#CPRAM22: Corporate Counsel Roundtable–Leveraging Technology to Prevent Disputes

By Janice L. Sperow

Unlike many other alternative dispute providers that focus exclusively on conflict resolution outside the courtroom, the International Institute for Conflict Prevention & Resolution (CPR) also places a high premium on dispute prevention.

That’s right–curtailing an emerging issue before it becomes a full-blown legal dispute in the first place. CPR has challenged the corporate world to commit to dispute prevention by signing CPR’s Dispute Prevention Pledge for Business Relationships.

Business disputes impose enormous costs in loss of mission, business, focus, revenue, and relationships. Consequently, today’s savvy leaders understand the need to use every tool possible to prevent them–including increasingly available, sophisticated technology.

Four corporate leaders shared how they leverage technology to prevent business disputes at this year’s CPR Annual Meeting. Corporate counsel in-house thought-leaders joined this article’s author, CPR neutral Janice Sperow, La Mesa, Calif.’s Sperow ADR Services. who moderated a March 2 #CPRAM22 discussion on the role of technology in preventing disputes.

The panel explored data transformation’s accelerating role in avoiding litigation, securing compliance, and minimizing risk across a wide range of industries, sectors, and markets. From “big data,” software development, and retail sales, to aerospace and defense, these experts explained how they navigate the benefits and challenges of today’s technology and tomorrow’s automation.  

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The corporate counsel panelists included leaders in their fields: Amy Yeung, General Counsel and Chief Privacy Officer for Lotame Solutions Inc., a Columbia, Md., data collection and management consulting firm; Nick Barnaby, Staff Vice President and Associate General Counsel at aerospace defense contractor General Dynamics Corp. in Reston, Va.; Chris Nelson, head of the Data & Operations Team for Microsoft Corp.’s Compliance & Ethics organization in Redmond, Wash., and Kenneth Oh, Vice President of Privacy for Bath & Body Works, headquartered in Reynoldsburg, Ohio..

Before Lotame, Amy Yeung started her career the conventional way, in law firm practice. She soon went in-house, joining Zenimax Media Inc., a Rockville, Md.-based global video game publisher, as  Associate General Counsel. She then moved to New York-based artificial intelligence platform Dataminr. Continuing to build on her successes, she became Deputy General Counsel at Comscore Inc., in Reston, Va., where she was integral in evolving the company to compliance with new and prospective privacy regulations, in addition to  launching Comscore products. 

Like Amy, Chris Nelson is no stranger to big data. His Microsoft position has primary responsibility for workplace- and business-conduct.  The Data & Operations Team (DOT), brings together data analysts, program managers, and legal professionals to design and operate solutions that increase the effectiveness of investigations, translate learnings into data-driven insights, and build predictive models and analytics that help the company mitigate emerging compliance risks. Chris is also a core member of Microsoft’s Anti-Corruption Technology & Solutions program, a 10-year effort to “bend the curve” of corruption by delivering expertise and anticorruption technology to governments. Chris worked as Microsoft corporate counsel before taking over DOT.

Protecting new technology, Kenneth Oh is a privacy and intellectual property attorney with more than 25 years of experience. He is a former Trademark Examiner with the U.S. Patent and Trademark Office and was of counsel with Washington, D.C.’s Baker & Hostetler, where he advised clients on intellectual property issues, litigated cases, and appeared before the USPTO’s Trademark Trial and Appeal Board. He served as Associate General Counsel at Bentonville, Ark.’s Walmart Inc., and Assistant Vice President, Privacy and IP Corporate Counsel with Miami-based TracFone Wireless Inc. before becoming the Assistant Vice President, Privacy at Bath & Body Works Inc.

Handling large government and other contracts, Nick Barnaby is General Dynamics’ Staff Vice President and Associate General Counsel, where he advises on many of the company’s most significant litigation and disputes.  Nick works on identifying and avoiding potential risks and disputes. Prior to joining General Dynamics, Nick was a partner at Jenner & Block, focusing on internal investigations and commercial litigation.

Moderator Janice Sperow is a full-time neutral, CPR arbitrator and mediator, hearing officer, special master, and Judge Pro Tem who serves on several arbitration panels, including emerging technology, complex commercial, and employment disputes. Formerly a litigator with Morrison & Foerster and then Managing Partner and Head of Litigation & ADR at Ruiz & Sperow, Janice has served as an arbitrator for more than 35 years, overseen more than 450 arbitrations as an arbitrator, and conducted more than 1,000 arbitrations as counsel. Like CPR, she also focuses on dispute prevention.

