By Leslie King O’Neal
What is an in-house counsel’s role in ADR? Should in-house lawyers simply hire the best outside counsel they can find and let him or her manage the dispute using ADR (or not) with little or no input? Or should inside counsel collaborate with outside counsel in developing strategies for resolving disputes using various ADR tools? This post suggests in-house counsel should take an active role in designing their organization’s conflict management system and should collaborate with outside counsel when resolving disputes with ADR.[i]
Not One-Size-Fits-All
Of course, not all in-house attorneys and legal departments are the same. Multinational design and construction firms with multiple offices and specialized legal departments approach disputes and ADR differently than smaller companies with only one in-house lawyer. In-house attorneys vary widely in their experience and in their personality, affecting their comfort level in dealing with dispute resolution. There is no ”one-size-fits-all” approach for inside counsel and ADR. However, there are several common situations where most in-house counsel can play an important role in dispute resolution.
Risky Business
The design and construction industry is a risky business, so almost every company deals with disputes. In-house counsel often shapes the company’s dispute culture and approach. The book, Controlling the Cost of Conflict,[ii] is an excellent resource for lawyers (and executives) to use in designing effective conflict management systems for their companies. The authors note most organizations rely on “higher authority” procedures for dispute resolution (litigation and hearings) rather than using a collaborative process early on to resolve disputes, making the process longer and more expensive.[iii]
ADR—Not Just an Add-on
While many companies include mediation and arbitration clauses in their contracts, the Conflict authors note frequently these clauses are “add-ons” to contracts, included without really understanding when they are best used. Often these ADR methods are used too late in the process to save money or preserve business relationships.
The Art of the ADR Deal
Many in-house attorneys are regularly involved in contract review and negotiation. While the business points are very important, ADR clauses deserve more than a passing review. Although executives rarely want to discuss disputes during the “honeymoon” stage of negotiations, counsel can point out that a poorly drafted ADR clause can create litigation, resulting in delays and substantial legal fees and costs.[iv] On the flip side, a well-drafted clause can help preserve business relationships as well as saving costs, which can erode project profit.[v] Remind executives that the dispute review clause may be the last thing negotiated, but it will be the first clause reviewed if a problem arises.
ADR Talking Points
Having an ADR talking point list is helpful in negotiating or revising ADR clauses.[vi] A sample ADR clause could include preliminary steps, such as negotiation, before mediation or arbitration. Consider having a non-binding “neutral evaluation” to overcome negotiation roadblocks as part of the preliminary process.[vii] Mediation clauses could suggest the “guided choice” approach, allowing early information exchange under mediation privilege.[viii]
Sharpen Your Clauses
To avoid disputes, arbitration clauses should clearly state which disputes are subject to arbitration. The arbitration award should be final and binding, subject to confirmation in the appropriate court. Include applicable rules and the administering organization (AAA, JAMS, CPR). In revising arbitration clauses, deleting references to evidence rules and civil procedure rules improves arbitration efficiency and may prevent later disputes.[ix] Also, including an arbitral tribunal is usually helpful to make the process run smoothly.[x]
Strategies for Corporate Advocates & Outside Counsel
The in-house lawyer’s role doesn’t necessarily end when a dispute goes to mediation or arbitration. As a trusted advisor with intimate knowledge of the company’s history and long-term goals, the in-house lawyer is an invaluable resource, bridging the gap between management and outside counsel. Inside counsel can explain the ADR process to management representatives as well as advocate for ADR’s benefits. By explaining legal risks and business risks, inside counsel helps executives assess settlement alternatives. Not only can inside counsel expedite obtaining resources (documents, witnesses, company procedures) for outside counsel, he or she can also provide outside counsel with inside information about personalities, prior experiences and business goals that may affect strategy.[xi]
In-House Attorneys– Use Your Unique Vantage Point
In-house lawyers have a unique vantage point as intermediary between company management and outside counsel, which they can use to the company’s advantage in mediation and arbitration. In mediation, an inside counsel’s conversation with his or her counterpart can create a dynamic the mediator can expand. Being an energetic voice to the other side can be helpful (but coordinate this with your team in advance).
Suggestions for Streamlining Proceedings
Their unique vantage point allows inside counsel to suggest methods for streamlining (thus decreasing costs) when outside counsel may be reluctant to do so. For example, inside counsel could suggest limiting motion practice and briefing, limiting discovery (especially depositions), using a single neutral damages expert, use of damages “floors” or “ceilings” or “baseball arbitration.”[xii] Also, the in-house lawyer can provide a slightly detached perspective on arguments, witnesses and exhibits.
In-House Counsel: An Invaluable Resource
Because they combine company knowledge with legal insight inside counsel are valuable team members for design and construction companies in preventing and resolving disputes fairly and efficiently. Their unique vantage point makes them an invaluable resource for management and for outside counsel
[i] In-house counsel should also collaborate with outside counsel in litigation, but this post focuses on ADR.
[ii] Karl A. Slaikeu and Ralph H. Hasson (John Wiley & Son, 1998)(available in print and e-book format: https://www.books.google.com). Hereafter cited (“Conflict”). Well-known construction mediators, Hal Gray and Steve Nelson cited this as one of the most important books they have read about conflict management. See post ADR Summer Reading List
[iii] Id. at 11.
[iv] See post: Same Parties, Four Arbitrations, Four Different Awards
[v] See Todd B. Carver, ADR—A Competitive Imperative for Business, ACCA’s 1999 Annual Meeting
[vi] AAA, JAMS and CPR all provide model ADR clauses on their websites for reference.
[vii] See post: Why Not Try Neutral Evaluation?
[viii]See post: Mediation Success With Guided Choice.
[ix] See post: Can Arbitration Award Be Vacated for Improper Pleading?
[x] See post: “Naked” Arbitration: Should You Go “Bare”?
[xi] David Burt, Steering From Your Chair: Why In-House Counsel are Uniquely Positioned to Drive ADR Solutions—and How to Do So Effectively, CPR International Institute for Conflict Prevention & Resolution (July 2015) https://static.cpradr.org
[xii] Todd B. Carver, supra, note v.