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We Hold These Truths
Related Neutrals:
Richard Chernick, Esq.
January 20, 2004
As the private judging field grows exponentially, our State of the Law panel debates the impact of ADR on the legal industry - most notably a citizen's right to a trial by jury.
The legal landscape is changing.
Officials up and down the state are struggling to make up for budget shortfalls and keep courtrooms running smoothly. Meanwhile, more and more litigants are forgoing their right to trial by jury and turning to alternative dispute resolution.
As the ADR field continues to expand, its issues and challenges grow increasingly complex. Daily Journal EXTRA decided to gather leaders from both the bar and the dispute resolution field for our inaugural "State of the Law" roundtable. Their task: to take the temperature of the industry.
Those kind enough to join us for the Jan. 8 evening discussion ranged from independent mediators to leaders of some of the state's foremost ADR providers. Respected members of the plaintiffs' and defense bar also gave us the benefit of their experiences.
The participants included
Los Angeles Daily Journal
editor Katrina Dewey and Daily Journal EXTRA managing editor Katherine Gaidos as moderators, and panelists
Richard Chernick from JAMS
, Lucie Barron of ADR Services, independent mediators Dana Curtis, Gig Kyriacou and Michael Dickstein, and attorneys Bruce Broillet from Greene, Broillet, Panish & Wheeler and N. Denise Taylor of Bonne, Bridges, Mueller, O'Keefe & Nichols.
The dialogue that follows provides an insight into ADR as it is today, and as it likely will be tomorrow. Our participants discussed whether attorneys these days must turn to ADR more quickly to appease cost-conscious clients, and whether new neutrals in the ever-expanding field receive enough training. They weighed in on the effect of the new Judicial Council disclosure standards for arbitrators, and debated whether the outcome of a mediation is justice in the traditional sense of the word, or something else.
The roundtable was a first in a series this year, which will span a variety of topics. We found it enlightening. We hope you do too.
-
Katherine Gaidos, managing editor
DEWEY:
I think as we were preparing for tonight and doing some research and kicking around different ideas, what we sort of were focused on is the enormous growth in private judging and all of its manifestations from 10, 20 years. I remember interviewing Richard at Gibson Dunn probably 12 or 13 years ago, and he was sort of talking about this private judging thing that he was interested in. And people didn't really know much about it at the time, and I think that the questions that people had were will it destroy the public judicial system and who on earth would want to do this and that there were Richards and others in the world who decided to give it some legitimacy. But we have come a long ways. Now it seems that everybody wants to get into this business, and the questions don't seem to be about should private judging exist. And so I think we wanted to promote some discussion about where you see it going now and are we really past the day where we should be talking about does this undermine the public court system or does it help it in some meaningful ways.
CHERNICK:
The real beginning, I think, of the whole ADR movement, modern ADR movement was Frank Sanders' lecture at the Pound conference in 1976 or 1977 on the multidoor courthouse. And his conception was that courts could do their jobs better by having lots of options for parties: judicial arbitration, mediation, early neutral evaluation, any number of different processes; that no one process was appropriate for every case, and every case had some process that an intelligent person could figure out would be good for that, including jury trials and court trials and summary jury trials and everything else in between. And so the whole movement started as an adjunct to the court system, and much of the impetus and the way most people have gotten into the business has been by participating as trainers and volunteers doing mediations and doing judicial arbitrations. But the business really has outstretched that whole movement, and it is now really not about the courts at all. Mostly what AAA and ADR Services and JAMS do is to provide a service for businesses primarily to resolve their disputes in a way that they believe courts can't or aren't able to do and where they are able to craft for themselves a process that is appropriate on a case-by-case basis for the optimum result. And that's really where California has taken the lead over the rest of the country, because this really is not evident yet outside of California to the extent that it is in California. I think that there are more cases in California that are resolved by arbitration award, commercial cases, than are resolved by court judgments, verdicts after trial.
BARRON:
But not mediations.
CHERNICK:
I'm not talking about mediations. I'm talking about the actual resolution process, the arbitration process.
BARRON:
Right.
CHERNICK:
There are literally hundreds of former judges and lawyers who are spending their entire professional life arbitrating commercial disputes, and they are outstripping in a lot of ways what is happening in the court system.
