When a business dispute arises and there is no quick resolution, aggrieved parties have been trained to say, “See you in court.” Those four words, however, just like the use of ‘four letter’ words, while perhaps satisfying when uttered, often are not the best choice.
Although the U.S. traditional court system can in certain situations be an appropriate venue to resolve disputes, it is not always the most efficient or effective way to do so. An alternative to the traditional court system includes alternative dispute resolution (ADR).
What is ADR; it’s a process or procedure other than adjudication by a judge in court—or, said another way, it’s a process or procedure where a neutral third party assists in or decides on the resolution of the issues in dispute.
Why consider ADR as a CEO?
ADR can minimize some of the disadvantages associated with the traditional court system. And, these disadvantages matter to a person who is running a business or enterprise; they include costs, the loss of control over the calendar, decision-makers are not chosen by the parties, decisions are subject to appeal, and the lack of privacy.
Rules governing our judicial system are designed to “leave no stone unturned.” These rules permit the parties and lawyers to exploit the procedures to preserve any hope of success. The result is that the court system and its rules can expand or exacerbate the problem. In turn, this causes the case to take longer and correspondingly costs more money.
Loss of Control of the Calendar
In a court system case the court drives the train, not the parties. Hearings have to be scheduled pursuant to the court’s docket and the trial has to be scheduled pursuant to the assigned judge’s calendar. The parties are at the mercy of those calendars, which are often inconsistent with the parties’ legitimate business schedules.
Decision-Makers are Not Chosen by the Parties
Although in limited cases an assigned judge can be challenged, in most cases, the assigned judge is the decision-maker for that case. The parties do not have a say. In the case of a jury, while the lawyers have limited role in their selection, there can be significant risks associated with the unknown jurors’ background, prejudices, and biases. All of that creates further risks to the parties.
Decisions are Subject to Appeal and There is No Privacy
Even if the judge rules in a party’s favor, or the jury concludes in the client’s favor, the case is not necessarily over. There is generally always a right to appeal within the traditional court case. The net result is twofold: the case is often not done after trial and costs increase as you move to the second phase. Additionally, because a court case is part of the public record, the proceedings are open to the general public; and, although a protective order can provide some limited privacy, matters in a trial case are generally accessible by anyone.
Alternative Dispute Resolution
Again, as discussed above, ADR proceedings generally refer to any method of resolving disputes other than through the conventional litigated judicial case. Although about 90% of all filed civil lawsuits are settled before they get to court for final determination, that does not mean that the above described disadvantages and associated costs and risks of the court proceeding are eliminated. In fact, since most court cases don’t settle until immediately before trial, many of the above disadvantages have already impacted parties prior to settlement.
Below are two ADR types of proceedings that are alternatives to going to court, and which in many instances should be considered by the CEO before uttering those four words … “See you in court.”
Unlike a court trial or an arbitration (discussed below), in mediation, a mutually agreed-upon third party, the mediator, does not impose a solution. Rather, the role of the meditator is to assist the parties to resolve their dispute.
Depending on the disagreement, the mediator’s role can include one or more of the following:
- encourage the parties talk to each other
- assist the parties by helping them understand the nature of the other side’s claims or defenses
- act as a messenger
- diffuse unrealistic expectations
- assist parties to develop proposals
- propose creative solutions.
Ultimately, the mediator’s role is to persuade the parties to agree to a specific identified resolution.
For a CEO, it is critical that they play a meaningful role in the selection of the mediator. Since the person running the business knows the business best, the CEO can help to ensure the mediator selected will be knowledgeable, responsive and receptive to the parties’ calendars. It’s important to remember that the mediation is private and therefore does not suffer from potential issues associated with a trial proceeding, which is open to the public. Further, mediation by its very nature takes out the use of adversary proceedings associated with the process of a court trial.
Finally, if successful, the mediation can substantially reduce the risks and costs associated with a typical case in the court system. When well done, mediation permits the parties to focus on the critical issues and with assistance, find a resolution to the dispute.
As an alternative to the court, the parties can mutually agree to have an arbitrator decide their case. The rules are decided by the parties and, as in mediation, the arbitrator is chosen by them. Although this has a superficial resemblance to a court case, the arbitrator is a functioning alternative to the traditional court and can have significant potential benefit over a court case.
First, since the rules that govern the proceeding are decided by the parties the rules can be designed for the matter, or if done in advance of a dispute, designed in consideration of the special nature of the industry involved. With that in mind, the CEO should be mindful, and become educated about what rules would be best for his/her industry and disputes which arise in that industry. Also, with the arbitrator selected by the parties, the parties have the ability to help ensure that the arbitrator is appropriate for the type of case, e.g., the arbitrator has the experience and the subject matter knowledge to effectively adjudicate the dispute. Again, as with mediation, the CEO is in the best position to understand the business, and therefore, should play a meaningful role in the selection of the arbitrator.
The arbitration generally is less formal which can and should require less time and money. Of significance, the arbitrator’s decision is generally final and, with few exceptions, is not appealable; unlike a court trial, which is often subject to appeal.
Certainly there is a place for traditional court cases. However, in light of some of the structural disadvantages of court cases, including the enormous costs associated with trial proceedings, ADR should be considered by CEO’s as a viable alternative. ADR can provide an efficient and effective, and often less costly way to bring about a more satisfactory conclusion to a dispute.
William S. Klein
Hopkins & Carley’s
San Jose office
Bill Klein is a member of the Litigation Department in Hopkins & Carley’s San Jose office and, also served as Hopkins & Carley’s Managing Shareholder and President for more than 15 years.
He is a highly respected litigator, advisor and mediator who assists clients with a broad range of contract and related disputes, as well as environmental matters, including:
- Environmental private cost recovery and damage actions involving multi-party and citizen-suit litigation
- Counseling and litigation under CERCLA (Superfund) and related state and local laws
- Contract disputes involving environmental liabilities
- Environmental due diligence and contract negotiations for the sale and leasing of contaminated sites
- Environmental insurance coverage disputes
Bill also counsels clients on environmental matters pending before federal, state and local administrative agencies.
Bill was the Chair for the San Jose Silicon Valley Chamber of Commerce during the time it bought its headquarters. He was also the General Counsel for the local repertory theatre during their successful capital drive and construction of a new theater