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Many company owners and board members are familiar with some aspect of litigation – or at least the threat of it. The paperwork, the Zoom calls, the meetings, hearings, depositions, the back and forth, the cost—democracy might promise a jury of our peers and having your day in court, but adjudicating a dispute the traditional route is for many, impractical, long, and expensive.
Shutdowns during the pandemic made that point all the more clear. Since the start of COVID-19, the volume of disputes has increased by more than 65% for companies over $1 billion, 50% of in-house legal teams are being pressured to spend less, and 75% of corporations want new preventative dispute mitigation procedures.
“The first question is never, ‘What is every single thing we can fight about?’ The first question out of any executive’s mouth is always, ‘This is a distraction—how quickly can we get this done and behind us?’ says attorney Rich Lee, whose 15 years in the field include general counsel roles at Livevol and Civis Analytics, a data science company stemming from Barack Obama’s 2012 re-election campaign. “Nobody, when you’re on the business side, ever relishes that dragged-out fight in any form.”
That’s why Lee teamed up with two fellow general counsels and a legal operations exec to form New Era ADR, a private arbitration and mediation platform rooted in efficiency, transparency, experience, and innovation. He says their process is 90% faster and up to 90% cheaper.
“Anytime there’s a potential dispute, it’s a massive distraction,” Lee says. “It costs the company a lot of money, a lot of time, and frankly, I think the worst part that’s immeasurable is that attention that you end up devoting to navigating a potential dispute. You could be in a sales meeting and you’ll be thinking about that dispute. It’s our firm belief that it just doesn’t have to be that way.”
We spoke with the New Era CEO and co-founder about the intricacies of arbitration vs. mediation, how to de-risk your transactions, and the best ways to protect yourself from arbitrary outcomes.
How to Decide Between Mediation & Arbitration
At its core, alternative dispute resolution is an umbrella term that encompasses mediation and arbitration. The former is a non-binding procedure unless contractually stated. When two sides can’t work out their differences, courts often ask parties to go to mediation because it helps them keep their dockets clean and cases moving through the pipeline. In arbitration, simply put, whatever the arbitrator says goes. And typically it’s not up for appeal.
Digitizing, Simplifying, and Streamlining
COVID-19’s impact on the court system means that if you have an existing case, it may not be heard for some time thanks to a massive backlog in the court system.
“If you want a quick resolution so it’s not hanging over your head, you can bring those cases to our platform right now,” Lee says. “Of course this involves the other side also agreeing to it. But you tell them the same thing, ‘Our cases are going to be delayed and that there’s a much faster forum with just as high quality of mediators and arbitrators on the other side.’”
He says the other option is more preemptive—a clause that New Era offers that you can insert into contracts. That means upon signing, both sides agree to use New Era as the dispute resolution forum.
“When something comes up, you’ve now de-risked that dispute because it’s going to be resolved much faster and more efficiently.”
Their timeframe gets parties to a resolution within 100 days, but New Era is also developing a shorter window of 30 days for simpler cases. As far as cost split between the parties, mediations are $6,000, while a binding mediation is $10,000. Binding arbitration increases to $35,000. Lee says in the traditional sphere, this can run up to hundreds of thousands of dollars.
But Lee explains that even though the platform may be able to capture a large segment of the 19 million civil cases filed every year, that doesn’t mean every case is a match.
“The big trade secret cases are not a good fit for us yet— like Google versus Uber or big pharma patent cases that are worth 9, 10 figures. But everything in the middle, which is the bulk of all the civil cases—I’m sure Google has thousands of cases they’re managing across the country that aren’t worth that much. If they could have a faster forum but still get the same quality of resolution, it’s still great for a company as big as Google all the way down to a small mom-and-pop business.”
Decreasing Arbitrary Outcomes (Maybe)
A case can fall one way or the other—that’s the nature of any dispute—but the prospect of an arbitrary outcome can instill fear in the heart of even the most intrepid company owner or board member. There’s no way to eliminate that, but there are ways New Era hopes to safeguard the process for a fair outcome.
Much of that peace of mind rests on finding the right neutral – the mediator or arbitrator. New Era requires that their neutrals have at least five years of civil/commercial mediation or arbitration experience, with 200 civil cases under their belts for mediators or more than 20 civil cases for arbitrators.
“We present a panel of five or six recommendations and then the two sides can rank them and eventually land on the one person who they want presiding over their case,” he says. “Through that, you can find someone who’s a little more knowledgeable in your area of law, maybe in a jurisdiction that’s more relevant. Federal court judges are highly experienced, but they may not be as well-versed in a certain area of law, and state courts are a little more arbitrary in terms of the experience level and expertise. That’s where things could break a certain way.”
New Era also simplifies the discovery process. Lee points to a 2010 study on litigation costs. Out of nearly 5 million documents disclosed during discovery, less than 5,000 were actually used or cited in court. Lee calls that, “crazy low signal to noise ratio.”
“We want the parties to get to the point so there’s less noise for the judge or a potential juror to sort through compared to courts. We’re capping the number of documents and pages you can share. Basically, present your best evidence—don’t sandbag it—then let that neutral make the call. So when you get to the point faster and the neutral has less noise to sort through, they’re also going to be able to make a better decision.”
Alternate Dispute Resolution strikes a resonant chord with interim and project executives working to inject more accountability and faster cadence into the companies they work with. Learn more at www.neweraadr.com.
InterimExecs RED Team is an elite group of CEOs, CFOs, CIOs, and CISOs who help organizations through turnaround, growth (merger, acquisitions, ERP/CRM implementation, process improvement), or absence of leadership. Learn more about InterimExecs RED Team at www.interimexecs.com/red-team or call +1 (847) 849-2800.
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