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Ql n3s4iwhm.pdf

Ql n3s4iwhm.pdf

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Published by Darren Lawson

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Published by: Darren Lawson on Dec 31, 2012
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Keeping it
Out of Court
regory L Greenwood, owner of a car
dealership in Y4ungstown, Ohio,
claimed that Chevrolet owed him
more than $100,000 worth of
through its
incentive program.
But Chevrolet refused to pay the
incentive to Greenwood Chevrolet
due to an intricacy in their agreement.
After six months of erchanging nasty
ktters, parent company General Motors gaveGreenwood the option of arbitrating the dis-
That meant he
an impartial panel of three people
hear and decide his case outsideof court.
Theyjointly chose thepanel, which included a Chev-
rolet dealer, a Chevrolet factory
representative and a professionalarbitrator from Endispute Inc., aWashington, D.C., company that
offers such service&
Greenwood and Chevrolet
chose a day for the hearing and
met on neutral ground. Within
nine bows, the panel had reached
a decision, awarding Greenwood
about one-third of the money.
Although he was not totally satis
fled with the size of the award,
Greenwood still believes he's
"several hundred percent ahead"because arbitration cost less thanone-tenth of what be would have
spent on full-fledged litigation.
Before you spend your time, energy
and money on a tedious, drawn-out
court battle, weigh the option ofalternative dispute resoiution
What's more, Greenwood and General
Motors were able to resolve the dispute in con-
fidence, preserving their working relationship,rather than sacrifice it to the adversarial forcesof a protracted and public legal battle. "I'm notjust here for the next two weeks. I'm here for along time," says Greenwood, a second-genera-
tion autOmobile dealer. "It felt good to resolve
Ethe case] in a noncom bative way."
A Growing Trend
Increasingly, companies like General Motors
and Greenwood Chevrolet are handling theusual business disputes-with suppliers, cus-
tomers and employees-through arbitration
and other types of alternative dispute resolu-
tion (ADR). These companies agree, either be-
fore or after a lawsuit has been filed,
an out-of-court resolution with the help of aneutral third party such as a lawyer, retired
judge or company that offers ADR services.
ADR case filings with the
American Arbitration Association in New York
exceeded 62,000 nationwide, a 34 percent in-crease from five years ago. The value o claimsand counterclaims in these cases amounted to
$4.6 billion.The. various form& of ADR, including arbi-
tration,. mediation and mini trials, have grown
in use primarily because they are faster and
cheaper than litigation. In recent years, court
backlogs in both civil and criminal cases have
pushed trial dates on to long, waiting lists. And
the civil cases, in particulai have taken a back-seat to more pressing criminal matters, Rather
than devote years to maneuvering a case
through court, companies have found they canresolve their differences in a matter of months
with ADR. And in the process, their disputes
remain confidential because ADR proceedings
generally are not a matter of public record.
Indeed, many courts themselves are be-
hind the move to ADR. Nearly 40 percent of
federal trial Courts and half of federal appealscourts now encourage or require parties to at-tempt ADR before litigating a case, according
to the Center for Public Resources, a New York-
based nonprofit group that promotes ADR, Atthe state level, court initiatives include "settle-
in New Mexico, Texas and New
York, when all trials are put on hold and judges
work with parties on reaching settlemen.ts and
mediation options in California, Massachusetts
and Ohio.
Exact savings are hard to quantif but
A1)R has the potential to trim tens or hundreds
of thousands of dollars from a company's legal
In 1991,
ADR case
with the
American ArbitrationAssociation.in
exceeded 62,000 nationwide,
a 34 percent increasefrom five years ago.
expenses. A fast resolution generally reduceslawyers' fees, and ADR's streamlined proce-
dures may lower or eliminate the expense of
pie-trial preparation, such as depositions that
can cost $1,000 a day just to transcribe.. With
ADR, the neutral third party 'who. helps resolve
a case costs an average of $250 to $600 a day,
and this fee is gerterally split between both par-
ties in the dispute.
ADR also gives you
much better shot at
preserving supplier an4 customer relatiotshipsbecause the methods emphasize a cooperative
rather than adversarial approach. That means
business owners can devise win-win solutions
that may not he available in court. In .a dispute
over a purchase contract, for example, you
might supplement a monetary award with anagreement to do a certain amount of business
together in the future.
To take advantage of these benefits, manycompanies are building clauses into their busi-
ness contracts that require the useEofADReither
in lieu of a lawsuit or before a matter can gO to
court. And at the Center for Public Resources,
more than 600 of the nation's largest. companies
time you
horns with a
customer over your contraci think
