[PODCAST] The Business Case for ADR

When it comes to resolving business disputes, should alternative dispute resolution really be seen as an “alternative” or a go-to for business leaders?

In this new podcast from JAMS, neutral Laura Abrahamson and JAMS’ director of international arbitration Ranse Howell discuss the many reasons business leaders prefer alternative dispute resolution when resolving disputes with partners and vendors. The pair discuss overcoming preconceived notions about ADR – which can limit its use and effectiveness – and share how ADR helps businesses return back to normal operations more quickly and efficiently, saving money and maintaining important relationships.

Moderator: [00:00:00] Welcome to another special podcast for JAMS. Today, we're going to be talking about the business case for ADR. Our guests are Ranse Howell, director of international operations at JAMS who is based in London, and Laura Abrahamson, a JAMS arbitrator and mediator who is based in Los Angeles.

Thank you both for being with us. Ranse, I'll start with you. Many people have a preconceived notion of ADR. What do you think that is? And how does that limit their understanding of what is possible using ADR?

Ranse Howell: [00:00:41] Well, I think that people's preconceived notion from ADR comes from kind of, almost, say a learned habit and experience; and ADR, to what most people understand it, is alternative dispute resolution.

Now, over the years we have said, is it really alternative or is it really the most appropriate? Does it really have to be a dispute, or can it be something else? And does it have to be a resolution, or could it potentially be a remedy? And I think particularly, as we're looking for a variety of different ways of dealing with some of the challenges that we'll be facing now and in the future. But I think that to just lump all the remedies under the acronym "ADR" I think limits the possibilities and really stifles the creativity, which I think that we will need to have, and that we do have. We just need to sometimes take a step back and think about really what's most appropriate for this particular need and circumstance.

Moderator: [00:01:36] And Laura, do you want to add anything to that? The preconceived notions that you've seen that people have of ADR?

Laura Abrahamson: [00:01:42] I think when you ask most businesspeople, their knee-jerk reaction is they think of ADR as simply being mediation and arbitration and maybe, sort of, an executive settlement discussion about a problem ahead of mediation or arbitration.

And I think, as Ranse just suggested, there are so many more hybrids and options and there's so much room for flexibility and creativity in fashioning a type of process that's appropriate for a particular type of problem that is overlooked when you simply think of it in the buckets of mediation or arbitration.

Ranse Howell: [00:02:17] And if I can just add to what Laura has just identified as the most general types of ADR on mediation and arbitration, and what people sometimes are looking for the alternative to the alternative, because people understand what mediation is, they understand the opportunity that it provides, and they also understand what arbitration is.

But sometimes they don't really necessarily understand its suitability, how they can be flexible, how they can actually shape the process depending on the situation and circumstance.

Moderator: [00:02:47] And Laura, we're now in, obviously, a pandemic and it has disrupted so many things. What do you think makes this moment an especially ripe time for ADR? Is the business case stronger now? And if so, why?

Laura Abrahamson: [00:02:58] I think that the business case is absolutely stronger now. This moment we've been in since February, March of last year, in which we're likely to continue to be in for well into 2021, has shown... it's disrupted the world, it's disrupted people's lives, and it's disrupted business in so many different ways.

And so, this has created many more conflicts, potential claims, and so there's many more problems that have come up in the last year that need to be addressed; and ADR, first and foremost, helps preserve relationships. The idea is that it's faster, it's more responsive, it helps de-escalate disputes, it helps businesses plan ahead and reduce uncertainty and it can help businesses use... so much of the world is interconnected and so much of the time when a problem arises, the parties are likely going to have to continue to work together on that same project for some period of time in the future or on other projects and coming up with a resolution process to help them get past a sticking point and move on with their business relationships is really critical. And one last point that I think makes this time particularly important is that the courts have been shut down in many areas with people not being able to do in-person trials and the like, the ability to get a speedy resolution of a problem through an ADR process, especially some of our more creative, expedited processes that people don't necessarily think about, is going to be really critical.

And Ranse, I think we've seen that as people have turned increasingly to ADR in the last six months.

Ranse Howell: [00:04:43] Yeah, certainly, Laura. And you know, one of the things that really springs to mind when you're saying about "is it right?" and "why now?" is three words that have stuck with me, which is: crisis, conflict, and chaos.