DICKSTEIN:
To answer your question about fear that this would supplant the court system, I think what people tend to ignore is that something like 95 percent of cases never go to trial. And it may have gone up slightly, but they never did. And so what this really is doing, this whole movement is making more efficient the process of getting a resolution before you go to court. There are still cases that are going through the trial creating precedence and ending up on the books.
BROILLET:
But it's important to distinguish between mediation, which is a voluntary thing that helps to resolve a case, and arbitration, where particularly individual consumers or the less powerful can be compelled by some kind of agreement they sign, not realizing what they are signing, to go through an arbitration process and lose the right to trial by jury. With regard to mediation, historically - and Richard, you will remember this from the '70s -- judges who had a case set for trial always had something we called a MSC.
CHERNICK:
21 days before trial.
BROILLET:
Right. It was a mandatory settlement conference.
CHERNICK:
After all the money had been spent, after all of the emotions had been invested.
BROILLET:
But worse than that, the judge who had a full calendar, a docket to deal with, a trial that might be going on, takes a case and tries to settle it in half an hour or 45 minutes. That's the way it used to be. It was very inefficient. What mediation does is it allows everybody to get prepared and to have a significant period of time, maybe over the course of multiple days, to try to get a case settled. That aspect of all of this is very good for the court system because it's helping to get cases out of the system, and it's benefiting both sides by allowing them a full-blown opportunity to settle the case. The danger comes in on the arbitration side if people are unwittingly being denied their right to trial by a jury.
BARRON:
What I have seen in the nine years that ADR Services has been around, is that there has been a terrific growth in the mediation side. And I don't know about arbitrations, but about 85 percent of the cases that come to our office are cases for mediation. And that's a big difference. The other big difference is that we used to get cases that were right on the courthouse steps or after the trial and a verdict was issued, and then they would come back and try to negotiate some kind of settlement, if they could. That tends to be rare, and in many situations almost nonexistent. We still get those cases ... but generally they come to us in a much, much earlier stage, first of all. And secondly, they tend to come much, much more from corporate counsel. We will get cases directly from corporate counsel, which never used to happen. Big business, I think, drives the resolution process; they don't like the risk or the exposure. And at some point, whoever you end up suing, some business entity at the end is going to have the money, whether it's an insurance carrier or otherwise. They're the ones that are going to foot the bill, and they are the ones who are really pushing for mediation. They look for dispute resolution much, much earlier, and they're much more sophisticated, much more comprehensive, much more prepared. And it's not something that the court orders out. It's done totally voluntarily at a much earlier stage.
DICKSTEIN:
Right. And it's even going farther than that. I think they're going to start supplanting our roles because you see things like Kodak, which has internal panels now that make decisions that have nothing to do with outside mediators or arbitrators where they are getting rid of a lot of disputes before they really become disputes involving lawyers.
BARRON:
They set up programs and things like that internally.
CHERNICK:
That is a great thing - that mediators have taught lawyers how to settle their own cases. And easy cases now get settled without anybody ever calling a mediator. So mediators now get much tougher cases. And cases that I used to get in the mid '90s that you could settle in an hour or two hours because everyone was there ready to settle, those cases you don't see anymore. They do it on their own because they know how to do it and they're not reticent to call the other side and say, "Hey, we ought to try to resolve this." But the cases you get now are tough, tough cases, and they don't settle in a day. They take multiple days.
KYRIACOU:
The realities of litigation and what is driving the popularity of mediation is the fact, like everyone said, cases settle at some point in time in the process. And they used to settle very close to trial or on the courthouse steps, and the costs that are involved in getting there and the lack of control in the process, all of those things are what drive the popularity of mediation where it's driving it to an earlier and earlier stage. We're seeing a lot of mediations prefiling now. It's very common in the employment field.
TAYLOR:
Surprisingly, it's not that uncommon in the malpractice cases either. I have had several conferences recently where the client has called me and said, "Before litigation, let's go to mediation," and I do a flurry of activity to do some discovery to find out what the case is about, get an expert review and then go to mediation. And it's exactly what Lucie was saying. It is the cost of litigating these cases and for my clients, the doctors, the exposure. A lot of them have policy limits that are rather modest for what the damages can be in some of these cases; and so the interest is settling and, for the carrier, settling before too much expense has been put into the case.
