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June 30, 2008

"At what price glory?" The lure of ADR in a down economy.

An "easy-to-win" business suit against your client defended by the most efficient defense counsel on earth can have defense fees well over $100,000, even with minimal or no discovery.

It's a good time for business clients to push for ADR (including mediation) over litigation. Not because ADR is cheaper, faster and better--sometimes it's clearly not--but because the cases you defend in a struggling economy can be more marginal.

Say you've just been handed a case to defend in an American court that is highly questionable and insubstantial. A weak employment discrimination or wrongful discharge action (the "un-classy firing" suit). Or a flimsy business case dressed up as an unfair competition or infringement action (the "it's-weak-but-let's-see-what-happens" suit). Down-on-their-luck David & Son, with hungry counsel, v. Flatfooted Goliath, Inc., your client. You are before a real judge, a scholarly, sane and honest one, and you think you will win your case on a dispositive motion. You are right on the merits--and any law prof would agree with you.


Just silly, right? Beneath you, you tell yourself. And easy to win.

Think again, Skippy. Because now--especially if you have a "winner"--you will have to work harder and be smarter than if you were defending a good faith or meritorious suit. The trick now is to win cheap*. An easy-to-win business suit handled by the most efficient defense counsel on earth can have defense fees and costs well over $100,000, even with minimal or no discovery. You really think that your GC or client rep will be happy the day you tell him or her about your great win on all counts based on your brilliant Rule 12(b)(6) or Rule 56 motion?

Don't bet on it. For the experienced client, the cost of the lawsuit is part of the "victory" analysis. In a down American economy, litigation tends to increase. More suits are filed. And in my view clients and their plaintiff's lawyers file more questionable suits, i.e., ranging from Rule 11 violations and frivolous to iffy and wasteful. Employee and business nuisance cases are a big chunk of those filings.

A good arbitration panel or mediator will cut to the quality of the suit and its likelihood of success quicker than even the best American judges, who often feel obligated to give bad and iffy cases a wide berth. And good judges understand the problems of the business community and the utility of arbitration and mediation. Get jurists on your side in your attempt to drive iffy cases into ADR.

*GCs would rather have "no lawsuit" than a great case or defense.

Posted by JD Hull at June 30, 2008 11:59 PM


For international arbitration, maybe it's about time clients consider hiring offshore outside counsel, especially if the arbitration is documents-only.

Posted by: Francis M. Egenias at June 30, 2008 03:22 AM

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