And those three things are really right in the mix in almost every business dispute and particularly now when people really don't know what the future holds. There is so much uncertainty and there's so much volatility that you really need to think to yourself: what do we know, what don't we know, and how can we move forward?

And, as Laura really identified, it is about preserving business relationships. It's about providing dialogue and providing a mechanism. Now, it doesn't necessarily have to be a form of mediation or arbitration it can be a structured negotiation; it could be a facilitated dialogue, but people need to have the understanding of how they can get out or whatever it is that they're in at that particular moment in time.

And that there potentially is a way forward. And sometimes they can't do it by themselves because of the sheer chaotic mess that they find themselves in and a dispute resolution provider and a dispute resolution guide can certainly provide that mechanism and provide that framework. And we've certainly advocated for that.

We've suggested it and we started to see that really being used in many different fields, in many different sectors. And I think the most important thing about this is that people think about and realize, that this is only going to last for a short period of time. However, that period of time, of course, depending on your situation and circumstance, can seem like a lifetime; but just to provide the opportunity to have dialogue, discussion and have a flexible arrangement will help people move forward.

Moderator: [00:06:36] And Ranse, has the view changed since the start of the pandemic? In other words, has the business case for ADR sort of changed?

Ranse Howell: [00:06:43] I don't believe that the business case has changed. I think that people's understanding and the need and the breadth and the scope potentially might have changed. As we said earlier on, there was an understanding of what ADR is. It's mediation and arbitration; we understand the process, we understand the beginning, middle, and an end. Today, we're very different, we have very different needs, very different timelines, very different requirements. And I think that people are now looking for flexibility. They're looking for certainty and they're looking for an expedited remedy that potentially they didn't think that that was available, which it has always been, in various different sectors and various different industries.

However, now people are saying, what is it that we can do together in order for us to find a resolution and a way forward?

Moderator: [00:07:32] And Laura, what are some of the ADR models that are perhaps less well-known, but are particularly appropriate for this moment?

Laura Abrahamson: [00:07:41] I think there's a range of options that people might not instinctively think about that dispute resolution providers, such as JAMS, offer and have increasingly been promoting that would be very worthwhile for businesses to consider.

The first of that is that early dialogue. Many dispute resolution contracts, the businesses, have, consider having, an early discussion between executives; but one of the options is to have that early dialogue facilitated with a dispute resolution provider. And I think that that's an option that would serve businesses very well and something that parties should really think about because having that neutral facilitation might make that early dialogue much more productive and capable of resolving problems before they escalate, under most traditional clauses, to mediation and arbitration. There's also facilitation, in more structured mechanism that the dispute resolution providers offer in a corollary early neutral evaluation, in which a neutral can assist each party independently to assess the strengths and weaknesses of their claims, identify maybe some common ground and help bring about a resolution short of a full-blown mediation in a way that's faster and much less expensive.

Ranse Howell: [00:09:10] One of the things that Laura has identified is really the role of the neutral and the role of the neutral third party.

And I think that whilst the traditional models of mediation and arbitration use a third party or a neutral in a very particular way, some of the other models can use them in a very flexible and a very broad range of various different options. And really, if you think about the role of the lawyer, which traditionally was a role of the counselor as a guide and an advisor, the legal team can certainly work with the neutral to craft and shape something that is really appropriate for the particular claim with a particular dispute. And I think that whether it's early dialogue, whether it's facilitation, or pre-litigation mediation, what we're trying to do here is provide a mechanism, provide a shape, provide a framework that works most appropriately for that particular dispute at that particular time.

And it's up to the legal team and the dispute resolution providers to provide and shape something that will work for everyone.

Laura Abrahamson: [00:10:18] And let me just add, from my perspective with 25 years in leadership roles within corporations, one of the barriers to the sort of executive dialogue and even pre-litigation mediation being an effective way to resolve things sometimes is that the people who are most familiar with the dispute often have a lot of emotional attachment.

They don't want to be seen as having created the problem, they're invested in their view of the facts and their view of the validity of their claim. And I think by using the early dialogue, facilitation services of a neutral, before the senior executives meet, if they have the neutrals view and take some of the emotion out of it, they might be able to reach, truly, an early resolution, taking some of the passion out, getting a third party, independent view of the situation and a path forward that's much more effective.

