Craig's Corner For Counsel: Alternative Dispute Resolution

Friday, August 1, 2008 - 01:00

Alternative dispute resolution (ADR) has proved its effectiveness in business disputes. In particular, it is getting new attention in the bankruptcy area. This month, I spoke to Lisa Hill Fenning, partner with Dewey & LeBoeuf in Los Angeles and a former U.S. bankruptcy judge. She counsels companies on corporate and financial restructuring, bankruptcy and insolvency issues

She contributed to Alternative Dispute Resolution Settlements and Negotiations: Leading Lawyers on Winning Legal Strategies for ADR, Mediation, Arbitration and Litigation from Aspatore Books and West.

Craig Miller: How does ADR fit into the bankruptcy process?

Lisa Hill Fenning: The bankruptcy process itself is a form of ADR. The automatic stay in a Chapter 11 proceeding stops all litigation and forces all parties in all disputes relating to a particular person or entity into the bankruptcy forum to try to achieve a global solution to many individual disputes that may exist between creditors and the debtor. That is sort of the backdrop of the insolvency aspects of ADR. If you recognize that Chapter 11 is not supposed to come up with a litigated solution but rather that success is defined by a consensual plan of origination, it's easy to see that the overall structure of that process is an alternative dispute resolution process.

The most important thing to know about ADR is that you can often achieve a win-win solution that is a more effective outcome than you could ever achieve if you litigated to finality. The emphasis is on flexibility and keeping in mind the multidimensional aspect of trying to deal with insolvency-related problems. The use of ADR to achieve a settlement becomes extremely important because you have a wasting asset in many respects. It becomes a pyrrhic victory, if at the end of the day you win litigation and you're holding an empty bag due to the fact that the other party no longer has any assets because they've already distributed them, gone completely bankrupt or liquidated and have nothing left.

Craig Miller: From your experience, what's the most useful advice for corporate counsel in ADR?

Lisa Hill Fenning: It's important to identify the time and place for mediation and to try and get claims in a position where you can leverage a satisfactory mediation. This often happens in claims in bankruptcy cases but it also rises in disputes, for example, over intellectual property where people have competing interests and rights and one of the parties is insolvent.

The key thing is to plan ahead. The moment you enter into a contract with the relationship is the best time to define the scope of ADR, to anticipate the possibility that even though everybody is lovey-dovey at the start of a relationship, that may not happen if there are disputes down the road. You need to know when to build in mediation if negotiation hasn't been successful, when to build in arbitration if mediation is not successful, and to define when and how those processes are to be invoked.

The real question is identifying the right time and the right place and the right manner in which to invoke an ADR process. As one of my ADR teachers along the way used to say, in mediation the right answer at the wrong time is the wrong answer. That is, if the other side isn't willing to hear it, if the issues are not ripe, then you may have the perfect solution that would resolve the matter, but the other side will reject it because they're not ready to hear it. They're not ready to use the ADR process. They're not ready to hear the offer that actually provides the best way out and the best solution.

Thanks to Lisa Hill Fenning, contributor to Alternative Dispute Resolution Settlements and Negotiations: Leading Lawyers on Winning Legal Strategies for ADR, Mediation, Arbitration and Litigation from Aspatore Books and West.

Craig Miller's entire interview with Lisa Hill Fenning is featured in a Westcast podcast at http://feeds.feedburner.com/Westcast.

For additional insight on alternative dispute resolution, the following Westlaw databases also are available:

Alternative Dispute Resolution Practice Guide (ADRPG)

Corporate Counsel's Guide to Alternative Dispute Resolution Techniques (CCGADR)

Guide to Judicial Management of Cases in ADR (JUDMGMTADR)

State-specific ADR practice manuals and guides for California, Georgia and Texas

Center for Public Resources Institute for Dispute Resolution: Model ADR Procedures and Practices Series (CPR-MAPP)