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.