BARRON:
I think there is another thing that drives the difference these days. I think that corporations will not keep their lawyers forever like they used to. If [a law firm] had Bank of America, for example, as a client, you had them for life and you could litigate whatever you wanted out of that, and they would stay with you. That loyalty has gone. So those lawyers that would litigate a case to a trial and then decide they were going to settle, that doesn't happen anymore. You do that once or twice; you'll get fired. They go find another set of lawyers. Another thing that I have noticed is that a lot of [companies] have now set up their legal departments as independent profit centers ... which means that they have to really manage their legal exposure and their legal costs.
KYRIACOU:
I have had a number of corporate counsel tell me that unless their attorneys are willing to mediate and are sophisticated in the process, they are looking for other attorneys.
BARRON:
That's right.
KYRIACOU:
Mediation is institutionalized now in the system.
DEWEY:
In a world where so much of this is driven by companies looking to save money or to even take these cases to mediation before they have been filed, can you ever have an outcome that is as good for the plaintiff or the consumer?
BROILLET:
I think that's the threat.
DEWEY:
Well, what do you see? Are plaintiffs willing to accept less money because they are getting it over with more quickly, or do they not feel that they have other choices?
BROILLET:
I think that the plaintiff, in consultation with the plaintiff's lawyer, will decide whether, on balance, it's better to settle at this point for a lesser sum of money than to spend what is involved in the case.
CHERNICK:
And to take the risk.
TAYLOR:
And to take the risk, exactly.
BROILLET:
But when it comes to risk, once again, the thing that drives the settlements in mediation is the fact that sooner or later everybody is going to have to face 12 people, unless they waive their right to trial by jury. And that can really drive the settlement in the case in terms of the risk, and that goes on both sides.
DICKSTEIN:
And it depends on the dynamics of a particular case ... There is really no simple way of saying that mediation benefits or hurts plaintiffs or defendants. It really depends on the context of a particular situation.
KYRIACOU:
There are many more options earlier on, whether it's for closing negative publicity, whether it's allowing someone to move on with their lives and re-enter the employment field. In the entertainment field, often publicity is always an issue. And once the case is filed, it has a whole different connotation than prefiling, where once depositions are taken, it has a different connotation. Your options are greater the earlier you do it. There is a downside of not having as much information, but a plaintiff may be able to net more dollars with the defense paying less earlier on just because of some of the costs that are involved in litigation.
BROILLET:
And there is also the time value of money. But it's a different consideration for the consumer. In the business cases that I handle - and we have a couple of sophisticated entities on both sides - that's one thing. But in the cases where I may be representing a consumer in, say, product liability ... sometimes the consumer will feel like the mediator is always working with the same company - Ford Motor, for example - over and over again. So is the consumer going to get a fair shot? And that's why ultimately in those situations, the consumer as the plaintiff has to have a lot of confidence in their lawyer, has to have a strong lawyer, and has to have [the option] to resort to a jury trial in the end -
TAYLOR:
Unless the consumer has Bruce Broillet as their lawyer, then they are going to feel like they are well-represented no matter how many thousands of times Ford has [used a mediator]
DICKSTEIN:
But that's exactly right. See, what I am concerned about is not the person you're representing. The person I'm concerned about is the person who is not represented at all. You are going to make sure that your client is properly treated and thinks about whether this is a reasonable resolution. Otherwise, that's not necessarily the case.
CHERNICK:
This is an extraordinarily sophisticated market in California in particular. And plaintiffs' lawyers as a group are very astute at knowing who provides skillful and good value to them in conducting mediations and facilitating settlements, and defense lawyers have the same network of information that they share among their side. So anybody who gets a reputation for leaning toward one side or the other is going to be out of business very quickly. The virtue of the California market is that there is so much of this that goes on that at the higher ends of both the mediation and the arbitration business the best people survive, and the rest sort of fall by the wayside. Because in all of those processes, both sides have to agree to select the person to conduct the proceeding.
DICKSTEIN:
And that, to me, is a totally key point. Because the idea that corporations are repeat users ignores that plaintiffs' lawyers are repeat users.
BARRON:
And you must know that what Richard said is absolutely true. There were some neutrals that were so busy in the beginning and then became a little bit less busy and decided that they were going to favor that entity, corporate America, that was going to provide them with most of the cases and six months later or three months later - fast. It's so fast now - that by a year, they're gone because it doesn't matter how often defense counsel propose them, the plaintiffs' side will say no.
