January 01, 2015

Five Dispute Resolution Alternatives You May Not Have Considered

Alternative dispute resolution (ADR) has become increasingly popular with clients looking to remove time and cost from what would otherwise be lengthy and expensive courtroom litigation. Mediation and arbitration are perhaps the best known forms of ADR—but they are not the only ones. This article presents brief overviews of five additional alternatives: neutral evaluation, co-resolution, discovery referees, binding mediation, and trial master procedures.

Neutral Evaluation: An Effective ADR Process

By Malcolm Sher

Neutral evaluation, sometimes called “early neutral evaluation” (ENE), is a confidential process in which a neutral third party (usually with subject-matter expertise) hears presentations by disputants of their positions, prepares (in private) a written evaluation of their case, and then asks the parties if they would like to engage in mediated settlement negotiations before hearing that evaluation. If either party wants to hear the evaluation at any juncture, the neutral evaluator presents it simultaneously to all parties in joint session. Thereafter, the evaluator again asks if the parties would like to discuss possible settlement. Pioneered by retired magistrate judge Wayne Brazil, formerly of the Northern District of California, neutral evaluation is also encouraged by some state courts and increasingly is being recommended by attorneys on a voluntary basis.

Often used in cases whose outcomes seem difficult to predict (e.g., complicated cases that involve mixed fact/law issues, difficult evidentiary issues, or hard-to-prove damages), it works best when parties and counsel acknowledge these concerns, at least privately, before spending inordinate time and money on extensive discovery or motion practice, although it is not uncommon for some initial discovery to be undertaken to flush out “core” issues and documents. Neutral evaluation offers lawyers and clients access, through a relatively informal and low-risk process, to what can be an instructive and truly objective “second opinion” about their case.

The process typically begins with the selection of a neutral evaluator, preferably someone who enjoys a high level of trust and regard by the attorneys, has some subject-matter expertise, is able to quickly grasp the issues, and is skilled enough to talk openly and candidly without burning bridges. The attorneys and the clients likewise need to be invested in the process, be non-confrontational, and be willing to listen actively to the evaluator’s opinions and factor them seriously into their settlement decisions.

Following selection of the evaluator and a pre-session conference call, the parties submit written statements, much like arbitration briefs, although they may be in the form of offers of proof. Included are relevant documents and reference to critical deposition testimony, if discovery has progressed that far, or witness declarations under oath.

The evaluator’s review of the submitted material is followed by a face-to-face joint session with the parties and attorneys. Here the attorneys present a summary of their clients’ cases, and in a Socratic back-and-forth dialogue the evaluator asks questions designed to elicit information and clarify issues. Some evaluators may “signal” their thoughts without offering any concrete opinions, and attorneys and clients who are listening carefully will usually be able to pick up what the evaluator considers to be strong and weak points in each other’s cases purely through the dialogue. Unlike many mediations, there are no private caucuses before the neutral evaluator commits his or her assessment to writing (so all participants can see everything that might affect the neutral’s substantive views). Private caucusing would occur in the neutral evaluation process only if the parties elected to proceed to settlement negotiations with the neutral—and only with all parties’ permission.

In most situations the evaluator will prepare a written evaluation, either in narrative or “bullet point” form. This evaluation may include the neutral’s opinions about both the liability and damages dimensions of the case (the latter often expressed as a judgment value range, as distinct from a settlement value zone). Before presenting the evaluation, however, many neutrals, including this writer, will ask the parties and attorneys if they believe it would be beneficial to have the evaluator change roles and work with them in a more “mediative” capacity in an attempt to resolve the case. If this is declined, the evaluator will present his or her written evaluation. If, however, the role change is accepted, the evaluator may never need to deliver the written evaluation unless settlement negotiations fail.

Although it is not suitable in all cases, there are obvious benefits to neutral evaluation. The process provides speedy, private, and relatively cost-effective access to a second opinion from an experienced, credible, objective source. The evaluator’s insights into which of the competing presentations are likely to gain traction at trial and which are likely to fail can be particularly useful when lawyers’ clients are corporate executives, adjusters, or risk managers who may need to report to other stakeholders before final decisions are made—and thus are not ready to settle then and there. Neutral evaluation also can be especially helpful when one or more of the parties (perhaps your own client) seems to have unrealistic expectations about how the case might play out. It can help protect counsel from unjustified client dissatisfaction. But even when a case cannot be settled, the neutral evaluation process can deliver significant value by sharpening trial preparation.

Co-Resolution: A System of Cooperative Negotiation Assistance

By Nathan Witkin

Co-resolution is an ADR process that facilitates optimal negotiations by providing each disputant with an expert on communication and bargaining, as well as ensuring that these professionals interact cooperatively across the table. With training in co-resolution, attorneys can expand the assistance they offer beyond legal advice in adversarial proceedings to also include negotiation-focused assistance where cooperative, positive-sum interaction is more appropriate or desired.

