Tuesday, June 21, 2011

Altertantive(s) to Litigation

Even though I like my clients very much, I never fail to get a humorous response from my fellow practitioners when I say that sometimes I wish I could insist that any party interested in initiating a lawsuit had to be compelled to carry a hot iron bar in their bare hands twenty paces to demonstrate sufficient belief in the merits of their own case before being allowed to file any form of complaint. I know that seems harsh (and indeed it was when a variant of this procedure was used in medieval England), but it was an early – and extreme – example of an ADR [Alternative Dispute Resolution] mechanism at work.
A Little History
Trial by combat is typically something that is mentioned in passing (if at all) in most civil procedure courses. If it is mentioned, reference is usually made to the fact that parties to dispute could basically fight it out, and the stronger party (supported by “truth”) would somehow prevail. Variations to fighting included the ordeal of water, where a priest would invoke a tub of water to not accept a liar, after which the accused would be lowered in. If the accused floated, guilt was pronounced, as the water would be “rejecting” a liar (yes, I know this sounds a little Monty Pythonesque, but there you have it (and on a side note to talk about myself a bit here – I went to the same high school as did Terry Gilliam of Monty Python fame…but, back to trial by combat…) Once the parties had set upon some form of trial by combat, they each had to retire to a local monastery (or similar institution) where they were secluded for anywhere from several days to almost a month, compelled to pray, fast and seek the counsel of a priest, who would query them again and again and again to discover if they might want to “settle” instead. Interestingly, the only point at which a party could withdraw from a trial by combat was only after the actual combat commenced; the case could be “settled” any time before that. Thus began a very early form of ADR.
           Fast forward a few centuries when the common law had developed to the point of more precise procedure and potential litigants had more of a choice as to where to take their claims: the Court of Common Pleas, the King’s Bench, the Chancellor of the Exchequer and so on. Taking advantage of any one of these forums would generally preclude physical violence as a procedural option. However, burdened by the highly technical forms of writ-based pleading, these courts still were not able to efficiently address or resolve many of the disputes of the day. Think about our modern concept of easily pleading the breach of a partially performed oral contract; the closest you might be able to in one of these courts was by pleading indebitatus assumpsit, wherein you would stretch the already rigid writ of assumpsit whenever you were stuck in the situation where you had already delivered the goods to the defendant and now wanted to be paid. And here’s what that writ/pleading looked like “back in the day”:

“The King to the sheriff, etc. in Trespass to show that, whereas the said defendant heretofore, to wit (date and place) was indebted to the said plaintiff in the sum of for divers[e] goods wares and merchandises by the said plaintiff before that time sold and delivered to the said defendant at his special instance and request, and being so indebted, he the said defendant in consideration thereof afterwards to wit (date and place aforesaid) undertook and faithfully promised the said plaintiff to pay him the said sum of money when he the said defendant should be thereto afterwards requested. Yet the said X, not regarding his said promise and undertaking but contriving and fraudulently intending craftily and [subtly] to deceive and defraud the said plaintiff in this behalf, hath not yet paid the said sum of money or any part thereof to the said plaintiff (although oftentimes afterwards requested). But the said defendant to pay the same or any part thereof hath hitherto wholly refused and still refuses, to the damage of the said plaintiff of ___ pounds as it is said. And have you there, etc.”

