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Posted in Commentary

Just ran across an article in Today’s General Counsel on choosing between litigation and arbitration.  There are many factors that go into a decision to pursue one or the other, but this paragraph caught my eye:

Moreover, the inability to obtain full discovery can be considered a cost, not a benefit of arbitration.  While it may be true that eliminating or severely restricting discovery can shorten the time it takes to final resolution of a dispute, doing so actually negates one of the primary purposes of alternate dispute resolution; facilitating expedient settlements.  Robust discovery provides each party with the opportunity to learn the true strengths and weaknesses of the other side’s case, which in turn permits both sides to take better and more reasoned settlement positions.  Because settlement is often the most efficient way to reduce costs, the lack of discovery  can actually hamper the dispute resolution process by adding unnecessary time and expense.

Excuse me?  Quite apart from the absence of any data to support the conclusions, the reason is dubious at best.  Let’s parse the paragraph.  The statements that appear in red are my commentary.

Moreover, the inability to obtain full discovery can be considered a cost, not a benefit of arbitration.  [So one benefit of arbitration most parties desire --less discovery--is a cost.  Hmm, other than privacy, why would anyone actually want to arbitrate anything?]  While it may be true that eliminating or severely restricting discovery can shorten the time it takes to final resolution of a dispute, doing so actually negates one of the primary purposes of alternate dispute resolution; facilitating expedient settlements.[The premise of this statement is that the parties must have full and complete discovery to assess their risk.  No trial lawyer believes this and I have not found a single client in 30 years who actually prefers to wait until discovery is complete before evaluating settlement. So if there is less discovery in arbitration, do parties just not settle?  No data suggests that is the case.]  Robust discovery provides each party with the opportunity to learn the true strengths and weaknesses of the other side’s case, which in turn permits both sides to take better and more reasoned settlement positions. [The assumption that a lawyer cannot assess the strengths and weaknesses of a case without "robust" (read, "really, really expensive") discovery" is simply untrue, as is the implication that business objectives do not greatly influence many if not most settlements.]   Because settlement is often the most efficient way to reduce costs, the lack of discovery  can actually hamper the dispute resolution process by adding unnecessary time and expense. [This statement is just absurd.  Clients know from decades of experience that settlements after discovery almost always raise their overall costs.  Legal fees are obviously higher and many times the settlement position worsens as both bad information becomes known and the other side's investment in the case escalates.  This is precisely why virtually every sophisticated litigant places a premium on early case assessment--trying to identify opportunities to assess and settle the case before the expense escalates.]

I don’t know the authors of the article, but the positions they espouse in the article seem to benefit only the law firm’s pocketbook.