Institutional Fact-Finding? Getting Started - Where To Go?

Tuesday, January 1, 2008 - 00:00

In today's era of electronic speed public trust, institutional goodwill, brands and corporate reputations, which took decades to build, can be shattered in hours or even minutes.The scenario is all too familiar.A situation arises in a company, which could become embarrassing.Unsubstantiated facts become public, rumors run rampant, and allegations, verified or not, are thrown about like convictions.The public demand for clarification or for the truth is immediate and unrelenting.If the response is neither adequate nor credible, public trust and confidence may be lost, and stock values for publicly traded companies negatively impacted.In such situations, taking time out in gathering the facts can quiet a damaging public spectacle.This can be effectively achieved through institutional fact-finding resources.

The key elements in any crisis management situation are accuracy of information, the timeframe in which the information is assembled, and the credibility of those gathering the information and providing reports and analyses."1

Without a set of pre-determined, uniform standards in which to perform the investigation, there is a high risk that the public will perceive the investigation as a form of a "cover-up."

Why Use An Institution?

Why is an institution a preferable route to fact-finding?The answer is it provides an immediate place to go as well as predictability and options.An institution, especially one with a recognized history of neutrality and integrity, offers a roster of individual fact-finders, with competencies tailored to the instant situation, along with their long-standing reputation in support of the fact-finding mission.

Additionally in using an institution for fact-finding a company or individual is able to do "one-stop" shopping.The client can simply tell the institution what it requires by way of expertise, and the institution can search its fact-finder database and match an appropriate fact-finder for the discrete need.This limits the amount of time, money, and resources that a company must use in identifying the appropriate fact-finder.Also, in the case of fact-finding as a form of alternative dispute resolution (ADR) between two parties, if the parties are unable to decide upon a qualified fact-finder, the institution, as a neutral repository of expertise, is able to provide a fact-finder with experience relative to their needs.

Thus, from the outset the parties have choices of competent individuals and an engagement with a known integrity-conscious entity.

Fact-finding In General

Fact-finding is typically employed in two conflict management situations. One is where a contentious organizational issue requires an investigation, and a second is where parties need to have facts in dispute resolved.

When asked about the advantages of using fact-finding in organizational investigations and as a form of ADR, former federal judge Timothy Lewis said, "There are enormous benefits to using institutional fact-finding in certain conflicts.One of the main benefits is cost.A fact-finding which concludes a contentious organizational issue can result in significant savings over other choices.Also, by using an institution to perform fact-finding as a form of ADR, parties are able to have an extensive and diversified list from which to choose their fact-finder."2

Two Types Of Fact-finding

As a form of Alternative Dispute Resolution

In this form, a fact-finding clause is placed in a contract between two parties which agree to send any dispute which may arise from the contract to a fact-finder. The American Arbitration Association has a model clause for this use of fact-finding:

If a dispute arises out of or relates to this contract, or the breach thereof, the parties agree first to submit their dispute to a neutral fact-finder pursuant to the American Arbitration Association's Fact Finding Procedures administered by the American Arbitration Association before resorting to arbitration, litigation, or some other dispute resolution procedure.

Such a clause is often utilized in membership agreements of trade organizations.One such organization which uses fact-finding to resolve disputes between both the board and members and among members is the Electronic Retailing Association (ERA).3

The ERA has incorporated fact-finding as a form of dispute resolution in cases of counterfeiting. According to the ERA website,4the process begins when an "ERA member contacts ERA with a counterfeiting claim." The "ERA sends [the] counterfeiting claim with information about the reporting ERA member and the accused ERA member to the institution5to implement its fact-finding process.6 This allows the fact-finding to be completely independent of the ERA and to prevent any potential conflicts of interest between the board and its members.By maintaining an arms-length distance from the dispute, the relationship between the members and the board of the ERA is preserved.By using an institution which has a long history of neutral dispute resolution as well as a working system to manage disputes, the ERA is minimally involved.The AAA is responsible for contacting the members involved, appointing an appropriate fact-finder to gather the facts, collecting the funds, and issuing the fact-finders report , "ERA is pleased to have this program as the resulting decision is independent from politics and therefore, provides a level of comfort to all parties.The program's expedient response timeframe and reasonable costs also add to its value," said Barbara Tulipane, CEO, Electronic Retailing Association.

On occasion, parties will disagree as to the veracity or accuracy of pivotal facts relative to a contractual relationship. This occurred recently when a labor union and a school board disagreed about the resources available for a given initiative.7A fact-finder, agreed upon by both parties, analyzed the numbers, and helped the parties overt a major dispute.8

Fact-finding Investigations

This form of fact-finding involves an independent investigation by a third party neutral.A highly-skilled fact-finder gathers information from documents, including electronic materials, interviews, and other information related to the sensitive issue or the dispute.The fact-finder's report may or may not include recommendations for settlement.Fact-finding serves to identify and clarify the central facts in issue, streamlining the discovery process and giving each party or parties the information needed to structure an optimal resolution - an important step toward facilitating settlement.

