily from the rules PACA had and from rules in Canada,” Whitney said. “And we created a set of bylaws, and rather than being governed, we instead have a board of directors.”

By 2000, with some funding from Agriculture and Agrifood Canada, the organization opened its doors with Whitney taking the lead.

“For CPMA to lose him, it was a big loss, but he was the right guy for the organization,” said Dan Dempster, president of CPMA. “Certainly from our perspective it was extremely important to get the DRC off the ground.”

In the beginning, Fred Webber, now vice president of trading assistance, worked with the DRC through his post as vice president of special service for Chicago-based Blue Book Services. He joined the DRC in 2005, when the organization built up the capacity to handle arbitration in-house.

DRC's history stretches beyond its 10 years

Courtesy DRC

Stephen Whitney, president and chief executive officer of the DRC, addresses attendees of a reception in 2006 to celebrate the organization's 2005 fifth anniversary.

One significant difference between the U.S. and Canadian dispute resolutions systems is that through PACA, a non-member company from a foreign nation can file a complaint against a U.S. company. Through the DRC, disputes are only handled member-to-member, but between or within any country.

“In our business, there’s always going to be challenges with arrivals and other issues you can’t solve on your own,” said Leonard Jang, vice president and general manager of Vancouver, B.C.-based Van Whole Produce. “This brings the industry to a level with everyone on the same page in terms of integrity.”

Canadian vendors still have a choice of being part of the DRC or being licensed through the Board of Arbitration, but 85% of companies migrated to the DRC its first year, and now 95% are licensed by the DRC.

“It provides for a speedy resolution for these produce disputes,” said Stephen McCarron, partner in McCarron & Diess, a Washington, D.C.-based law firm that both helps with arbitration and represents produce companies going through arbitration.

“There is no other mechanism that resolves these issues as quickly as the DRC,” McCarron said. “PACA and the courts, these take much longer.”
 
The group now uses PACA-type attorneys and others with dispute resolution experience to handle cases that go to arbitration. It has an agreement with PACA that allows PACA to function as the DRC when there are spikes in work flow.

Still, most cases are handled by DRC staff without formal arbitration.

Matt McInerney, executive vice president of Western Growers and volunteer chair of the DRC since its inception, said the DRC has been able to function as a self-help tool for the industry because it coaches on underlying rules and regulations.

In all its years, the DRC has only lost two members because of dissatisfaction with arbitration agreements, Webber said.

“We’ve had some issues in the past where we used the DRC, and I was very impressed with the way they handled things and were impartial in the process,” Jang said.