Ranse Howell: [00:11:22] One of the most essential things that a neutral or a third party can do when you have individuals who are in a pre-dispute or in a very highly charged discussion is to provide a framework, an agenda, and an understanding of the outcome, which takes away some of that pressure and some of that stress from the parties.

And if you can start to provide that and you can start to see areas of agreement, then already, you're starting to move the process forward.

Moderator: [00:11:51] Laura, before you came to JAMS, you served as deputy general counsel at AECOM. What about ADR did you find resonates the most with business leaders?

Laura Abrahamson: [00:12:01] In my discussions with the business leaders and senior executives at AECOM and at Occidental Petroleum, before that, what I found resonates the most with them when they talk about ADR and what they want in ADR is they want to know they have a level playing field for their disputes to be heard. They want those disputes to be resolved quickly. For them, a solution that comes about three or five years down the line is not very attractive.

They want to get an expeditious resolution, they want it at a low cost, and they want to get to certainty while at the same time, being able to preserve the extent possible their business relationships. Because oftentimes a dispute that they're having are with parties who they are either in the middle of a project with, and they need to preserve their relationship to allow them to complete the project or they are parties that they're going to be doing business with time and time again.

So they're really looking for, and what resonates with them is, speed, efficiency, keeping the costs down, getting to certainty and preserving relationships.

Moderator: [00:13:09] Ranse, business restructurings are sort of now a routine fact of life and maybe for the foreseeable future, unfortunately. How can non-traditional forms of ADR help make those go smoother?

Ranse Howell: [00:13:21] I think that both traditional and non-traditional forms of alternative dispute resolution provides some assistance. The nontraditional forms, which are what we described earlier, which is discussing the use of the neutral to help facilitate, to help provide some dialogue, and to really help, to increase the opportunities by working with the parties, understand, really, what are the key fundamentals, and in order to maintain the relationship and in order to preserve what elements of the business need to be saved. And also, understanding what the priorities are. As far as traditional forms, I think that certainly pre-litigation mediation and other forms of expedited processes can also provide some assistance; but ultimately what we want to try and provide is that, what is the purpose of the discussion?

What is the purpose of the restructuring? And also, is it possible given the information and given the situation and circumstance? And certainly, the facilitator or the neutral could provide that reality testing, working with the parties, and sometimes asking those difficult questions.

Moderator: [00:14:31] And Laura, are there other examples of non-traditional ADR that you've seen effectively deployed over the last year?

Laura Abrahamson: [00:14:39] Absolutely. I've seen non-traditional methods being employed very effectively in the last year, in particular, looking at the hybrids and using neutrals in some of the ways that Ranse was suggesting earlier to facilitate and do an early evaluation. And let me give you one concrete example, in a dispute where there were claims and counterclaims, and on the claims the parties were able to reach an agreement as to a number in their negotiations, but they couldn't agree on the value of the counterclaims. They agreed to do and use a neutral in a way that was sort of a hybrid between a facilitation and early neutral evaluation/expedited arbitration and they agreed on a 45-day process. They identified together a list of three neutrals and the neutral would consider evidence. They agreed on a two-week, four-week timeline to provide the evidence, they agreed that if the neutral thought it was helpful to have a one-day hearing and the neutral would render result, that would be binding within two weeks and what they did is the neutral was going to come up with a number of a value of the neutrals view of the value of those counterclaims, and that would then translate in their settlement to, they agreed on, a range of zero to $8 million extra where the settlement amount would go up or down depending on where the neutral valued the counterclaims. And that was incredibly effective. And I think that shows how parties can be creative in using the services of a neutral to really fashion a mechanism that is most appropriate in any given circumstance.

Moderator: [00:16:22] Ranse, I'm curious to hear how you think these models can be applied across the industries.

Ranse Howell: [00:16:27] Certainly. One of the things that we've seen in the press recently of course, are large commercial lease holders trying to restructure and trying to renegotiate the arrangements because many of them haven't necessarily had occupancy for some period of time, yet they have a long-term relationship and they have a long-term opportunity for both parties' sustained business. We're also seeing that there are opportunities for things like supply chain finance. Supply chains are being constrained, liquidity is also constrained, and in order for that to start to move, there needs to be some sort of restructuring and better understanding of needs; and also, timeframes and limitations. Another area is certainly around insurance. I know there's been a huge amount of discussion about the liability for insurers and the insured.

