A Firm Exponent Of ADR

Monday, June 24, 2013 - 09:13

The Editor interviews The Hon. William A. Dreier of Norris, McLaughlin & Marcus, P.A. on his ADR practice.

Editor: Please describe your practice at Norris, McLaughlin & Marcus.

Dreier: Approximately 95 percent of my practice is arbitration and mediation, much of it originating with the American Arbitration Association as well as some private parties. I do mediation and arbitration primarily for complex commercial matters nationally, in New Jersey, and occasionally internationally.

Editor: Doesn’t this represent your earlier practice as an attorney?

Dreier: Yes. Before I went on the bench, I was in a commercial law office that represented one of the larger banks as general counsel. I also practiced some municipal law and other types of commercial law.

Editor: You’ve become well-known for your advocacy of ADR (Alternative Dispute Resolution). Of late, there have been some detractors of ADR. Do their claims have any validity or merit?

Dreier: I would say it depends on the arbitrator or mediator. With mediations my work is still scoring at a 90-95 percent settlement level. In a mediation I just completed, the parties initially stated they wished to arbitrate but agreed to first mediate the break-up of a professional practice, which we were able to mediate successfully. In a major pre-litigation case involving an international communications network with extensive radio transmission towers built throughout the Middle East, one party demanded $110 million while the other offered to settle for $6 million. We were able to settle that case last week for a substantial number after two days of mediation. I enjoy very much settling those kinds of cases in bringing about peace through mediation in a fragile situation.

The detractors have been mainly at the arbitration level, claiming that arbitration now has approached litigation in terms of e-discovery, naming of large numbers of witnesses, etc., as well as costs. However, in my view an arbitrator who can take control of the case, reduce discovery, and reduce the waste and time delays amounting to tremendous cost is really earning his or her money. In arbitration, an aggrieved party can choose the arbitrator, so it’s not just the luck of the draw at the local courthouse. Often that person can find a person with either some special expertise or with a reputation for getting the job done. Arbitration greatly benefits the parties and, at worst, is not more costly than litigation. In addition, there is not the opportunity for appeal after appeal. The scheduling is very much as the parties and the arbitrator agree – the burden of operating under a court schedule is absent. Many times the arbitrators like to move the case along by foregoing some of the depositions and other costly measures, but the attorneys may be resistant. My process is to ask the client to sign off on shortening the process by having unnecessary depositions dispensed with at the outset of a proceeding. When the attorney refuses to reduce the number of depositions, then I request that I get a written statement from the client to the effect that the arbitrator is willing to proceed with fewer depositions to hold down the cost, but that the client wishes his attorney to engage more witnesses and depositions. Sometimes attorneys back down, but sometimes they agree with my request.

Editor: The cost of e-discovery has been a problem for corporate law departments, even when a case is being arbitrated. How do you control this cost when you are a presiding arbitrator?

Dreier: Much can be done. Bill Slate, formerly at AAA, had a word for this – “muscular arbitration,” where the parties work to keep the costs down and work at a speedier rate. Often some attorneys blame the costs on the arbitration process, which are actually caused by the demands of the types of complex cases that are going into arbitration. Arbitration should never cost more than litigation and should be much less. If it does cost as much as litigation, then there’s a failure to communicate. CPR is running a series of courses on this subject right now. I am a mediator and arbitrator for both CPR and AAA.

Editor: One tool that you have advocated for reducing both ADR and litigation costs is early case assessment. Why has this logical step to reduce cost not been more widely accepted?

Dreier: I have no idea. To me, it’s just so logical. If you can head things off by having the case assessed by a neutral (party), who upon reviewing internal problems in a corporate setting where someone has made a poor decision, but wants to be vindicated, and if you can point out the likelihood that there could be an adverse decision, you have done a real service. The problem with that approach is that the very people with a vested interest in the case will not yield to the proposition that they might lose. If parties are willing to have early case assessment, it works in different ways. The case can be assessed by a neutral who just advises them or it can go to a panel - there are many ways of doing it. It’s being used quite a bit now in the labor and employment area, with great success, but outside of that area, it often falls on deaf ears.

Editor: You might describe the pre-nup process or what is formally called “Economical Litigation Agreement.”

Dreier: This is a means of deciding in advance of any proceeding where the case is headed and trying to assess limits on the outcome. By the time you get through the initial sessions of a mediation, you usually know where the case is going. In an arbitration, it can be a high-low level that the arbitrator is advising or not advising about. To have a pre-arbitration agreement as to where a case should go works very well.

Editor: What other means are useful in reducing discovery cost?

