Top Tips: Cost-effective and Timely Dispute Resolution
Top Tips: Cost-effective and Timely Dispute Resolution
Bert Spence provided the following top tips for timely dispute resolution and answers to questions for New Horizons – How External Counsel Can Help You Explore and Secure Market Entry Opportunities that was published in November 2021 by IR Global and the Association for Corporate Counsel. Content is republished with permission from the publication.
Top tips: Cost-effective and timely dispute resolution in your jurisdiction
- When making contracts, consider including arbitration, mediation, jury-waiver and/or forum-selection clauses to control where and how disputes will be resolved.
- The “default” rule in U.S. jurisdictions is that all parties bear their own attorneys’ fees, win or lose, so to create a “loser pays” situation, it must be agreed to. Accordingly, consider including in contracts a provision that grants attorneys’ fees and costs to the party that prevails. Such provisions are not right for every situation (they can incentivize a party to sue that might otherwise think it would be too costly), but in the right circumstances, they can also dissuade a potential litigant from “rolling the dice” in a lawsuit by creating a significant downside to losing.
- Hire local advocates with a strong background in the subject of the dispute. Such lawyers are better able to determine and achieve appropriate settlements.
How swiftly are disputes handled in your jurisdiction’s court system? Are there any common complications to cross-border resolutions that businesses should be aware of?
Dispute resolution in the U.S. takes longer than in many other places; often several years. There are two parallel court systems here: federal and state. Though procedural rules are facially similar in both, cases normally move more slowly in state courts for many reasons. Federal-court jurisdiction is limited, however, primarily to matters involving disputes between citizens of different states (or between a foreign citizen and a U.S. citizen) and disputes that involve federal law. State courts, conversely, have jurisdiction over all almost all types of disputes and litigants so long as there is a jurisdictional link to the particular state. In both systems, disputes follow a pattern of (1) initial pleadings; (2) discovery (which is almost unlimited in comparison to most non-US jurisdictions); and (3) trial before a jury or in some instances only before a judge. The initial pleading phase is short in both systems, and the discovery period is often as brief as a year or less in federal court, but in state cases discovery involving document requests, interrogatories and depositions of potential witnesses can go on for years.
In both systems, appeals of trial-court judgments are available and tend to be resolved relatively quickly, almost always within one year, though the federal system tends to move faster. In states where there are intermediate appellate courts and final l(supreme) courts, a second appeal obviously takes more time. Not all states, however, allow appeal by right to their Supreme Courts but instead follow the federal model where the Supreme Court takes only those cases it wishes to.
Final judgments obtained in one state are generally enforceable in any other U.S. state via relatively simple procedures, but enforcement outside the U.S. is a function of international agreements such as The Hague Convention.
Are there any cultural issues that businesses should be aware of when dealing with a legal dispute in your jurisdiction? How can working with a third party on the ground help to navigate these issues?
The U.S. is a collection of 50 different states with different histories, ethnic and cultural populations, laws, methods of
choosing judges, and procedural rules in their state courts. Though states’ legal systems are superficially similar, there
are vast cultural differences even between neighboring states. Even within states, there can be significant differences in the legal culture between one court district and its immediate neighbor based on demographic diversities between the two.
There are “small town” judges who do not appreciate having “big city” lawyers tell them what the law is on a particular
subject. Some brilliant legal scholars have become judges in federal courts who do not appreciate “small town” lawyers that are not familiar with the sometimes-more-technical procedural rules used in federal courts. Jurors in one state may be inherently suspicious of a lawyer who is from outside that state.
Dispute resolution is ultimately about persuading a neutral adjudicator (judge or jury) of the correctness and fairness of a client’s position. Though studies show that most people try to approach their duties as judges and jurors objectively, those same studies show that cultural affinity works at a subconscious level. People simply put more trust in people they perceive to be like themselves than they do in outsiders. Because ordinary citizens have a large role in dispute resolution in the U.S. (most court litigation involves a jury), this “local prejudice” must always be considered.
Because of these considerations, it is absolutely essential, when litigating in the U.S., to have counsel that is aware of
and experienced in navigating these cultural differences. For example, a lawyer in a smaller town will have practiced
before the local judge many times and will be particularly aware of how that judge likes things to be done. In the event of a jury trial, that local lawyer may be personally acquainted with or have friends in common with people on the jury. Though of course no extra-judicial communications can take place during a trial, there is nonetheless an inherent tendency of people to be more trusting of people they know and who are culturally similar to them. In larger cities, it may be more important to have counsel from a known and respected firm that has a general reputation for competence among the local judges.
What are the most common challenges when dealing with disputes in your jurisdiction? What measures can
businesses take to navigate these obstacles to secure a cost-effective, timely resolution?
The most common challenges in most U.S. jurisdictions are hinted-at in the foregoing discussion; i.e., litigation in U.S. courts is expensive, time-consuming and can involve an incredible amount of disclosure of what would otherwise be private information along the way; something that often has a cost that is greater than the amount in controversy in the dispute.
The principal means of avoiding lengthy litigation in the American system is to include arbitration provisions in
agreements with contractual counterparties and customers. Federal law in the U.S. makes properly constructed arbitration agreements enforceable in all matters that involve “interstate commerce”, which effectively encompasses almost all commercial matters. Arbitration avoids arbitrary and excessive jury verdicts. Also, most states will enforce contractual waivers of the right to trial by jury. However, arbitration awards are not usually appealable so there is no opportunity to seek correction of an erroneous ruling.