Alternative Dispute Resolution: The Practical Approach
The "pay me now or pay me later" message delivered in that old commercial runs true in the legal profession and the business community in general. Protective measures to avoid litigation or, at least, place you in a position which may result in
The early decision that litigation need not be filed;
The decision by your opposition to resolve a matter prior to utilizing the court system.
Obviously this is the kind of business judgment that every business should institute and which our Firm strongly advocates. For that matter, it is our position that the same should be an inherent position and strategy which every attorney should advocate to his or her clients.
My last comment is the real purpose of this memo. In the twenty-five (25) years that I have been practicing law (many of you have heard this before but I say it again) the way that attorneys undertake their affairs has become shockingly uncivil in many respects. We can no longer rely upon a handshake agreement; assurances that, should problems arise, the "right" thing will be done; nor that the Court system will necessarily serve as an effective means of resolving disputes.
I had the occasion to speak at a recent "American Arbitration Association Annual ADR Day", a day dedicated to the goals, objectives and benefits of ADR ( Alternative Dispute Resolution.) (1) My subject was the positive economics and expedited time lines of proceeding with ADR as an alternative to utilization of the court system. The graph I presented outlined my opinion and experience that, should a client utilize ADR as a means of dispute resolution, the likelihood was that (on the average) the legal fees which my clients incur oftentimes ranged from 40%-60% less than proceeding with traditional litigation. Also, matters addressed by use of ADR are oftentimes resolved conclusively within a period of 4 to 5 months rather than 1 to 2 years as is the case when court litigation is the forum for dispute resolution. A retired Federal Judge from the Northern District on a number of occasions gave me a "thumbs-up" gesture during my ADR speech. I finally felt compelled to ask the Judge if he was indicating he liked my presentation or if he was indicating something else. He literally hollered back "Joe, your estimates in regards to legal expenses are too low." On reflection, he was probably right.
Enough stories. We are each facing a true crisis as it relates to dispute resolution. Regrettably, too many Judges have little knowledge of the intricacies and technicalities related to complicated business affairs related to technical areas of law or business. Juries too often are inundated with technical and other information which is outside their scope of understanding, no matter how simplistically one attempts to present the testimony and exhibits. Clients too soon recognize that litigation becomes an extremely more expensive proposition than originally expected, particularly if the opposition is financially well-heeled and can eventually wear them down. Per studies undertaken, approximately 98% of all court cases ultimately get settled before trial but, by that time, the expenses, time and aggravation associated with the litigation frequently outweigh the benefits of settlement. Hindsight becomes 20/20 and the clients (and all too often their attorneys) wonder if they should not have sat down early during the dispute and attempted, in good faith, to resolve it.
YOU SHOULD STRONGLY CONSIDER USE OF ADR PROCEDURES
Typically parties agree to proceed with ADR:
By the inclusion in contract documents of the requirement that any disputes are subject to resolution through ADR procedures; or
By their practical recognition and that of their counsel that ADR is the preferred method of resolving a dispute and then voluntarily proceed with ADR with the approval of the opposition.
Too often legal counsel and/or the parties feel (or make the excuse) that they need their "day in court" and therefore elect not to use ADR procedures. However, arbitration (in particular) is fully equivalent to a "day in court" and, as noted, is less expensive and much more effective and expeditious. Our firm's website (www.jeromelaw.com) outlines ADR procedures but allow me to provide you with a short overview:
1. Through Mediation parties are required to meet (typically prior to commencement of an action but, sometimes, after the dispute has been filed in Court or after filing of arbitration demand) to attempt to resolve their dispute. Mediators are experienced in the field which is the subject of the dispute. For example, through the American Arbitration Association, only highly knowledgeable and selectively-trained Mediators are permitted to serve. At a neutral location, the Mediator brings the parties together to discuss their positions in a non-adversarial fashion; highlights the strengths and weaknesses of one's case; conferences individually with the individual parties and their counsel (though attorneys need not always be involved); and tries to shape a resolution by way of suggestions that are positive, oftentimes focusing on the extraordinary costs of litigation and time delays. Based on my experience as a Mediator for both the Federal District Court and the American Arbitration Association, I believe that the success rate of meditation is somewhere between 50-60% of the cases I have mediated.
2. Through Early Neutral Evaluation (oftentimes tied into Mediation), the parties meet before an experienced Evaluator who is presented a short-form of the individual positions of the parties. After a brief presentation and inquiry of the parties (in some instances), the parties are advised by the unbiased Evaluator as to his/her opinion as to the strengths and weaknesses of their case, and, thereafter, the parties are requested to weigh the evaluation and determine if further discussions as to resolution should be conducted. Oftentimes settlement discussions proceed through the continued participation of the Evaluator whose position evolves into that of a Mediator. My personal experience as an Evaluator is that close to two-thirds of all cases are resolved at this level.
* It is important to note that both Mediation and Early Neutral Evaluation are non-binding. Therefore, if unsuccessful, the parties can proceed with litigation or arbitration (preferred). There is a cost to undertake Mediation (including the legal representation expense and typically the payment of an hourly fee to the Mediator and a modest fee to the American Arbitration Association.) Some of the benefits include gaining a significant understanding of the opposition's case which oftentimes can be utilized by counsel to minimize future legal expenditures by focusing on the affirmative defense positions of the opposition rather than to undertake general discovery which may result in greater legal expense. Of course, the financial and personal/business aggravation which is avoided compared to the likelihood of success cannot be measured in terms of money.