Despite their differences, the panelists shared one key innovation: they are on the cutting edge in using technology to prevent disputes and mitigate risk.

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The Format: The moderator used a series of questions to launch the dialogue. Here is what the panelists shared with CPR at its annual meeting.

Question: Share with us how your company currently uses technology to prevent disputes and avoid risks.

Chris: Microsoft aggressively uses technology inside the company to fuel its compliance programs and to drive a culture of accountability and business ownership of risk. One of the critical avenues Microsoft uses focuses on increasing the use of data and data fluency on the legal compliance side so that managers and risk owners can translate historically subjective descriptions of risk into objective quantifiable indicators of why a particular risk is trending high or low as compared to the rest of the world–all in the business language they understand and work with daily. It also paints a big picture of how the risk looks over time, its scope, magnitude, and current probability. 

Amy: Lotame pulls together a lot of big data sets for commercial advertising purposes, but many companies also use these same data sets to address risk. For example, insurance and financial companies use them to round out their own data for benchmarking, context, and discrimination avoidance. Prior companies, such as Dataminr, capture social media content for immediate use on the ground, such as in the Ukraine conflict, to protect employees and personnel at risk by feeding them real-time data. Other companies use the data for anticipatory prevention such as crafting policies or developing training to address predicted risks.

Kenneth: Bath & Body Works focuses on technology use to protect privacy. In today’s world, it would frankly not be possible to practice privacy law without technology, AI, and third-party vendor software that track data, systems, and populates necessary information fields. Technology reduces the risk of human error as the AI manipulates the data.

Nick: General Dynamics likes to use technology to address the root causes of disputes. Most disputes trace back to three sources or drivers: poor business partners, poor assumptions, or poor contractual terms. For example, technology-assisted due diligence of potential suppliers or partners can uncover more information quicker than a manual review. It may reveal information that can permit the parties to structure a deal which addresses that information directly before a problem arises, or even information that permits a company to choose not to partner with a particular entity.

Question: Dispute prevention looks both backward and forward. We hope to learn from past disputes and avoid repeating them.  We also hope to use data to predict potential future problems and avoid them. How has your company used technology both to prevent repeat problems and to avoid future risks?

Chris: Microsoft has been on a multi-year journey to learn how to capture lessons from disputes, workplace investigations, and corruption cases to then try to hone them into a compass that can help point in the direction of likely problems in other places to ideally avoid them, since most risks are serial in nature. Microsoft then feeds those lessons back to the management teams to implement and thereby can avoid a whistleblower case, for example, before it happens. While Microsoft understands that reactive capabilities are critical and therefore it has hotlines, complaint, and ethical issue avenues for problems requiring immediate redress, its focus also includes a proactive approach, for if we do not proactively apply what we learned, then we have as a society have learned nothing. Reactive posturing is a long-term losing proposition.

Amy: Post-mortems are critical on all levels: individual, enterprise, strategic. Plus, the data sets can serve as an independent check to confirm that the company is on the right track. The data become a movable white board to hold us all accountable and to avoid repeating mistakes because we all share in the lessons learned based upon the data.

Question: What are some of the most underused technologies in the corporate world today? Technology that could really help prevent disputes and risk but that we are simply not taking full advantage of?

Nick: Data currently used for business purposes could often be leveraged to mitigate risk if seen through that lens. For example, a budding contract dispute in a long-term contract can often mask a bigger underlying issue, such as a failure to meet a contractual obligation. If we used the information we collect in the aggregate for business purposes for prevention purposes, we could often address concerns before they ripen into full-blown disputes. General Dynamics, and likely many other companies, could use the information they already capture for business uses and repurpose it for risk-management purposes and to escalate the issue more quickly to higher-level decisionmakers before it blossoms into litigation.

Ken: Technology tools work exceptionally well for version- and document control. [Version control tracks systemic changes in software engineering.] We actually have many tools right now that we do not fully understand and use to their maximum capabilities.

Chris: The type of tool most needed and underused depends on the type of risk. For example, for financial risks, data architecture and structure are key. At the executive level, if the company is deciding where to deploy personnel to manage risk, then visualization and constant monitoring are essential.

