Practice Tips

How Litigants View the ADR Options in Courts

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By Alice Albl

At the Sept. 17 online CPR Institute Mediation Committee meeting, University of California, Davis, School of Law School Prof. Donna Shestowsky presented her research about the role courts play in encouraging alternative dispute resolution over a trial.

The study revealed that litigants seem to be unaware of ADR options when going to court, although knowing about some of these options—specifically, mediation–improve litigants’ opinions of the court itself.

This lack of awareness stayed relatively consistent among demographics, even among those with legal representation.  

“Repeat player” litigants were less likely than first timers to report uncertainty or confusion whether ADR options were available.

Shestowsky’s research observed the experiences of more than 350 litigants spread among the court systems of three different states.

The first system, in California, allowed litigants to choose between a trial, or opting into mediation or arbitration.

The second system, in Utah, assigned mediation as the default option but allowed litigants to convert their cases into an arbitration or trial.

The third system, in Oregon, statutorily required nonbinding arbitration for cases involving amounts in controversy less than $50,000. Litigants could opt-out by filing a “Motion for Exemption from Arbitration,” or by agreeing with their opposition to enter mediation.

All three court systems posted information online about available ADR programs and kept a list of approved neutrals on file. None required attorneys to educate their clients about the available ADR options.

Litigants in the study took a survey before and after their journey through the courts. The questions sought to gauge litigants’ awareness about relevant court-sponsored ADR programs, whether legal representation affected their awareness, and how awareness of court-sponsored ADR affected litigants’ opinions of the court offering the options.

The data Shestowsky reaped from these surveys revealed some unexpected findings. While roughly half of the litigants were unsure whether mediation and arbitration were available to them, another 20% wrongly stated these options were unavailable.

Without knowledge of the court systems’ sponsorship for mediation or arbitration, litigants most often considered negotiation as a means for dispute resolution, even before the prospect of a trial.  

While about a third of litigants considered mediation, knowing that the method was a court-sponsored option generally improved their opinion of the sponsoring court system.

Arbitration was only considered by about one quarter of the litigants, and knowledge of court sponsorship did little to affect litigants’ opinions of sponsoring courts. Shestowsky attributed this to the possibility that litigants had low opinions of arbitration as an option for their court-filed cases, which aligned with findings from her past research.

Having a lawyer did not make litigants more aware of ADR options, even when those options were offered, or even mandated, by the court system.

Shestowsky pointed out this universally low awareness rate of ADR options as an issue to address among courts, especially given how awareness seemed to improve court favorability.

One possible solution would be rules that require attorneys to properly educate clients about ADR options before engaging the courts, which could be enforced using penalty fees or an affidavit.

Shestowsky also suggested that courts implement “direct education.” This could involve bolstered advertisement of ADR options, a dedicated ADR helpdesk, and periodic information sessions. The professor, who serves as UC Davis School of Law’s Director of the Lawyering Skills Education Program, even envisioned an artificial intelligence-powered digital aide that could recommend options based on litigants’ specific needs.

While Shestowsky cautioned that her research focusing on three court systems may not perfectly reflect the general state of ADR awareness, the consistency of data among the diverse systems could point to a greater trend. To gauge this, the professor recommended that courts across the nation buck the trend of measuring success for ADR programs by their usage rates, and first look to their awareness rates by surveying those who do not use their ADR programs.

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Donna Shestowsky previously discussed her research at “New Research Sheds Light on How Litigants Evaluate the Characteristics of Legal Procedures,” 34 Alternatives 145 (November 2016) (available at https://bit.ly/2ScA71w), which adapted and updated material from Donna Shestowsky, “How Litigants Evaluate the Characteristics of Legal Procedures: A Multi-Court Empirical Study,” 49 U.C. Davis L. Rev. 3 (2016) (available at http://ssrn.com/abstract=2729893).

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The author, a CPR Institute Fall 2020 intern, is a second-year student at Brooklyn Law School in New York.

