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Using ADR Techniques In-House For Profit And Protection

As in-house counsel, you do everything to avoid disputes with customers, suppliers and staff. But are you also doing everything to resolve the unavoidable disputes?

No one wants to waste resources on conflict with employees, key suppliers or customers, yet traditional litigation techniques do just that. By emphasizing a winner-take-all approach to problem resolution in a public forum, courtroom litigation fails to promote long-term, mutually acceptable solutions in a cost-effective, confidential way.

In house counsel can reduce the cost of conflict by providing legal guidance designed to avoid problems, and by introducing dispute resolution techniques at all levels of the corporate enterprise.

Disputes arise throughout organizations. How effectively and inexpensively the organization manages the risks of conflict depends on you. Proactive involvement by legal counsel to draft corporate policies that promote negotiated solutions, encourage dispute resolution training, and adopt alternatives to traditional courtroom litigation will help your company focus on increasing profit rather than decreasing loss.

The Ombuds Way

What’s an Ombuds? It’s a tongue-twisting Swedish name, but the role of an “ombudsperson” is straightforward — to smooth out conflicts at an early stage. Originally employed by governments to advocate for citizens or others aggrieved by the actions of the government, the function is being incorporated into corporations throughout the world.

When employed by a company, an ombudsperson charts a neutral course, investigating and recommending resolution of disputes involving the company. Often viewed as an advocate for parties in conflict with the company, the ombudsperson brings fresh perspective. With knowledge of the company’s policies and personnel, the ombudsperson can ensure that the conflict is addressed by the most appropriate decisionmakers (which may include the ombudsperson); and that the company’s proposals for resolution reflect consistent policies, corporate values and fairness.

Professional ombudspeople are guided by a code of ethics requiring neutrality and confidentiality. The ABA’s sections of Administrative Law and Regulatory Practice and Dispute Resolution described the function as follows: “An ombuds uses the powers of reason and persuasion to help resolve matters. … [T]he ombuds’s quest is to seek the fair and just resolution of the matter.”

Adoption of an ombuds function provides a company with an in-house “advisor” with authority to tell the company when it has erred and to counteract the natural inclination of most organizations to “deny and defend.”

Many supervisors and managers perform this function informally. Human resource professionals frequently investigate and advocate employee interests within the company. Professional ombudspeople pursue specialized training and have defined authority to impartially investigate and resolve certain disputes.

If you can’t be everywhere in the organization to prevent problems an ombudsperson can identify and resolve the problems that arise. More information about the ombuds function can be obtained from The Ombudsman Association website at, which contains links to other useful sites.

Why, When and How to Mediate

If problems persist despite your wise counsel or an ombuds intervention, don’t despair — other techniques can keep your company out of the courtrooms and off the front page of New England In-House.

Mediation employs an impartial third party to assist disputants to confidentially negotiate a mutually satisfactory resolution. In business disputes, mediation often permits both parties to explore creative ways to achieve beneficial results and avoid the win/lose bilateralism of adjudication.

In a dispute between a customer alleging product failure and a manufacturer, a mediator will push both manufacturer and customer to examine not only the damages claimed and evidence of alleged product failure, but also future business opportunities, new quality control methods, etc. The goal is to identify solutions beneficial to both sides.

The assisted negotiation techniques of mediation can be useful in any dispute — with customers, suppliers, and employees at all levels. Many attorneys prefer to try mediation before spending corporate energy and dollars on extensive discovery.

Even if the mediation fails initially to resolve the dispute, it often narrows the issues. Subsequent focused discovery may yield information to reevaluate the claims and provide a renewed opportunity for a negotiated resolution.

Provisions for mediation can be included in vendor contracts, executive compensation agreements, employee personnel policies and even customer “bills of rights.” To be effective, the mediator should be acceptable to each side.

Mediation fees often are split between contesting parties, but can be assumed by one side. To ensure the mediator’s impartiality, the fee should be channeled through an administrative entity such as JAMS so the mediator is unaware of payment arrangements. Examples of mediation clauses and more information about mediation can be found at the JAMS’ website,

Arbitration — A Knowledgeable Expert, Confidential Adjudication

If you can’t negotiate or mediate a solution, arbitration is another alternative to the public drama of a traditional courtroom. Jury reports make great reading, but not when your company’s name is in the headline.

Arbitration is confidential adjudication before an impartial arbitrator whom they select. The arbitrator may have an understanding of corporate environments, special expertise in the subject matter of the dispute, or other qualifications to decide the dispute. Parties may agree to special procedures such as videoconference testimony by distant witnesses, relaxed evidentiary rules, and a schedule that isn’t subject to unforeseen interruption by other judicial priorities.

Parties may control the potential risk of any award by negotiating minimum and maximum amounts that are not disclosed to the arbitrator. If an award exceeds the maximum, or is less than the minimum, the parties adjust pursuant to their agreement.

Agreements to arbitrate can be incorporated into human resource policies, vendor contracts, and customer service standards. Court enforcement of awards is subject to minimum standards of fairness designed to protect the rights of all disputants. Information about arbitration and examples of arbitration policies and clauses is available at Arbitration awards are enforceable by courts. Although arbitration awards are rarely subject to court review, parties can incorporate an appeal procedure in their agreement to arbitrate.

Internal Steps To Minimize The Cost Of Conflict

Review your company’s contracts. Do they encourage early identification of disputes, impartial intervention and alternatives to litigation? It’s easier to include such clauses in agreements before a dispute arises than to introduce the idea after the parties start fighting.

Review your company’s training programs. Managers and supervisors can be trained in conflict management techniques to resolve problems before they escalate. Customer service personnel can be trained to resolve customer problems, or to quickly refer them to appropriate supervisors.

Review your company’s culture. Are employees encouraged to ask questions before misunderstandings lead to disputes? Are supervisors and managers encouraged to use their authority to negotiate conflict resolutions rather than impose solutions unilaterally? Are customer service personnel encouraged to seek customer satisfaction? Are purchasing personnel trained to seek prompt resolution of disputes with vendors?

Maria C. Walsh is a mediator and arbitrator with JAMS — The Resolution Experts, the nation’s largest private alternative dispute resolution provider. She is also of counsel to the Boston law firm of Perkins, Smith & Cohen, where she concentrates her practice in employment law. More information is available at, and she can be contacted at [email protected].

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