Question: Greater technology use certainly achieves greater benefits. But it also comes with its own challenges. What are some of the issues you have faced with increased reliance on technology and how have you navigated them?

Amy: The greater the footprint grows, the more resources the company needs to devote to it. For example, most companies adopted email without pre-planning or thought. Now, emails frequently represent litigation fodder. Well, many companies are not currently thinking of today’s email equivalent–the data and technology we are using or adopting today and how it will be used in disputes down the road. Thus, one of the key challenges both at the enterprise and commercial level is the thoughtful planned and integrated structure for technology use at your company. Earlier architecture and ongoing monitoring of data uses can create a much more seamless integration of technology and avoid some types of risk before they occur.

Nick: General Dynamics very deeply values transparency and trust. So, one of the challenges we face in any adoption of new technology is managing the culture around its implementation, requiring us to focus on alignment and trust so employees understand the purpose, need, and benefit of the technology. General Dynamics empowers employees to use and adopt the technology themselves rather than imposing it on them.

Question: How does data ethics fit in?

Amy: Awareness and enactment of data privacy regulations has definitely increased dramatically. Consumers are also becoming more conscious of the varying uses of their data. We data professionals are really looking at the ethics involved in data use and taking responsibility. We do a gut check: Are our assumptions correct? Did we start with the right questions to begin with? Is this the right thing to do?

Question: What has really been worth it in terms of return on investment? If you had to choose one technology that has most impacted your company’s bottom line in terms of dispute and risk cost savings, what would it be?

Kenneth: Privacy software. Frankly, it would subject the company to statutory liability and damages not to properly monitor the use and privacy of customer data with available technology.

Chris: Microsoft uses its own really deep stack of technological tools. In addition, Microsoft spends on securing rich, valuable data sources, especially when working with governments. We also spend on data fluency, making sure we have the personnel who can bridge the risk managers to the backend data.

Nick: Technology limiting and eliminating the environmental impact of our operations. Investing in remedial technology beyond legal requirements to reduce any lingering liability from past environmental issues that occurred before people understood the environmental impact of the chemicals and materials used.

Question: How has data automation affected your own department? Has it helped prevent disputes and minimize risk?

Ken: Access to data quickly has allowed us to prevent disputes.

Chris: Data transformed the de-escalation of the energy after an investigation or dispute. After a dispute, the stakeholders meet and determine the critical failure points. At the end of the meeting, they are energized to avoid the same problems in the future. But a manual audit approach does not have a good return on investment and tends to deenergize the good intentions and follow up. Data has transformed that phenomenon. Now, people have data and a model showing where to look next for the problem to surface and to avoid it, rather than anecdotal memories. Vertically integrating the process to avoid waiting to get answers and analytics in the middle of the process has really helped as well.

Nick: Technology has helped us diagnose legal spend and determine patterns with data analysis rather than an old-school subjective review of legal bills.

Question: Predictions–Experts predict that we will see more technological advances in the next decade than we did in the past century. Given our world’s accelerated data transformation, what area do you predict will see the greatest advancements in dispute prevention over the next five years?

Kenneth: AI.

Nick: A more-hope-than-a-prediction that conscientious folks will use technology for good purposes, such as preventing disputes, and not just to gain an advantage.

Amy: Consolidation and integration of technology uses and functions.

Chris: Natural language processing.

Moderator: Personalized and genetics-based healthcare.

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Key Themes & Takeaways:

  • With greater technological advancement, comes greater responsibility.
  • Use technology in a language business managers understand to achieve common goals.
  • Real-time data allow on-the-ground, in-the-moment decision-making to mitigate immediate risks, such as supply-chain blockage due to extreme weather or civil unrest.
  • Keeping knowledgeable and current on developing technology allows companies and individuals to pivot nearly instantaneously to new business opportunities.
  • Technology-assisted due diligence can more easily permit companies to partner and align themselves with others that share their goals and values.
  • Capturing data over time illustrates the serial risks companies face, their pattern, and where they are likely to surface next.
  • Technology allows society to turn its past lessons more easily into future remedies.
  • Repurpose and leverage data already captured and monetized for business uses to prevent disputes.
  • Understand and use all the features of your technology.
  • The nature of the risk will often dictate the best technological tool to prevent it.
  • Data ethics must be a conscious part of all technology use.
  • Ultimately, technology is only as good as the uses to which we, as humans, put it.

