I was a lawyer with large firms for more than 40 years, primarily representing technology companies. Despite being a “corporate lawyer,” I was often the first person approached when there were disputes, and I knew there had to be a more cost and time efficient solution to resolving them.
A typical situation I would face: The client (counsel) receives a claim from another business for $300,000. The client’s vice president thinks the claim is completely meritless and is unwilling to roll over and play dead. However, litigating the claim may cost the client upwards of one-half the amount in dispute, the litigation could go on for an extended period, and there is no guaranty the client will win the dispute. If the client loses, they will pay me (and be angry about it) and still have to pay the other party as well.
In moments like these I would wonder, “What am I supposed to tell the client?” or, “How do I advise the client to put the dispute behind the company without capitulating?”
Weaknesses of Traditional Methods
The traditional answer has been alternate dispute resolution. However, particularly for a dispute of this type, I found over the course of my career that each of the two traditional forms of ADR have severe weaknesses and are unlikely to accomplish what the client needs.
The first customary ADR approach is mediation, where the parties hire a third-party mediator. However, mediators are not only expensive (some charge up to $40,000 per day), but the process can go on for days. Progress is made—at best—only if the parties are willing to compromise.
The basic problem is that the process often undercuts itself because either party can walk away and continue fighting—no matter how weak the mediator tells a party its position is. The parties can simply posture, and that’s often exactly what happens.
The customary ADR follow-up to failed mediation will be an attempt to arbitrate the matter, rather than go to court. Arbitration as practiced today is very expensive, often continuing over an extended number of months or years. It has devolved into a legal proceeding with many of the formalities of a court case—companies end up paying lawyers significant amounts for document exchange, legal briefs, expert witnesses and preparing fact witnesses.
The arbitrator(s), whose busy schedules determine the length of the proceedings, also prove quite expensive. When the smoke clears, participants in arbitrations often wonder why they did not simply go to court.
Fixed Fee, Set Deadline
I formed Swift Dispute Resolution LLC (SDR) in 2019 to address these deficiencies in mediation and arbitration. Under SDR’s process, the involved parties sign an agreement that provides for complete confidentiality and a set timeline for completion, which can be as short as two or three weeks. The parties’ lawyers are only involved in preparing a short, 20-page position paper and, if desired by a party, participating in a one-day meeting. At the meeting, I will talk to both parties and seek to find a resolution acceptable to both.
Although this may sound like a traditional mediation, there is an absolutely crucial difference: If the parties don’t settle by 5 p.m. on the single-day meeting, I will render a binding decision on the dispute that is enforceable in a court that both parties have chosen.
The looming 5 p.m. decision leaves no room for posturing by the parties and trying to outwait the other side, so they must seek a negotiated settlement in good faith. In addition, they will not have to spend a fortune on their lawyers because the matter will be over and done at the end of the day. Although matters may differ based on complexity, the fixed fee will generally be no greater than $25,000.
The SDR process is not meant for all situations, particularly ones that are too complicated (such as patent infringement) or crucial to the client financially or as a precedent for expedited resolution. But, for many disputes, including the example described above, it makes eminent sense for both parties.
At the end of the day, clients are satisfied because they do not roll over and play dead, and instead get his or her “day in court.” The other party to the dispute likewise gets their day in court. Unlike traditional mediation and arbitration, lawyers are given a limited time to spend on the dispute and both parties can keep legal costs within budget with SDR’s flat fee for its services.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Christopher (Kit) Kaufman is a retired partner of Latham & Watkins in Silicon Valley where he focused on mergers and acquisitions, securities law, and corporate governance from 1990-2017. He is the founder of Swift Dispute Resolution LLC.