Why You Should Always Mediate

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AnnaBy John R. Goldman and Anna M. Hershenberg (pictured)

If we had a nickel for every time a client instinctively refused to consider mediation to resolve a dispute, neither of us would have to work anymore. We have heard every excuse in the book:

We do not want to come in from out of town.
It is going to be a waste of time.
We are going to outspend them in litigation
so they will give up.
We want to crush them in litigation.

And our all-time favorite:

Suggesting—or even agreeing to—mediation
makes us look weak.

The notion that mediation makes a client look “weak” is an unfortunate gut reaction, typically fueled by the misconception that pounding the table and fighting your adversary on every issue is the only way to show strength in litigation. Sure, there are circumstances where litigation is necessary and a mediated resolution is impossible, but those situations are few and far between. Let us explore why it is almost always prudent to mediate—especially for budget-conscious corporate counsel trying to resolve disputes most efficiently (i.e., cost-effectively) so they and their company can focus on accretive business.

1. You Might Actually Resolve the Dispute. First (and foremost), you might actually settle the case and save lots of dough in unnecessary and unproductive litigation expense. That would be good, right? Look, we all know that litigation is often time-consuming, distracting, expensive and unpredictable. Even if you are convinced you have a “slam dunk” case, elephants sometimes fly in courtrooms (and when they do, it can vastly alter—and increase the cost of —that case you thought was definitely a winner). Mediation gives you a chance to resolve the dispute in a much more controlled environment with a smart mediator you have a hand in selecting. A savvy mediator typically redirects the parties away from unproductive competitions over litigation issues and strategy and towards consideration of a mutually beneficial business solution. Indeed, if mediation happens quickly enough (i.e., before the parties become entrenched in litigation posturing), it is possible—even likely perhaps—that the settlement will include the parties doing productive and mutually profitable business together going forward.

2. You Always Learn Things (and That Is Really Good). Even if mediation does not result in settlement right away, you never leave a mediation empty-handed. Going through the mediation process educates you (hopefully early on) about the strengths and weaknesses of your position, as well as those of your adversary. A good mediator is an expert at helping both sides to most sincerely and realistically evaluate the case—both from a legal perspective and from a practical perspective. That analysis provides critical information as to what a fair settlement might be. This information is always valuable to corporate counsel in setting strategy and managing expectations going forward. The very process of mediation lends itself to this. In trying to push each side toward settlement, the mediator—as a neutral third-party (often a former Judge)—will flag the legal and practical obstacles each side will face should the case continue and will provide valuable insight into how those weaknesses may play out in front of a Judge and/or jury. A neutral assessment of the viability of the claims and defenses in the early stages of the case provides corporate counsel with the opportunity to most effectively manage the case (and the expectations of his or her business people) and be in a much better position to determine strategy—for example, whether to recommend settlement or to recalibrate litigation tactics going forward.

3. In the Immortal Words of the Late, Great Philosopher Yogi Berra, “It Ain’t Over ’til It’s Over.” Even if the case does not settle right away, a good mediator is persistent and stays on the matter. He or she often (indeed, almost always) remains an independent and trustworthy sounding board for both sides. Many times after “unsuccessful” initial mediations sessions, we have reached out to the mediator and so have our adversaries. This means there is always the possibility that the matter will settle at a later point in the litigation. In our experience, we have found that parties who have already had at least one  mediation session—even if “unsuccessful”—are often more likely to return to mediation at the mediator’s invitation (or after tiring of throwing more money at the litigation) because they trust the mediator and the process, have a sharper awareness of the strengths, weaknesses and settlement value of their case and, in many instances, because opposing counsel have had an opportunity to establish a productive working relationship.