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Take the Pledge:

If you agree that dispute prevention should play a vital role in our economy and society but are not sure where to begin, start by taking the CPR Dispute Prevention Pledge for Business Relationships. If you would like to become more active in dispute prevention, join CPR’s Dispute Prevention Committee, or if the intersection with technology sparks your interest, join CPR’s Technology Advisory Committee. Contact CPR Senior Vice-President Ellen Parker at eparker@cpradr.org. For other questions or information about this article or the roundtable, contact Janice Sperow at janicesperow@sperowadr.com

CPR members can access the roundtable video and other #CPRAM2022 sessions after signing in here.

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Author Janice Sperow is a full-time neutral, arbitrator, mediator, dispute prevention facilitator, and Hearing Officer specializing in mass claims, healthcare, technology, employment, and all commercial matters. She works on domestic and international matters at her La Mesa, Calif., firm, Sperow ADR Services. Her previous CPR Speaks article was “Increased Mobile Health Triggers Increased FTC Enforcement, and Points to a Need for Dispute Prevention Efforts,” CPR Speaks (Nov. 4, 2021) (available here).

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Increased Mobile Health Triggers Increased FTC Enforcement, and Points to a Need for Dispute Prevention Efforts

By Janice L. Sperow

The pandemic changed how we work, how we shop, how we communicate, and how we “meet.” It changed our world’s “normal.”

Most significantly, it changed the healthcare industry, but not only with new vaccines and protocols. It revolutionized the way we maintain our health and wellness, as healthcare app development now shapes the future of medicine.

That, in turn, provides an opportunity for a new application for alternative dispute resolution—specifically, a recent Federal Trade Commission statement puts health-care industry managers on notice that they should institute dispute prevention steps and protocols to avoid potentially costly civil penalties as their products face closer federal scrutiny.

Spurred by rapid significant advances in mobile technology, artificial intelligence, and the internet of things, medical apps have accelerated at an unprecedented rate. Even before the pandemic’s uptick in the use of healthcare mobility tools, the Physicians Practice medical publication conducted a mobile health survey in 2018 and found that more than 75% of respondents used some form of mobile health solutions on a weekly basis.

Since the pandemic, the use of mobile applications in healthcare, MedTech (see www.medtech.org), and eHealth has skyrocketed. A $21.3 billion market in 2017, the global mobile health market is anticipated to reach $151 billion by 2025. See, e.g., Grand View Research, mHealth Apps Market Size, Share & Trends Analysis Report By Type (Fitness, Medical), By Region (North America, APAC, Europe, MEA, Latin America), And Segment Forecasts, 2021–2028 (February 2021) (available at https://bit.ly/2Zqo5bR).

The U.S Food and Drug Administration defines a health app as mobile software that diagnoses, tracks, or treats disease. A wellness app uses mobile software to enhance or track overall user health. They can and do address every facet of life impacting wellness from mental, physical, social, environmental, nutritional, behavioral, to even spiritual factors.

In response to the market’s growth, the Federal Trade Commission issued its “Statement of the Commission on Breaches by Health Apps and Other Connected Devices” (Sept. 15) (available at https://bit.ly/3bgLv63).  The statement stresses the FTC’s commitment to protecting private medical and health information inputted into these apps and devices, and explains the FTC’s Health Breach Notification Rule in more detail. (The Rule is available at https://bit.ly/3nFzkpk.) The Statement unequivocally declares the Rule’s scope and the FTC’s intention to enforce the rule.

The FTC’s Health Breach Notification Rule has been in effect since 2009, when the American Recovery and Reinvestment Act of 2009 (text at https://bit.ly/3pGHtMy) became effective. The Rule addresses the security of personal health records, or PHR, defined to include an electronic record of identifiable health information on an individual that can be drawn from multiple sources and that is managed, shared, and controlled by or primarily for the individual. See 16 C.F.R. § 318.2(d).

“PHR identifiable health information” includes “individually identifiable health information,” as defined in section 1171(6) of the Social Security Act. See 42 U.S.C. 1320d-6. It also includes individual information provided by or on behalf of the individual that actually identifies or reasonably can be used to identify the individual. See 16 C.F.R. § 318.2(e) (“reasonable basis to believe that the information can be used to identify the individual”).