throwing down the.legal
gauntlet: III
you in court." Inrecent years,
challenge bus be.
gun to fade as more companies settle
their difterences
alternative dis..
resOlution tichniques They're
dlscoveriflg that they. can achieve
•sedy resolUtions, reduce legal costs
protect business relationships byavoiding a courtroom.druma.
have signed a corpo-
rate policy statement
agreeing to attempt
ADR with other cOm-panies that have made
the same pledge. As a
more small
firms may 'be asked to
resolve their business-
to-business conflicts
Harris, a vice presi-
dent of the center.
ADR can be es-
useul in
cases in which your
and the potential
has the potential to trim tens or hundreds of thousandsfrom your company's legal expenses.
damages are high. It can even be used to settle
your differences with other codefendants in a
complex lawsuit. In environmental or con-
struction cases, for example, the codefendants
may spend years in court trying to shift the
blame to each other. With ADR, you can coop-
erate in a joint defense and then negotiate, me-
diate or arbitrate with your codefendants. This
keeps the proceedings from dragging on and
building up legal costs.
These techniques also work well in dis-
putes with other small companies, the govern-
inent and customers. With claims of $IOO;000
or less, in fact, the cost of litigating quickly may
exceed the amount at stake. Thafs when a
speedy resolution can prevent too much dam-
age to the bottom line.
Of course, ADR is not always the best routebecause it tends to leave many stones unturned.It
may be hard to evaluate a proposed settle-meat, fr example, without full discovery, the
stage before a trial in which each side defines the
issues at stake and discovers the strengths and
weaknesses of its case. And you usually cannot
take advantage of the so-called provisional
remedies, which allow participants in a lawsuit
to ensure that assets are available to pay a future
judgment. While a court could seize a piece of
property or attach a paycheck, third-party neu-
cannot take such measures without autho-
rization from the parties involved.Litigation also can be a better choice when
you want to deter similar lawsuits or set indus-
try precedent through the public process offighting it Out in court. If an employee you
fired files a discrimination suit, for example,you may decide to spend time and money on
litigation to prevent other wrongful discharge
claims. In doing so, you send a message to fu-
ture litigants that you plan to. fight any such
suits fiercely, says Edward Dauer, an attorneywith Popham, Haik, Schnobrich & laufman in
Denver. "You may invest more in the case than
you think it's worth to take the posture that
you're not going to roll over and settle," says
ADR Methods
When. ADR appears to be the ilght route, how-ever, there are a number of approaches you can
take, including mediation, mini trials and arbi-
tration. Here's how each works:
With this informal and voluntary approach,
you and your adversary meet to negotiate a set-
tiement that suit$ both sides. While the agree-
ment is nonbinding, the benefit is that you
won't have a decision imposed on you by a
judge or arbitrators says Eric E. Van L<on, ex-
ecutive vice president of Endispute. That makesmediation useful in cases involving. an.ongoing
relationship, when animposed decision could
plant the seeds of future discord.
Rather than have lawyers battle it out, each
company sends a management representative
with the authotity to reach a settlement. The
executive should be familiar with the dispute,
but mediation sometimes Worl<s best if the per-
son is not, directly involved in the conflict and
has less af:a personal stake in. the case's out-
come. That way, he or she will be more open to
a compromise and more willing to explore cre-
ative 'solutions.
During the proceedings, a third-party me-
diator meets with each side.'and then conductsjoint sessions to. help you reach an agreement.Unlike litigation, which can drag on for years,,
the average two-party mediation 'proceeding
takes four hours, says Leif Bentsen, assistant di-rector of United
Arbitration & Mediation
a Seattle-based fraathisor of ADR
'services. In an ideal situation, the mediator
plays a facilitating role, encouraging the parties
to resolve the issue themselves. But if the pro-ceedings lag he r she may shift into an evalu-
ative mode and ath'ise you on how. a judge and
jury would see the case. In effect, the mediator
becomes a "cold shower provider," says Andrew
managing director of interlaken
Capital, a Greenwich, Conn., holding company
for a number of small businesses.
In one recent 'case involving a small manu-
facturer held by Interlaken, for example, themediator's evaluation helped push the partiestoward a settlement.. The manufacturer 'wasembroiled in a 'dispute regarding a complex
agreement to design products that would then
be assembled by a much larger firm.
One year into the deal, the assembler asked
Bursky's firm to rebid the job, arguing that itsprice was too high. lelations broke down, andcourt papers were already being drafted when
they decided 'to try mediation.
'Since the, procedure'was nonbinding, all
involved knew they could withdraw at any time

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