4. Suggesting or Agreeing to Mediation Is Not Weakness. It Is Strength. This one really is our favorite. It is the one where we scratch our heads, furrow our brows and remind ourselves that when really smart people get really angry, they become their own worst enemy. (Typically, the clients who tell us mediation is a sign of weakness are the same ones who will not attend a settlement meeting unless it is at their office and are the same ones who write us emails thanking us for convincing them to give mediation a try). The goal of litigation should not be to win an award for being the best posturer. It should be to reach the most efficient resolution. Mediation is often the best route to that result. In this context, it is confounding why anyone would think it demonstrates weakness when it is actually just the opposite. In fact, suggesting or agreeing to mediation sends a clear signal that you are ready to persuade an intelligent and experienced neutral that your case is better than your adversary’s. Who would not want to seize that opportunity? And remember, mediators (unlike Judges) have manageable dockets and can spend the time to understand the nuanced arguments that might cause elephant lift-off in a courtroom.

In the end, budget conscious corporate counsel are, and should always be, looking for ways to save—and make—money. Given the reality that almost every case settles before trial anyway, it is in everyone’s best interest to reach that settlement as early in the process as possible. This is especially true for in-house corporate counsel, who have the unenviable task of having to explain to management how the company could possibly have spent so much money on a litigation for the privilege of ultimately settling a case on terms equal to or worse than those that could have been obtained early on (and at a much reduced cost). Mediation is an excellent way to try to avoid that nightmare.

Anna M. Hershenberg has recently joined CPR as its Vice President, Programs and Public Policy. John R. Goldman is a litigation partner at Herrick, Feinstein LLP, Anna’s former firm.

This article was originally published in volume 33, number 3 of the Winter 2015 publication of the Corporate Counsel Section of the New York State Bar Association. It has been republished with permission.

Removing Anger in a Mediation Allowed Parties to Settle

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StephenGilbert By Stephen P. Gilbert

I conducted a mediation several years ago between two companies in the healthcare field, one a small high-tech company (“Company A”) and the other a much larger conglomerate. The smaller company had invented certain cutting edge technology (“Technology A”), which held great promise but required a substantial investment of money and personnel (scientists and engineers), each of which Company A had little of, to finish the R&D work and bring Technology A to market.

Company A had entered into a joint development agreement with the conglomerate to conduct the R&D work and, if possible, commercialize the technology, which Company A hoped would be used in some of the conglomerate’s products. The agreement provided that if Technology A were commercialized and used in the conglomerate’s products, the conglomerate would pay a running royalty to Company A. The few scientists and engineers of Company A worked closely with the scientists and engineers of the conglomerate and disclosed significant confidential information to them to aid in the R&D work. The conglomerate also loaned substantial capital to Company A (covered by a promissory note) because Company A was operating on a shoestring.  The agreement contained a stepped dispute resolution clause: in case of a dispute, executives of the two companies were to confer to try to resolve the dispute; if that did not work, they would go to mediation; and if that did not work, to arbitration.

A year or two after entering into the joint development agreement, the conglomerate acquired a small company (“Company B”), which had developed its own technology (“Technology B”), which, with sufficient and successful R&D work, could be used instead of Technology A in the conglomerate’s products. Both Technology A and Technology B were also potentially useful in third-party products, not just the conglomerate’s products.

Sometime after acquiring Company B, the conglomerate terminated the joint development agreement, requested payment on the promissory note (as it had the right to do) and eventually started marketing products incorporating Technology B.

Company A accused the conglomerate of purposely trying to harm Company A and prevent commercialization of Technology A. The actions of the conglomerate to which Company A pointed included acquiring Company B, terminating the joint development agreement, demanding payment of the debt, and using Company A’s confidential information to help develop and commercialize Technology B. Company A said it would now have to try to raise money to pay the debt and at the same time would have to try to find a new R&D partner, since it still could not afford the R&D work required (nor did it have sufficient personnel) to commercialize Technology A.

Company A said commercialization of Technology A would now be substantially delayed or altogether prevented and that it might have to cease operations. It noted that the conglomerate would not have to pay any royalty for using Technology B in its products because the conglomerate owned that technology through its acquisition of Company B and, if the conglomerate wished to do so, it could license Technology B to third parties without worrying about competition from Technology A, since Technology A was not yet ready to be commercialized (and might never be).