The Rule applies to (1) vendors of personal health records; (2) PHR-related entities that interact with vendors of PHRs or HIPAA-covered entities by offering products or services through their sites; (3) PHR-related entities that access information from or send information to a PHR; (4) PHR-related entities that process unsecured PHR identifiable health information as part of providing their services; and (5) third-party service providers for PHRs vendors.

The Rule does not apply to HIPAA-covered entities or any other entity to the extent that it engages in activities as a business associate of a HIPAA-covered entity.

Under the Rule, vendors of PHRs and PHR related entities must report a “breach of security” involving PHRs to the FTC, the consumers, and in some cases to the media. Service providers that process information for PHR vendors and PHR related entities also have a duty to notify their business customers of a security breach.

Typically, these service providers handle data storage or billing as a third-party provider. The Rule defines a “breach of security” as the acquisition of unsecured, PHR identifiable health information without the individual’s authorization.

Upon discovering a security breach, the entity must notify the required recipients within 60 days; but it must alert the FTC within 10 business days if the breach involves more than 500 individuals. Noncomplying entities face civil penalties of $43,792 per violation per day.

Rule Clarification

The FTC’s new Statement clarifies the Rule’s scope and application. It explains that the Rule covers PHRs vendors that contain individually identifiable health information created or received by health care providers. The Statement then specifies that health app and connected-device developers qualify as “health care providers” under the Rule because they “furnish health care services or supplies.”

Consequently, the Rule’s protections encompass any personally identifiable information developers create or receive that relates to the past, present, or future physical or mental condition of an individual; the provision of healthcare to an individual; or the past, present, or future payment for healthcare to an individual.

The Statement also emphasized that an electronic health record must draw information from multiple sources and be managed, shared, or controlled by or primarily for the individual before the FTC will consider it to be a PHR under the Rule.

The Statement, however, interprets multiple sources liberally to include other non-health related information. An electronic health record can draw information “from multiple sources” in the context of a health app, for example, through a combination of consumer inputs and application programming interfaces.

Hence, the Rule would apply to an app if it collects information directly from consumers and can technically draw information through an application programming interface that enables syncing with a consumer’s fitness tracker or phone, even if only one source provided the health information. For example, the Rule would cover a blood sugar monitoring app that collects health information only from the user’s blood sugar levels if it then uses non-health information from the user’s phone, such as date, time, or percentage figures.

The Statement also warns entities that the Rule does not limit a “breach of security” to cybersecurity intrusions, illegal behavior, or ill-intentioned activities. Rather, any unauthorized access will trigger the Rule’s notification duties, much like under HIPAA. Thus, a health app developer faces a reportable breach of security if it accidentally discloses private health information to a third party without the individual’s consent.

Rule Enforcement Change

In addition to clarifying the Rule’s scope, the FTC’s new Statement also signaled an enforcement sea change. Even though the Rule was enacted more than a decade ago, the FTC has not enforced it once since 2009.

The FTC admitted that it has not used the Rule. The Statement cautioned, however, that the FTC considers the Rule’s notification duties critical now in light of the surge in health apps and connected devices. The Statement explicitly declares the FTC’s intent to notify entities of their continuing obligation to publicize breaches under the Rule.

The Statement’s message is unequivocal: the FTC will enforce the Rule and its notice requirements from now on.

A Dispute Prevention Opportunity

Instead of being in a “more bad news” category, healthcare managers should file the FTC’s Statement as a new opportunity to prevent future disputes. The FTC Statement serves as a warning, affording the healthcare industry some time to implement strategies to protect itself from class actions, mass claims arbitration, and other costly disputes. By taking the warning seriously, the industry can assess and then minimize its risk.

The bottom line: Healthcare and wellness app developers should assess the Rule’s application to their services and the adequacy of their current security measures in order to prevent triggering the Rule’s notification provisions or even the possibility of a noncompliance finding.

And then they can breathe a sigh of relief if the current measures adequately protect the business, or implement new measures now to upgrade them until they do. Either way, the FTC handed the healthcare industry an opportunity to prevent costly future risk.

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The author is a full-time neutral, arbitrator, mediator, dispute prevention facilitator, and Hearing Officer specializing in mass claims, healthcare, technology, employment, and all commercial matters. She works on domestic and international matters, and is based in La Mesa, Calif.

