The New Normal
A New Dispute Resolution Game Plan Inspired by America’s Favorite Pastime
Posted May 23, 2012 7:54 AM CST
By Patrick J. Lamb
Business disputes are not for the faint of heart. Dispute resolution focuses to a great degree on process, designed to accomplish the end of a fair trial or a fair hearing. That so few cases are actually tried seems irrelevant in an effort to foster a fair path toward trial. These days, those cases that do go to trial do so years after the events at issue, and the uncertainty of resolution only makes things worse.
Arbitration was conceived of as a way to avoid the ills of the civil justice system, particularly the time and expense associated with many suits. But over the years, arbitration has proven to be as, or nearly as, expensive as civil litigation, and the uncertainties of arbitration are no different than those of the courts. Arbitrations frequently take as long or longer that it would have taken to handle the dispute in court, sometimes even in the face of arbitration provisions requiring expedited hearings. Sometimes, in fact, the problems are compounded by the practice of many arbitrators of looking for ways to “split the baby.” Both sides get something, nothing is really ever resolved. The expectation of a “split decision” drives parties to extremes, hoping to edge the “split” more toward their own side.
The stories of anger with the system are growing more frequent. Not terribly long ago, I met with a general counsel who lamented that her company had spent more than $2 million in legal fees in a business-to-business lawsuit worth about $5 million, and the suit had not yet reached the summary judgment stage. She was beside herself, yet not sure about what recourse was available. Another in-house lawyer complained about an arbitration that was supposed to occur, under the terms of the contract, on an expedited basis. More than a year later, the arbitration was still unresolved.
An old friend once told me that “that which interests my boss fascinates me.” I loved this concept, and have tried to apply it this way: “that which interests my clients fascinates me.” So I have become engrossed in trying to figure out a way to resolve litigation fairly, or at least reasonably, in a fast, streamlined, inexpensive manner. Several people have encouraged me to share this idea I have with the hope that it might gain some traction in the business community.
Let me begin with three premises. First, what I am going to propose is designed for resolution of business-to-business disputes. The dynamics of suits involving individuals versus businesses are too different to make me believe any approach outside the jury system would be acceptable on the plaintiff’s side.
Second, lawyers frequently do not facilitate swift resolution but instead hinder it. There is too much chest-thumping, posturing and similar behaviors more associated with gladiators than businesspeople.
Three, litigation devolves far too frequently into procedure contests where the plethora of rules too often trigger games of “gotcha.” Too many fights occur because lawyers try to exploit the rules for gain. Fights about discovery too often interfere with rightful focus on the actual business dispute.
There is a solution to these difficulties. Lawyers must be removed from the gladiatorial roles, and the rules and procedures must be streamlined to facilitate resolution instead of creating tangents of litigation. Lawyers are about process, while businesspeople are less concerned about process and more focused on outcomes and timing. The latter needs to trump the former in dispute resolution. Here is the approach—a variation on the system used by Major League Baseball, the so-called baseball arbitration—that I believe can create a streamlined, effective process that will facilitate quick and cheaper resolutions:
1) Before a lawsuit is filed, one of the parties advises the other of its willingness to resolve the dispute using the approach. The other party or parties agree or decline. Those who decline will face their futures in court, just as they do now.
2) The parties that agree to use the approach agree that all communications and meetings will involve a single businessperson and single lawyer on each side. The same businesspeople and lawyers will be parties to each communication or attend each meeting. The businessperson must have full authority to resolve the dispute.
3) Within 14 days of the agreement to use the approach, the parties must agree on a single decision-maker. The decision-maker can be a neutral from an arbitration service, a mutual friend of the CEOs or anyone else the parties agree upon. This allows for experts or nonlawyers to be used if the parties so choose. The decision-maker’s fee is split by the parties.
4) Within 14 days of the decision-maker agreeing to serve, the parties are to meet in person with the decision-maker. At this initial meeting, the following will occur:
a. The parties will agree on the date the hearing and decision will take place. It must be within 60 days of the initial meeting date (90 days from trigger event).
b. Both parties can ask the other for up to 10 things—specific documents, precise, limited categories of emails, sales or accounting records or other business records. During the meeting, each party will agree to produce the requested items or object. Any, objections, problems or uncertainties will be resolved by the decision-maker that day during the meeting. The standard is whether the requested document is needed to evaluate the dispute. The documents must then be produced within one week.
c. Each party identifies no more than two people on the other side, by name, title or area of knowledge, that it wants to depose. Each deposition is limited to two hours and must take place with three weeks of the initial meeting and within two weeks of the production of documents.
5) The next event is the hearing / decision. Each side has one hour to present its case to the decision-maker and the opposing party. At the end, each side provides the decision-maker only its proposal for resolution in a sealed envelope. Outside counsel shall leave the building at this time. The decision-maker adjourns to make a decision, which is to accept one proposal or the other. There is no middle ground available to the decision-maker. The decision-maker shall endorse one proposal and place the accepted resolution in a sealed envelope. Regardless of the time the decision-maker returns his or her sealed decision the to the parties, the envelope shall not be opened before 4:30 pm. The parties commit to spending a minimum of two hours and up to the rest of the day negotiating. At the conclusion of the day, if the parties have not resolved the matter on their own, the sealed envelope is opened, and the endorsed proposal stands as the decision resolving the dispute. It is binding and nonappealable.
6) The matter is thus concluded.
Each of the features of this approach (listed below) serves the ultimate end of reaching a reasoned compromise of disputed claims.
1. The involvement of a businessperson with authority. Nothing is worse than an orphan problem. With no owner, no one is responsible for resolution, and the buck is frequently passed from one person to the next. Likewise, businesses frequently use intermediate-level personnel with no real authority as a means of delaying settlement discussions or turning them into a process rather than an end. This modified baseball arbitration approach requires senior businesspeople to be involved at every step of the process.
2. The involvement of a businessperson in every step of the process. The problem will not be left in the hands of the lawyers. Lawyers = Process. In the context of resolving disputes, excessive focus on process is not helpful.
3. Limited discovery. Too often, discovery becomes an end to itself. But when trying cases, the focus is on a handful of documents, and it is pretty predictable what those documents are. To be sure, we give up the endless search for the “smoking gun,” in exchange for relying on the integrity of the players. Finding something that even has residual heat, let alone is still smoking, is a long shot. It is an acceptable trade-off.
4. The “hearing” format. Those on each side have an opportunity to tell their story. Then there is time for the businesspeople to reflect and, in light of what the other side has said, to make further efforts to resolve the case.
5. The decider cannot split the baby. The decider must pick one side’s proposal or the other’s. There is no middle ground. This forces the parties to present a solution that is their best compromise position, since being closer to the middle, in most cases, will increase the chance that your proposal is selected. When the parties start off at the hearing closer to middle ground, the possibility of resolution is increased.
The goal is fair solutions by principals, quickly. I think this concept achieves those things.
One of my clients has incorporated this concept into agreements with alternative dispute resolution processes. There was pushback, predictably, concerning the lack of discovery and lack of opportunity to appeal. The client’s reaction: “Lawyers will behave like lawyers. That’s not what we want.”
Patrick Lamb is a founding member of Valorem Law Group, a litigation firm representing business interests. Valorem helps clients solve their business disputes and coping with pressures to reduce legal spend using nontraditional approaches, including use of nonhourly fee structures, coordination with LPOs or contract lawyers, joint-venturing with other firms and implementation of project management tools to handle lawsuits or portfolios of litigation.
Pat is the author of the the recently published book Alternative Fee Arrangements: Value Fees and the Changing Legal Market. He also blogs at In Search Of Perfect Client Service.