Jeff Bleich, president of the California State Bar, writes in the California Bar Journal about how the legal system is beginning to fail the middle class due to the high costs of the legal system.  He makes an analogy to the medical profession and doctors and how the average person (absent insurance) is priced out of decent care and treatment.

He writes:

It should not come as any surprise to us to hear that — as a profession — we are not meeting the needs of a good portion of the public. Most of us have friends or relatives who have gone without a lawyer, or chose someone outside of their field, or settled a case that they shouldn’t have, simply because they couldn’t afford the right lawyer. A quarter of all California attorneys earn less than $50,000 per year, and so if they faced a serious legal problem, they likely could not afford themselves. I routinely counsel friends that they would be better off absorbing some slight or injustice rather than face the cost, risk and pain associated with full litigation.

He also lays out some other sobering stats:

In 2005, only one in eight family law litigants had a lawyer; 34 percent of landlords and more than 90 percent of tenants were unrepresented in their housing disputes. As any lawyer who has sat through a long calendar and watched unrepresented parties try to navigate the system knows — and despite the best efforts of the self-help centers in the courts — our system is not equipped to deliver on the promise of equal justice to most pro se parties. They know it too. In fact, there are blogs and Web sites that are only too ready to describe the shortcomings of the system.

He proposes three “solutions” to the problem:

1. The right to counsel in certain types of civil cases (similar to criminal cases when the accused cannot afford an attorney).
2. Alternative Models including preventative law services to avoid litigation in the first place and utilizing specialized judges and investigators.
3. Creating alternatives to lawyers, such as less-than-full-service lawyers to advise (i.e. students and specially trained paralegals) or allowing out-of-state attorneys to handle certain cases via the internet.

Sadly, Mr. Bleich omits mediation as alternative to resolve this problem.  Maybe someone cannot afford $20,000+ on an attorney to take them through discovery and a trial, but maybe they can afford $2,000 on an attorney and their share of a mediator — and get their case resolved in a fully informed manner.  Mediation works, especially when the parties are fully involved in the process and they have an understanding of what the potential outcomes could be.

Tags: Commercial Mediation, Divorce Mediation and Law // Add Comment »

This question is one of the big debates going on in the legal and ADR/CDR worlds.  Arbitration is essentially a private court (actually, that’s what tv shows like “People’s Court” and “Judy Judy” are).  The advantage is generally lower costs for all the parties, quicker hearings and relaxed rules of evidence.  The disadvantage is that the arbitrator’s ruling can only be appealed on very narrow grounds (fraud, conflict of interest, abject disregard for law, etc.).  Courts generally uphold the sacrosanct nature of the limited right to appeal.  So, if you don’t like the ruling of the arbitrator, you’re stuck with it.

You may not realize it, but more and more agreements you enter into contain mandatory arbitration clauses.  Credit card agreements are the big one.  Who reads those things when you sign up?  Not many people do (it’s long, boring, in small print and in legalese that the average person may have trouble understanding).  But then they get into financial trouble, default on their account payments, get scared and ignore all the arbitration notices, miss the hearing and have a default judgment against them that cannot be vacated and have little recourse afterward.  This and the converting of arbitration proceeding closer to a court trial (with higher discovery costs) are the main criticisms leveled at the arbitration process.

The U.S. Chamber for Legal Reform (an arm of the U.S. Chamber of Commerce — who represent businesses) has come out with a study showing how credit consumers are better off going through arbitration than litigation.  They compared arbitrations in California to a “random sample” of trials in New York City courts.  Their study claims that in 32% of the CA arbitrations the consumer prevailed versus 7% in NYC courts.  The arbitrations resulted in a lower default rate (47% vs. 80%) and a higher settlement rate (21% vs. 6%).

Companies like to use arbitrations because it limits their expenses on collecting on delinquent accounts.  So, in analyzing the study, consider the sponsor (and their motivations).  Also, you would be right to question if apples and oranges are being compared.

The debate will continue.

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FINRA is the financial industry’s self-regulatory arm.  Part of what they do is manage arbitrations for broker-client and broker-employee disputes.  Nearly all brokerage agreements and broker employment agreements contain a clause mandating aribtration rather than litigation.

Most arbitration panels are comprised of 3 arbitrators, one who is considered an “industry” arbitrator (generally, someone who works or has worked in the financial services industry) and two who are “public” arbitrators (never having been associated with the financial services industry).  In this way, the panel will have a perspective from within and outside the industry and having 2 public arbitrators protects the client or employee claimant from feeling like the panel is stacked against them by a self-regulating body.