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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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#CPRAM21: Inside Counsel Focus on Prioritizing Dispute Prevention Efforts–How? And How Much?

By Claudia Diaz

Here are notes from the 2021 CPR Annual Meeting second-day panel, “Expanding the Definition Of ADR: The Case for Conflict Prevention & Risk Management,” an hour-long Jan. 28 afternoon event.

Moderator:

Loren H. Brown

Partner, Global & U.S. Co-Chair, Litigation Practice, DLA Piper, New York

Panelists:

T. Reed Stephens

Partner, Winston & Strawn, Washington, D.C.

Laura Robertson

Deputy General Counsel, Litigation, Arbitration & IP, ConocoPhillips Co., Houston

Megan Westerberg

Assistant General Counsel, Eisai U.S., Woodcliff Lake, N.J.

The session opened with the panel members introducing themselves:

  • Laura Robertson manages worldwide disputes—litigation and international arbitration, as well as intellectual property matters, as deputy general counsel, and serves on CPR’s board.
  • Megan Westerberg works in risk management, among other duties, as assistant general counsel at her employer, a U.S. unit of a Japan-based pharmaceutical company.
  • Reed Stephens, a former U.S. Department of Justice prosecutor, focuses on pharmaceutical fraud and abuse, corporate compliance, and risk management.