After reviewing the two confidential mediation statements and speaking ex parte with each side prior to the mediation session, it seemed settlement was possible but getting there would not be easy.

There were about ten people from each side present at the joint mediation session: Company A had business people, investors, technologists, and outside counsel; the conglomerate had business people, in-house lawyers, and outside counsel. There were no technologists from the conglomerate present. I suspected this mediation was make or break for Company A; I doubted it had the money to litigate against the conglomerate.

Each side made a short, polite opening statement, and we then split up for caucus sessions. I started with the Company A team. It was the first time I was speaking in a caucus session with anyone on the Company A team other than its outside counsel. Company A did not mince words: it was positive that all of the conglomerate’s actions had been part of a long-term plan to harm it and delay commercialization of or kill Technology A. Everything it said about the conglomerate was laced with anger.

I went to see the conglomerate team. The conglomerate felt it had done nothing wrong. That was the same message that had been conveyed to me by its outside counsel during my discussions with them before the mediation session.

One of the conglomerate’s in-house counsel who was present had been involved with the joint venture when he was a junior member of the conglomerate’s legal department (he was now significantly higher up in the department). I asked what he had done with respect to the joint venture, and it became apparent he was a goldmine of information. He had participated in drafting the joint venture agreement, had helped “administer” that agreement for the conglomerate, knew about the substantial money it had spent and R&D efforts its technologists had made on Technology A, knew (at a high level) about the technical problems that had been encountered, and knew (at a detailed level) how the decisions to abandon the technology and terminate the agreement had been made. He also knew about the “wall” the conglomerate had put in place between its people working on Technology A and those working on Technology B.

During the pre-mediation session ex parte discussions, I had asked each side that, if possible, people familiar with the joint venture relationship be at the mediation, but the depth and breadth of this individual’s knowledge was more than I could have hoped for. I asked if he would feel comfortable sharing some of this information with the other side, and I also asked lead in-house and lead outside counsel if they would feel comfortable with his doing so. They asked why; I said I thought it might be helpful, added that I didn’t see any downside (since all the information would likely be disclosed during discovery if mediation didn’t work), and received yesses from everyone. Then I went to see the Company A team.

I told them I had had a helpful discussion with the other side and asked if they would be interested in hearing some information directly from the other side (since I could never do as good a job as the conglomerate’s people could of imparting the information). The Company A team said it saw no downside, and I asked both sides to reconvene for a joint session.

It was less than two hours since the original joint mediation session had started. I asked the in‑house counsel who had given me all the information to address the other side. I said that in particular what might be helpful for the other side to hear was the history of the conglomerate’s effort to develop Technology A, the problems it had encountered, and how it had come to make the decisions to abandon Technology A and terminate the agreement.

The conglomerate’s in-house counsel began by recounting the history of his involvement and then turned to the R&D efforts that had been made and the money that was spent. At first, the Company A team just listened but soon started asking questions, which the in-house counsel answered without hesitation. I didn’t speak again until there seemed to be a logical break point, at which time I suggested we have lunch.

After lunch, he was asked more and more questions by a few members of the Company A team, some rather pointed. Others from the conglomerate’s team started to chime in. It was a lively, sometimes loud discussion. I said little except to suggest breaks when I felt it was appropriate and to remind everyone it would be better if people spoke one at a time so everyone could hear what was being said. We broke for dinner and agreed to reconvene the next morning.

The next morning, the Company A team started by discussing what it would like to see in a settlement. Bargaining ensued. Agreement was reached late afternoon, and a heads of agreement (which provided for subsequent negotiation of a comprehensive agreement) was negotiated and executed, after which we all shook hands, each side thanking the other for participating and congratulating it on reaching agreement.

