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Legal Ethics And ADR: Do You Pass The Test?

by Nancy Neal Yeend & John Paul Jones

First published in the San Francisco Attorney, June/July 1998

Questions of legal ethics in Alternative Dispute Resolution usually arise in three main areas:

  1. Telling the client that ADR is available
  2. Preparing the client for the ADR process chosen
  3. Providing for the future management of disputes through the use of ADR

Is there an ethical obligation to tell a client about ADR options?(1) Some argue that failing to inform a client about ADR options can amount to malpractice. Others say no such ethical duty exists. (2) It appears that the American Bar Association is about to clarify any ambiguity.

The ADR Section of the ABA hopes to have a recommendation to the House of Delegates later this year that will clarify a lawyer’s obligations in this area. Some states including Colorado, Georgia, Virginia, Texas and Florida already admonish lawyers to apprise their clients of the alternatives to litigation. Such a provision might read: “A lawyer should counsel the client concerning the benefits of mediation, arbitration, and other alternative methods of resolving disputes.” (3)

Legal ethics tangential to ADR have not been considered a major discussion point, perhaps because a significant number of today’s practitioners have limited knowledge of ADR. Most lawyers never had an ADR course in law school; consequently they are hard pressed to distinguish between the three most commonly used ADR processes. To meet the ethical obligation to tell a client about ADR, the lawyer must first understand the available alternatives.

Understanding the Processes
Although this article is not intended to be a treatise about the more than 23 different ADR processes currently in use, some understanding of the major distinctions among them is necessary in order to appreciate the ethical questions that may arise. ADR processes may be viewed as a continuum that begins with negotiation (direct party control), progresses to mediation (facilitated party control), and ends with arbitration and private judging (surrendered party control). Except for direct negotiation, a hallmark of ADR is the presence of a neutral third party. The neutral’s role changes depending on the process. In mediation, the neutral’s role is that of a facilitator, and changes to that of a decision-maker in binding arbitration and private judging.

There are several hybrid ADR processes, including med-arb and arb-med, which combine mediation and arbitration in various permutations. (4) A separate hybrid, referred to as a mini-trial, is not a trial, but in fact a modified form of mediation. It is used to resolve high stakes issues between large corporations. The neutral, referred to as an advisor, facilitates the negotiation between top corporate leaders, and only offers an advisory opinion if there is a stalemate and if asked to do so by the parties.

The federal courts have become active in promoting ADR. In San Francisco, US District Court Magistrate Wayne Brazil developed Early Neutral Evaluation, ENE. In this process, an acknowledged legal specialist opines about the merits of the case as a settlement guide for the parties. US District Judge Thomas Lambros conceived another court innovation, the Summary Jury Trial, SJT, in the early 1980s. The SJT utilizes an advisory jury impaneled from the regular jury pool, which after hearing abbreviated presentations renders an opinion. The attorneys can then poll the jury to glean their reasoning. Hearing the jurors’ responses often motivates the parties and counsel to negotiate more seriously at the settlement conference that follows the SJT. This results in a high settlement rate for cases utilizing this process. (5)

As illustrated above, each ADR process has its own nuances. It is imperative that an attorney be able to explain the differences among the ADR choices. Otherwise the client cannot make informed decisions about what process would be best, when the process should be initiated, the factors to consider when selecting a neutral, and the degree of control to surrender.

According to Francis McGovern, noted professor at Duke University School of Law, the most important thing among the many reasons for considering ADR is that these processes achieve better results. (6) A lawyer should be prompted to recommend ADR, because clients who use some form of ADR have a higher level of satisfaction with their representation. (7) Reducing the chances of a malpractice claim by a disgruntled client seems to be a good reason in itself for lawyers to embrace the concept of ADR. (8) Clearly a client suffering “post trial” remorse may be quick to point the finger at the lawyer who failed to inform about the available alternatives to trial that would have been less costly and would likely have yielded a better result. (9)

Selecting the Neutral
Does a lawyer have a duty to select a competent neutral? Here too, it is important that the attorney understand the various ADR processes and what attributes of a neutral are important for each. Paramount is the selection of a neutral who has been trained in the specific ADR process being used. (10) It is also important that the neutral have an understanding of the issues in dispute, the applicable law and a general understanding of the industry or culture in which the dispute arose.