Investigative fact-finding, where the entity itself is the initiating party, is perhaps more commonly associated with the term "fact-finding."

It is typically employed where alleged misdeeds by staff, senior management, or the Board itself have impuned an entity's reputation and/or public trust.

Fact-finding Clients

Fact-find is fitting for a broad spectrum of clients. Public corporations, NGOs, unions, universities, and governments use fact-finding to prevent and resolve disputes. The subject matter of those fact-findings is equally diverse from allegations of sexual harassment, discrimination in hiring and promotion practices to back-dating of stock options and steroid use by professional athletes.

A company can proactively protect itself from a potential internal problem by incorporating a fact-finding process into its operational procedures. By adopting or amending by-laws and human resource polices which include a procedure for addressing such problems, a company might avoid having to address damaging developments after the fact.Companies should ensure that their directors and officers liability insurance covers the cost of fact-finding investigations.9A preemption policy avoids last minute scrambling after the wrongdoing has already been discovered by others. According to R. William Ide , former General Counsel and Secretary of Monsanto Corporation, "reliance on an established institution gives an entity's management and stakeholders confidence in a credible and transparent process with practical options which qualified fact-finders provide.With such an institution, a single phone call and the entire process is set in motion. This is ideal for reliance, speed and credibility - all of which are highly significant elements in corporate decision making."

Fact-finding By Governmental Entities

Governmental bodies, municipalities, school boards, police departments and executive branch agencies can use fact-finding to conduct internal investigations to alleviate public fears and concerns of a "cover up." Judge William Webster, a consulting partner in the Washington D.C. office of Milbank, Tweed, Hadley & McCloy, has been involved with government entities for many years, including leadership of the FBI and the CIA as well as serving on the Homeland Security Advisory Council.He observed that

"Government agencies must be sensitive to matters of transparency in order to promote and maintain public trust and confidence.Both at the state and at the federal level agencies are increasingly exposed to many of the issues encountered by private corporations, and therefore must have a procedure to handle situations involving the potential loss of public trust. Fact-finding can also address the growing demand for disclosure and openness in the public sector."

Given the important and pervasive role of police departments, the value of independent internal investigations with respect to police functions enhances public confidence in this significant public service.10Therefore, in order to preserve both credibility and legitimacy, internal investigations into police misconduct must be independent of the police themselves, but also independent of any political pressure that may be applied in cases where the "independent investigator(s)" are part of the municipal staff. 11Currently, there are many forms of a "Citizen Review Board" in which local civilians are appointed to a board which reviews complaints against officers.12Such practices would be enhanced by a fact-finder, independent of a municipality and its law enforcement structure. By using institutional fact-finding, the municipality buttresses independence, which is a crucial component of police internal investigations. One of the criticisms that police unions and supporters voice with the current "Civilian Review Boards" is that it uses people who "know nothing about how police departments or officers operate."13This demonstrates another positive aspect of using an institution to perform the fact-finding investigation: the institution has a plethora of potential fact-finders, who have both experience and knowledge in multiple fields, including that of law enforcement operations.

Getting Started

Fact-finding is usually initiated by a corporation or by means of a written agreement among contracting parties.It is designed to be a flexible process based largely upon the clients' needs.Flexibility is very important in resolving problems and disputes because it allows the investigation and resolution to fit and mold to the actual situation.

Once a case has been set in motion, the client(s) selects a neutral fact-finder.Their mission is not one of advocacy, but of an independent investigation conducted according to the highest ethical standards.Their reports or conclusions can be a major factor in preserving public trust and confidence when facing a potential crisis.No person should serve as a fact-finder in any dispute in which that person has any financial or personal interest in the result of the fact-finding, except by written consent of the client(s). Prior to accepting an appointment, the prospective fact-finder should disclose any circumstance likely to create a presumption of bias or prevent a prompt meeting with the client(s). The fact-finder and the client(s) then set up a schedule and parameters for the investigation as well as whether or not a written report is to be issued.

It is the process of getting started where the real benefits of using an institution are found.Rather than having to search for an appropriate fact-finder that meets the client's specific needs and requirements, an institution, which has many different types of fact-finders can assist a client in finding an appropriate person.An institution can also screen fact-finders to ensure neutrality and independence and integrity in the investigation.

