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Bar News - December 18, 2009

Private Justice an Increasingly Popular Option


High litigation costs, case delays, lack of control over the process, and a desire for privacy are driving more and more civil litigants and their lawyers away from the courts and into private justice venues in New Hampshire, as well as nationwide.

In an effort to stem that exodus, the NH Judicial Branch has increasingly promoted alternative dispute resolution within the state courts. Most recently, it championed the creation of a specialized business docket in the Superior Court, explicitly acknowledging that the new court was set up to compete with private justice options. But what are these "private justice" venues and what makes them so attractive? What are their advantages and disadvantages compared to litigation?

Starting with this article, the Bar News will be reporting on private justice alternatives over the next few months to answer some of those questions.

While alternative dispute resolution has existed since the dawn of civilization, what we’ve come to think of as the private justice system owes its popular origins in the United States to the turmoil of the 1960s.

According to Dispute Resolution by Stephen Goldberg, Frank Sander and Nancy Rogers, the period saw dramatic growth in social reform legislation, including the Civil Rights Act of 1964, the creation of Medicare, and the expansion of environmental protection laws. Lawsuits surged as a result of many new far-reaching laws, overloading the courts and opening the door to alternatives.

Terry Shumaker, an attorney with Bernstein Shur in Manchester, arbitrates and mediates for the American Arbitration Association, as well as for the state and federal courts. He has published numerous articles on both mediation and arbitration and says that he expects the growth of private adjudication to continue well into the future.

"I think that this is a mega-trend. The wave is gathering momentum," he said. "I think the funding issues [in the courts] will push it even faster. The Internet has also picked up the pace of commerce and people don’t have the time to take three or four years to settle a dispute."

Types of ADR

There are two major types of alternative dispute resolution: binding resolution and non-binding resolution.

In arbitration, the most common form of binding resolution, an independent, neutral arbitrator – or panel of arbitrators – hear the facts of a case and then make a decision that is binding under state and federal statutes, and recognized by the courts. The arbitrator(s) are normally chosen by agreement of the parties, but may be appointed by a court in certain cases or if an agreement cannot be reached. Arbitration proceedings, and in most cases, arbitration decisions, are private.

With non-binding resolution, commonly in the form of mediation, an independent, neutral mediator hears a summary of the dispute and then facilitates talks between the parties involved. At the conclusion of mediation, parties will settle, decide on more mediation, or continue to trial. The proceedings of the mediation are not admissible in court without party agreement.

Both binding and non-binding resolution each have their own strengths and weaknesses – which will be explored in future articles – but both are generally cheaper, faster, and more customizable than litigation.

Mediation Less Costly

When a case is brought to court, the costs – monetary and otherwise-- often become overwhelming. In addition to one’s own legal fees, there is the possibility of having to pay opposing counsel’s legal fees in fee-shifting cases, the time required from the parties involved, and even the toll on one’s health due to a long, drawn-out and stressful trial process. ADR, proponents say, provides an easier, less expensive route to resolution.

Shumaker cites an example: Consider a contested will granting ownership of a vacation home."Any time you’re fighting over a finite number of assets, mediation should certainly be considered," Shumaker says."In a trial, by the time you’re done fighting, the pot has shrunk. With mediation, even if you don’t settle, at least you haven’t lost that much."

The speed of mediation also produces savings. In less complex cases with a limited number of parties who are open to negotiation, mediation often takes only a single – albeit long and stressful – day to complete. Mediation is used very successfully in many types of disputes, from family and probate law to employment, construction and zoning disputes.

Monetary costs of mediation, excluding the settlement itself – are often limited to the time required to draft a dispute summary for each party, travel expenses, and the cost of hiring a mediator, whose rates are consistent with an attorney’s hourly rate, but which apply only to the span of the mediation process and generally split by the parties.

Arbitration Produces Certainty

For more complex cases where certain expertise is required, or where parties agree to conduct it, binding arbitration is still, if used effectively, cheaper than a full-scale trial in the court system.

In arbitration, a "trial date" is set ahead of time, and, barring any extreme circumstances – illness, emergency, etc. – it will take place on that date. This, Shumaker says, can prevent high costs when there are cases that require many expert witnesses, long travel and multiple parties. "In arbitration, the process is usually more efficient," Shumaker said. "Having a set trial date is a godsend in complex cases with lots of witnesses."

Even in the most complicated cases, arbitration rarely takes more than three or four days and the discovery process is limited. Often used with complex corporate disputes, employment issues, harassment cases, and many other specialized practice areas, arbitration agreements are quickly becoming standard additions to business contracts and employment agreements.

ADR More Timely

Both mediation and arbitration cases are turned around more quickly than is possible in the courts. Whereas a criminal docket and under-funded courts can force civil cases to wait a year or more to get to trial, delays that are virtually unheard of in the world of private adjudication.

The fact that less time is spent waiting for resolution in the world of private justice makes it very attractive to many litigants, especially those in business.

Litigation can tie up key managers and employees, diverting their focus, exponentially increasing the true cost of going to trial.

Even with a broader discovery process than mediation, arbitrated cases still close more quickly than litigated cases. And the arbitrator’s ruling is final. There are no "automatic" appeals with binding arbitration. "There is a place to get a fair trial without having to be in court for three years. Normally, [with binding arbitration] you get a written decision within 30 days," said Shumaker. "You could have a case be completed in nine months and the decision will be pretty much bulletproof."

Tailored to You

Alternative dispute resolution can be tailored to the individual parties and their dispute. The parties choose their neutral, a fact that can make a huge difference in how a dispute is resolved. The less confrontational atmosphere of ADR processes allows parties to maintain relationships after the case concludes. Finally, for messier disputes, mediation and arbitration provides privacy that a trial can’t.

Once again, using the example of the contested will, Shumaker says that the individualized approach of mediation has its advantages. While a court would make a definitive decision awarding an inheritor possession of the vacation home, mediation would allow the parties to agree, perhaps to share the property and the associated costs. Shumaker says that the mutual involvement of the parties not only provides for "more appealing outcomes," but also allows the parties to maintain their relationships while the adversarial nature of a trial may make that nearly impossible.

"It’s perfect for parties that have a dispute and need it decided quickly so they can get on with their lives," Shumaker says.

Bringing a case to the courts forfeits control over the way the case will be decided. The choice of judge and jury are luck of the draw, while in ADR, the parties parties agree on the selection of a neutral.

Here to Stay

ADR is growing in popularity. A recent survey conducted by the National Arbitration Forum, which polled the members of the ABA General Practice Solo & Small Firm Division and the Tort Trial & Insurance Practice Section, shows that more than 80 percent of those polled believe their clients are sometimes best served by ADR solutions. More than 50 percent said that offering clients ADR options was an ethical obligation as a practitioner.

Editor’s Note: In upcoming articles, we’ll speak with other ADR professionals about specific types of binding and non-binding resolution, look at the drawbacks of ADR and other issues regarding ADR.

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