Legal View: ADR grows in importance in business cases

By Stephen I. Platt
The Daily Record Newswire

I am privileged to be participating in a panel discussion of “ADR in Business Litigation” during the American Bar Association convention in San Francisco that begins this week.

The growth and development of alternative dispute resolution in Maryland has paralleled the birth and evolution of problem-solving courts. Upon reflection, that seems not to have been a coincidence.

Both the utilization of ADR and problem-solving courts proceed from the premise that a satisfactory resolution of people’s disputes more often than not should deal not just with the dispute itself but also with the underlying causes of the dispute. The underlying cause of most disputes usually is more economic and psychological than legal or even factual.

The enhanced expectation that not only will your dispute be resolved but the underlying cause also will be addressed is one that is evolving among all classes of disputants and litigants in our courts and in the halls of our administrative agencies and even in our legislatures.

It is a byproduct, to a certain extent, of our focus on providing greater “access to justice” to individuals and institutions that do not completely understand and accept the constitutional statutory and, most important, practical limitations of our judicial system. It also results from the hue and cry from all segments of society to reduce the costs of dispute resolution generally and litigation particularly.

The result of those enhanced expectations is that public and private institutions, including law firms and courts that have developed in our society to assist people in resolving their disputes, are being forced to dramatically change their business models and work processes.

The recessionary economy which has accompanied these enhanced expectations has propelled them to the forefront. As Norman Solovay wrote in an article in The ABA Business Law Section Journal, “Law firms across the country are laying off associates and even partners have reason to worry about job security. In recent years clients, including corporate clients, have become increasingly unwilling and now in many cases have become unable to pay the skyrocketing costs of full-blown litigation.”

Delaware leads the way
The judiciary, albeit belatedly, has recognized this primarily economic but also legal and political reality. Corporate in-house counsel, law firms and individuals are looking for cost-effective alternatives to full-blown litigation. Law firms will have to provide them in order to survive. Courts will have to incorporate them into the dispute resolution services they offer to remain relevant lest they be replaced by private alternatives or worse, become the lower tier of an economically tiered civil justice system.

The Chancery Court of Delaware, as usual, is ahead of the curve. That court, which essentially is a business court and at least partly a model for other business courts around the country (including the Maryland Business & Technology Case Management Program), has in the last year begun to allow parties to choose arbitration as an alternative to litigation.

It also offers an evaluative form of mediation of its cases by a chancellor who will not preside over the case. More business courts around the country, including our own, will and surely should follow suit.

There are many different models of business courts, commercial parts, business technology case management programs, complex litigation management tracks and so on in this country.  Each has its own history and culture.

All were created because the business litigation and disputes that gave rise to the cases filed in these courts, as well as the parties and lawyers participating in them, were perceived to have special needs. Those needs were articulated in state legislatures and the rules committees in many of our state’s highest courts, where these specialized dockets were developed.

The special needs of the parties and counsel in business cases are defined as more timely, rational, legally correct and predictable. It is also important that these disputes be resolved or decided in a manner that recognizes that, unlike many other types of cases, an arbitrarily and unduly delayed resolution of a case or dispute may devastate one or both of the parties economically.
Similarly, a legally incorrect, impractical or illogical ruling, particularly on a request for a temporary restraining order or a preliminary injunction, can unfairly and irreparably leverage a business party’s position so that it cannot recover legally and, more important, financially and operationally.

At best, legally incorrect, illogical and/or unduly delayed resolutions of business disputes unnecessarily cause great difficulty for business organizations and their lawyers as well as other professionals in accurately quantifying risk.

ADR takes different forms
ADR has been integrated into all of these business courts as a means of meeting these needs in various forms.  Those forms are:

Formal settlement conferences: These are not mediations because, among other reasons, insufficient time is allotted by the courts to conduct a mediation. In fact, in many instances not enough time is allotted to have a meaningful settlement conference.

Unfortunately, the number of cases processed is deemed to be more important than the quality of the results. At worst, when this kind of program is established, it is usually by administrators and/or presiding judges who have no background or training in business litigation and do not understand that the techniques of ADR which can be effective in resolving business disputes are not the same as those used to resolve simple motor tort cases.

At best, this technique, if presided over by a judge or attorney with a background or training in business litigation, can provide a valuable neutral case evaluation.

Mediation: An experienced and thoughtful business conflict mediator, who is trained as a mediator and understands the unique nature of business disputes, recognizes that mediation is a process, not an event.

That means that the process of mediation in certain complex business disputes can take days, weeks, or even months and sometimes has to be staged. Information which may not be known or even available when the mediation begins may need to be exchanged or developed. Disclosure of certain information, particularly that which may be arguably proprietary, may be both an internal and external issue.

The trade-off between maintaining confidentiality for the tactical reasons, i.e. reserving of information for litigation purposes and thereby reducing the possibility of settlement, may need to be explored by both counsel and client with a mediator facilitating the process. This is almost a sub-mediation within a mediation.
This is particularly true in intellectual property disputes where science may affect the value of the case. It is also a factor in cases involving financial losses where the the market affects evaluation of damages.

Arbitration: The challenge to this form of ADR, which is not often met these days, is to ensure that this process doesn’t become one that is just as lengthy and expensive as litigation.

Future columns will describe the methods and techniques which can and should be utilized in resolving these disputes whether they be mediated, arbitrated, or neutrally evaluated.

Steven I. Platt is a retired associate judge on the Prince George’s County Circuit Court. He can be reached at