The Role(s) Of The Fact-finder

There are two fairly distinct roles by which the fact-finder serves the parties. The first type is where a fact-finder is engaged to make a determination of the facts in dispute among contending parties. In essence the fact-finder is performing the role of an arbitrator.In this situation the fact-finder enjoys a quasi-judicial status."Because an arbitrator's role is functionally equivalent to a judge's role, courts of appeals have uniformly extended judicial and quasi-judicial immunity to arbitrators."14 Therefore, a fact-finder, assisting contending parties in resolving a dispute is comparable to an arbitrator, and it is likely that the fact-finder would be protected in the same category as an arbitrator.

The second role is that of a neutral fact-finder In cases where the fact-finder is also an attorney, it is highly likely that all parties will wish to have the relationship enjoy the protections of attorney-client privilege.The situation becomes problematic when the fact-finder is not an attorney since it is unclear whether a court would recognize some form of qualified immunity for the fact-finder and principles of confidentiality for the parties.

The Investigation

First and foremost, the client(s) identifies all persons who have information that would assist the fact-finder in his or her investigation.The fact-finder conducts interviews with these individuals.Clients are expected to fully cooperate during the interview process, answering all questions factually.The fact-finder is given access to all relevant, necessary information and documents during the investigatory process.When all relevant documents have been received and all interviews conducted, the fact-finder issues a report within the designated timeframe.

These neutrals are protected by both contract and case law from being forced to be witnesses against parties which ultimately find themselves in litigation, even after using fact-finding as a primary step in resolving their dispute.

The Report

The fact-finder'sreport can come in many forms.The client will determine what form is best suited for its purposes.While most fact-finders reports are presented in writing, it is also possible to deliver the reportorally.It is important for the client to decide if the written form is going to be publicized or disclosed to persons other than the client(s). Oral debriefings may be suitable for clients who are uncomfortable with certain confidential facts being reduced to written form.

The parties may or may not wish for the fact-finder to include recommendations in the report. Sometimes, fact-finding is simply that: finding the salient facts of a given situation.

Another consideration for the parties is whether the report is to be disclosed to third parties such as shareholders, government agencies or the public at large

Confidentiality

Confidential information disclosed to a fact-finder by the client(s) or by witnesses in the course of the investigation is not divulged by the fact-finder.All records, reports, or other documents received by a fact-finder while serving in that capacity are protected by confidentiality agreements which the clients are required to sign along with the fact-finder before any investigation begins.Institutions are likewise bound by rules of confidentiality and,statutory laws also shield them from being compelled to give court testimony.

Costs

The cost of fact-finding varies according to the needs of a given case. In both forms of fact-finding involving an institution there is a modest administrative fee, along with an hourly or daily rate for the fact-finder.Clarifying, collecting and disbursing fees is another important service implicit in institutional fact-finding.

Conclusion

The value added contributions of institutions to the fact-finding process include:

A choice of fact-finders from a selection of experienced, inclusive, and highly regarded men and women;

The reputation for integrity and the ability to screen for conflicts and provide persons with discrete subject matter expertise;

Institutional history and experience is servicing corporations, governments, individuals, NGOs, unions and universities;

Information collection and distribution of fact-finding fees.

All of the above value added contributions in no way interfere with the fact-finder/client - attorney/client relationships in investigative fact-finding.

1 American Arbitration Associatio , AAA Independent Fact Finding Services

2 Judge Timothy Lewis is a partner inthe Washington, DC office of Schnader Harrison Segal & Lewis LLP

3 Electronic Retailing Association, ERA Counterfeiting Fact-Finding Program: Procedures & Policies ( revised May 10, 2007), available at http://www.retailing.org/new_site/memresources/policies_procedures/counterfeiting_fact-finding.htm.

4 Id.

5 Id.

6 Id.

7 This case is on file with the author.The identifying information is withheld due to confidentiality requirements .

8 Id.

9 Execute Internal Investigations Carefully , General Counsel Consulting , available at www.gccounsulting.com . 28. R.William Ideis a partner in the Atlanta office of McKenna, Long, and Aldridge, LLP.

10 External Review: Citizen Review Mechanisms , available at http://www.hrw.org/reports98/police/uspo22.htm).

11 Alternative Models of Police Oversight, Albuquerque Models of Police Oversight , available at http://www.cabq.gov/council/abqrpt9.html).

12 External Review: Citizen Review Mechanisms, available at http://www.hrw.org/reports98/police/uspo22.htm.

13 Id.

14 Olsen v Nat'l Ass'n of Sec Dealers, 85 F.3d 381, 382 (8th Cir. 1996).

William K. Slate II is the President and Chief Executive Officer of the American Arbitration Association, (AAA). The author expresses sincere appreciation to Debora Miller Moore , National Vice President of the AAA for Claims Program, Online Services,and Fact-finding, for her guidance and many contributions to this article. The author also thanks Erin Morris , who is a third-year law student at Campbell University in Raleigh, NC.

Please email the author at aaaslate@aol.com with questions about this article.