A New Approach to Dispense With Disputes

by Spilman Thomas & Battle, PLLC
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Business owners grudgingly accept lawsuits as a part of doing business. If you’re doing what it takes to advance your business, you will suffer the bumps and bruises that will result in your name on a legal pleading. You may even be the one who files the lawsuit.

Almost any money you can recover in a lawsuit is eaten up by lost employee time, and, perhaps more importantly, the business owner’s loss of focus on healthy profits. If you are the one sued, you can never win.

But what if there were a way to reduce the money you spend on a lawsuit by seventy to eighty percent? What if you were able to reduce the precious time you spend on a lawsuit by similar number? What if you could keep your employees focused productively on their jobs, instead of practicing to testify, testifying at depositions, and testifying at trial?

Like all other businesses, you have a need to resolve your cases quickly. You have no need to wallow in interminable litigation. And the last thing you need is to play the litigation lottery in a place like the courtroom, where sympathy can become the deciding factor in the case.

A few years ago I became aware of an approach to litigation by which a company became systematically and dramatically more assertive in pushing for mediation as soon as it became aware of a possible claim against it. I have devoted myself to studying and developing a system of claims resolution that removes some of the risk for clients, and, better yet, saves businesses money.

BACKGROUND
Toro Company was an innovator of an Early Dispute Resolution (EDR) approach that I have adapted and adopted. As a manufacturer of lawn care products for home and industry many of the lawsuits it faced were traumatic injuries that resulted in high-dollar claims. Toro developed an EDR plan that had the company acting with strike-force speed in engaging injured people who somehow notified the company that they may bring a claim against it. They settled overwhelming numbers of those claims before involving any lawyers. When they involved their settlement lawyers in a case, they acted with similar alacrity to settle claims.

Toro and its lawyers have claimed that the result of that program was dramatic savings for the company:
  • Number of pending cases reduced by 75%;
  • Reduced attorneys’ fees and expenses paid out by 78% over eight years;
  • Reduced the average payout due to lawsuits by 70%;
  • Reduced the life span of a claim by 80%, from two years to 8 months.
Though Toro was an innovator of this approach, Toro is not alone in using the EDR model, as several other companies have adopted this approach with similarly compelling results.

HOW DO WE DO IT?
An EDR program requires a commitment to a style of handling cases that is a departure from the norm for most. The client works with its own risk managers and its settlement counsel to develop well-trained employees, or settlement representatives, who can personally engage with any person who the client learns has been involved in an incident that might result in a claim or lawsuit. This settlement representative would resolve any issue he or she could by, essentially, engaging in aggressively hospitable claimant service, making every small concession the company can reasonably make to resolve the matter to the claimant’s satisfaction.

That’s giving away the store, isn’t it? Well, no. The quicker a lawsuit is settled, the better. The client may pay some money that is deserved, and some that is not, but it avoids the tar pit of litigation that is required to discover the facts necessary to get a “fairer” settlement or low trial verdict.

If the matter cannot be resolved at the settlement representative stage, the client would engage settlement counsel to contact the claimant in an attempt to hold a mediation within the next 60 days. Settlement counsel would contact the claimant’s attorney to offer a plan for the mediation, proposing to the attorney a mediation agreement that is fair to both parties, providing for document exchange and very limited investigation.

Time is of the essence. Settlement counsel will control everything possible to investigate, mediate and resolve the claim within 60 days.

Discovery will be limited by agreement. Settlement counsel wants to agree to take a sworn statement of the claimant that is strictly limited to a very brief time -- say, 90 minutes. The statement would be privileged and confidential, meaning that both parties agree that the contents of the statement could never be used against the claimant in any legal action that may result. The confidentiality agreement puts the fears of both the claimant and the attorney about the process to rest. If the claimant wants to take a statement of the company’s representative, the same rules apply to that statement as applied to the claimant’s statement.

The claimant agrees to provide all medical records, documentary support for any financial loss, and other information that may bear upon the claim. The company agrees to supply the owner’s manuals, schematic drawings of the premises, or any other limited items that might be useful. Settlement counsel will perform much of the investigation informally, or with the aid of his or her own professional investigators.

This limited investigation process leads to a mediation session with a mediator upon whom the parties can agree. One would want to select a mediator who will work hard for a settlement, and not a passive person.

Representatives for the parties will have a firm agreement that the parties share the cost of the mediator equally. That gives the claimant stakes in the mediation, so it won’t be taken lightly.

THE CLIENT’S ARRANGEMENT WITH SETTLEMENT COUNSEL
The EDR approach to claims requires a commitment from the company and its insurer, and significant trust among the defense team. There are several aspects to this method of addressing lawsuits that are designed to foster that trust.

It works well when the settlement counsel serves for a flat fee per case, instead of an hourly fee. Counsel then has no apparent reason to drag the case out beyond the self-imposed deadline of 60 days. The client’s interest in quickly resolving the case mirrors counsel’s own desire to do the same.

If the mediation is not successful, settlement counsel does not automatically become litigation counsel. The client could take the case to another lawyer for the litigation. Counsel is judged on his administration of a single effort -- getting the case settled quickly at a low overall cost.

We come into the legal system determined to find fairness. The business person’s mindset, though, is that while they want fairness, but they must have efficiency, above all. It would be nice if one could avoid paying any claims where the business is not at fault. But the primary focus of an early settlement program is to get out of the dispute right away, even if someone gets a couple of undeserved dollars.

When word gets out that you’re just handing out money, won’t every faker within a country mile line up to take your handout? This approach requires a true partnership between business and legal advisor. You count on your lawyer to know your business to evaluate the cases where an EDR approach works, and to recognize where the claimant is just taking advantage of you.

You fiercely fight the bogus claims to win, and to show you’re not a stooge, but you resolve the close calls to save the company money.

The business saves. That’s the bottom line.
 

For more information, please contact:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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