Dreier: A frank discussion with the attorneys is helpful. Sometimes it’s the muscular process – just order them to make progress if they won’t go along. But I try just talking to the parties, saying words to the effect, “you may want to have the parties deposed, you may know enough about what the positions are through documentary discovery or prior statements, or other litigations – these are things where you can already condense what has to be proven.” I tell parties very often to use demands for admissions up-front. Then ask the opposing side to confirm the veracity of the statements. I do not accept the general “we don’t admit” answers. Answers have to be specifically related to what the opposing party is asking for admissions. And that party must give the background facts, laying them out so that the answers meet the substance of what is asked for in an admission. This approach can hold down discovery costs.

I don’t believe in using interrogatories in arbitration or in litigation. Interrogatories are just drafting exercises for the attorneys. They are only helpful in limiting claims, but this can also be done through admissions or by just writing a letter to say what you are demanding and why. I try using that informal process in an arbitration, and thereby reduce attorney time and cost.

Editor: How useful have mock trials been in your experience?

Dreier: They are a good practice if you really want to know where your case is going and how an impartial jury will respond to certain arguments. Mock trials can also be useful as a reality check. Each side talks to each other beforehand, you talk to your clients, you talk to the other people involved in the case. They talk to the attorneys, to their families, to their friends, and everyone agrees with them how good their case is. But they don’t have a reality check on how an impartial person looks at the case. And then especially when you use a mock jury, or even a specialist that will come in and listen with a neutral ear, you might see that the case isn’t really the way you expected. You either correct your presentation, or sometimes you reassess your case. And in that way I think it works very well.

Several years ago we had an extensive mock trial where I was assigned the job of representing the other side. In my opening statement I presented my case in seeking a large amount of money in settlement. But I remember the person acting as head juror saying that the jurors had declared, “there shouldn’t be a lot paid here…maybe an apology is all that we need!” We felt very good about our prospects until we went to a mediation that was aborted because the other side walked out when we convinced the mediator of the merits of our case and that the claims were without merit based on our mock trial. This process worked too well! We went to trial, and just before trial the judge really hammered us into what I thought was too high a settlement.

Editor: While cost-shifting to the loser has been the new theme in a model rule being proposed in Britain, do you think this will ever catch hold in arbitration tribunals?

Dreier: It is, in fact, a provision that is permitted, by agreement by AAA rules, and of course, the cost of arbitration can be awarded by the arbitrator. With the New Jersey Arbitration Act, arbitrators can make it go either way. The real question is attorney-fee shifting, i.e., complete cost-shifting, which is the English rule as well as on the Continent. That accounts for the lesser amount of litigation since litigation becomes the province of rich people or substantial corporations. A small businessman or an individual can’t run the risk of bringing a claim to litigation. Let’s say you think you have an 80 percent chance of winning, but if that 20 percent happens, it could bankrupt you. That’s the reason for the American rule, which opens the courts to the less affluent. There are good and bad ramifications of shifting to a winner-takes-all situation. I would favor that it be an option to have all or part of the fees assessed. Even if an individual brings a patently frivolous claim, we have the frivolous litigation statute, and if the claim survives this challenge, even though it is unfair to assess the winning party with tremendous costs, the arbitrator may have to assess the loser looking at his ability to pay. It is only fair under the circumstances. The automatic payment of attorney’s fees and complete cost-shifting can lead to extremely hard results, but it makes the figures on litigation look great. The less amount of litigation abroad means that the courts are closed to people who cannot afford it.

Editor: Do you see arbitration tribunals in the U.S. and around the world placing stricter controls on the way in which arbitration is conducted in such areas as limiting witnesses, documentation, e-discovery requests, etc.?

Dreier: The ICC arbitration that I was involved with in Singapore was greatly reduced in number of demands by the practices of the ICC and Singapore procedure as well as the substantive law of Hong Kong, which applied in that case. We received statements or declarations of witnesses, rather than depositions, that gave rough outlines of what the witness was going to testify to. While heavily prepared by lawyers, you knew where the witness stood, and so avoided deposition costs. We departed from that rule, allowing two depositions in a multi-million dollar case, which would have taken longer in the U.S. The documentary exchanges are fairly liberal abroad, but there are not the huge burdens of e-discovery documentation abroad. I think that the international tribunals are doing a good job. In the European tribunals, not just in arbitration, the investigating magistrate will do much of the job on discovery that is done by attorneys in the U.S. While still a judge, the magistrate can follow up leads and ask that particular people be brought in for very limited depositions or statements. There are many limiting statutes under The Hague Convention allowing for more confidentiality and permitting parties to refuse to give discovery, especially if it is an out-of-country matter. I recently dealt with such a case in Germany with which we have an international treaty that protects a witness, who declined to give a statement. In countries such as Switzerland, it is illegal to conduct discovery, to take depositions or require people to make statements. There are criminal statutes that bar attorneys from making these requests.

 

Please email the interviewee at wadreier@nmmlaw.com with questions about this interview.