Video Simulation Highlights the Need for a New Deal Point: The Prevention Neutral

By Amy Foust

A March 4 New York Law School Alternative Dispute Resolution Program presentation focused on the work of CPR’s Dispute Prevention Committee, centering on recognizing the inevitability of disagreements in complex business relationships, and the value of working to prevent problems from festering into conflict and formal disputes.

The program, “No Need to Resolve if You Can Prevent,” opened with moderator Noah Hanft, of New York consulting firm AcumenADR, noting that mediation was rare just a few decades ago, but is now common or even required in many jurisdictions.  He expressed confidence that dispute prevention, although unusual today, will be a part of ADR’s future.

Hanft, who was CPR’s president and CEO from 2014-2019, co-chairs the CPR Dispute Prevention Committee with Gregory S. Gallopoulos of General Dynamics Corp., in Falls Church, Va. The committee has worked with CPR to develop a dispute prevention panel of professionals to assist companies in developing techniques and processes to head off conflicts, and Model Dispute Prevention and Resolution Provisions. 

The model provisions assist with the appointment of a standing neutral for significant transactions, such as joint ventures where the parties envision a long-term relationship; a standby neutral, who is ready to step in but is not necessarily involved in regular meetings; or an agreement, without the appointment of a neutral, to work to recognize and resolve friction before it evolves into conflict.

CPR also offers a new Dispute Prevention Pledge for Business Relationships (it can be viewed and signed here) to recognize the importance of addressing conflict. The Pledge allows for contracting parties to incorporate dispute prevention mechanisms into business arrangements, such as the prompt identification of escalating conflicts or the appointment of a third-party neutral who will be engaged before disputes emerge.

Noting that the failure rate for joint ventures might be as high as 60%, the panel used portions of  a video from a January dispute prevention simulation at the CPR Annual Meeting to discuss how dispute prevention might work in a complex business scenario, with several of the #CPRAM21 presenters returning for analysis at the NYLS program. 

The video follows a hypothetical joint venture of two auto companies seeking to build a network of electric car charging stations. The scenario envisions perfunctory quarterly meetings, with increasing departures from projected results.  In one version of the scenario, there is no early intervention.  The failures lead to finger pointing and blaming.  Mediation fails, and the case goes to arbitration.

In a second scenario, a neutral attends meetings, and calls attention to the pattern of falling revenues before the parties have expressly addressed them.  Recognizing this as a likely source of future conflict, the neutral facilitates a conversation about the significance and causes of the departure from plan—a “constructive framework” for review. The parties work on a joint plan to revise the course of the deal or terminate the joint venture before a dispute emerges. 

The video segments also addressed overcoming objections to adding a dispute prevention clause to an agreement, distinguishing dispute prevention from a routine dispute resolution clause.  One mock negotiator dismissively described the appointment of a standing neutral as “like marriage counseling.” 

But panelist Deborah Hylton, a neutral who heads her own Durham, N.C., firm and who also played the role of the standing neutral in the CPR video, described the neutral’s role as more “guiding and facilitative,” akin to “an honest broker.”  She said the neutral can call out “the 500-pound. gorilla” neither side felt that it could address “for fear of signaling a weakness.” She described the value of the neutral’s ability to raise difficult issues.

Panelist Kimberly Maney, assistant general counsel at pharmaceutical manufacturer GlaxoSmithKline, based in Durham, N.C., spoke to the familiarity of the hypothetical scenario.  These relationships start in a great place, she said, but then “something goes not quite right,” and the relationship “moves to a scorched-earth posture.” 

Her business partners, Maney offered, would be happy to have a better option for managing conflict than burning the relationship to the ground.  Dispute prevention is helpful in allowing the parties to have a disagreement but still maintain a relationship, she noted.

Panelist Steven Bierman, a New York-based partner in Sidley Austin, noted that outside counsel and litigators are ultimately problem-solvers.  One way to help clients, he said, is to litigate or arbitrate a case, but another is to help clients anticipate problems and avoid litigation.  There will always be disputes to be litigated, Bierman said–if not this one, the next one.

In responding to audience questions, the panel encouraged counsel to engage the business executives involved in a large transaction in crafting a dispute resolution clause appropriate to the relationship the parties seek to establish. 

This is too important, Moderator Noah Hanft said, to be left to the lawyers.  Using ADR provisions as boilerplate copied from one agreement to the next is likely inadequate.  ADR clauses typically address how to resolve disputes, not how to manage the relationship to prevent disputes.

