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July 03, 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 are often more marginal from a merits standpoint. And that's exactly where ADR can really help--even you don't love ADR, or you were trained for full-blown trials.

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 and a deep pocket.


The stars seem to be aligned in Goliath's favor.

Not only does your client Goliath have more resources, and the case filed against it is transparently contrived and weak, you are assigned to a real judge. Your firm is before a scholarly, honest, sane jurist, with people sense, and loved by all. Your research suggests that the judge is business-savvy in rulings, and takes a dim view of iffy cases.

So you think you will win your case on a dispositive motion (and you do, eventually). You are right on the merits--and any law professor in the U.S. would agree with you. The "case" your long-time GC just handed you is silly, right? And a piece of cake. Beneath you, you tell yourself. An "easy win", right?

Well, think again, Skippy.

Your GC couldn't have hired you to do anything more difficult. "Winning" just took on a new and more complicated meaning. Because now--especially if you were just handed a defense counsel's dream and stone "winner" of a case--you will have to work harder, and be smarter, than if you were defending a good faith or meritorious suit in which your client had the lion's share of bad facts. 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 July 3, 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

In some sense, I understand the desire not to resolve "iffy" cases on any level, because you don't want to encourage more of them.

On the other hand, a lot of "iffy" cases are simply weak, not frivolous. The distinction is critical. A "weak" case is valid and meritorious but difficult to prove, like a soft tissue injury case. Plenty of people have serious soft tissue injuries, resulting from negligence, that restrict their ability to work and have hampered their personal lives. But they have an uphill battle at trial attempting to prove the extent of their injuries, given the nature of juries these days, and even if they win the recovery usually isn't that large.

But the possibility of recovery is there (as is the possibility of a substantial recovery) and, just as important, the ethical duty to right a wrong is there, too. Same goes for any business case: if there's a claim in any sense there, there's a chance it will carry the day, and a chance it should carry the day. Which brings me to my real point: everyone, both plaintiffs and defendants, should always consider actually resolving the case, rather than "litigating" it, which does nothing good for the clients.

If that takes mediation or arbitration or some other ADR, so be it; if it takes cutting off your own billing (or slashing your contingency agreement), so be it. Just always keep in mind that your role is to resolve conflict, not create it.

Posted by: Max at July 7, 2008 05:31 AM

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