Original article published on Litigation 360 on www.Medmarc.com on Thursday, March 31, 2016
Case Resolution Strategies
By Cynthia Day Grimes and Jill F. Bechtold
When products liability claims arise, we often conceive of the options for resolving them as binary—either settle the claim or, should settlement not be reached, litigate it in a trial. The notion of settlement and litigation as the only two options for claim resolution is outmoded, however, and alternative dispute resolution (ADR) techniques are becoming increasingly common as means of effectively resolving claims. These alternatives—principally mediation and arbitration, on which this article will focus—offer the opportunity for a more robust presentation of evidence and structured negotiation than settlement but constrain costs and can be completed on an accelerated timeline compared to litigation. For these reasons, mediation and arbitration can be very desirable means of resolving products liability claims.
Below, two seasoned products liability defense attorneys—Cynthia Day Grimes (Strasburger & Price) on mediation and Jill F. Bechtold (Marks Gray) on arbitration—describe the two proceedings and provide their best tips for making the most out of each.
Mediation is the more informal of the two chief ADR proceedings.1 In mediation, a neutral third party—typically a trained mediator—presides over and facilitates discussions between the plaintiff and defendant. Though informal compared to trial proceedings, mediation does have a structure and timeline that distinguishes it from usual negotiation.
Mediation is widely accepted and currently a precursor to all trials in most jurisdictions. This is beneficial to both the defendants and the plaintiffs. Each of the parties has a lot to lose in proceeding full speed ahead to trial instead of seeking possible resolution early on. Keep in mind that in proceeding to trial, the medical product company must have a knowledgeable and jury-appealing representative of the company present for the entire trial which usually requires 8 hours a day, 5 days a week, for at least a couple of weeks. The representative needs to be “present” in the court room and not distracted by other matters (i.e., no smart phones or computers in use to keep up with work back at the office). Additionally, depending on the allegations, a good defense will often require high-level representatives from marketing, design and compliance. These witnesses will not only need to be ready to dedicate several full days to testimony, but they need to undergo several days of preparation with the lawyers even after they have already given their depositions in the case.
With respect to the plaintiff’s side, the expenses to bring qualified experts in several fields against the product manufacturer and health care providers can be as high as $15,000 to $20,000 for each expert plus the travel expenses. Both defense and plaintiffs face these expenses.
In view of these expenses and “costs” of time and disruption to the business parties, in one-off cases (where there is no class action or multiple cases as to the product), the wise position on each side is to reach a mutually acceptable resolution before the expenses and hard-held positions prevent resolution desired because of the practical and expense considerations.
Keys to Successful Mediation
Being mindful of its advantages, here are some keys to making mediation successful and thereby avoiding a lengthy and expensive trial.
Time the mediation carefully. Schedule the mediation after you and your counsel have enough information to properly evaluate the case; however, consider that mediation has the best chance for success when it commences before each side is entrenched in their own positions. Also consider that you want to schedule it before the defendant has incurred too much expense or experienced too much disruption of its business as a result of obtrusive discovery and depositions. Likewise, it’s best to attempt mediation before the plaintiff has incurred too much expense from conferring with experts.
Be wary of plaintiffs’ fear tactics. The presence of a representative of the defendant at mediation often helps to resolve significant cases, but plaintiffs’ demands that “the person attending the mediation must have absolute, autonomous authority to settle for the amount demanded” are inappropriate. In this situation, the employee who represents the defendant at mediation may be vulnerable to “fear” tactics. Some counsel may resort to statements such as “you will face job consequences in the event of a large verdict,” which are an attempt to intimidate and force settlements not supported by the facts and law.
Be patient with the process. There is much “dead time” during mediations. Patience is a supreme virtue, with listening skills as a close second. Use the time to establish relationships with the mediator and your attorney.
Though it is similar to mediation in many ways, arbitration is more formal than its counterpart and has two significant distinctions: (1) in most cases, the result is binding upon the parties; and (2) whereas the role of the mediator is to facilitate compromise and discussion among the parties, the adjudicator that presides over arbitration is mostly removed from settlement discussions and, instead, merely issues a determination of liability and damages.
Arbitration became the preferred method of case resolution in the early 2000s. When parties agree to arbitration, they generally give up all rights to a jury trial. Many companies agree that arbitrations reduce the amount of large verdicts, costly discovery and lengthy trials. The results have been beneficial, but there are still some companies that question the cost savings and benefits of arbitration versus other methods of case resolution.
In most cases, arbitration is established contractually by placing arbitration provisions in sales contracts. The parties both agree to pursue any claims in arbitration in lieu of a jury trial. The provision usually selects the type of arbitration that the company prefers and the place where the arbitration will be held. These types of provisions are generally upheld and enforceable by the courts.
There are multiple types of arbitrations, with the most common form being under the rules of the American Arbitration Association (“AAA”). The AAA is a national organization that established a set of rules and procedures for arbitrations. The benefit of using the AAA system is that the AAA assigns experienced arbitrators to each case and the rules are uniform across the country. One important aspect of the AAA is the significant costs associated with filing a complaint. The initial cost to file can be in excess of $25,000.00, as compared to a few hundred dollars to file a civil complaint in state court. Many commentators believe that this increased cost deters potential plaintiffs from filing lawsuits, thereby decreasing potential litigation. Most of the arbitrations conducted under the AAA are binding, meaning that the judgment is final and can only be challenged in very narrow circumstances.