Now, FINRA is launching a pilot program to test how well an all public panel will work.  From their press release:

Six firms — Merrill Lynch, Citigroup Global Markets, UBS, Wachovia Securities, Morgan Stanley and Charles Schwab — have volunteered to participate in the pilot program. The first five firms will contribute 40 arbitration cases each per year to the program and Schwab, with fewer cases in the forum, will refer 10 cases - meaning that over the course of the pilot, over 400 arbitration cases involving those firms can be heard by all-public arbitration panels. Only the investor making the arbitration claim can elect to participate in the pilot program; the firms will not decide which cases become part of the pilot. The pilot will be available to eligible claims filed on or after October 6, 2008.

FINRA is also reaching out to a wide range of other firms to join the pilot so that a variety of firm sizes and business models will be represented.

The pilot program will be evaluated according to a number of criteria, including the percentage of investors who opt into the pilot and the percentage of investors who choose an all-public panel after opting in. FINRA will compare the results of pilot and non-pilot investor cases, including the percentage of cases that settle before award (and how quickly they settle). FINRA will also study the length of hearings and the use of expert witnesses in pilot and non-pilot cases.

I am an arbitrator for FINRA.  I’ll be curious to see how this works.

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A federal court in California recently ruled that a company who did not mediate their dispute prior to filing suit, according to the agreement between the parties, will have its case dismissed.  In Brosnan v. Dry Cleaning Systems Inc, plaintiff entered a dry cleaning franchise agreement with the defendant.  The agreement stipulated that any disputes must be put to mediation before filing suit in court.  That did not happen in this case.

Plaintiff argued that the case should be stayed (paused) until a mediation could be held.  The court did not agree, holding that unlike in an arbitration case, there were no preliminary issues to be settled, and granted defendant’s motion to dismiss.

Hat tip to National Arbitration Forum.

Tags: Arbitration, Commercial Mediation, Lawsuits // Add Comment »

The NJ Court system has set time goals for disposing of cases that are filed in their system.  They rate cases by vicinage (county) and case type (criminal, civil, family, municipal, etc.).   The report for the year July 2007 through June 2008 has just been published by the Administrative Office of the Courts.  It shows that backlogs are down, despite the filings of new cases being up.  If you’re having trouble falling asleep, you can read it here.

In the civil division (in which I am referred cases to mediate), statewide filings amounted to nearly 95,000 new cases.  In the same time period, 109,000 cases were disposed of (basically, the cases ended due to a settlement, motion, judgment/trial, or lack of prosecution/defense).  At the end of June 2008, there were 93,000 active cases.  Of those, 17% were considered backlogged (past the expected time for a final disposition).  The total number of cases backlogged is down 5% from the previous year.

Cases from the special civil part (claims less than $15,000) amounted to 608,000 filings and 601,000 dispositions (both up 17% from the previous year).  2% of special civil part are considered backlogged.

How about divorces (where I am also referred cases from)?  Filings amounted to 68,000 (same as dispositions) over the year.  That is up 2% from the previous year.  18,000 were active at the end of the year and of those 5% were backlogged.

One of the main reasons cases are sent to mediation is to get them resolved and off the court’s docket.  The court simply does not have the resources to hear a million cases a year, along with all the associated motions, case management, settlement conferences, etc.  The fact is only 1.8% of cases filed ever make it to trial.  Mediation saves the litigants time, money and aggravation.

As a comparison, about 29% of all civil cases statewide resolve directly in mediation (my personal settlement rate in court assigned cases is about 50%).  Even if the cases do not settle directly in mediation, mediation will lay the ground work for the settlement.

Tags: Commercial Mediation, Divorce Mediation and Law // Add Comment »

In NJ, you generally use an attorney to buy or sell a home.  Sales contracts are not standardized, often contain legalese and are not friendly for lay people (i.e. non-attorneys).  Attorneys hold the exchanged monies in their trust account for disbursement. California, on the other hand, generally uses standardized forms and escrow companies rather than attorneys.

California has a clause in their standard residential sales agreement that mandates mediation before suing, otherwise attorneys fees are not recoverable.  This was recently upheld in the case of Jay Lange v. Roxanne Schilling, et al.
The plaintiff spent $113,000 in legal fees to get a $13,000 judgment. Plaintiff did not offer mediation before suing (he claims he couldn’t find the defendant) and the appeals court would not grant him his legal fees.

