ADR - Law Firms Pioneering A New Path To Dispute Resolution

Monday, August 1, 2005 - 01:00
Lew Goldfarb Associates, LLC
Lewis H. Goldfarb

Editor: How does your practice differ from conventional ADR?

Goldfarb: My practice focuses on the prompt and efficient resolution of class action lawsuits and other complex litigation, including government investigations, at the earliest practicable time. I typically get involved in cases while the litigation is in progress to take a fresh look at ways to end the lawsuit. It is always important in high stakes litigation to assess resolution potential before damage is done to the company's reputation and before the parties become so entrenched in their position as to preclude settlement. By acting separately from those charged with defending the litigation, I am able to bring the parties together in a more constructive setting.

Typically, I am retained by the defense side as part of a dual-track approach. The litigation continues on one track, while I advise the plaintiffs' lawyers that I have been retained by the defense to take a look at the possibility of settlement. At the outset, I make it clear that I have been given only a 30 day window to attempt settlement and that my involvement should not be construed as a lack of resolve to litigate the case.

Following this initial dialog, I review the strengths and weaknesses of defendant's position. Class action litigation often produces a contentious dynamic that polarizes positions based more on emotion than factual disagreements. One of my most important tasks is to identify the true elements of disagreement. When I have a good understanding of these factors, I make recommendations to my client and obtain parameters for my discussions with plaintiffs' counsel.

I then meet with the plaintiffs' counsel, preferably one who is not involved in the litigation, to focus on ways to settle the case. Plaintiffs' lawyers are usually receptive to this approach, because they are looking for ways to get relief for their clients and to get their legal fees without the costs and risks of further litigation.

In some cases I am first approached by plaintiffs' counsel who are interested in settling a case and who know me from years of litigating class actions. I will then take this overture to the corporate defendant who will decide whether to retain me to attempt a settlement. I have resolved a number of cases in this manner.

I have also found success in ending class actions by combining the resolution of a government investigation with additional relief to class members. Very often class actions follow on the heels of a government investigation. In negotiating a settlement with a government agency, it is often possible to synchronize the remedies that the government wants with those that plaintiffs' counsel is seeking and put them all into one package. This serves not only to end the government's involvement, but also to satisfy the claims of the plaintiffs, and provide a compelling argument for ending the class action. I would then go back to the plaintiffs' lawyers, demonstrate how their clients' claims have been fully satisfied, and offer them appropriate attorneys' fees.

In some cases plaintiffs' counsel demand greater relief for the class, in part, to justify higher attorneys' fees. If agreement is not reached, the client can attempt to persuade the court that the relief to the class is adequate. If the court agrees, the lawsuit becomes a catalyst case where the only issue is whether the plaintiffs' lawyers are entitled to attorneys' fees for achieving results for the class. The defendant often is in a much stronger position arguing this issue rather than the merits of the case.

Editor: How does your background help you deal with these matters?

Goldfarb: I have more than 30 years' experience resolving disputes. I spent 12 years prosecuting and settling consumer claims at the Federal Trade Commission, first as a trial attorney, then as Assistant Director of the Bureau of Consumer Protection. Following government service, I spent 15 years at Daimler Chrysler as Associate General Counsel. I was in charge of much of the company's regulatory compliance as well as class action defense. Most recently, as a partner at Hogan & Hartson, I represented a variety of major corporations in defending class actions, all of which fully supported my efforts to achieve early resolution of the litigation. An overriding principle throughout my experience is that customers are the most valuable asset of any company. I viewed class action litigation as damaging to my clients' relationship with its customers and worked to bring litigation to the fastest possible resolution. This approach, of course, had the added benefit of minimizing disruption to the company as well as the costs of litigation.

Equally important as early resolution, is the need to deter plaintiffs' lawyers from filing new, often frivolous, class actions is even greater. I was given a free hand at DaimlerChrysler to use a variety of approaches to achieve that objective as well so that the company's willingness to settle would not be seen as a lack of resolve to litigate. All of this culminated in many of the strategies that I use today.

Editor: Why should a general counsel ask you to settle a class action rather than the litigators who are intimately familiar with the case?

Goldfarb: Litigation counsel have a completely different outlook from someone who is retained solely to achieve a settlement. Litigators are trained to "win" litigation. "Early resolution" to a litigator means winning a dispositive motion or defeating a class certification motion. Litigators often become so entrenched in their position and emotionally antagonistic towards plaintiffs' counsel that settlement becomes impossible. One general counsel hired me to settle a group of class actions, in part, because his defense counsel would not even shake hands with plaintiffs' counsel when they appeared in court. (I was able to negotiate a settlement of these cases in one 12 hour session.)

Additionally, defendants who use my approach are able to demonstrate confidence in their legal position by limiting the settlement window to a 30 day period and insisting that the litigation continue in earnest while settlement is pursued. Further, plaintiffs' counsel are more willing to work with separate settlement counsel who comes to the table with a fresh outlook and whose only mandate is to resolve the litigation. Finally, my experience in litigating and negotiating settlements with top tier plaintiffs' counsel for over 25 years has provided me with a degree of credibility with the plaintiffs' bar that has enhanced my ability to settle cases.

Editor: Are your strategies effective in resolving individual product liability cases?

Goldfarb: In such cases, unlike class actions, the individual plaintiff obviously has a much stronger interest in the outcome. The critical issues in these cases are causation and damages. Very often a plaintiff will have suffered serious harm but be unable to demonstrate that it was caused by a defect in the product. One of the impediments to resolution of product liability cases is the inflated expectation that plaintiffs' counsel often engender in their clients. The goal, therefore, is to persuade plaintiff's counsel to take a realistic view of the chances of establishing causation and to lower the client's expectations regarding compensation.

This process requires a lot of trust on both sides. I think I have developed a fair amount of trust over the years within the plaintiffs' bar because I have been able to negotiate settlements that both sides have seen as fundamentally sound.

In one case, I was able to mediate the resolution of a serious motor vehicle burn case where the plaintiff's lawyer was willing to forgo a significant jury verdict because his severely burned client did not want to go through a trial and relive the experience. The outcome often depends on the quality and the ethics of the counsel you are dealing with.

Editor: It is arguable that the requirements of Sarbanes-Oxley with respect to effective internal controls may require every department in a company to use techniques to eliminate unnecessary expense as well as to resist pressure from executives to continue litigation to serve their personal interest rather than the corporate interest. If you assume that this proposition is correct, what are the implications of the approach you suggest?

Goldfarb: My approach positions the company well for SOX purposes. It demonstrates an intention to find the best outcome for the corporation by exploring alternatives to the high costs and risks of litigation, allowing for a very brief window of time to settle while the litigation continues. Setting up a separate settlement track can insulate corporate counsel from internal corporate pressure to continue litigation when the company's interests are best served by pursuing settlement.

Recent reports document instances where major defendants rejected settlement overtures only to be hit with billion dollar plus jury verdicts. While it is always easy to question the wisdom of litigating after a bad result, some reports have suggested that the decision to litigate was unduly influenced by discrete factions within the company. Bringing in a third party to perform an arm's length assessment of settlement alternatives and pursue settlement while the litigation continues can avoid this result. It serves to satisfy those within the company that want to litigate while enabling the general counsel to present a realistic alternative to management.

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