In addition to the private AAA structure, there are also state and federal arbitration forums. In 1925, Congress passed the Federal Arbitration Act, which allows companies to participate in arbitration when the transactions crossed interstate lines. The FAA Code provides a specific set of arbitration rules and the filing fee is less costly than the AAA. The results of the FAA are also binding and the outcome can later be enforced as a judgment against the losing party. Many states also now provide a specific statutory scheme for conducting arbitrations. For example, Florida enacted the Florida Arbitration Code that governs in state transactions. These arbitrations are also binding and are conducted in accordance with the specific state rules.
By far the largest benefit of arbitrations for any company is the elimination of the jury trial. Juries nationwide are unpredictable and can lead to outrageous, excess verdicts against companies. Arbitration takes cases out of the hands of inexperienced juries and instead allows educated and knowledgeable arbitrators to resolve the issues. Those opposed to this system argue that the arbitrators unfairly benefit companies more than individual plaintiffs since the arbitrators make their money from multiple cases. A company will be more likely to use an arbitrator again if the outcomes are favorable, leading to an economic incentive for the arbitrator to find in favor of companies in each case. Whether this is correct or not, many companies have chosen to continue using the arbitration scheme simply to keep juries out of the litigation.
In addition to the benefits of a non-jury resolution, discovery is generally less time consuming and costly in arbitrations. In most cases, discovery is narrowed to include written discovery and possibly limited depositions of main witnesses. Many states do not even allow for interrogatories or depositions at all prior to the arbitration. This significantly reduces the amount of legal fees expensed by lawyers in a case but can also limit the amount of information that counsel will have in preparation to defend a matter. Further, the rules of evidence are generally more relaxed at arbitrations. This prevents delay and legal tactics by counsel. While it can take several years to conduct a trial in civil court, most arbitrations are conducted in less than one year. Arbitrations are also usually conducted in significantly less time than jury trials, thereby reducing legal fees further.
Finally, most arbitration results are binding and difficult to challenge on appeal in civil court. Depending on the type of arbitration selected, most arbitration awards can only be challenged when there are significant findings of unfairness in the proceeding or by the arbitrator. Some examples include when an award is procured by fraud, undue means, or corruption, or when there has been evidence of bias by the arbitrator. Unlike a jury trial, a losing party is much less likely to successfully file an appeal of an award. This makes decisions of the arbitrators more definite and final for a company moving forward and reduces post-resolution appellate legal fees. However, in some circumstances, an unfavorable verdict against a company could be detrimental if not appealable.
Overall, the use of arbitrations is still on the rise by companies. Companies recognize that although arbitrations can have multiple downsides, including binding outcomes and less access to discovery tools, the benefit of protecting themselves against possible runaway jury verdicts remains supreme. Arbitration provisions continue to be used in contracts for the sale of goods and continue to remain enforceable by law. Arbitrations will continue to be a tool for companies in future.
Keys to Successful Arbitration
If your company elects to use the arbitration method, the following are some key considerations for a successful outcome:
Contract for arbitration. Review all your existing contracts and make sure they contain an arbitration provision. Most companies will never agree to arbitrate after an issue arises. A best practice is to ensure that contracts are already in place that require arbitration prior to litigation occurring.
Specify your forum. Ensure any provision to arbitrate specifically identifies how and where an arbitration proceeding would occur. Specifically, the provision should state the forum or rules that will apply (e.g.,FAA, state statutes or AAA) and identify the city where the arbitration will be held. Most companies prefer that the arbitration occur at their place of business to reduce costs and expenses of travel later.
Ask for costs. Make sure the arbitration provision also specifically identifies the damages that may be awarded. For most companies, an arbitration provision will include an award of attorney’s fees and costs to the prevailing party as well as payment of all arbitrator fees and the cost of arbitration. Specifically outlining possible damages can sometimes serve to deter claimants from filing a case and helps the company to assess their potential exposure moving forward.
Control your documents. As with any anticipated litigation, make sure all document evidence regarding the issue is preserved. Alert all necessary personnel, including IT employees, to properly protect and maintain important records for future use at arbitration.
Use an expert. Retain a defense attorney with knowledge and experience in arbitrations. These specific attorneys will know how to best preserve the narrow appellate issues and how to navigate these cases effectively despite having limited discovery opportunities in your case.
Maintain confidentiality. Keep all disclosures regarding the litigation in confidence. Unlike open trial courts, most arbitrations are private and not open to the public. Refrain from publicizing the litigation and help to keep the procedure as confidential as possible.
All methods of ADR should be considered as a possible means of resolving claims. Often, mediation and arbitration can provide more palatable results than mere negotiation or litigation and can usually do so at significantly less time and cost than a trial imposes.
1It should be noted that, though the most popular, mediation and arbitration are only two forms of alternative dispute resolution (ADR), and ADR also refers to neutral evaluation, negotiation, and conciliation.