It was then that the key decision-maker of Company A shared with me and with the key decision-maker of the conglomerate the following. At the end of the first day, while the Company A team was returning to its hotel, he said to his team that in view of what they had heard from the conglomerate’s in-house counsel who had spoken at length and provided answers to their questions, they might have been wrong about what had happened and about what they had been sure was the conglomerate’s bad faith. His team sat at dinner that evening talking about what they had heard and came to agree with him. Once that happened, their feelings of anger dissipated and they started to focus on how to resolve the dispute.

We were lucky to have in attendance a smart individual from the conglomerate’s side who had sufficient first-hand knowledge of the entire situation and could present information (including answering probing and pointed questions from the other side) in a non-confrontational, believable way. There is no way of my knowing, but I think it would have been difficult, if not impossible, to have reached settlement at that time if the anger Company A felt and had expressed to me so strongly had not been removed.

Stephen P. Gilbert (www.spgadr.com) is a CPR Distinguished Neutral, CEDR Accredited Mediator, American Arbitration Association Commercial Master Mediator, Fellow of the College of Commercial Arbitrators, Fellow of the Chartered Institute of Arbitrators, Fellow of the American College of e-Neutrals, Member/Panelist of the Silicon Valley Arbitration & Mediation Center, and was a computer programmer, a chemical engineer, and a patent attorney.

THE NEUTRAL’S NOTEPAD: Consider Expanded Use of Written Witness Statements

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With this post, The CPR Institute introduces a new “CPR Speaks” series feature in which members of our esteemed panel of neutrals will periodically contribute their thoughts on developments and best practices in dispute resolution.

THE NEUTRAL’S NOTEPAD: U.S. Advocates and Arbitrators Should Consider an Expanded Use of Written Witness Statements in U.S. Domestic Arbitration

BenderRay-41309-06By Raymond G. Bender

One technique for creating efficiencies in arbitration is submitting the direct testimony of fact witnesses in writing rather than orally.  Written witness statements provide detailed testimony a witness would offer (including references to relevant documents) if questioned live.  The written testimony is signed by the witness, its truth and accuracy is sworn to or affirmed, and the statements are exchanged in advance of the hearing.  Each witness providing a written statement appears at the hearing for cross-examination by opposing counsel and questioning by the tribunal.

Written witness statements can afford material advantages in arbitration.  For example, as lengthy oral testimony becomes unnecessary, written testimony can save days or even weeks (in a complex case).  Exchanging witness statements in advance also permits opposing counsel to prepare fully for cross-examination. In fact, exchanging witness testimony prior to hearing permits all of the participants in the hearing—counsel and arbitrators alike—to focus before hearing on the key issues in dispute, formulate pertinent questions for the witness, and conduct a more efficient and streamlined proceeding.  Moreover, witness statements can obviate or lessen the need for depositions since opposing counsel will have advanced notice of a witness’ direct testimony.  Finally, written statements can serve an important fact-finding function when depositions are disallowed or limited to key witnesses.

Why are written witness statements so common in international arbitration, but not as prevalent in U.S. domestic arbitration?  Some U.S. counsel and arbitrators may be unfamiliar with the technique, particularly if they serve exclusively in U.S. domestic proceedings where oral testimony is the norm.  Others may believe that drawbacks associated with witness statements outweigh the advantages.

For example, some may feel that lawyers draft witness statements and the testimony therefore is not as spontaneous or genuine as when a witness testifies live.  A witness also might rely too heavily on the lawyer and not review the testimony carefully or completely.

However, when preparing witnesses for oral testimony, attorneys also typically assist and invite them to rehearse their hearing presentations.  Attorneys have a duty to admonish witnesses concerning the truth and accuracy of their testimony—whether they testify orally or in writing—and to highlight the need to defend the testimony under cross-examination and arbitrator questioning.  Witnesses also sign and/or swear or attest to their written testimony, and such formalities signal that witness statements need to be truthful and accurate and not approached in a careless manner.