  • Q [by Moderator Brown to Panelist Westerberg]: The role prevention takes in your in-house job?
  • A:
    • The company is in “a constant state of assessing risk benchmarking, trying to anticipate . . . what our regulators’ next move might be.”
    • A focus on robust training–constantly evolving our training.
    • Proactive monitoring–will spend resources and go out looking for processes.
    • Quarterly and monthly updates to risk assessment processes. 
    • Lawyers and business colleagues working together at all times, making efforts to assess and benchmark “anything . . . that is different, unique, novel, cutting edge.”
    • “Our goal is obviously taking smart risks.”
    • Private party conflicts–There can be internal “silos.” When the company starts to see tensions with another party, the company will assess who internally is working with the other party, and there is already a dialogue–looking for ways to de-escalate.
  • Q [to Robertson]: The role prevention takes in your company?  . . . Can you give insight into the culture of prevention in your company?
  • A [by Robertson]:
    • The legal department wants to foresee issues. Early evaluation and resolution saves money.
    • The legal department has a written litigation management mission statement focused on early resolution and early evaluation, and “feel[s] strongly” about multistep dispute resolution provisions.
    • We want to be consistent with business goals in the legal department–we want to help the business be successful.
    • A focus on trust building so we can resolve disputes early and quickly . . . before they become full-fledged litigation.
  • Q [to Stephens]: It’s probably harder to draw attention to prevention in large law firms.  Can you talk about risk management and prevention?
  • A:
    • “My perspective on this . . . is built around the idea that conflict avoidance really depends on active risk identification and active management.
    • “I am coming out on the back end” after the company has fallen into a situation, so the task is to “see how a problem really emerged.”
    • The challenge is how to persuade stakeholders to not get there in the first place.
    • Being able to explain to clients that they need an active risk management approach “can take some doing.”
    • Part of the job is to explain the value in doing this risk management—”to the extent it is proportionate to the risk” being taken.
    • The industry is important . . . different types of risk depending on what the enterprise focuses on.”
  • Q [to Robertson]: How do you measure successful prevention “in a world where everyone wants metrics” to prove outcomes and demonstrate performance. How do you measure this?
  • A:
    • Success is around the business clients feeling like the legal department helped prevent business interruptions.
    • In an example of a dispute with a foreign government, the company was able to resolve the dispute and make a framework for future disputes that clarified definitions.  “It actually improved the relationship.  . . . I use that as an example of success.”
    • It is “mak[ing] lemonade out of lemons.”
  • Q [to Westerberg]: How do you evaluate the value of the risk prevention work?
  • A:
    • We have a Japanese parent company and that has helped us . . . look to other cultures and to how they approach conflict.
    • A “proud parent moment”: “We spend a lot of time” counseling and asking why the leadership is not getting this, but “then you get struck by this a-ha moment,” and we see them explaining “the gray areas” and helping their teams navigate “with or without our help. [T]his is . . . a measure of success.”
    • If the legal department does not see that type of moment, “then it causes use to go back to the drawing board” and ask why the policy, guidance, or training was not getting through.
    • “We don’t want to be thought of as the police.  . . . We need to get to know the business . . . and let [the business executives] know you’re approachable.”  
    • The company is not “running metrics on those ‘proud parent moments’ but it sure makes us feel warm and fuzzy when they happen.”
  • Q: Prevention can be seen as different things, for example, de-escalation, or sometimes you work on contract provisions on exposure when a situation arises. You talked a little bit about risk assessment.  . . . How do you prioritize what you are going to spend your time on in terms of prevention? . . . Reed, from an outside counsel perspective, how do you think prioritization should work?
  • A [from Stephens]:
    • It’s “the idea of figuring out what’s the high value [of] catastrophe,” dollars or personal injury or reputation, “and then you back through your operational structure” to address it. It requires identifying where the employees “have the most discretion to make a decision” and focus on those potential bad outcomes with them.
    • Where outside counsel comes in is to help the enterprise align where the big risk is, with how the product or service is being delivered.
    • The effort is connecting real world problems with the consequences back to the process to identify where the highest risk, and the activities surrounding it that can lead to problems.
  • Q: I would be interested to hear about early case assessment and early resolution.
  • A [from Robertson]:
    • A tool we use for early evaluation is decision tree analysis, the “Treeage” software (see https://www.treeage.com/) that is designed for litigation and disputes. For large matters, the company brings in a consultant, but it also trains “all of” its lawyers and paralegals. The point is to “define the issue.”
    • At the end of that process, “we always come out of it with a better understanding of what is really at stake.”
  • Q [to Westerberg]: How do you approach early resolution in the pharmacy industry?
  • A:
    • “I’ve really been reflecting on the need . . . for the in-house lawyer to step back and get the team . . . in-house counsel, outside counsel, your insurance company, to pause, and in our case without the software . . . do that assessment. Where is this going . . .?”
    • “That is, I want to commit myself to [assessing] . . . the pros and cons of those options.”
  • A [from Stephens]:
    • A lot depends on your adversaries and if they are interested in early resolutions.
    • The government is more accustomed to a matter taking two or three years–“and they’re comfortable with that.”
    • “As outside counsel, being able to get the government to even entertain the thought of early resolution, without, essentially, handing over the keys to the kingdom is a challenge.”
    • Defining the problem is critical when discussing issues with the government.  “You’ve always got to be ahead of the government.”
    • “[T]he biggest challenge with dealing with government conflicts is really figuring out a pathway to get the government’s attention, [and] engage them to be willing to look at issues of exposure,” instead of allowing “months and months to go by.”
  • Q [by moderator Loren Brown]:  Regarding the pandemic, “I had no idea how much [the world] would also need lawyers, but when things are uncertain and dislocated this way, and our clients are responding to change, they need advice and counsel. . . .  How [has the] pandemic changed what you are doing . . . on your legal teams, in your practice and how that has affected prevention?”
  • A [from Robertson]:
    • “We may be too close to see really see [the long-term] impact.” But the biggest impact to how the company has managed disputes and dispute prevention and resolution in a virtual world is how much “we just skyrocketed . . . our use of Microsoft Teams and Zoom, and people have gotten so good at using virtual platform for meetings and hearings.” But how much will stay virtual?
    • This environment is challenging for negotiations. It is hard to do a negotiation with an adversary because it’s harder to develop rapport. “When we get out of this [it’s something] we won’t do—I think that’s something that’s been a real challenge for the last year.”
    • Not having courts open, “has had an interesting psychology impact on resolution.”
    • On the positive side, virtual work won’t disappear.  “There’s a lot of value” in virtual events like CPR’s Annual Meeting that can have hundreds of people all over the world “that we never could have done before.” And the cost savings from less business travel is significant.
  • Brown: Mediations have been going really well virtually.
  • A [from Westerberg]:
    • “Value transfers” with customers, healthcare providers, are “always scrutinized by the government.”
    • Has the company “been able to educate [its] providers over the past year” without having to provide entertainment and events associated with the sale of pharmaceuticals? And, if so, it may mean that the company and industry “has fundamentally shifted how we interact with customers.”
    • “Are we just going to pivot back to the old way? . . . [W]hat will the government think and say about that? We’ve proven we can educate through ways that are more nimble, less expensive.”

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The author, a third-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern.

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