Anyone working within or around the legal industry knows that the industry has undergone sweeping changes in recent years. Four main trends have affected the legal profession: globalization and regulation, technology, client evolution, and demographics.₁ While each trend has certainly impacted the industry, perhaps no trend continues to affect it like technology.
On a global scale, the internet has profoundly affected society and altered the manner in which social interactions occur. The World Wide Web came to life in 1989, and, by 1994, 11 million American households were equipped to fully engage in internet communications.₂ In parallel, by the late 1990s, Alternative Dispute Resolution (ADR) was gaining momentum and provisions for mediation were starting to become regularly integrated in commercial contract dispute resolution clauses as a precondition to arbitration or litigation. This integration “reflect[ed] widespread acknowledgment of the value of mediation and its acceptance as a primary intervention strategy in managing conflict.”₃ More companies began to use mediation, in general and instead of arbitration, to resolve the following types of conflicts: commercial/contract, individual employment, consumer, corporate finance, environmental, intellectual property, personal injury, products liability and real estate.₄
Fast forward to present day where the threat of losing compensatory and punitive damages, combined with the high cost of defending cases, results in more than 95% of all cases being settled or otherwise resolved prior to trial.₅ ADR is now more popular since it allows the parties to resolve disputes without the expense and time required by trial. “[Corporate counsel cite] the use of mediation to resolve disputes as an important factor in the dramatic drop-off in the incidence of court trial.”₆ Mediation benefits have been gaining traction for years. In fact, between 1997 and 2011, the use of mediation to resolve personal injury and products liability cases significantly increased: a survey of corporate counsel in 1997 indicated about 56% of personal injury disputes were submitted to mediation, compared to 70% of personal injury disputes in 2011; likewise, 39% of product liability cases were submitted to mediation in 1997 compared to almost 60% in 2011.₇ Courts across the country reported that about 70% of all cases sent to mediation settle either during mediation or shortly thereafter.₈
The three most commonly implemented ADR techniques are mediation, arbitration, and med-arb (or arb-med), which combines mediation with the arbitration process and employs separate neutrals acting as mediator and arbitrator(s). An increased use of ADR, particularly mediation, makes sense since corporate counsel, and clients in general, are looking for more effective, but less expensive, service offerings; however, while still less expensive than trial, the rising cost of ADR has caused some in the industry to search for even more cost-effective alternatives like Online Dispute Resolution (ODR).
ODR: The Basics
At its core, mediation is a confidential process through which a neutral third-party (a “mediator”) helps parties to a conflict communicate to understand one another’s position and, ideally, reach a mutual agreement that resolves the conflict. ODR supplements traditional mediation by allowing two or more conflicting parties to negotiate and resolve the issue(s) at hand through electronic means via the internet. Including mediation, ODR encompasses techniques like double-blind bidding negotiation and assisted negotiation that are handled entirely online. Additional ODR methods will certainly develop as a new generation of lawyers and clients continue to look for resolution options beyond the “traditional” litigation model.
ODR is not a new concept and developed almost in tandem with traditional ADR. The first online arbitration center, Virtual Magistrate, was created in 1996, but only attracted one case. By the end of the decade, ODR experienced a “boom” as consumers became more comfortable with the internet and amenable to using it to resolve disputes online. The online auction site eBay was the first company to truly promote the use of ODR when, in 1999, it used a few hundred auction dispute cases to start its ODR pilot program.₉ Today, companies like Cybersettle, Inc., Smartsettle, and VirtualCourthouse offer a range of ODR services. According to its website, Cybersettle has “facilitated settlement of $1.9 billion in claim-based transactions for insurance companies, self-insured Fortune 500 corporations, and municipalities” since its founding in 1996.₁₀ Similarly, Smartsettle offers an “unattended, automated process for simple cases” or a “facilitated process for more complex cases.”₁₁
While ODR began in the e-commerce world as a way to resolve basic consumer disputes, the types of disputes handled through ODR services cover an ever-growing spectrum, ranging from intellectual property, insurance, personal injury, and privacy cases. Internationally, ODR has been used beyond e-commerce: Israel has used ODR in peace negotiations; ODR is used by the Dutch Council for Legal Aid in The Netherlands; Australia has implemented a family law ODR system; General Electric Co.’s oil-and-gas division in Italy implemented an internal ODR system using Cybersettle’s technology for managing and resolving consumer and supplier disputes under $65,000.₁₂ Despite broad use elsewhere, practitioners in the U.S. have expressed reservations about expanding ODR beyond its roots.
