Recent Innovations for Reaching Better Results at Lower Cost in Business Disputes

Peter W. Benner

Two recent contributions to the dispute resolution field are reinforcing awareness of, and offering tools for,early and more favorable resolution of business disputes.  Both are available on the web:

  • Planned Early Dispute Resolution (PEDR): Google “Planned Early Dispute Resolution” to reach the ABA Dispute Resolution Section website that describes the process and provides a download link to a pdf User Guide.
  • Guided Choice Dispute Resolution System:
  1. The PEDR User Guide is a succinct 13-page “how to” digest fashioned by a Task Force of the ABA Dispute Resolution Section to address what the Task Force characterizes as “an an all-too common pattern in ‘litigation as usual,’[in which] settlement comes only after the lawyers engage in adversarial posturing, the litigation process escalates the original conflict, the parties’ relationship deteriorates, the process takes a long time and a lot of money, and none of the parties is particularly happy with the settlement.”

That is a persistent and highly problematic pattern associated with business and commercial disputes, which I have written about previously in the context of making more considered efforts to engage in early mediation (and why that is not happening more often).

Briefly, the Guide describes how “PEDR is designed to satisfy parties’ interests, reduce litigation risks, and save time and money.”  If that sounds good, in fact it is, as the Guide outlines a well-conceived and direct approach to addressing the problems that are easy to identify but not as easy to solve due to entrenched habits of the participants in a dispute as well that the financial disincentives for lawyers, to say nothing of simple resistance to change.

PEDR speaks to the “prison of fear” (perhaps a dramatic term, but it often fits) that traps both attorneys and business leaders in reflexively combative practices that serve only to escalate a dispute without productive purpose. The Guide makes the case that implementing means to escape this prison present very little, if any, risk.  Exploration of options to formulate and agree upon processes more appropriate for meeting business objectives need not supplant litigation altogether, and can open up discussion, directly between the business participants at a high level, that can identify and develop the kinds solutions that do not materialize through preoccupation with the posturing and parrying of most business cases.

The Guide describes how to create and implement a practice of (a) early case assessment specifically tailored to the business, (b) engagement between business players, and (c) thoroughly evaluating and understanding the opportunities achievable through negotiation and mediation, each of which is a central element of the program.

One notable recommendation of the Guide is to create alternative fee arrangements so as to align clients’ and lawyers’ interests. As I have written before, this can be a touchy subject, and it is one that has not been sufficiently addressed out in the open. The work of the Task Force addresses this issue head-on. Until these incentives are realigned, resistance to early assessment and resolution innovations will persist. For that reason, having a document such as the Guide originating from the ABA is an important step, and the Guide should become required reading for in-house counsel as well as the litigators who advise them.

  1. The Guided Choice Dispute Resolution System is built around six core principles: 1) an obligation to mediate; 2) diagnostics by the “facilitator”; 3) information exchange; 4) anticipation of and overcoming of impasse; 5) continued use of the facilitator after suspension of negotiations; 6) customization of arbitration for disputes that do not settle, each of which is explained in detail on the website. The system initially was developed for construction disputes, and has been broadened to apply to a wide range of cases in the business area. The term “Guided Choice” seems intended to steer the parties toward a more rational and considered process of addressing a dispute than allowing a contested case to take on a life of its own within escalating litigation.

Guided Choice rests heavily on the concept of “diagnosis” of the dispute by an independent facilitator: “The facilitator must be able to 1) identify the parties’ needs for information; and 2) understand financial, and insurance issues and the existence of other potentially responsible parties who may not have previously agreed to participate in the mediation process.  The facilitator should also …identify any biases, hostilities, risk aversion and other psychological factors that have led to impasse. For example, how have the parties framed the impasses? What are the alternatives the parties have to a settlement? Are there possible win/win scenarios based on business considerations?” (emphasis added)

These are important questions, and the inclusion of consideration of cognitive biases, which are becoming increasingly recognized as the causal barriers to constructive engagement in resolution processes, goes beyond the express objectives of traditional mediation.

Guided Choice, like PEDR, in a perfect world, already would be more widely practiced.  The fact is that Guided Choice may seem even more “different” or removed from a litigation track than PEDR, and for that reason may take more time to find its way into the mainstream, or require further adjustments.  In any event, the Guided Choice approach is one worthy of review and consideration by those looking to improve litigation results and reduce costs.

One critique of these kinds of programs is that there is no data that demonstrates their effectiveness for bringing about better, faster and less expensive resolution of disputes. This legitimate issue should be part of the conversation.  To some extent, however,that misses the point that reorientation of the dispute “paradigm” toward identifying business opportunities through direct engagement of the principals, rather than defaulting to worst-case risk aversion through a litigation process managed by lawyers, will uncover prospects and means of resolution, and even create business gains, that can readily be missed through escalation of a purely adversary process.

To examine and further develop these kinds of ideas, a group representing dispute resolution practitioners and providers, as well as business leaders who have experienced disputes firsthand, convened at the Straus Institute for Dispute Resolution at Pepperdine University in September 2014 for a program entitled “Reimagining Corporate Conflict Management”. The purpose was to do just that – to “reimagine”, by stepping back to take a multidisciplinary look at how companies might more effectively manage their internal and external conflicts. This is the kind of discussion that needs to infiltrate the overall dispute resolution system, as well as within individual companies and lawyer/client relationships, so as to identify the existence and causes of dysfunction within the current system and engage an array of participants in consideration of how to move beyond established processes that may continue simply because “that’s the way we do things around here”.

Both PEDR and Guided Choice are valuable contributions to that conversation, and are to be taken seriously as offering means to the end of moving beyond “litigation as usual” toward a system that embraces the opportunity presented by conflict as much, if not more than, it does the lawyer driven avoidance of risk.