Understanding the benefits of alternative dispute resolution
There are at least nine different kinds of ADR, providing insurers with a variety of options outside of the courtroom.
Plaintiffs and defendants often describe their goals in emotional terms: “Make me whole,” “I want vindication,” “Teach them a lesson,” “I demand justice,” “This must never happen again,” and perhaps the most realistic goal, “I just want this to end.” Even that simple goal, closure, has become less available than it used to be.
Why ADR? Why now?
The civil justice system provides a fair set of rules, also called due process: fair notice of the deadlines and fair opportunities for the parties to make their case to the judge or jury. As the American Judges Association explained in a 2007 white paper, “[P]eople are . . . more willing to accept and abide by the decisions of judges when those decisions seem to have been made fairly. And their views of judges, the court system, and the law are more favorable following an experience in which their case is handled via a fair procedure.”
But even with the fairest procedures, is it fair to have civil cases drag on for three or four years, or even longer? Is it fair for parties’ resources to be consumed, sometimes to the point of bankruptcy, through unfettered discovery and repetitive and needless motions that deplete courts’ sparse resources and the parties’ money?
In a February 24, 2021 article, CalMatters, a California-based nonprofit news source, reported that from March through August 2020, during the COVID pandemic’s upswing, only half as many California cases were closed when compared to the same months in 2019 — leaving 1.4 million civil cases unresolved. Courts across the country have similar logjams. Somehow those backlogged cases must come off the dockets.
Does civil justice come at a fair price? Americans enjoy professional sports, especially baseball, basketball and football. In 2017, the total revenues of the NFL, NBA and Major League Baseball were slightly under $30 billion, including salaries, branded merchandise, food/beverages, and other income. That amount pales in comparison to what we spent on civil litigation in 2017. Civil litigation cost Americans $135 billion in 2017, including all salaries, vendors’ fees and experts, but not the money awarded as damages — four and one-half times as much as those three sports combined.
Attendees at sporting events want to be there, but very few people and businesses relish being hauled into court or having to haul someone else there. Why do we spend so much more money on a pastime that we’d rather spend less time doing?
As to that elusive goal, closure, a trial that goes to verdict isn’t always the last act in the drama. It’s common for the losing party to file post-trial motions, seeking to reduce or even erase the jury’s award, or to force a new trial because of an (allegedly) erroneous ruling by the court, or suspected misconduct by one or more jurors. Failing that, there’s still the possibility of an appeal, which may take as long as the case did.
ADR is changing the litigation landscape
When I began practicing law, direct settlement negotiations between counsel were as routine as mediations are today.
Flash forward to the mid-1990s. I was trying to settle an insurance bad faith case with an opposing lawyer. He asked if I wanted to mediate. I said I’d like to try the old-fashioned way, just bargaining with each other until we reached a settlement or an impasse. His response: “Are we still allowed to do that?” We were, and it settled.
As my obliging opponent and I were settling the case, states were enacting laws to protect the confidentiality of nearly all mediation communications. Lawyer-to-lawyer negotiations were not given the same degree of protection. Mediators and mediation organizations quickly proliferated, spurred by the new laws, but also by lawyers’ realization that mediators could take the fall for delivering bad news to their clients, cloaked with the authority that comes with a quasi-judicial, neutral role.
Decisions and deciders
There are at least nine kinds of ADR: mediation, arbitration, mandatory settlement conferences (MSCs), early neutral evaluations, direct negotiation, conciliation, facilitation, community dispute resolution and binary decision making (such as high/low agreements and baseball arbitration). The chart in Figure 1 notes some of the pros and cons of the first three.
As imposing as MSCs can be, the judge or settlement officer cannot force the parties to settle, only to attend — “in good faith” — for as long as the court wants them there. MSCs apply “the art of the possible,” as Bismarck described politics. They seek the most expedient outcomes that are possible that day. When they succeed, and the parties put a settlement on the record, they bring about closure. Otherwise, it’s off to trial unless the parties agree to mediate.
Whether the MSC is in person or virtual, the process can’t succeed unless everyone needed to make or approve a settlement participates. Just “showing up” isn’t enough. The representatives for each side — parties, counsel, liability insurance adjusters, spouses (if their consent is required), guardians and others who must sign or consent in court to a settlement — must be prepared to make quick decisions. A conference call among them a few days before the MSC is the best way to prepare.
If the court’s rules allow the parties to submit MSC briefs, they should be…well, brief. Bear in mind that the court already has the full record of the case. A concise statement of liability, damages, anticipated key issues at trial, and the most recent settlement offers/demands should suffice but follow the local rules.
Contractual arbitrations are mandatory, with some statutory exceptions. In other cases, the parties may agree to submit their dispute to arbitration and ask the court to stay the case. In an arbitration, the parties cede their decision-making ability to one arbitrator or a panel of three, who decide the outcome.
Cases are often won and lost in the arbitrator selection process. Carefully review the prior awards granted by the candidates and speak confidentially with a few attorneys who participated in one of those arbitrations.
Arbitrators’ fees can mount quickly. In one case, several respondents who were covered under the same liability insurance policy burned through their policy limit before the hearings, which extended over six months, ended. The claimants were awarded a handsome sum of money, very little of which was collected. Parties may save a great deal of money before the arbitration hearing by stipulating as many facts as they can agree on and to the admission of exhibits. They may also stipulate to time limits on themselves, which the arbitrator(s) may extend for good cause. The moral of the story: don’t give an arbitrator a blank check.
Mediations are usually voluntary though some are contractual. Mediators don’t decide the case but assist the parties in reaching a settlement through “shuttle diplomacy,” speaking to each side in turn and seeking concessions.
If the only issue separating the parties is the amount of money to be paid, it is sometimes possible to convert a mediation into an arbitration. To do so, the parties must agree in writing that the mediator may consider all the facts he or she learned during the mediation. Then the newly minted arbitrator can decide the case within the range of the last offer and demand.
If the parties’ settlement positions are not wide apart, but they aren’t budging, the mediator may suggest a non-binding Mediator’s Proposal between the two figures. Each party then replies to the mediator only with a written “yes” or “no.” If all parties reply “yes,” the mediator announces there is a settlement. If there is even a single “no,” he or she announces there is no settlement without saying who said “no.” That generally ends the mediation, though the mediator may contact the counsel again after a cooling-off period.
Who will decide your case? It’s the first and most critical consideration for parties and claims professionals evaluating their ADR options. My rule of thumb: the only outcome you control is the one you negotiate.
A concluding thought: disputes’ outcomes may be fair, just, efficient, final, economical and speedy, but rarely do they have all those qualities in the same case. As with so many things on our minds during the past 16 months, we’re all doing our best. Maybe when it comes to dispute resolution, closure should take precedence over other goals, so we can get back to those pastimes we enjoy.
All’s well that ends.
Louie Castoria is one of the first 40 mediators nationwide to be certified as a mediation and arbitration panelist for CourtCall®’s new Online Dispute Resolution service. He is a partner at Kaufman Dolowich & Voluck, LLP’s San Francisco office and has a civil rights case awaiting the opinion of the U.S. Supreme Court. He is a member of the Mediation Society, a mandatory settlement officer with the San Francisco Superior Court, and an adjunct professor of law at Golden Gate University. Contact him at louie@castoriadisputeresolution.com.
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