           Again, ADR – in the form recourse to the newer mercantile courts – provided a solution. Parties here would agree to be bound by some variation of what later became nominated as the Law Merchant, which had business-savvy judges applying more real-world commercial norms to resolve disputes. Thus began the Uniform Commercial Code.
ADR Now, Litigation Later...If At All....
As an attorney, I am a very strong believer in the necessity for aggrieved parties to have recourse to a court of law. The procedural rules, though highly technical and sometimes seemingly obtuse, really have as their noble goal the placement of the parties in equipoise: properly represented, the small side should be on an equal footing with the larger side so that the law can be applied fairly.
           That being said, I know that at the end of the day parties to a civil action usually come away feeling like the whole matter could have been handled better. Studies continuously bear out that the vast majority of parties to non-personal injury actions have stated that if given the chance with their opposing side, they probably could have worked out a more satisfactory result outside of court. Moreover, most of those polled agreed that the missing factor in a civil action was time, and time is the coin of the realm for a host of practice areas. As a practitioner, you need to be aware that the cycle time for concluding a civil action often does not serve the life cycle of the litigated subject matter, even if you end up representing the prevailing party. Accordingly, consider the merits of some form of ADR as a precursor to filing suit. Technology and entertainment provide are two areas where ADR makes sense.
In high technology practice, “Moore’s Law” dictates that the speed of an average CPU (i.e., the computer’s brain) doubles approximately every 18 months. This means that the shelf life for most software programs is about one year, and is in fact often less. While you might be able to obtain some timely injunctive relief, today’s fast-track rules don’t really capture technology’s life cycle to make civil litigation the preferred forum for resolving disputes where the underlying subject matter surrounds things like software or the Internet. Let me give an example.
           In the not-too-distant past, I was asked to resolve a dispute between a technology house and one of its former employees. The technology house (I’ll call them “TechCo”) was in the posture of the plaintiff and the former employee (whom I’ll call “Programmer”) was in the posture of the defendant, who had threatened to file a counter-claim. This dispute arose out of Programmer’s alleged theft of TechCo’s trade secrets while developing a particular piece of software code. Programmer claimed that there was no theft as Programmer was never an employee, only an independent contractor. It gets worse: not only did TechCo retain Programmer under an oral contract, TechCo appears to have never properly protected its proprietary information in the first place such that it could credibly argue that such information should be subject to trade secret protection. But wait, there’s more: Programmer was prepared to allege that Programmer was retained by TechCo to develop the specific piece of code in question to allow Programmer’s own trade secret information to work with TechCo’s contemplated software program.
           I have to complement the counsel for both sides here as they realized that all parties stood to lose if this matter were not resolved in less than one month. Here’s what we all were able to come up with in non-binding mediation. Each side would release the other; TechCo agreed to a one time fee (approximating 1 year of what it would have paid Programmer as an employee) for an exclusive, one-year license to Programmer’s proprietary information; Programmer, in turn, agreed to a very robust set of cooperation obligations for this one-year period to work with TechCo finalizing, debugging and implementing this software for any of TechCo’s clients who purchased this software. At the conclusion of this one-year period, each side agreed to engage in substantive negotiations for the retention of Programmer as either an employee or consultant, and reduce an agreement covering such to written form, including how any of Programmer’s subsequent “inventions” would be treated (e.g., TechCo as having right-of-first refusal, work-for-hire, etc.). Importantly, it took only 1 day for us to hear, analyze and craft an agreement for this. I doubt that any court could have compelled such a win-win solution in even 1 year.
In entertainment practice, cycle time is important, but so is the availability of really robust arbital forums. Luckily, a good portion of the entertainment industry is covered by collective bargaining agreements that provide for ADR – especially arbitration – with neutrals that really understand the “biz”.
           For example, let’s say you represent a screenwriter who has gotten the run-around from a quasi-professional producer who has a “housekeeping deal” with a studio (whereby the studio basically agrees to seriously consider any and all movie ideas presented by the producer during the term of the “housekeeping deal”). Your client was asked to perform what otherwise might be characterized as some non-substantial edits and this producer is now wanting a co-writing credit should your client’s script get optioned for development by a major studio. Obviously, you might be able to file suit alleging breach of a confidential relationship (and plead a Desny claim) in the hopes of getting this producer to cry uncle, but win, draw or lose, this course of action has the strong likelihood of destroying your client’s current (albeit imperfect) deal and also marking your client as a “suer”, foreclosing a lot of meetings with other producers in the future. A better tack would be to take advantage of the Writers Guild of America arbitration powers. Not only would your client arbitrate before a panel of three very well qualified writers, but a decision would be reached pretty quickly...and in this set of circumstances, the decision would likely be in favor of the screenwriter. This would allow you to continue work with your client moving this script in development and, hopefully, on to pilot format (I do like to be optimistic).
Conclusion & Resources
No matter what your practice area, though, keep in mind the costs that can be saved by you and your client when you elect ADR over civil litigation. Whenever I have a client who really wants to litigate I do a litigation budget that captures not only what it will cost to get to – and through – trial, but also how long it will take (I find Microsoft Excel displays this sort of data very clearly, especially for my high-tech clients).
           And I can tell you that once most of my clients go over this, they are soon asking me if there are other alternatives....

No comments:

Post a Comment