The unique aspect of co-resolution is that it resists the otherwise pervasive effects of the “Prisoner’s Dilemma” on negotiation. In the Prisoner’s Dilemma (the well-known scenario posited in game theory), two prisoners held separately are apt to betray each other out of mutual distrust, even though they would both benefit from cooperating. This dynamic occurs in informal negotiation because, without a powerful referee regulating cooperation, less-than-honest bargaining practices offer marginal benefits over open and honest communication. As a result, even though mutual cooperation promises efficient and mutually beneficial outcomes, the safe and common practice is to inflate demands and hide actual capabilities. In contrast, co-resolution is the first ADR process that ensures cooperation-focused assistance on both sides of the table.

To guarantee that the opponent is cooperative, co-resolution replaces independent advocates with two coaches who work together in a single service while coaching separate disputants in each case. The coaches act as one unit, are approached together, and are assigned to separate disputants at the start of the co-resolution process. Because they will work across from each other in future disputes, the coaches will not assist disputants in bargaining tactics that would undermine the coaches’ ongoing relationship (i.e., deceptive or competitive tactics).

This may appear to raise conflict-of-interest or loyalty concerns, but remember that the assistance of the coaches is constrained to negotiation. Therefore, if either disputant believes that the assigned coach is working against his or her interests, that disputant can terminate the entire process by simply disagreeing or walking away. As a result, both coaches remain motivated to loyally assist their respective disputants.

The resulting dynamic is such that, if each disputant would benefit from the assistance of the assigned coach and this assistance is designed to be cooperative, then each disputant can be assured that it is in the other disputant’s best interest to cooperate within the co-resolution process. The above dynamics were indicated in a pilot project conducted from 2012 to 2014 in Franklin County, Ohio, in which disputants expressed satisfaction with their own coach (average rating of 4.8 out of 5.0) and found the opposing coach to be fair and reasonable (average rating of 4.6 out of 5.0).

As compared to mediation, co-resolution replaces one impartial third party with two cooperative coaches. Abandoning impartiality allows ADR professionals to become more actively involved in the negotiation process, forming closer connection and quicker rapport with disputants.

As compared to conflict coaching, co-resolution allows for active participation at the bargaining table by preventing the danger of the unauthorized practice of law or other breaches of ethics that can arise when an independent conflict coach negotiates against an adversarial attorney. Co-resolution is similar to collaborative law but better protects cooperation across the table, removes barriers related to hiring two attorneys who must be willing to withdraw if negotiation fails, and can be conducted by experts in communication or negotiation rather than by attorneys.

Because negotiation involves a voluntary coming together by both sides, I would argue that co-resolution is the ideal method for offering partisan assistance in negotiation. In the adversarial forum of the court system, attorneys must be independent, and this independence leads to Prisoner’s Dilemma pressures that undermine the trust and cooperation needed in negotiation. Ideally, disputants should take their legal cases and questions to independent attorneys but use the cooperative coaches provided in co-resolution to negotiate resolution.

Discovery Referees: Judges Send You to One for a Reason

By Joe Hilberman

Here’s a surprise: Judges do not like discovery disputes. Our courts are overworked and understaffed. If you have a case with lots of production, interrogatory, motion, and deposition issues, you probably will be sent to a discovery referee.

When I am serving in that capacity, the thing I find most different from the bench is the bicker quotient: lots of bickering, little substance. I suggest counsel avail themselves of telephone conferences with me, as it is less time consuming and disruptive of the day—and far less costly. The down side is that many attorneys seem unable to restrain themselves on a conference call. Rather than waiting for the other party to stop talking before responding, they seem compelled to interrupt, cut each other (and me!) off, and bicker. Not constructive.

When using a discovery referee, consider the wisdom of the late Judge Alan Buckner, whose bench had a sign on it that said “Be Brief, Be Direct, Be Gone.” Time is money to you and your clients. Be sure to engage in a meaningful meet-and-confer session, in person if possible, and really reduce the issues to those most significant.

One positive difference between my situation on the bench and that as a discovery referee is the luxury of time. I try to make the initial discovery meeting an opportunity to get a sense of the case and discuss with the attorneys a comprehensive discovery plan that will allow for meaningful discovery without unnecessary delay and conflict. In the private sector, especially where the referee is not the ultimate trier of fact or “decider,” the parties can be candid and need not posture for the final result.