There was a huge discussion about force majeure when COVID started. That sort of drifted away, but people are looking to their insurers to say: what relief do I have and what can I get as far as the claims and how can they be paid out? And of course, we understand that if they had to pay on every single claim there would be a real concern about their survival, but there's a dialogue about that.

And I think if you look at industries that have been really successful about long-term resilience and short-term results, you look at the construction industry, and this is something that Laura really has a good understanding about. They've been really, really smart about how to deal with their disputes.

They understand the long-term need to preserve the relationship. But they also understand the short-term requirement to get a quick and effective resolution, and I think that's what other industries would look to; to the effectiveness of use of particularly in the construction and other forms of ADR.

Laura Abrahamson: [00:18:12] And just to pick up on that Ranse, I think you're absolutely right. And I think in the UK, in particular, the construction industry has adopted the adjudication procedure, which could be used in other jurisdictions through an ADR provider, which allows you in the course of a project, you have a very short timeframe to present a claim and get in a very short term, two to three month determination by a neutral, who then can go about finishing the project. And the parties have the ability to come back and re-litigate after the project's over, but it gets to a quick resolution that keeps the money and the project flowing, and I think that the statistics show that in a vast majority of times, people accept that initial adjudication and don't come back and re-litigate. And I think that's a model that could very effectively be used in the U.S. and in other jurisdictions in construction disputes and other disputes to get to a quick, neutral determination that allows a project to keep going.

Moderator: [00:19:23] Okay, well, let's wrap up with a thought about the future. We're now at the start of a new year, so looking ahead, where do you see the biggest opportunities for ADR? Ranse, I'll start with you.

Ranse Howell: [00:19:34] I mean, I think the biggest opportunities are to basically break beyond, kind of, the confines of it simply just being understood to be mediation and arbitration; that it's so much more, it provides such a greater range of possibilities, and it's about really thinking about in partnership, with all of the key stakeholders, with the neutral, with the legal team, with the in-house counsel and all the major decision makers, what is it that we need to get - that you need to get - in order to find a mechanism that works for you now, and also that is sustainable and durable for the future.

And I think it's about educating, it's about informing, it's about understanding, and ultimately it's about resilience and the pathway forward.

Moderator: [00:20:21] And Laura, same question to you.

Laura Abrahamson: [00:20:23] I completely agree with what Ranse has said, and I guess I would add to it, I think the necessity for people to be asking those questions and leading to find the alternative forms of ADR that work for them, it has been continued as courts can't really reopen, as your big type of arbitration hearings in person have new virtual because they can't happen in person, if it's going to take longer to get to that type of hearing it really pushes people to look at what else they can do so that their disputes and concerns can be resolved quickly and efficiently.

I think the demand and the need for finding those solutions that Ranse mentioned is going to present a big opportunity because the lack of access to the courts and the constraints on people's ability to resolve their disputes in the more traditional ways is going to force people to be more open to considering all the other frameworks and mechanisms and benefits that ADR can offer and the more creative ways that will best help them preserve their relationships and resolve their disputes.

Ranse Howell: [00:21:37] And Laura, wouldn't you say from looking at the business perspective, you are looking at, really, the short term survival for the long-term growth, and that's what we're trying to provide here.

Laura Abrahamson: [00:21:47] Absolutely. I think that what we've seen as businesses have been thrown in across the world, in this situation of crisis and conflict and chaos with the disruptions brought about by the pandemic for the last nine months and continuing that they need above all else to find ways of resolving disputes quickly at the lowest cost possible since costs are such an important issue and threatening business survival and to provide them some certainty. And so in many ways, ADR offers a life jacket to businesses that are in danger of drowning to try and help them navigate through some of their problems and find resolution in this very turbulent time where their very survival is, is at stake.

Moderator: [00:22:39] Okay. Well, we'll leave it there. Ranse and Laura, thank you so much.

Ranse Howell: [00:22:43] Thank you.

Laura Abrahamson: [00:22:44] Thank you.

You've been listening to a special podcast from JAMS, the world's largest private, alternative dispute resolution provider. Our guests have been Ranse Howell, the director of international operations at JAMS who is based in London, and Laura Abrahamson, a JAMS arbitrator and mediator who is based in Los Angeles.

For more information about JAMS, please visit www.jamsadr.com.