Another potential concern about written versus oral direct testimony is that the tribunal’s first exposure to the witness would be on cross-examination.  No lawyer wants arbitrators to observe a witness initially in a defensive posture under questioning by opposing counsel.

This concern can be addressed by permitting counsel offering the witness to conduct a brief direct examination (e.g., 15 to 30 minutes), depending on the nature and size of the testimony and the case.  This lets the tribunal hear from the witness in his or her own words.  Such abbreviated direct examination could include background information on the witness and/or a summary of key aspects of the witness’ written testimony.   This direct testimony should be relatively brief so as not to frustrate a fundamental purpose for using written witness statements, i.e., to achieve efficiency and cost-savings.

A final potential concern is that using written statements prevents arbitrators from evaluating a witness’ credibility on direct examination.

There normally are sufficient opportunities for a tribunal to assess witness credibility other than on direct examination—most critically during cross-examination, but also on re-direct, and during questioning by the tribunal as well.  Moreover, permitting an abbreviated direct exam before a witness is cross-examined, as discussed above, affords yet another window for arbitrators to assess witness credibility.

Granted, written witness statements may not be an optimal solution for every witness or in every case.  For example, where believability of a key witness or witnesses may influence the outcome in an arbitration, presenting the witness’ direct testimony live may be preferable to using a written witness statement.

Additionally, any decision to present the direct testimony of fact witnesses in written or oral form ultimately should reside with the parties and counsel. Arbitration still is a creature of party agreement, and arbitrators in U.S. domestic arbitration should never compel the use of one technique over the other.

However, here are some general practice tips that arbitrators might keep in mind, not only to help ensure that counsel consider the full range of their options, but to utilize written direct testimony, if they so choose, in an optimal way:

  • Arbitrators should encourage written witness statements where appropriate and highlight the benefits surrounding their use.  Including witness statements as an item on the preliminary hearing agenda, and having an open discussion of the pros and cons during the preliminary hearing itself, can expose the technique to counsel otherwise unfamiliar with it.
  • Arbitrators should condition the use of written direct testimony on the witness’s attendance at hearing for cross-examination and questioning by the tribunal (unless all parties and the tribunal agree to waive a witness’ appearance).  Cross-examination of witnesses generally is considered a fundamental right in the U.S. (and in other common law jurisdictions) and this right should be safeguarded when written witness statements are used.
  • Arbitrators should permit sponsoring counsel to question the witness briefly on direct examination (e.g., to summarize key points) so the witness can “warm to the seat” before being turned over for cross-examination.  This procedure lets the witness become comfortable in the arbitral setting and also allows the tribunal to observe witness credibility (albeit briefly) on direct examination.
  • U.S. arbitrators should review witness statements in preparation for the hearing, listen attentively during examination by counsel and, if appropriate, pose follow-up questions to the witness to clarify relevant facts, gain insight as to witness credibility, or achieve a better understanding of the case.

In conclusion, greater reflection and dialogue on written witness statements should give U.S. counsel and arbitrators an enhanced appreciation for their use in U.S. domestic arbitration. U.S. arbitration proceedings would surely benefit from this development.

Raymond Bender is a full-time commercial Arbitrator in domestic and international disputes.  He is a member of the CPR Panel of Distinguished Neutral Arbitrators for Washington, D.C., Technology, and Cross-Border Disputes; the American Arbitration Association’s Roster of Commercial Arbitrators for Washington, D.C., Technology, and Large, Complex Cases; the International Center for Dispute Resolution (ICDR) Panel of International Arbitrators; and the Silicon Valley Arbitration and Mediation Center’s List of the World’s Leading Technology Neutrals.  He also has served in International Chamber of Commerce (ICC) and ad hoc arbitrations.  Mr. Bender is an Adjunct Professor at the Washington College of Law, American University, Washington D.C., where he teaches Alternative Dispute Resolution Law, and serves on the Arbitration Faculty of the International Law Institute.