Last month, Womble Bond Dickinson launched “Doing Well by Doing Good,” a thought leadership series focused on ways in which environmental and social governance impact business. The following article summarizes “Win-Win Dispute Resolution? Collaborative Law for Businesses,” a presentation in the series. Click here to view the on-demand presentation (registration is required).

About the Speakers 

Looking for a practical alternative to costly, time-consuming and combative litigation, some business attorneys are adopting an approach long-used by their family law colleagues. Divorce lawyers have praised the “collaborative law” process for decades as a tool for producing amicable resolutions to sensitive disputes. Now, business litigators are recommending collaborative law to their clients.

“Business relationships can be very similar to a marriage,” said Mark Henriques, a partner with Womble Bond Dickinson who is trained in collaborative law. “Both are relationships where the parties involved have a lot invested and often they’ll need to continue to work together. So it’s in everyone’s best interest to resolve the dispute in a way that preserves that relationship as much as possible. That’s the focus of collaborative law.” 

The collaborative law process involves negotiations outside of court aimed at producing a mutually agreed upon settlement. While collaborative law has been used for decades to resolve family law matters, including divorce and separation, its application in the business setting is just gaining momentum. More than 20 states have enacted the Collaborative Law Act (with more considering it), providing uniformity from state to state.

Collaborative law is voluntary; both parties agree to a full and open exchange of information and commit to negotiating, using attorneys trained in the collaborative process, based on mutual needs and interest. It’s more than a handshake agreement, however; collaborative law requires a signed contract. And while all parties are working toward a common goal, trained attorneys still advocate for their clients throughout the process.

All of the professionals involved agree to limited representation, which means that if the parties can’t come to an agreement through the collaborative process, the parties hire new attorneys and experts and the matter resumes in court. 

“That allows everyone to focus their energies on resolving issues through the collaborative process rather than thinking ahead to potential arbitration or litigation,” said Amy Cox Gruendel, a collaborative lawyer at Resolution Mediation Services.

If any litigation is pending, any deadlines are stayed once the parties agree to the collaborative process, and this can be a significant benefit for both parties. 

When Collaborative Law Makes Sense

Collaborative law is often a useful approach when parties have an ongoing personal relationship – for example, it can be used to negotiate an internal dispute in a closely held family business or the dissolution of a business partnership. It’s also an effective tool when the parties involved have an ongoing business relationship – for example, to solve a supply chain dispute, negotiate a long-term service contract or resolve a construction dispute. Other applications include mergers and acquisitions and employment disputes related to executive severance, American Disabilities Act (ADA) complaints and non-competes or non-solicits.

How Collaborative Law Works

Once the parties agree in principle to the collaborative process, everyone meets to review and sign the participation agreement. The parties and attorneys then hold a series of sessions during which they:

  • Identify the issues that need resolution; lawyers can help the parties frame the issues in a meaningful way that facilitates discussion. 
  • Discuss their respective needs and interests. 
  • Brainstorm possible solutions.
  • Identify mutually acceptable solutions.

The process typically involves four to six two-hour sessions over the course of 60 to 90 days. The sessions are short, focused and productive, and each party leaves with homework to help move the process along.

“Even though you are meeting, and discussions can be intense, the process intentionally limits the collaborative meeting to a two-hour window,” Gruendel said. “It is structured in a way to have short bursts of energy and attention rather than a long drawn out all-consuming process. I think that is a real benefit of collaborative law in terms of being able to work through legal disputes while also conducting your day-to-day operations.” 

The process is also truly client-driven, which helps in the end because it results in a more durable agreement. 

“It opens up the playbook for any type of resolution the parties want to enter into,” said Jamie Dean, a partner at Womble Bond Dickinson. “You can negotiate based on the parties’ interests and the things that actually matter to them outside of just money. You have a wider array of possible resolutions and much more flexibility, and that will lead to resolutions that people feel better about, that are better and that are more efficient than what our judicial system can provide."

Additional benefits include: 

  • Speed: The two-hour structure of the collaborative meetings can save a lot of time, because parties gather additional information in between meetings. The process also helps parties narrow down the issues, which saves time (and money) even if the collaborative process breaks down and the dispute moves to arbitration or litigation. 
  • Cost: Collaborative law offers a less expensive way to resolve disputes. There are no pleadings or pretrial motions to be filed, and it helps parties avoid significant discovery costs because information is provided voluntarily. Having all information up front can enable the lawyer to focus his or her efforts in the most effective way. 
  • Control: The parties in a collaborative process can explore options and control their own fate to a greater extent than they would otherwise. “You never know what the outcome is going to be when you go before a judge or jury,” said Brent Powell, a partner at Womble Bond Dickinson with experience in all types of dispute resolution. 
  • Confidentiality: Communications are not just privileged but also confidential. If the issue ultimately ends up in court, communications from the collaborative process are not admissible and are not subject to discovery. 

Of course, the collaborative approach is not suitable in every situation. The process, Henriques notes, depends upon the parties and their attorneys working in good faith. 

“A party could potentially agree to participate solely for the purpose of delay, and then refuse to share information or follow the process in good faith,” he said. “Similarly, if a party is focused on keeping information secret, and refuses to share key information, the process can stall. There is no court to issue orders compelling production of documents or a deposition. Finally, if the process fails, the parties will need to hire new counsel and restart traditional litigation or arbitration. In this case, costs and total time will both be higher.”

Why Not Just Use Mediation?

As most attorneys and clients experience it, mediation is a positional bargaining process that revolves around money; i.e., the parties exchange a series of proposals and counterproposals until they reach agreement on a settlement amount. Accordingly, mediation often involves standard negotiating practices such as bluffing and anchoring. The collaborative process moves away from the positional model to focus on interests and needs, with the goal of exploring all possible options to resolve a dispute. Unlike most mediations, the collaborative process is also not designed to conclude in a day. The parties are encouraged to take their time rather than feel pressured to agree to a settlement that one or both of them might later regret. 

Despite these differences, collaborative law and mediation are not mutually exclusive. Indeed, a collaboratively-trained mediator or neutral can prove invaluable in helping parties get “un-stuck” during the collaborative process. 

Collaborative Law Contract Clauses

Many business and commercial contracts have added dispute resolution clauses in recent years, including clauses requiring dispute escalation, mediation, or arbitration before, or in place of, litigation.  Now collaborative law is another option to include in the dispute resolution “tool box.”  Here is one such sample clause, which provides a tiered approach, culminating in arbitration:

Tiered Dispute Resolution Clause

“The Parties shall make all reasonable and good faith efforts to resolve all disputes arising under the Agreement.  If all such reasonable efforts fail, the parties agree to first utilize an appropriate alternative dispute resolution (ADR) process, such as Collaborative Law, Mediation or an another interest-based negotiation process, to resolve the dispute. Should the efforts through one of these interest-based ADR processes fail to resolve the dispute within six (6) months of the date parties begin the ADR process, then the dispute shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The obligations of the Parties within this paragraph shall be ongoing, notwithstanding any termination of this Agreement.”

At a time of record court backlogs, and when companies are being encouraged to consider all stakeholders, collaborative law is a welcome option for businesses looking to resolve disputes quickly and efficiently. In 1850, Abraham Lincoln advised lawyers to “Discourage litigation. Persuade neighbors to compromise whenever you can.  Point out to them how the nominal winner is often the real loser – in fees, expenses, and a waste of time.” Collaborative business law gives attorneys and their clients a new way to heed this sage advice.