3. In respect to Arbitration you do get your "day in court" though the setting is usually the offices of the Arbitrator or the offices of the American Arbitration Association (2). The thumbnail benefits of arbitration are as follows:
As noted above, a relatively quick resolution, with the expenditure of extraordinarily less legal expenses.
Avoiding attendance at multiple pretrials (as is too often the case in litigation matters.)
Typically a more "gentlemanly" approach to the proceedings. As both an ADR Neutral as well as an advocate in ADR settings, I oftentimes deal with Arbitrators whom I know well and with whom (I believe) there is a mutual respect. Likewise, Arbitrators and active participants in the ADR practice oftentimes select me to serve as an Arbitrator. Essentially, a checks and balance system exists, i.e. whether we have been at opposite ends in the past, we expect that each of us will give each other a fair shake in the arbitration proceedings since we never know when the next time the other will serve as an Arbitrator in one of our cases in which we are advocates.
Discovery procedures are typically dispensed with or severely limited. Documents are ordinarily exchanged voluntarily rather than through preparation of formal Requests for Production of Documents. Depositions are normally not conducted or at least are limited to key parties. Interrogatories are generally never propounded. Again, legal fees are less.
Under arbitration the Award is binding and conclusive. This, of course, has its positives and negatives but does , in turn, extinguish the too frequent statement of a losing party in litigation: "I'll take this to the Supreme Court if I have to".
Decisions of a jury are avoided. Of course there is something to be said for having eight (8) laymen hear your civil case, the hope being that, they will be able to balance the credibility of the witnesses; all of the evidence; and come to a fair conclusion and verdict. Again, it is my opinion that the jurors are far less capable of understanding sophisticated legal documents and the intricacy of one's business dealings than a highly-trained and highly-experienced arbitrator.
The hearing is significantly shorter. If you have used the Court system in the past, you know that Judges have to focus on a number of cases, oftentimes continuing matters because criminal matters take precedence or, in some instances, they may delay cases during the course of trial to sentence criminal defendants, undertake pretrials; etc. It is my experience that one might get four (4) to five (5) hours of "good trial time" in a courtroom. On the other hand, Arbitrators set a whole day aside; require the parties to focus on the relevant material issues and disregard theatrics; and oftentimes will extend the arbitration beyond business hours to conclude it as soon as possible.
You can essentially pick your own Arbitrator. Normally I suggest that the arbitration proceed with a single Arbitrator deciding the case. As a member of the American Arbitration Association, I have participated in a culling process whereby, at our Northern Ohio Regional Level, we reviewed the resumes of each of the Arbitrators appointed to the Commercial ADR Panels and suggested to the American Arbitration Association that only the "best of the best" be retained as Arbitrators. As a result, the number of arbitrators presently serving nationwide has been reduced from approximately 80,000 to around 10,000. It is my experience that, now serving, are only those Arbitrators who are truly experienced, knowledgeable and committed to the ADR process. By the way, an arbitrator need not be an attorney and can be an engineer or architect; a construction expert; a human resources professional; financial expert; or any other individual who brings with her or him the ability to understand a case and the realities of business. In more complex cases, a Panel of three Arbitrators can be designated, combining the skills of various professions and levels of expertise.
WHAT SHOULD YOU DO?
First of all, of course, I suggest you compare this memo to your own experiences. Has undertaking your business affairs become tougher because parties you are dealing with are not acting fair and square when a dispute arises, rather threatening to get their attorney involved?
Once you (unfortunately but likely) come to the conclusion that you should undertake a more civil program of resolving disputes, do something about it. We could go into detail ad infinitum how today you need to cover yourself with paperwork; redraft your contracts; institute internal procedures to check and balance and catch problems in advance. This memo is far too long anyway and we leave it to you to evaluate your business affairs and, if you wish, call upon us for our input.
Again we must emphasize that you should immediately incorporate ADR provisions in your contracts whereby an agreed means of resolving disputes is clearly stated.
OUR FINAL THOUGHTS
This memorandum was drafted with an admitted degree of selfishness. We like to win our cases and, in turn, have satisfied clients. We are also becoming extremely cynical about where our profession is going. The "take no prisoners" approach which lawyers and business people too often take puts an extraordinary strain on our clients' financial resources and, as well, impacts our efforts.
The suggestions set forth in this memo are ours but the options are yours. Feel free to use this memo, passing it on to your staff and associates. Discuss with those with whom you do business the ADR provisions in your contracts. Discuss with a party with whom you have a dispute the option of resolving your dispute early on through ADR processes. Of course, and as you desire, feel free to call upon us for any other thoughts or assistance.
Please accept this memo with our compliments and with our continued best wishes for your success in both your personal and business endeavors.
We welcome and value your thoughts, comments and criticisms of this memo. Feel free to phone, fax or e-mail us (firstname.lastname@example.org) as you wish.
For more information on the American Arbitration Association, also check the AAA website @
1. ADR procedures include mediation of disputes; early neutral evaluation by an unbiased expert who gauges the likelihood of success of the parties success prior to commencement of litigation; and final and conclusive arbitration of disputes.
2.There are other ADR organizations which also provide their administrative services. However, it is my personal preference to utilize the AAA.