Is ODR Only For E-Commerce Disputes?
For many low-dollar, basic e-commerce disputes, engaging in ODR makes good sense since it offers a platform for creating a relatively straightforward resolution. With the push from clients to find more creative and cost-effective methods for handling a variety of litigation, the industry seems curious, yet divided, about whether ODR can be used to resolve more than just e-commerce issues.
Critics of expanding ODR to products liability, personal injury, domestic, and other “emotionally charged” disputes argue that ODR is not effective because the face-to-face element of negotiating is removed, meaning that non-verbal cues are not available to supplement a party’s actions, which may hinder the parties’ ability to reach a mutually acceptable agreement. Likewise, removing face-to-face interactions from the process may obstruct the mediator’s ability to correctly assess the dispute. Critics further believe that it will be impossible for a mediator to maintain control over a virtual mediation since he or she is unable to interpret the tone of the parties’ communications or non-verbal cues, and the parties are unable to visually appreciate the mediator’s authority. Finally, opponents worry that the aggrieved party may not feel that he or she actually had a true “day in court” without physically interacting with the opposing side or mediator.
In response, ODR proponents assert that, just as traditional ADR may include med-arb or arb-med, ODR does not need to be strictly conducted online. There may be an initial in-person meeting with the mediator and all parties, negotiations can be conducted online, and there can be a closing in-person meeting in order to create a more efficient and effective overall process. “For example, a mediator could meet face-to-face with two geographically separated disputants for an initial meeting, then move the discussion into an online environment for joint problem solving and agreement drafting, then re-convene face-to-face to get final buy-in. Building online dispute resolution environments in such a way that they can easily be integrated into and complement face-to-face ADR may make dispute resolution professionals more comfortable with ODR over time.”₁₃
The technology to make ODR successful already exists. Computers, tablets, and smart phones equipped with programs like Skype, FaceTime, Windows Meeting Space or Microsoft Office Live Meeting are essential to bridging the gap between in-person meetings and the virtual world. ODR may be particularly useful in class actions or multi-district litigations where the parties and counsel are across the country as it would minimize the amount of time spent traveling, which, in turn, reduces the overall cost of litigation and potentially shortens case resolution time.
Whether conducting the entire mediation online or using a hybrid approach, another benefit of ODR is that it affords participants a “cooling-off period.” Responses, demands, and offers may be better thought out when the pressure of face-to-face interaction is removed; operating virtually allows for thought organization and planning. ODR also allows time to pass before participants act, preventing over-emotional or rash decisions, which may increase the number of matters that settle during mediation.
Both supporters and opponents of ODR implementation agree that the greatest challenge is developing a process that protects confidential information. Where traditional mediation does not create a physical record other than each party’s mediation statement, ODR by its nature creates an electronic record. This could potentially enable a party to print and distribute e-mail communications, including settlement offers, without the knowledge of the other party. Inability to control dissemination of the electronic record created by the ODR process may dissuade participants from fully engaging in the process, thus thwarting the purpose and benefits of mediation.
Ultimately, whether mediating online or in-person, the goals of seeking resolution through ADR rather than trial are to separate people from the actual conflict, and to separate objective criteria from subjective criteria. Knowing when to mediate instead of litigate is key, and understanding the underlying claim or case information is the first step to making this decision.
Let The Data Be Your Guide
Respondent’s to an Altman Weil’s “Chief Legal Office Survey” indicated that in-house counsel expect outside counsel to display a “better application of real risk analysis (as opposed to hypothetical risk) to avoid unnecessary actions and associated costs.”₁₄ Mediation is a process, not an isolated event, and both sides must take time to prepare before engaging in negotiations.
During mediation preparation the defense must realistically set a settlement range based on a review of facts, evidence, strengths and weaknesses. From the defense perspective, Early Case Assessment (ECA) is ADR’s most trusted ally: ECA has been used to gather data and statistics across all plaintiffs to determine which plaintiffs are candidates for in-depth work-up and/or full discovery, helping counsel manage data collection and the overall discovery process. In the same vein, ECA alerts counsel to which cases are least in need of their attention, positioning them to focus their resources on other critical matters. In both modestly sized litigations and mass torts, LMI has partnered with inside and outside counsel through the ECA process to successfully formulate a plan for gathering, synthesizing, and managing data from the outset of a matter, which allowed counsel to develop an effective exit strategy.
