IN TODAY'S LITIGIOUS, media-intense times, the economic risk of negative publicity and loss of clientele is a significant concern for every professional enterprise. This holds true for all professionals - doctors, accountants, lawyers, engineers, consultants, dentists, professors, realtors or architects. Because those seeking professional services can compare and "shop" even on the Internet, competition for clients and patients is more intense than ever. This trend makes safeguarding a practice's professional reputation for expertise and good judgment of paramount importance. A good public image is difficult to earn and easy to lose.

Historically, disputes within a professional practice were resolved privately. When that failed, the practice typically dissolved, with members opening their own offices. Until recently staff would not have dreamed of suing the professional group where they worked. That has all changed.

Professional firms, even in New England, are growing larger and operating out of multiple locations (some partners in large national law and accounting firms have never met). Size can lead to a diminished sense of loyalty to the enterprise and a willingness to challenge its authority. Numerous laws now guarantee the right to contest virtually any adverse employment decision. For example, a dental hygienist, secretary or bookkeeper let go after telling her boss she is pregnant has a state agency, a federal agency and the courts available to hear her discrimination case and plenty of attorneys eager to litigate it.

A professional group's vulnerability to employment-based litigation is not limited to claims by administrative or support staff. The professionals (doctors, lawyers, etc.) at an incorporated professional association are themselves employees who can and do take advantage of the same statutes even if they are part owners. No less an authority than the United States Supreme Court has ruled that even a law firm partnership decision can be challenged under the employment discrimination laws.

One of the first sexual harassment suits in New Hampshire was brought by a female architect who was fired after she rebuffed the company president's romantic advances. Engineers and accountants have claimed retaliation after they objected to their employer's skirting safety or tax regulations. Discrimination charges by college professors contesting denial of tenure are becoming more frequent. Non-competition litigation between medical, accounting and veterinary groups and their former professional colleagues is now commonplace in our state. A major big city law firm was prominently featured in the national press when a legal secretary sued a partner alleging that he had sexually harassed her for years, and a jury agreed.

There is another way to resolve such disputes: arbitration. In arbitration, the is sues can be decided promptly, costs can be controlled and other undesirable side effects, such as negative publicity, can be avoided. While an agreement to arbitrate professional firm disputes must be implemented carefully with applicable laws in mind, it is not that difficult to do and well worth the effort.

A shareholder, partner or employee suit is a stressful event for any business. It contributes nothing to the bottom line even if the firm prevails. Such cases hit a professional practice even harder when its internal decisions are challenged publicly as the "product" for sale is its professional service, judgment and advice, not a lawnmower or a hamburger. A professional's time is his or her stock in trade. Lots of it will be gobbled up defending a claim in court and dealing with the attendant negative publicity.

In court litigation, professional firms should expect their fee structure, profits, client identities, personnel policies, past personnel problems and even malpractice claims or professional conduct complaints to become fodder for a courtroom and media audience. Any medical provider, architect, lawyer or accountant can easily imagine the harm that may result from such disclosure.

An agreement to arbitrate claims can do much to minimize publicity and other potential negative impact of court litigation. It may also mitigate the cost of settling a case, as plaintiffs' lawyers know that an employer will often pay a high premium to keep certain kinds of cases out of the public eye. While arbitration is not a new vehicle for dispute resolution, for decades it was unclear whether it would be upheld in the employment context. In recent decisions, the Supreme Court of the United States has left no doubt that the law favors arbitration and that when a valid arbitration provision is in place, employees and shareholders must arbitrate even statutory claims, such as for discrimination or overtime pay. (Mandatory arbitration of client or patient complaints may well raise ethical issues and is beyond the scope of this article.)

Since actions speak louder than words, I note that our law firm has included arbitratoin clauses in our shareholder and employment agreements for at least 15years. While we have never had to invoke those provisions, we all take comfort in their existence. A few reasons why:

• Court cases and appeals can drag on for years. Arbitration moves much faster. The hearing and decision in an arbitration often occurs within six months or less.
• Court discovery is very broad and much sensitive information can become known. Arbitration offers streamlined discovery generally supervised by the arbitrator who limits it to what is really pertinent to the issues.
• Judicial review of an arbitration decision is very limited. As long as the arbitrator acts within authority, under New Hampshire law a judge can only set aside the ruling for fraud, corruption or misconduct. The courts have ruled that if an employee's substantive claims can be advanced, the arbitrator neutral and the proceedings fair, the arbitration decision must stand. For this reason most cases are never appealed. This saves time and money.
• Unless agreed otherwise, the proceedings are private and conducted without public or press, at a mutually agreeable time and location. The parties customarily share the expenses, but other arrangements as to costs may be appropriate and should be explored with counsel drafting your arbitration clause.
• The parties have a major say as to who the arbitrator conducting the hearing and making the rulings will be. Court cases are assigned randomly with judges subject to change as the case proceeds. Parties to an agreement to arbitrate often agree in advance on a specific arbitrator or the selection process to be followed. Our law firm agreement calls for an attorney arbitrator and specifies the American Arbitration Association's rules for selection and hearing procedures. The parties can choose an arbitrator who is familiar with their profession and/or the kinds of issues presented. Such flexibility is simply not available in the judicial system.
• There is no jury in arbitration; the arbitrator decides factual, legal and credibility issues, rendering a written ruling on the case if the parties desire. Many believe that complex contract, shareholder and discrimination claims are not well-suited for juries and an excessively high verdict is less likely from an arbitrator.

There are various options available for implementing an arbitration program for a professional practice. As always, get good legal advice and follow it so your procedures will hold up if challenged. Professional service firms should not miss the opportunity to take advantage of the recent legal developments favoring arbitration to avoid the many risks of court litigation.

Edward E. Shumaker, III is an attorney with the Concord law firm Gallagher, Callahan & Gartrell. He is a Fellow of the College of Labor and Employment Lawyers, has drafted many employment agreements and tried over a hundred arbitration cases. He is an American Arbitration Association-approved panel arbitrator for commercial and employment disputes and was recently appointed to chair a subcommittee of the American Bar Association's Dispute Resolution Section.

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