First published in the San Francisco Attorney, June/July 1998
Questions of
legal ethics in Alternative Dispute Resolution usually arise in
three main areas:
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
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