Alternative Dispute Resolution (ADR) and corporate ADR policies are no longer a novel idea. The International Institute for Conflict Preservation and Resolution (CPR) reports that nearly 50% of large US corporations are now using ADR as their main dispute resolution vehicle. Reasons for its growing popularity include cost savings and greater efficiency compared with traditional litigation; increased privacy; and increased opportunities for preserving otherwise valuable business relationships despite the presence of a dispute.
What’s less clear is whether such increasingly common ADR policies are maximally effective. The answer is not always straightforward. A successful ADR policy depends not only on its design, but also on its implementation and adoption by all key institutional players – from the executive to staff level. There are real risks here: ineffective ADR policies may be abandoned or ignored, while ill-conceived policies can cost companies as much as, or even more than, traditional litigation, from both the financial and business opportunity perspectives.
Ensuring the success of a well-designed ADR policy
The success of an ADR policy is strongly correlated with the degree of commitment undertaken at all levels of an organization, not just the legal department. Senior executives, management and even staff must adopt the concept of ADR as the default option, even in cases in which there would be a good chance of winning in court. We often imagine ADR as a solution when in the position of a respondent. However, when enforcing rights with a strong case, a company is much more likely to take a bullish position and encourage litigation. Such a position of strength is a critical juncture at which an ADR policy should be respected and applied for the long-term benefits to come to fruition.
Another consideration is when the ADR policy is the alternative or the modus operandi. For companies with a mandatory ADR policy, it’s crucial to avoid unnecessary carve-outs to an otherwise required policy. Certainly, different forums for dispute resolution are necessary for a limited number of circumstances, but it’s important to adhere closely to those limitations and ensure that the team is committed to ADR in most, if not all, cases.
Elements of a Well-Designed ADR Policy
A strong commitment to ADR isn’t sufficient; good design is crucial too. For example, an ADR policy authored with a strong litigation hand (i.e. it leaves room for extensive motion practice, broad discovery and depositions, experts, etc.) tends to result in a process that mimics the negative effects of traditional litigation.
So what are the elements of a well-designed ADR policy? Once a company has made basic preliminary determinations regarding its ADR policy – i.e. what ADR mechanisms will be used and when they will be deployed – the company must decide what objectives the system should be designed to accomplish. Options include:
Systematization. Systematizing an ADR policy allows companies to implement rote processes that ensure maintenance of the principles of ADR and efficient use. To do this, companies often include:
- A mandatory list of steps to take at the signal of any legal dispute, such as whom to notify within the company and how to do so;
- A timeline for taking those steps; and
- an organized and consistent means of documenting the outcomes of disputes.
It’s also important to maintain a record of which solutions worked in the long-term and which did not, which disputes ultimately required litigation and which were successfully resolved using ADR, etc..
Preparation. Diligent, methodical preparation prior to a mediation session or arbitration hearing will almost certainly result in time and cost savings. Such a policy should also include guidelines for prehearing conversations. These exchanges help to reduce the number of necessary witnesses and also allow parties to discuss specifically what is at stake before entering the hearing. Further, this allows the parties to discuss damages and specify the extent to which they can be claimed. In cases of arbitration, an arbitrator will ultimately decide the reasonableness of this determination, but having a conversation of this nature will help parties understand what is on the line and how they need to approach ADR. Proper preparation of this magnitude also supports convivial relationship building between parties throughout the resolution process.
Minimization. Less is more for ADR. Opportunities for minimization include:
- Prehearing exchanges help achieve minimization by facilitating itemization and streamlining of issues.
- Removing extraneous witnesses fosters a speedier resolution by eliminating unnecessary information and time needed to interview those witnesses.
- Paperwork, particularly as it concerns briefs, is another key area for minimization. It’s easy to assume your mediator or arbitrator will need briefs from each party on every issue, but it’s just as easy to ask whether or not this is the case. In addition, set page limits with the mediator or arbitrator for the circumstances in which briefs are absolutely necessary – it will be better for everyone involved.
- Expert involvement is another area for minimization. Find a neutral expert who will work with both sides and weigh in on questions objectively. When each side has its own expert, the focus can quickly move to the biased arguments backing facts rather than the facts themselves.
Resources for Assistance in Crafting an ADR Policy
While developing an ADR policy may seem overwhelming, the Dispute Resolution community offers extensive support for formulating one effectively. For example, ADR institutions like the American Arbitration Association (AAA) and JAMS have local or regional offices that offer an array of support services to companies and counsel. Further, there are ADR practitioners with a high level of expertise in conflict resolution; ADR conferences; law school clinics focusing on ADR, which produce academic research on the topic; State and Federal Court ADR administrators, and even practical ADR books and tools such as AAA’s ClauseBuilder can help guide you to design an effective ADR policy for your Company.
Once your policy is developed, both individual lawyers and institutional resources are available to help companies stay up to date, establish a means of measuring success and remain open-minded about feedback from internal players and external users.
Disclaimer: This article is written by M. Salman Ravala, Esq. for general information and discussion purposes only. It highlights a few key points and is not a complete analysis or toolkit to develop your Company’s ADR policy.