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Practicing in the Alternative:
Responding to increasingly cost-conscious clients, more firms are beginning to embrace ADR
By Steve Albert
Graham & James partner George Coombe Jr. heard about a case two months ago in which his firm's clients was suing an engine manufacturer over warranty problems. The client had already racked up nearly $250,000 in attorneys fees, and Coombe could see that by the time the case got to trial both sides would have spent more on lawyers than the dispute was worth.
Knowing the engine manufacturer, its law firm and Graham & James were all signatories to a national corporate and law firm pledge to use alternative dispute resolution, Coombe called the manufacturer's general counsel and suggested mediation. Soon after, the dispute was settled in half a day.
"Sometimes you can lose sight of the forest for the trees," Coombe says. "In the preparation of an active lawsuit, somebody always has the opportunity to say let's find a way to settle."
A year or two ago, Coombe's story would more likely have been a hypothetical at an ADR seminar than a partner's recollection of how a case settled quickly. Now firms - which aren't without reason to fear ADR - are increasingly using the process and are beginning to market it inside the firm and to their clients.
"Clients realize cases settle," says Landels, Ripley & Diamond litigation partner Yaroslav Sochynsky. "As they understand the litigation process and look more closely at the costs and consider alternatives, we want to be identified as having an ADR expertise."
Landels is one of several prominent Bay Area Firms that has put together a formal ADR practice group to head up lawyer education, perform triage on incoming or ongoing cases, and design ADR options for particular disputes. At Farela, Braun & Martel about 10 attorneys from litigation, commercial and construction practice groups have banded together in an ADR section. And partners at Oakland's Crosby, Heafey, Roach & May partners may formalize a group there.
"It's the wave of the future," says Crosby partner William Quinby, a member of the firm's executive and compensation committees. "There is a heightened interest in ADR. Clients are demanding it. If you don't have someone or a group sophisticated in ADR, you won't be a player."
More commonly, firms are taking a less formal approach. Pillsbury Madison & Sutro has a five-member ADR advisory group. The members, all litigators with ADR experience, help others in the firm look for ADR opportunities in work coming to the litigation department and advise non-litigators on drafting mediation and arbitration clauses into agreements.
"Five years ago clients were not receptive to ADR," says Pillsbury partner Rodney Thompson, who is chairman of the State Bar's ADR practice committee. "Now, clients ask about ADR. Lawyers would be foolish not to look for an advantage in this service-orientated business."
In Silicon Valley, Wilson, Sonisini, Goodrich & Rosati litigator Charles Compton says the firm has established a six-lawyer arbitration group that is typically called on to get involved in disputes where arbitration is contractual.
At Graham & James, Coombe launched an ADR education program when he joined the firm two years ago from Bank of America. As the bank's general counsel, Coombe has pushed for the widespread use of arbitration and mediation in business disputes, and says that since he came to Graham several partners have become members of arbitration and mediation panels, particularly overseas.
"We tell clients that a business relationship can actually be strengthened through disputes resolution," says Coombe. "Adjudication is not always the answer. Mediation and conciliation are important when there are underlying and ongoing business ties."
Brobeck, Phleger & Harrison partner Thomas Welch estimates that about one in five active litigation cases are steered into ADR at a very early stage. He says the use of ADR is up considerably just in the past year.
On the corporate side, Coombe sees a marked increase in the drafting of mediation and arbitration clauses for employment contracts, joint venture agreement, licensing agreement and other deals.
Charles Cooper, who heads the American Arbitration Association's regional office in San Francisco, says the number of mediations and arbitrations his organization handles has tripled in the past five years. In 1992 AAA arbitrated 1,600 commercial cases, 300 labor cases and 150 insurance disputes in Northern California.
'Satisfied, Return Customers'
Randall Wulff, a litigator at Farela, has represented clients in about 40 mediations or mini-trials which have produced cash settlements totaling about $70 million. He says that while ADR settles cases faster and less expensively - which translates into less billables for attorneys - clients walk away much happier and often return with more business.
"If any lawyer says mediation is bad for business, that person is dead wrong," he says. "You have satisfied, return customers."
Revenue is no small part of the equation for firms considering ADR practice groups. Particularly at larger firms, some partners believe ADR's often quick, direct approach to settling disputes isn't lucrative enough to help pay for little used - in the ADR process - associates and staff. When ADR options are employed, litigation associates still must be paid.
"There is concern over the 'L' word - leverage," says Crosby's Quinby. "How will other members of the firms regard your contribution?"
But Quinby says ADR is a service clients will more and more demand and ADR practice groups should be viewed as startup operations that will pay off in the long run.
In addition to drafting agreements and representing clients in ADR matters, most firms with an interest in the process also have attorneys who serve as "neutrals" - arbitrators or mediators - usually on a AAA panel.
Wulff, and Sochynsky of Landels, both serve as neutrals, mostly for AAA. They bill their regular hourly rate and the fees are part of firm revenues.
ADR practices are not limited to medium and large firms. Mill Valley solo Steven Rosenberg says his solo litigation practice was transformed by ADR. He began serving as a neutral and suggesting mediation to family law, personal injury and business clients about five years ago.
"When you see a case that would take two years and $50,000 in attorney's fees to get to court settle at a cost of $3,500 in attorney's fees, it's hard to take interrogatories seriously," he says.
In May, Rosenberg gave up litigating and became a full-time mediator.
"I really feel I'm helping people," Rosenberg says. "Litigating can be exciting, but making peace is not a bad thing to do."