Wake Up and Smell the Options! Top Ten Alternatives to Litigation
Mar 1, 2012
1. Get the right corporate policies and procedures in place to avoid the risks in the first place.
You can use this Top Ten column to implement standard procedures designed to minimize risk in specific legal areas. You can also institute procedures that pertain to any legal risk. One internal policy you might consider is a stepped-up standard procedure for handling complaints, from inside or outside the company. Name a go-to person who can shepherd the complaint along so that it doesn’t go unattended to fester and grow. Have a small (maybe rotating, volunteer) committee review the complaint and recommend the appropriate action. There might be an in-house fix that makes the problem go away.
2. Get a Case Evaluation done by an independent, outside party.
Consider this a reality check before you act, particularly before you hand a problem over to outside counsel. You can hire an expert in the appropriate specialty area to give you an evaluation of your case, and it should be tailored to your needs. For example, you an ask for a quick assessment, maybe just a dollar value, or you can ask for a full evaluation of all the strengths and weaknesses, hurdles that will have to be overcome, recommendations, and so on. The evaluation can help management put the appropriate financial, procedural and other guidelines in place if litigation is unavoidable.
3. Try Mediation before a lawsuit is filed.
Mediation is another option that can be tailored to your needs. Trained Mediators are available virtually everywhere now and can be hired to help parties voluntarily resolve disputes through guided discussion of the issues and settlement options. You can find Mediators who range from community volunteers to international, subject-matter experts. Mediation Hearings can take place at your place of business, at the Mediator’s office, at professional sites (such as local Bar offices), or anywhere the parties are comfortable meeting. The Hearing can be done in more than one session and can include telephone sessions. If you settle your dispute, the Settlement Agreement is binding, and can be used to avoid disputes in the future. You will learn a lot about your case, and probably about your business, even if you are not able to settle the dispute.
4. Use Mediation to narrow the dispute.
Even if Mediation does not completely resolve a complaint or dispute, it can be used to isolate and resolve certain specific issues, with remaining issues to be determined elsewhere. Mediation parties can agree to limit a case being submitted to a Judge or an Arbitrator to save costs and other exposure. For example, parties can eliminate certain named parties or witnesses, eliminate certain counts in a Complaint, and can even limit damages by agreement. This often involves concessions pertaining to those isolated issues, but it can result in a dramatic reduction in the cost of litigation, while still allowing for findings of fact or law where deemed necessary and worth the cost.
5. Use Mediation AS YOU SEE FIT.
Mediation is basically negotiation for mutual benefit and can be used to come to any voluntary and enforceable agreement, so BE CREATIVE! Don’t be afraid to try anything in Mediation. I have witnessed hundreds of surprising solutions to perceived problems and disputes. The dispute might turn into a new business opportunity. The lawsuit might be submitted to arbitration with a minimum monetary award and a maximum monetary award already agreed to by both parties. The parties might set a course for the case, once a Judge has ruled on certain preliminary motions. Combinations of Mediation, Arbitration and litigation are often used.
6. Submit your case to Arbitration.
The benefits of Arbitration are well documented. What you might not realize is that Arbitration can also be tailored to the needs of the parties. Whether Arbitration is mandatory or not in your particular dispute, you can still save costs and limit exposure by specifying what is being submitted for decision. What specific issue(s) will the Arbitrator decide? You might ask for a dollar award with no reasoned decision. You can agree to and submit the factual background of the case, eliminating the cost of putting on an evidentiary case. Or, you can do the reverse and ask for factual findings, with the application of the law predetermined by the parties. You can further reduce costs in Arbitration by handling preliminary motions, and even some testimony, via telephone or video conference.
7. Take full advantage of tools for settlement within litigation.
Courts have various tools in place for helping parties settle their dispute short of a trial, such as Settlement Conferences, Status Conferences, formal Case Evaluation (usually by a 3-person, court-appointed panel) with sanctions, and offer tenders with sanctions, among others. Each court is different, but it behooves you to understand those tools in-house to better direct outside counsel to take advantage of them. Preliminary Motions can also be used to dramatically reduce the risk of loss in a lawsuit, but often Motions are filed willy-nilly, with no clear strategy. Company management should be involved in that strategy if cost and other exposure is a business concern.
8. Hold a mock trial.
Sometimes companies who are facing serious litigation with a significant risk of loss, along with various unknowns, will hire a jury and/or judge to decide a “practice” case. This can be expensive but can also save the company millions of dollars by learning necessary lessons before the company is really on the line. It can help you decide if you do or do not want a jury trial, and how to tailor your case for a jury versus a judge. This can even be helpful before Arbitration and may steer you toward seeking another option for getting past the dispute.
9. No time for looking into all of this?
I know in-house counsel can be extremely busy. If you don’t have time to run down all of the above options, hire an independent to present some options and costs (a sort of menu) for your specific dispute, so you are not making decisions in a vacuum. This should be done by a neutral party, someone who does not stand to gain or lose anything based on which option you choose.
If ever there was a reason to go through litigation or any other effort to resolve a dispute, it is to learn from your mistakes! It is amazing how many companies do not turn back internally to identify what caused the dispute and analyze how the risk of loss can be minimized in the future. Going right back to #1 above, any dispute should cause an automatic review of corporate policies and procedures to see if some changes, even minor changes, can pave a smoother road for the company going forward. A cost-benefit analysis should be done on any tools you used to get through a dispute. Was it cost-effective to use Mediation? Did you lose ground with ineffective Motions? How much money did the company save by getting an expedited Arbitration ruling? Did the company make a mistake with a jury? Outside counsel may not point these things out, but business managers owe it to their companies to learn as much as possible from disputes and how they play out.
Reprinted with permission from the Association of Corporate Counsel (ACC)