So, he in essence gained a pyrrhic victory. He won on his underlying claim (the published judgment does not detail what that was), but it cost him $100,000 to do so.

Sometimes “winning” isn’t everything…or better yet, define what “winning” is prior to setting off on your journey to get it.

With a hat tip to Kevin Forrester at Making and Keeping Peace in Real Property Matters.

Tags: Commercial Mediation // Add Comment »

Following up on an earlier post, Rich Rodriguez, now the coach at University of Michigan, has come to a settlement with West Virginia University.    Rodriguez left WVU to become UM’s head coach after last season and a $4 million buyout clause in his contract became the center of a lawsuit.  Coach Rodriguez thought that verbal promises were made that made the clause invalid.  WVU thought otherwise and sued for the full value.

The settlement was that Rodriguez will pay his alma mater $1.5 million in 3 installments starting in 2010 and U of M will chip in $2.5 million as well as pay for Rodriguez’s legal costs.

So why did this settle?  Only the parties know, but here’s some speculation:

• Mediation elicited some facts to one or more parties and laid the ground work for the settlement.  Mediation allows parties to re-assess their upside and downside (risks) in a lawsuit.
• Rodriguez really was looking for a payment plan (which is what he ended up with).  The settlement was for full value, not a discounted value, which is typically the case (parties hedge their litigation risks).
• Several Wolverine officials were scheduled to be deposed shortly after the settlement was announced.  It is possible they did not want some information to come out.
• Michigan was afraid of some sort of tortious interference or conspiracy suit in parallel to the suit filed against Rodriguez.
• Perhaps it is at face value to what the Wolverine Athletic Director had to say: “To help Rich focus on the challenges ahead, we have worked with him to resolve the dispute between him and West Virginia University over the terms of his buyout.  Although he continues to disagree with the validity of the terms, Rich and the rest of us at Michigan felt that it would be best to get this distracting issue behind us.”
• Or it could be something totally different motivating the settlement.

WVU hired Rodriguez assistant Bill Stewart who will essentially cost the Mountaineers nothing, as his contract will be funded for the next 5 years by the Rodriguez settlement.

Less than 5% of cases actually go to trial.  Mediation almost always helps pave the ground work for the settlement.  If you have a dispute you want settled, please contact me.

Tags: Commercial Mediation // Add Comment »

The Media Infocenter reports that the NFL and Comcast, the cable giant, have agreed to enter mediation to solve their dispute over which tier the NFL Network should appear on.

The mediation will focus on whether Comcast had a contractual right to place the NFL Network on a sports tier that around 2 million of Comcast’s 24.7 million subscribers buy for about $5 to $7 per month.

The NFL has refused to suspend its carriage discrimination complaint against Comcast at the FCC for the duration of the mediation. The complaint accused Comcast of favoring company-owned sports networks Golf Channel and Versus over independent channels like NFL Network. Comcast denied the charges in a June 20 filing at the FCC.

“While we are prepared to agree to mediation of the contract language dispute between us and Comcast, we expressly told the court in New York that we would not stay the FCC proceeding — which raises major issues of federal communications policy — during the mediation. Comcast is trying to persuade the FCC to stay it, but we see no good reason to do so — especially because Comcast doesn’t deny that it treats NFLN differently than sports channels that it owns,” NFL spokesman Dan Masonson said last Thursday.

Tags: Commercial Mediation // Add Comment »

Here’s a nice article about commercial mediation from the Charlotte Observer. I’ve done EEOC (employment discrimination) mediations and they are usually among the most emotional. Every mediation has a life of its own and predictions of outcome are usually futile or wrong. The bolding is my emphasis…

Here’s your final offer … and a hug

GUEST COLUMN

Stephen J. Dunn

It had been a long day. My client and I were drained. After hours of intense negotiation, it seemed as though we had reached an impasse.

We made our final offer and packed up our briefcases to leave, but just then our mediator returned and said, “Guys, she says she’ll do the deal. There’s just one more thing. She wants a hug.”

My client and I looked at each other and shrugged. This sort of thing happens only in mediation.

In virtually every lawsuit, at some point the parties participate in a mediated settlement conference. The mediator, a neutral third party trained in alternative dispute resolution, hears from both sides and attempts to facilitate a settlement. It is an informal process with no sworn testimony, no jury and no judge. The mediator has no authority to declare a winner, but only to work toward a resolution acceptable to all.

