America is the most litigious country in the world with the highest legal fees. Civil law countries may have a difficult time understanding just how laborious and expensive litigation is; it seems that a knee jerk reaction of wanting to drag a defendant into a quick trial is quickly quelled when a direct attorney speaks to them about the litigation procedure. With the ongoing government shutdown in the U.S. and the recent downsizing of courts, the litigation process will take longer than ever. Cases on average will take from four to seven years to reach trial. E-discovery in the meantime will cost parties millions of dollars each year.
It has been just over four months since I started in the new legal affairs department at my company. While reviewing existing contracts that are in dispute, I have to say that I am incredibly grateful when I see that the drafter of the contract had the foresight to add a dispute resolution clause. I am currently in a dispute where an arbitrator is required to settle an accounting dispute where both parties are refusing to budge from their positions. Management took this clause for granted and at times of immense frustration, lamented its existence and longed for litigation. Because of the clause, however, this dispute will be resolved in two months and each company will no longer waste valuable time and energy in hours of conference calls and calculations, not to mention tens of thousands of dollars in attorney's fees each month.
I feel it is important to stress the magnitude of the dispute resolution clause. The legal department is often seen as a drain on company finances due to the lack of visibly generated profits. The legal department is in the business of saving the company money. If the legal department trains corporate executives on the usefulness of alternative dispute resolution, the company can be saving millions of dollars each year on legal fees. For something as simple as accounting discrepancies, litigation is definitely overkill.
I see more and more litigators in law firms listing their expertise and services in mediation and arbitration in their profiles. As the legal coordinator that searches for potential outside counsel, I gravitate towards counsel with mediation and arbitration experience. This tells me that as litigators, they understand the value of alternative means to resolve disputes. Since I have studied ADR, I can recognize whether they fully understand the process and I can opine whether their legal strategy is congruent with the spirit of ADR. Are they storming into the mediation with blazing guns and offending the mediator, or are they making a good faith attempt to work with the neutral in finding creative ways to solve the problem?
At the same time, the company needs to recognize the need for ADR. If more of their clients push for mediation or arbitration, more outside counsel will have to equip themselves with ADR skills. I believe it is the job of the legal department to advocate ADR and train the company on its uses both internally and externally. Of course ADR might not be the best method in 100% of all matters based on the needs of the company, but I cannot see how it should not apply 99% of the time.
There are more and more surveys illustrating companies looking to drastically cut down on legal fees. Companies are decreasing their use of outside counsel especially for litigation. AlixPartners published a study from 2012 showing this shift. For a company to save on legal costs, ADR needs to be incorporated into its conflict resolution methods such as through dispute resolution provisions in contracts. In light of this change, it would be wise for outside counsel to train and gain experience in mediation and arbitration.