BROILLET:
That's a very good point, and I can tell you that in my own experience, sometimes I am surprised by the mediators that are proposed by the defense bar in cases that I have handled because they are people that traditionally have been thought of as plaintiffs' mediators. So obviously the mediators have been sensitive to the fact that they have to pretty much cut it down the middle or else they're not going to have credibility to both sides.
KYRIACOU:
If you're not impartial to the parties as a mediator, you're going to lose business down the line. That doesn't mean that you're impartial about the facts. The facts will drive the case one way or the other, and the parties want you to participate and help them obtain an evaluation from a third party as to where the case should go. That's part of the reasons that they come to mediators as well. But if you're not impartial ... your name gets out there.
BARRON:
And there are a lot of people out there today, really good neutrals in the marketplace. There are many, many people to choose from, more today than there were a year ago, many more a year ago than there were three or four years ago.
DEWEY:
It sounds amazing because the competition evolved to the point where there are so many good people in the market that if you're not going to really be down the middle, you're going to get shaken out of the market.
DICKSTEIN:
I actually have a different view on that. I don't think there is a huge glut of really good people. And it may just be my perception, but I think it's hard to get a really good person. And even people that are very capable at the law are not necessarily capable mediators or arbitrators. But you're right. If you're not neutral, you won't last in this business for a minute.
CHERNICK:
I think that the more good people there are in the business, the better it is for the business and for everybody who is in it. Because as people gain confidence in the reliability of the ADR processes of arbitration and mediation, they're going to be motivated to use it more extensively. It really is dramatic how the quality of the California dispute resolution market has affected the size of the dispute resolution market.
TAYLOR:
The interesting thing to me is that many of the same people are mediators and arbitrators. And while in mediation finding someone who is quote, unquote, down the middle is an important thing - and I think what we're really saying is someone who is fair and who doesn't favor one side or the other - that's very important. But in arbitration, what the defense fears is that the arbitrator will do just that, and that's cut it down the middle where there should be an arbitration award for the defense. And I think there is a fear of arbitration from the plaintiffs' side because they'll get their award, but it will be much smaller than they could have gotten from a jury because the arbitrator will try to split the baby.
CHERNICK:
I think it's an unjustified, unwarranted fear because arbitrators who have that reputation simply don't get work. If their reputation is to figure out a mediated result, which is satisfactory to either side, both sides are going to hate it. And they don't have to pick that person because there are so many good people around who are available, who are not going to do that.
GAIDOS:
In terms of how attorneys choose an arbitrator, how do the new Judicial Council ethics standards for disclosure affect that?
CHERNICK:
They have made the process much more transparent. It used to be that many people in the business weren't careful about making disclosures because they didn't think it was important, or they thought it was too much trouble to keep track of the information. But now, obviously, you have to, and there is a big risk that if you don't and if it jeopardizes the confirmation of an award, that's the kind of thing that sort of gives the neutral a black eye and the arbitration institution that is in charge of administering the process as well. So it has helped, I think, to acquaint neutrals with their obligations. It's information that the parties are entitled to have. They should absolutely know if the arbitrator has previously mediated or arbitrated cases with the law firm or with the lawyer or with the party. And if they think it's important, they choose not to take that person. It is absolutely a great benefit, in spite of everybody's fears that it was going to be a nightmare.
BROILLET:
The concerns I expressed earlier that the consumer or the little guy would have some concern about the number of cases that a particular arbitrator or mediator has with a particular company over the course of time, it's not so much with regard to mediation. It's with regard to arbitration because of that loss of the right to a trial by jury. Because in mediation, you select a mediator together, and if somebody doesn't want to settle, they don't settle. And there has been tremendous development positively in the field of mediation that I have seen. But, for example, if it's arbitration - let me just throw out a hypothetical question here - should the parties be allowed to voir dire the arbitrator on bias?
CHERNICK:
Absolutely. It happens all the time.
BROILLET:
It does happen?
TAYLOR:
Not in our cases.
CHERNICK:
It happens in a joint conversation, telephonic or in person, where the arbitrator is interviewed by both sides. I get interviewed all the time in larger cases where they want to know what kind of cases have I had in the past, who have I worked with, what kinds of experiences have I had ... You can't ask questions about, what do you think about applying 16600 in this particular situation? That would certainly be off limits. But you can get a sense that way, and it frequently happens to arbitrators in high-end cases.
DICKSTEIN:
But I think that's the key, is that you said high-end cases.
TAYLOR:
That's right.