In an arbitration case involving a real estate transaction, an arbitrator who is not conversant in real estate law may not be able to ask the probing questions that will provide all of the information needed to reach a decision. Similarly, if the case were mediated, a mediator lacking real estate industry expertise may not ask cogent reality testing questions. The parties may then be prevented from finding common ground for resolution or worse, may enter into a flawed agreement.

The attorney must also be aware of the neutrality requirements associated with ADR. Familiarity between the neutral and the involved attorneys can raise ethical concerns. Commonly, neutrals are also practicing attorneys, and may have close ties with many of the fellow lawyers, either from previous professional associations or from past dealings. Disclosures are required. The neutral’s impartiality might also be jeopardized by the not uncommon practice in which attorneys or large organizations select one mediation provider as their sole source for neutrals.

Representation in ADR
What additional or different skills does a lawyer need to effectively represent a client in ADR? Depending on the process selected, representation in ADR may well differ from the usual role played by the lawyer in trial. Attorneys inexperienced with ADR may take their normal trial preparation approach, coming to ADR with a traditional adversarial attitude. ADR initiates have learned that the collaborative techniques used in advocacy are preferred in ADR, especially in mediation. Even in the decision-making forum of arbitration, modifying the “gunslinger” approach to one that is artfully persuasive can be more effective. Because of the contrast of ADR to litigation, the ABA is considering whether there should be modified ethical standards for representation in ADR proceedings. (11)

The lawyer’s role in the facilitative and collaborative ADR processes, such as mediation, arb-med, med-arb and mini-trial, is significantly different from binding arbitration. In the facilitative setting, the question is not one of “right” or “wrong” but of whether the parties can fashion a solution that is better for them than spinning the roulette wheel of litigation. An acceptable solution may be influenced by a number of factors that would be irrelevant in a trial, including timeliness, closure, custom or tradition. In the facilitated processes, parties often make settlement decisions based on whether a proposed solution meets their needs, rather than on the “rights” they may be able to prove in litigation.

One of the most important skills of a lawyer is to be able to listen to the needs of a client. Lawyers are trained to take a narrow view of legal interests. Effectiveness of legal representation is enhanced, however, when one practices good interviewing and counseling techniques, is able to see extra-legal factors and can understand the client’s needs and interests. (12)

When preparing for negotiation or mediation it is essential to recognize the client’s economic, business, social, psychological, political, legal, and economic needs to prepare effectively. Typically legal rights are not the primary focus in mediation, hence the amount of discovery required is much less than that necessary for arbitration or trial. (13) Although mediation is a very informal process, there has developed an accepted (and sometimes required) practice of submitting pre-mediation statements to the mediator. This has probably grown out of the custom of filing briefs in arbitration (an ADR process that in many cases has become nearly as cumbersome as trial). Originally touted as faster and cheaper than litigation, some ADR processes, particularly arbitration, look a lot like litigation. This may be because some attorneys have become most adept in the use of a hammer and consequently, everything begins to look like a nail.

It is of singular importance for the practitioner to remember that in most ADR processes, especially mediation, the lawyer’s role is that of an advocate – not an adversary. Advocacy does not equate to ineffectiveness. In fact, the opposite generally is true. An adversarial approach will most often defeat the effectiveness of the ADR process and will work against the client’s interests. One could then argue that a lawyer who is highly adversarial in a collaborative, facilitative process fails to provide effective representation.

