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Understand ADR Concepts

Understand ADR Concepts
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We’re now going to move on to discuss ADR, alternative dispute resolution concepts. This is a general introduction and look at concepts. And then later on, we’re going to look more in depth at the true key building blocks of ADR which are arbitration and mediation. So in this segment, I first of all want to give you an example of a form of mediation, and then we’ll look at an example of a form of arbitration. But the basic message here is that you can start with the two building blocks that we’ll explore later on. But you can be as creative as you want to be in developing variations on the two basic themes.
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So, let’s start with mediation, and the example I’d like to give you is called a mini-trial. But again, there are a lot of variations on the basic mediation theme. So, here’s the example. Let’s take a look at an actual mini-trial. This was one of the very first mini-trials ever. It involved an intellectual property dispute between Telecredit and TRW. And this case is typical of a lot of litigation. The two parties fought over intellectual property. It was a $6 million claim. The parties spent $500,000 in the early years of the litigation. They exchanged 100,000 documents. The case sat in court for three years, nothing was happening.
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And so finally, the Executive Vice President of TRW and the President of Telecredit got on the phone and basically asked, you know why have we outsourced this dispute to the court system? Why have we outsourced it to lawyers? We deal with business problems all the time. Why don’t we get together and just resolve this dispute? And so they came up with a structured negotiation, which later came to be known as a mini-trial. And fundamentally there were five people at this structured negotiation. There’s was the Executive Vice President of TRW, the President of Telecredit.
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They each brought an attorney, and then there was a neutral party, an expert on intellectual property, who could answer any technical questions that arose during this negotiation. So, they began on day one with the attorney, one of the attorneys, let’s say the attorney for Telecredit standing up in front of the two executives and explaining her case. And then the executives asked her questions. If there were technical issues, they referred them to the intellectual property expert, and that attorney sat down. And then let’s say the attorney for TRW got up, and again, had about a half day to present the case, answer questions, technical questions go to the expert, that person sits down.
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The two executives then go off into a room by themselves for one half hour and settle the dispute. Estimated savings in legal fees, $1 million, but think about the benefits beyond those dollar savings. For one, this procedure gave each executive a chance to hear the case as described by the opposing attorney. And that description might sound quite a bit different from the story that they get from their own attorney. Second, they’re able to come up with a resolution of the case that makes sense from a business perspective. When you’re in court, litigation is a zero sum game. One person’s going to win 6 million, one person’s going to lose 6 million.
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But when you negotiate a settlement as somebody in business, then you can come up with something that preserves the business relationship. So, that’s a quick example of a form of mediation, again you can come up with as many varieties as you want. Let’s now move on to arbitration, and an example of a variation on the arbitration theme. This example is called Rent-A-Judge. Now, this is not the same as the Buy-A-Judge program that has been used in Chicago and other emerging economies for many years, just kidding. With Rent-A-Judge, you actually hire a retired judge to hear the case. And so an example, we’ve got a couple of former roommates who are involved in the dispute, Brad and Jennifer.
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Jennifer is especially upset because Brad now has a new roommate called Angeli. So, they’re involved in litigation, Brad Pitt and Jennifer Aniston. And rather than go to court, they use the rent-a-judge procedure. They hire a retired judge to hear the dispute. Now what are the advantages for Brad and Jennifer in using this retired judge? And what would be the advantages for you if you’re involved in a business dispute? Think about that for a second, hit pause if you want. Write down the advantages that you can think of in using this form of arbitration or other forms of arbitration.
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Here are some items that might be on your list of advantages. Number one, it might be a lot quicker than sitting for years in the court system waiting for your case to arise. Number two, it might be cheaper, although we’re going to discuss that issue later.
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Number three, and this is a big one for Brad and Jennifer, but also for your business, you want to keep the dispute out of the newspapers. You want to keep this private. One way to think about arbitration is that it is a type of litigation, but it’s private litigation. And finally unlike the regular court system, you get to pick the judge. When you’re in the regular court system, the selection of the judge is pretty random. You might end up with a judge who has never handled a business case, who has no idea what’s going on in the type of business dispute that you’re involved with.
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With Rent-a-Judge, you pick somebody who’s an expert in the particular area that is in dispute. So, lots of advantages to using that form of ADR.
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So, that concludes our look at ADR concepts.
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