Furthermore, because the dispute prevention and resolution clauses govern the relationship, what worked in a prior relationship might not be in the best interests of a new relationship.  The best time to address these issues is at the outset, when everyone is on good terms. 

The program, hosted by NYLS ADR Skills Program Director F. Peter Phillips, is available at the program’s link above.  The CPR Institute has a web page devoted to the program, too, and it includes the video, here. Panelist Deborah Hylton also posted an article that expands on the Annual Meeting and NYLS programs that can be found here.

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Author Amy Foust is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

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Update Regarding COVID-19 & CPR Mediation Services

The COVID-19 health crisis is causing unprecedented disruptions and damages to the World’s economy and business relationships. A great variety of commercial disputes are surfacing as parties find it impracticable or impossible to perform their contractual obligations. In all likelihood, this crisis will result in a surge of litigation and will also considerably slow down the resolution of pending court cases. In fact, many courts around the world have stopped holding jury trials which will create a considerable backlog for many pending cases. These unprecedented delays should encourage parties to consider alternative dispute resolution.

Last week, we shared with you the launch of a new Dispute Prevention panel, comprised of neutrals who have the experience to facilitate the resolution of a dispute before it becomes a legal conflict. At the same time, we also want to remind you that CPR Dispute Resolution and its Mediation Services are also available to assist businesses in these difficult times. As you know, mediation is a flexible, nonbinding dispute resolution process that uses a neutral third party- the mediator – to facilitate negotiation between the parties and help them find a mutually satisfactory solution to the dispute. The mediator has no authority to impose an outcome on the parties and controls only the process of the mediation itself, not its result. The process is typically faster and more cost-effective than binding dispute resolution processes, such as litigation or arbitration.

CPR’s Mediation Procedures have been drafted by dispute resolution experts and have been used to resolve hundreds of cases over the past three decades. They offer flexibility while providing ground rules for the conduct of the mediation. For example, they provide rules to select the mediator, exchange information between the parties or to preserve confidentiality. All our mediation procedures are available here.

CPR’s Panel of Distinguished Neutrals comprises those among the most respected and elite mediators in the US and around the world. It includes prominent attorneys, retired state and federal judges, academics, as well as highly-skilled business executives, legal experts and dispute resolution professionals who are particularly qualified to resolve all business disputes including those involving multi-national corporations or issues of public sensitivity. Focusing in more than 30 practice areas, CPR’s esteemed mediators have provided resolutions in thousands of cases, with billions of dollars at issue worldwide. Click here for more information about CPR’s Panel of Distinguished Neutrals.

FAQs

How do I commence a mediation with a counterparty with which I have a dispute?  You will need to execute the following mediation agreement with your counterparty:

“We hereby agree to submit to confidential mediation under the CPR Mediation Procedure the following controversy: [Describe briefly]”

What if it is an international dispute? You will need to execute the following mediation agreement with your counterparty:

“The parties hereby agree to submit to mediation under the CPR International Mediation Procedure the following controversy: [Describe briefly]”

What if it is an employment dispute? You will need to execute the model submission agreement in Appendix 1 of CPR Employment Mediation Procedure

What is the cost? 

  • You do not need to pay any filing or administrative fees to use CPR Mediation Procedures. However, if the parties cannot agree on a mediator – or if they would like to benefit from CPR’s expertise in identifying a qualified mediator for the dispute – you will need to pay US$ 1,500 fee (the fee is split among the parties). Click here for more information on how CPR’s experienced case management team assist the parties in selecting their mediator.
  • In addition, you will need to pay the mediator.  Most mediators charge an hourly rate.

What if my dispute is below US$ 500,000?  You may consider using CPR’s flat fee mediation program.  Under the program, the dispute will be mediated for a flat fee of $3,500, to be split among the parties ($2,500 when a CPR member is involved in the dispute).  This amount will entitle the parties to one day of mediation (up to 10 hours, including preparation). Thereafter, an hourly rate of $350 will apply.  Mediators are directly appointed by CPR, after the parties have agreed upon a date and venue.

How do I request CPR’s assistance for the selection of the mediator? To obtain the appointment of a mediator, send your request via email to CPRNeutrals@cpradr.org with the contact information for all parties, including email addresses.  You will also need to pay a $750 non-refundable deposit. Payments can only be accepted via credit cards or wire transfer. Please specify in your cover email how you would like to pay. Click here for more information.

How to I contact the case management team if I have additional questions? Contact Alveen Shirinyans at ashirinyans@cpradr.org or +1.646.753.8230 or Helena Tavares Erickson at herickson@cpradr.org or +1.646.753.8237