Our courts are generally overwhelmed and unable to schedule timely hearings on discovery (or any other) motions. If your case will support the time and cost savings of hiring a private discovery referee, don’t wait for the court to order the litigants into a discovery reference. Meet early with opposing counsel, come to agreement on the need for expeditious, cost-effective resolution of discovery disputes, select a discovery referee, and agree to refer all discovery disputes to him/her as they arise. Many referees will entertain a telephone call when you are in the middle of a deposition to resolve an objection or other evidentiary issue as expeditiously as they would were you in trial. Counsel and parties alike will appreciate the efficiency.

Binding Mediation: Beware of Conflicts of Interest

By Michael D. Marcus

You might have heard of binding mediation, a process in which a neutral, by agreement of the parties, makes a binding determination regarding the dispute when mediation has been unsuccessful. You might even have thought about using it. This article, prompted by Bowers v. Lucia Companies, 206 Cal.App.4th 724 (2012), which sanctions the use of binding mediation, recommends that before the mediation part of the process begins, the mediator-arbitrator should provide conflict disclosures to the parties and that the parties should also waive any conflicts of interest that the mediator-arbitrator might have. (Inexplicably, Bowers did not discuss these requirements.)

Bowers affirmed a judgment arising out of binding mediation because it found that (1) there was substantial evidence to support the trial court’s determination that both parties had agreed to the procedure; (2) the binding mediation provision in the underlying settlement agreement was not uncertain; and (3) binding mediation is not a constitutionally or statutorily prohibited means of waiving jury trial rights where, as therein, the parties had agreed to settle their dispute in a non-judicial forum.

Although Bowers found the concept of binding mediation to be “paradoxical,” it noted that the procedure is recognized in collective bargaining and marital dissolution situations and, according to one commentator, is “more flexible than arbitration because the mediator can request more information, documentation or discussion and the parties and their counsel can more actively participate in the process” (id. at 735). In contrast, the earlier case of Lindsay v. Lewandowski, 139 Cal.App.4th 1618 (2006), which held that a binding mediation agreement could not be enforced because the parties had never specifically agreed to the procedure, mused about the significant problems inherent in binding mediation, including the lack of recognized rules governing the process, but found it inappropriate to discuss those issues because the matter could be resolved by simply finding the underlying agreement to be uncertain (id. at 628–1629).

Unlike Lindsay, Bowers failed to discuss the potential conflicts of interest that exist in binding mediation and to find that statutes and rules of court address that issue. Consider that opposing parties must be careful about proceeding from mediation to arbitration with the same neutral because the mediator who becomes an arbitrator may have been compromised by hearing inadmissible argument. In California, communications in mediations are privileged (see Cal. Evid. Code §§ 1115 et seq.). Accordingly, if parties wish to have a mediator arbitrate their case, they should consent in writing to that process (see, e.g., Cal. Rule of Court 3.857(g)) and waive the privilege. Before that waiver, the neutral must inform the parties about the consequences of revealing information in the mediation that might be used for decision making in the arbitration phase and also give the parties the opportunity to select another neutral for that stage (id.). Also, if the parties have consented to binding mediation, the mediator must clearly inform them when the transition from mediation to arbitration is occurring (id.). Finally, because binding mediation involves a process that may turn into an arbitration, the mediator-arbitrator, before beginning the mediation, should disclose the many circumstances that could cause a person aware of those facts to reasonably entertain a doubt that the proposed neutral arbitrator could be impartial (see Cal. Code Civ. Proc. §§ 1281.9 and 170.1 and Standard 7 of the Cal. Rules of Court, Appendix, Division VI, Ethics Standards for Neutral Arbitrators in Contractual Arbitrations).

Thus, Bowers must be followed with caution. Binding mediation may be an appropriate remedy to settle a case but, before initiating that process, the parties should require the agreed-upon neutral to disclose all potential conflicts and make sure that they, themselves, have waived the potential conflict that a mediator, and about-to-be-arbitrator, might be influenced by all sorts of admissible and non-admissible arguments that he or she heard in separate mediation caucuses. The better process is to avoid all these problems by never having the same person mediate and arbitrate a matter.

Trial Master and General Judicial Reference Procedures: Advantages over Arbitration

By James A. Steele

In one of my first arbitrations as a lawyer, to my dismay—and to the even greater dismay (and expense) of my client—the evidentiary hearings spanned approximately 20 days over a period of several months. Although my client ultimately prevailed and was awarded his fees and costs, the experience left my client, and me, with serious reservations about the arbitration process. As litigation would have required us to wait almost five years to get to trial (now a recurring phenomenon in some jurisdictions, including California) and would have afforded us little, if any, ability to select a trier of fact with industry-specific experience, arbitration was, and still is, deemed by many to be the only practical alternative. Based on my experience, however, there is a better solution. The “general judicial reference” procedure (as it is provided for pursuant to Cal. Code Civ. Proc. § 638) or “trial master” procedure (as it is sometimes referred to elsewhere) provides a potentially far more efficient, expeditious, and fair alternative to arbitration.