Negotiation strategies of arriving late to throw off the other side, “take it or leave it” offers, and creating calendar conflicts are all adversarial tactics that may keep the meter running, and usually do not serve the client’s best interests. (14) The ethical issue surrounding required lawyer truthfulness in negotiations is another representation issue, and not limited to the discussion of ADR. When representing a client in any ADR process, it seems clear that the Rules of Professional Conduct apply. In some states it has been determined that a lawyer owes to the mediator the same candor as a judge. (15)

To properly focus on the client’s interests in any ADR process, the lawyer should have a plan. When using a consensual process such as mediation, a list of ways to make offers “yesable” to the other side is helpful. (16) Drafting the optimum parameters for resolution and identifying the criteria for evaluating settlement options provide a matrix for achieving the client’s interests. (17) A game plan in the ADR forum is every bit as important as in litigation. In fact, it may be even more important because in ADR the parties are in control of the game’s outcome. Attorneys who regard ADR as unimportant walk on ethical “thin ice” by not preparing. Their representation without proper preparation makes them vulnerable to actionable criticism by their clients. Their view is that just showing up for the non-binding arbitration, mediation or settlement conference is all that is necessary. Such indifference, however, would seem to expose these lawyers to malpractice. (18)

Managing Future Disputes
Is managing future conflicts a lawyer’s duty? According to Marguerite Millhauser, “Until use of dispute resolution alternatives become as common in law firms as use of more traditional litigation and negotiation, clients will not benefit fully from the innovations of ADR.” (19) A familiarity with ADR includes an understanding of what is required to have a quality ADR clause in all contracts and agreements. These clauses provide a mechanism for more constructive dispute management and resolution.

At a minimum an ADR clause needs to fully address seven fundamental elements: process, neutral, timing, place, procedures, rules, and finality. Not clarifying what process will be used in the future means the parties will have to resolve that issue when a controversy arises. After a dispute arises is not the best time to ask people to make important decisions. This lack of planning usually prolongs the controversy and consumes more resources. Identifying the criteria to be used when selecting a neutral is more important than specifying a particular neutral or provider’s name. Neutrals die, move, their rates change, or their calendars are full. Having the latitude to select a person with the requisite experience and subject matter expertise for the specific dispute is beneficial to the client, as opposed to prospectively providing for a specific neutral.

Identifying how soon after a complaint arises that ADR will be utilized often reduces costs. Studies show that using ADR sooner, rather than later, generally saves resources. It is important to select a site convenient to the parties, because access encourages participation, and client participation often enhances settlement.

It is also important to establish specific procedures that will guide the neutral and specify jurisdiction. To save time, attorneys use boilerplate language adopting generic rules of a named neutral service provider. In a future dispute this procedure may work against the parties’ interests, because it does not provide the best mechanism for resolution. It is incumbent upon the lawyers to read the provider’s rules to assure that the client’s future interests are protected.

Presumably in any dispute there is some desire to resolve the matter expeditiously and with the least consumption of resources. When this assumption is true, pre-selecting a binding procedure is less expensive than opting for a non-binding one. For example, problems can still arise when a thorough search for an arbitrator has not been conducted, and the arbitrator is inexperienced or does not feel bound by the law. If the neutral has been properly selected and the rules are appropriate, a binding process is usually superior.

With regard to finality, if the parties to a mediation reach a settlement, a written agreement is usually prepared. When signed by the participants, this becomes an enforceable agreement. Mediation settlement agreements have a greater likelihood to be honored than arbitration awards, because the parties developed the terms. They then “own” the agreement and are more apt to comply. People prefer to make their own choices rather than having someone make the decision for them.

As a counselor, an attorney can do many things to prevent their clients from becoming involved in litigation. Anticipating problems and planning how to manage them, in advance, protects the client as well as counsel.

Summary
A lawyer has a duty to understand ADR sufficiently to be able to explain and recommend the appropriate process, to identify the ideal time for ADR use, and to assist in the selection of the best qualified neutral for a given matter. A lawyer’s embracing of ADR concepts can improve client satisfaction and reduce the number of malpractice claims. (20)

Preparing for the nuances of a specific ADR process will enhance representation and increase the probability of settlement. The client will laud agreements reached through the attorney’s careful and thorough preparation. Providing a mechanism for clients to better manage future controversies will promote client satisfaction and peace of mind for the lawyer. Do you pass the test?