“[Several] dispute features lend themselves well to mediation: a good relationship between parties and their attorneys, opportunities for creative problem solving, the willingness of one or both sides to apologize for any mistakes or wrongdoing, eagerness to settle quickly, and the presence of multiple issues that might lead to tradeoffs.”₁₅ Beyond case data, both sides must take time to consider what the opposing side feels in order to make the process successful. Reaching out to opposing counsel for input on whether the matter is ripe for mediation not only forges a relationship but also reveals opposing counsel’s personality and emotions towards the matter; mediation will be more productive if all sides buy in and want to be involved.
Factoring together the facts of a case, the governing law, and any insurance coverage, and the effect that each has on the matter at hand, drives the ability to negotiate and settle, rather than try, a case. A successful mediation further depends on internal cohesion between inside and outside counsel, and approaching the mediation process as a team. During preparation, the defense team must also factor in external pressures and business decisions, its biggest impediment to settlement, and what terms must be included in the settlement agreement when preparing.
Legal services, including ADR services, will not disappear simply because the legal industry embraces technology; rather, these services will continue to be delivered differently. As the legal industry embraces technology, the potential of more traditional ADR methods supplemented by online technologies will continue to develop.
The current, internet-fueled society regularly presents new challenges and opportunities by making information instantly available to wider sectors of the population. The legal industry is not immune from these challenges and opportunities, particularly as they relate to the claim or case resolution process. For an overburdened legal system, the prospect of implementing a cyber solution for managing disputes, beyond e-filing of documents and docket management, should be appealing from the standpoint of increasing efficiencies. ODR has the potential to contribute to a more productive and economical judicial system.
Regardless of whether mediation is “live” or virtual, it is crucial for the parties to honestly discuss whether the matter is ripe for mediation. Once agreed that mediation should move forward, both sides must commit to resolving the conflict at issue if doing so is truly in the best interest of all involved parties. Minimizing costs while maximizing value is essential, as is balancing the risks and rewards, so that each side feels reasonably confident that they are benefiting from the negotiated resolution.
₁ See Richard Susskind, The End of Lawyers? Rethinking the Nature of Legal Services, Oxford University Press, 2010.
₂ “World Wide Web Timeline,” Pew Research Center, March 11, 2014, , accessed on July 21, 2014.
₃ Thomas J. Stipanowich and J. Ryan Lamare, “Living with ADR: Evolving Perceptions and Use of Mediation, Arbitration and Conflict Management in Fortune 1,000 Corporations,” 19 Harvard Negotiation Law Review 1 and Pepperdine University Legal Studies Research Paper No. 2013/16, 2013, p. 12.
₄ Id., p. 30.
₅ See Kenneth Ross, “The Origins of Products Liability,” Medmarc Products Liability 360, February 5, 2013, , accessed on January 27, 2014.
₆ Stipanowich, supra, p.12.
₇ Id., pp. 30-31
₈ See Robert E. Lee Wright, “Letting litigants know that mediation really works,” State Bar of Michigan Alternative Dispute Resolution Section, February 2013, < www.michbar.org/adr>.
₉ Jeffrey N. Rosenthal, “Online Dispute Resolution: Log In, Settle Out,” Law Technology News, April 26, 2012, , accessed on April 30, 2012.
₁₀ Cybersettle Holdings, Inc., “About Us,” , accessed on July 23, 2014.
₁₁ iCan Systems, Inc., “Smartsettle Advantages,” < http://www.smartsettle.com/home/about-us/advantages/>, accessed on July 23, 2014.
₁₂ Vanessa O’Connell, “At GE, Robo-Lawyers.” The Wall Street Journal, October 10, 2011, , accessed on June 3, 2014.
₁₃ Colin Rule, “New Mediator Capabilities in Online Dispute Resolution,” Mediate.com, December 2000, , accessed on July 16, 2014.
₁₄ Altman Weil, Inc., “2013 Chief Legal Officer Survey,” October 25, 2013, , accessed on November 6, 2013.
₁₅ Keith Lutz, “Three Questions to Ask About the Dispute Resolution Process,” Harvard Law School Program on Negotiation Daily Blog, July 3, 2014, , accessed on July 16, 2014.