A number of jurisdictions provide for a functionary similar to that which exists under California law, sometimes called the “trial master.” However, the trial master may or may not have general, as opposed to special, jurisdiction over the dispute, and when the trial master has general jurisdiction, that may sometimes require consent of all parties and approval of the court (see, e.g., Fed. R. Civ. P. 53(f)(3)(B)). The defining distinction is whether or not the master’s findings are final, albeit subject to appeal, upon which judgment may be entered, or whether they are first subject to approval and adoption by the court. California law specifically denominates judicial references as being either “general” (pursuant to Cal. Code Civ. Proc. § 638) or “special” (pursuant to Cal. Code Civ. Proc. § 639). Special references, sometimes called “settlement masters,” “discovery masters,” or “coordinating masters,” involve limited assignments in which a mere advisory opinion is provided to the court (see, e.g., Cal. Code Civ. Proc. § 644). For example, a federal court may designate a particularly experienced patent attorney to conduct a Markman hearing to make findings regarding disputed patent claim terms (see Markman v. Westview Instruments, 517 U.S. 370 (1996)). However, these findings and recommendations may or may not be approved by the district court. In federal practice, the appointing order will provide the extent of the master’s authority (see Fed. R. Civ. P. 53(b)(2)(A)). Some states, such as California, have their own rules, while a number of others are modeled upon the federal rules. (The article “Special Masters in State Court Complex Litigation” by Lynn Jokela and David F. Herr, available at tinyurl.com/lwmvo4w, offers a state-by-state listing.)

Although the judicial general reference as it exists under California law may not mirror the trial master procedure found elsewhere, the intent of this article is to focus on the comparison of the general reference, or trial master, who is not subject to having his or her findings approved by the court, over the special iteration thereof, and compare it to arbitration. For convenience, the term “general reference” is therefore intended to apply to what might be conceptually thought of as a general trial master procedure.

As in arbitration, the parties in a general reference can initially contract for, or later agree to, their forum and hence the applicable governing rules; they may also be afforded a degree of privacy in the proceedings, and they may select neutrals with relevant experience. However, there are a number of very significant advantages of the general reference over arbitration.

The general reference procedure may help ensure the parties’ previously agreed-upon dispute resolution methodology will apply. Arbitration, especially where the parties may be deemed having unequal bargaining positions such as in the employment context, is subject to significant scrutiny and even avoidance at the appellate level. General references are not typically so treated, at least under California law (e.g., Woodside Homes of California, Inc. v. Superior Court, 107 Cal.App.4th 723, 736 (2003) and Trend Homes, Inc. v. Superior Court, 131 Cal.App.4th 950 (2005)). This is owing, at least in part, to the fact that general reference proceedings are, subject to the parties’ agreement to the contrary (e.g., Cal. Code Civ. Proc. § 2016.030), generally more akin to court proceedings. On the other hand, arbitration rules often permit skeletal pleadings, little if any law and motion practice that might narrow the issues, and very limited if any formal written discovery.

Furthermore, for fear of having their arbitration awards vacated for the failure to admit evidence, many arbitrators admit virtually anything “subject to weight,” no matter how irrelevant, time consuming, or confusing to the issues it might be. By contrast, “[t]he hearing before a referee is conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings” (see Sy First Family Ltd. Partnership v. Cheung, 70 Cal.App.4th 1334, 1341 (1999), and Cal. Evid. Code § 300). As such, the considered balancing analysis mandated by Cal. Evid. Code § 352 is required in general references.

Despite this, the time and expense otherwise associated with traditional civil litigation, where it now may take four to six months or longer just to have a simple motion heard, may be very drastically reduced. Routine motions are typically heard in fewer than 30 days, or even eliminated. For example, the referee may be consulted during a deposition and immediately resolve any disputes, thereby avoiding deposition adjournment and extensive motion practice.

At the conclusion of the general reference trial, the referee prepares a statement of decision that stands as the decision of the court and is reviewable in the same manner as if the court had rendered it (e.g., Cal. Code Civ. Proc. §§ 643(a) and 644(a)). By contrast, at least in California, an arbitrator’s decision is not generally reviewable for factual or legal errors, even if those errors appeared on the face of the award and caused substantial injustice to the parties (see Moncharsh v. Heily & Blase, 3 Cal. 4th 1, 6 (1992)).

For all of the foregoing reasons, the general reference or trial master possessing general jurisdictional powers provides a superior mechanism for the efficient, expeditious, and fair resolution of commercial disputes.