Notes

  1. Much of the discussion related to the lawyer’s obligation to understand, explain and recommend ADR focuses on the ABA Model Rules of Professional Conduct, specifically Rule 1.1 “A lawyer shall provide competent representation to a client” and Rule 1.5 “A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”
  2. Kimberlee K. Kovach, “New Ethics for the New Lawyer: Fitting the Standards to the Process,” Dispute Resolution Magazine, Winter 1997.
  3. In 1990 the Florida Bar included in the Ideals and Goals of Professionalism guidelines under the heading of Fair and Efficient Administration of Justice. Goal 4.2 is quoted in the text.
  4. Nancy Neal Yeend and John Paul Jones, “Making Sense Out of ADR Alphabet Soup,” The Orange County Lawyer, August 1994.
  5. Nancy Neal Yeend and John Paul Jones, “Summary Jury Trial,” California ADR Practice Guide, 1995.
  6. Francis E. McGovern, “Beyond Efficiency: A Bevy of ADR Justifications,” Dispute Resolution Magazine, Summer 1997.
  7. Stephen R. Marsh, “Choosing Mediation: Ethical and Practical Considerations for Attorneys,” Mediation Monthly, May 1996.
  8. Forrest S. Mosten, “The Complete Guide to Mediation,” 1997.
  9. Pamela Chapman Enslen, “Insights on Participant Satisfaction May Be Real: Significance of the RAND Report,” Dispute Resolution Magazine, Summer 1997.
  10. Lela P. Love, “The Top Ten Reasons Why Mediators Should Not Evaluate,” Florida State University Law Review, Vol. 24, 1997.
  11. Carrie Menkel-Meadow, “Ethics in ADR Representation: A Road Map of Critical Issues,” Dispute Resolution Magazine, Winter 1997.
  12. Nancy Neal Yeend and Terrance N. Church, “Interviewing and Counseling,” California ADR Practice Guide, 1995.
  13. Paul Kreutz, “Legal Profession Facing a Tightened Net of Accountability,” The Business Journal, March 15, 1993.
  14. Peter Sinton, “Taming Rambo-Style Lawyers,” San Francisco Chronicle, 1994.
  15. Bruce E. Meyerson, “Telling the Truth in Mediation: Mediator Owed Duty of Candor,” Dispute Resolution Magazine, Winter 1997.
  16. The August/September 1998 issue of San Francisco attorney carried an article on how to prepare for mediation.
  17. Michael Wheeler, “Getting to No,” Negotiation Journal, Vol. 13, Number 1, July 1997.
  18. Richard A. Zitrin, “Emerging Ethical Issues in Mediation,” California Lawyer, April 1992.
  19. Marguerite S. Millhauser, “Gladiators and Conciliators: ADR, A Law Firm Staple,” Bar Leader, September/October 1998.
  20. The State Bar of California handles approximately 150,000 questions and complaint phone calls per year. Nearly 3,000 attorney-client fee arbitrations are held each year in California. Figures based on 1997 statistics.

Biography



John Paul Jones is the founder and President of The John Paul Jones Group, and resides in St. Petersburg, Florida, where the firm is headquartered. He received his B.S. degree from Florida State University and his J.D. from Vanderbilt University School of Law, where he was elected to Order of the Coif and was an editor of the Vanderbilt Law Review. Admitted in Florida, Georgia and Virginia, he practiced employment law for 25 years on a national basis and appeared before United States District Courts in 15 states and argued before the United States Courts of Appeal for the Third, Fourth, Fifth, Sixth and Eleventh Circuits, as well as The Supreme Court of the United States.

Nancy Neal Yeend, national dispute management specialist, mediator and trainer. Combining over thirty years of mediation background with entrepreneurial experience, Nancy brings extensive insight and wisdom to her profession. She is an appellate mediator serving both the California First and Third District Courts of Appeal; faculty member of the National Judicial College for 19 years; and a founding member of the Silicon Valley Mediation Group, Los Altos, CA.

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