When it works, mediation brings an end to litigation. The parties sign an agreement, often drafted by the mediator on the spot, and shortly thereafter dismiss their claims.

Successful mediation circumvents the need for trial, reducing legal expenses and lessening the burden on the court. The parties cannot, however, be forced into a settlement. If there is an impasse, the lawsuit proceeds to trial and a judge or jury declares the winner.

By the time our mediator proposed settlement terms including a hug, my client and I had already been down a long road. My client was an employer who had been sued for sex discrimination by a former worker.

As is often the case in employment discrimination cases, the financial and emotional stakes were high.

The company sympathized with the plaintiff, a longtime employee with financial difficulties, but was adamant that her gender had nothing to do with the termination decision.

We had been through months of discovery and depositions. We felt good about the evidence, but there is always risk at trial and always a possibility of appeal.

A good mediator knows how to focus parties on their interests, not their dispute. Rather than debate who is likely to prevail in court, a skilled mediator highlights the flexibility and finality of settlement.

A company may wish to make payments over time. An employee may want certain language included in a reference letter. The parties may agree to keep the settlement confidential.

Mediation allows the parties to explore resolutions outside the scope of what a court can provide.

Over the course of several hours, our mediator had brought us close on a number of points, but the plaintiff still wanted more money than we were willing to pay. My client’s representative, a human resources director who had been friends with the plaintiff, was losing patience. We decided to make one final offer as a “take it or leave it” proposition. We never expected the counter offer of a hug.

I always tell my clients if you can give something to the other side and it does not cost you anything, you should do it.

In this instance, at the end of a long day and a long case, facing the prospect of a long road to come, the hug would not be a deal-breaker. We drew up the papers and my client gave the plaintiff a hug.

She wanted to give me a hug, too, and I agreed (even though it had not been negotiated into the bargain!). Within weeks, the case was dismissed and the parties went on with their lives.

A hug almost never settles a lawsuit, but a creative mediator finds ways for parties to come together beyond just dollars and cents.

Stephen J. Dunn is a partner in the Charlotte firm Van Hoy, Reutlinger, Adams & Dunn and specializes in representing employers.

Tags: Commercial Mediation // Add Comment »

Cynthia Fox, in the South Side Journal writes an excellent article about the benefits of mediation (excerpted):

One of the hardest things about divorce is its cost, not just emotionally and psychologically, but in cold hard cash.

A typical scenario is a husband, wife and two attorneys. Add the expense of outside experts if there are disputes over who can better parent their children or the valuation of an asset such as a business that one or both owns, and the bottom line is fees well into five figures for each party.

However, in my experience, anger and contentiousness drives up the cost more than any other factor. More anger equals more destruction, cutting deeply into the wealth and well-being of both parties. Deeply hurt litigants file too many motions, push issues beyond reason, are unable to compromise and often are so damaged that they emote endlessly in the lawyer’s office. The result: very large legal bills that anger them even more.All of this has led me to develop a new approach that I describe as the ConstructiveDivorce, which attempts to reduce the emotional and financial costs of divorce and help my clients prepare for and get onto the next stage of their life. Helping people resolve their conflicts more constructively is also why I trained to become a certified mediator.

Any couple heading for divorce can go to mediation, even if they have already hired attorneys and started down the more adversarial path. In mediation, the wife and husband meet together with the mediator, and with his/her assistance, prepare the final settlement agreement that the Family Court requires in order to grant them a divorce.

This agreement typically deals with the division of the property, parenting plans for the children, assigning custody and visitation rights, as well as addressing child support or spousal maintenance needs. Understandably, resolving these questions can be stressful and difficult, particularly for estranged couples.

The mediator is a like a “tour director,” identifying all the stops along the way, providing knowledge and insights, while making sure each person gets what they need with a minimum of friction.

And, while no one would say getting a divorce is like taking a vacation, in the hands of a skillful mediator, the excursion can be both liberating and empowering. That’s because each party is encouraged to be totally open about what they feel, believe and expect about the end of their marriage with the mediator there to support and buffer them. The mediator’s job is not to allow the strain of these painful topics keep the parties from getting to the finish line.

I believe couples that mediate the end of their marriage “own” their divorce in ways that provide a clean break with the past and allow them to get on with their lives. They also save a boatload of money.

In most situations, no attorneys are needed until the settlement agreement is completed, and then one or both parties will usually retain a lawyer to take the agreement to the court for its approval.

Tags: Divorce Mediation and Law // Add Comment »