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Collaborative law for business disputes: Three things to consider

Collaborative law for business disputes: Three things to consider

| Mar 25, 2021 | Business Litigation |

Business owners and executives are always looking for ways to streamline processes and minimize excessive costs. Unfortunately, while looking at business systems, production processes and market analyses for places to trim costs, so many miss the most obvious: legal services. There is perhaps nothing more in need of streamlining and minimizing than the costs associated with legal services.

In a recent blog post, we discussed how the pandemic is forcing many business disputes out of the courtroom and into alternative dispute resolution (ADR) processes. Although this can be a challenge for many businesses needing resolution, it could also be a hidden opportunity for businesses to explore more efficient and effective means of resolving commercial disputes.

Collaborative law is a prime example of a relatively new ADR method that could have tremendous benefits for disputing businesses.

What is collaborative law?

Collaborative law is an alternative dispute resolution method that began in the context of divorce and family law. It is similar to mediation, but with a few key differences. In terms of similarities, collaborative law involves disputing parties who meet outside of the courtroom to settle their disputes amicably if possible. Any involved parties should have legal counsel present.

In terms of differences between the two, collaborative law involves an agreement from everyone to work out the dispute amicably. Further, everyone involved agrees that the lawyers representing the parties in the dispute will not continue representing them in the same dispute if it cannot be resolved in the collaborative law sessions. Everyone involved also agrees that all communications regarding the collaborative law process will be deemed confidential, privileged and inadmissible in any subsequent litigation regarding the dispute.

Three things you should consider

Before proceeding with collaborative law, litigation or any other dispute resolution methods, you should consider these three things about collaborative law:

  1. Collaborative law involves an agreement to work together.

When two businesses are in litigation against each other, it can turn into all-out legal warfare. And warfare is extremely expensive. With a good faith agreement to work amicably and openly, tremendous savings and efficiencies are introduced into the process.

  1. Collaborative law involves agreements that focus on efficient resolution.

When collaborative law attorneys agree to not represent their clients in future litigation if the collaborative law sessions do not bring resolution, they have no incentive to delay and drag on the proceedings. There’s no money in it. Further, by agreeing to discuss the case openly and amicably, there is less reason to be dodgy, so both parties can work together to find efficient resolution.

  1. Collaborative law is not perfect.

Although the above factors can make collaborative law seem very attractive, there are some significant issues and risks involved.

First, the agreement to keep everything confidential and inadmissible in future litigation can be a two-edged sword. For example, Business A freely admits to fraud and IP theft against business B during a collaborative law session, giving all the proof and evidence needed to allow Business B to recover substantially in a civil claim. But since this evidence came up in the collaborative law sessions, it can not be used in a lawsuit, and Business B is without recourse.

Second, there are gray areas when it comes to an “agreement to work toward resolution amicably and in good faith.” For collaborative law to really work, it really does require both parties to act in good faith, and there is simply no way to know for sure that the other party will do this.

Finally, while a courtroom trial is adversarial, its rules and procedures are in place to protect both parties from cheating and manipulation in the proceedings. Without those protections, the dispute process becomes more open to one party gaining an unfair edge.

While collaborative law could provide some significant benefits – especially in a time when the courts are backed up and turning away all but the most significant cases – any business considering collaborative law should do so cautiously. It is not a perfect system. An experienced business dispute lawyer can look at your case and determine whether collaborative law is the best solution.