New Tools for Corporate Counsel: The Emergence of the Soft Technologies of ADR

By John B. McCammon
VBA News Journal, December 1998

Times they are a’changin. The dramatic emergence of mediation and related processes has provided corporate counsel with new and more effective techniques for getting the job done.

Whether it be cost control, dispute management, or relationship building, the benefits available with the emerging “soft technologies” of ADR have prompted a dramatic shift in the way corporate counsel conduct their activities. The demands of a rapidly changing world have compelled the legal industry – and industry generally – to devise new methods for dispute resolution. Faster, less expensive, less stressful and simply better results are the requirements that must be met to allow corporate America to compete successfully. Yes, necessity is the mother of invention. Mediation and its siblings have been crafted out of this necessity. ADR as a significant corporate tool is here.

What triggered this ADR explosion ?
Technical advances have shrunk our globe. As a result, the geographic reach of businesses has expanded, thus creating more competition with entities which previously were only remote spots on the globe. In order to compete effectively, corporate entities have had to enhance their performances. One of the many line items in a corporate expense budget is dispute resolution. As the general counsel of one of America’s leading corporations reputedly said in the old days, “They give us an unlimited legal budget every year, and every year we exceed it.” No longer is this the case when the number of competitors has increased globally by several multiples. These competitive pressures have stimulated the development of new and creative processes to help in cost cutting, in saving time, in producing better resolutions of disputes in preserving business, customer and employee relationships. As a result, ADR has come to the fore.

What is this stuff called ADR?
ADR refers to alternative dispute resolution. Essentially, it reflects the privatization of the resolution of disputes, a process which to a large extent has been previously dominated by the public sector. (Not only has the ADR movement been fueled by private pressures, but it has also been nurtured by increasingly scarce public resources.)

The “sleeping giant” of ADR is mediation which is the negotiation of a dispute with the aid of a neutral. Mediation’s touchstone is flexibility. Generally, counsel leads the effort the present each side’s views, but the active participation of the parties is encouraged. In the negotiation phase, the mediator coordinates a conversation including everyone or any number of subsets of the participants.

Also of significance, and perhaps of a more familiar tradition to corporate counsel, is arbitration. Arbitration is a private adjudication by a neutral with, probably, looser rules of procedure and evidence, but with very limited avenues for appeal.
There other processes being used (e.g., mock trials, neutral case evaluation, partnering, ombudsmen) and others being developed (e.g., med\arb, wwww).

So what’s so great about this stuff anyway? 
The dramatic popularity of mediation is explained when reviewing its benefits.

1. Effective — It works 75%-85% of the time. 2 12
2. Cost control — 90% of corporations would use mediation to control litigation costs. 1
3. Dispute management — 81% of corporate respondents think mediation produces a more satisfactory result than litigation. 1
4. Confidentiality.
5. Preservation of relationships.
6. Time savings.
7. Reduction in personal and organizational stress and disruption.
8. Increase in control and predictability.

It should be noted that ADR users feel strongly that the accrual of these benefits are greatly dependent on the quality of the neutral employed.

How have corporate counsel and others reacted?
As a result of the growing recognition of these benefits, the corporate world has increasingly embraced ADR generally, and mediation, specifically. 88% of corporations used mediation in 1998.1 79% of corporations used arbitration in 1998.1 The ABA’s 1997 survey reveals that the bar at large actually prefers mediation over litigation.7 77% of the respondents say their clients are willing to use mediation. 7 Even the federal government has announced its support3, and the insurance industry is actively involved. This trend continues dramatically upward.

Yes, but how are these techniques best used?
Of course, mediation and the related ADR processes may be utilized on a case by case basis as disputes arise. The disputing parties can contact an ADR provider and go forward.

Increasingly, however, corporate counsel as well as associations and individual business persons are utilizing these processes in programmatic ways. The National Association of Securities Dealers has a mandatory ADR program to deal with customer claims and is actively promoting its mediation service over arbitration. Toro Power Products has virtually eliminated its products litigation because of its comprehensive customer mediation program. Internal dispute resolution programs designed to hand employee claims are becoming commonplace. A recent count revealed 185 such programs.1 Trademark cases are routinely routed through mediation in a pilot program in Illinois.12 The construction industry has long been a leader in arbitration of claims and now is shifting its attention to the use of mediation.10 General Motors has a national ADR program to deal with dealer disputes. Financial institutions (e.g., NationsBank, Wachovia) are increasingly adopting ADR programs to deal with customer claims. The recent bankruptcy proceedings of Best Products required mediation as a condition precedent to any trial. A consortium of America’s corporate leaders (Pepsi, Kellogg, Philip Morris, etc.) have agreed to use ADR to resolve inter-company disputes through the Center for Public Resources.12 The National Association of Manufacturers and the Equipment Leasing Association has an ADR program. It is anticipated many of the Y2K disputes will be addressed by ADR techniques.

The public sector is also involved. The federal government has promulgated its support.3 Virtually every state has ADR legislation, and many of state court systems even require some form of ADR before trial is available. State agencies, such as the Virginia Department of Environmental Quality, are adopting programs.

The underling reasons of competition for the corporate adoption of ADR continue. And so will the dramatic growth of ADR.

Notes:
1. “Movement to Mediate Is Growing,” The Wall Street Journal, July 1997.
2. “The Use of ADR in U.S. Corporations: Executive Summary,” Davie B. Lipsky and Ronald L. Seeber, Conflict Resolution Notes, Vol. 15, No. 3, January 1998.
3. Id.
4. Id.
5. Id.