Commercial Litigation

The “Alternative” to the Courthouse

Over the past 20 years, the number of civil lawsuits filed in Texas district and county courts has increased by 31%, including an almost 4% average increase per year since 1999. While the number of lawsuits filed is steadily rising, the number of civil cases that go to trial is steadily decreasing. The United States Department of Justice found a 47% decrease in the number of civil trials in the nation’s 75 largest counties from 1992 to 2001.

So how can the number of lawsuits continue to increase while the number of trials continues to decrease? The main reason is settlement, as between 88 and 90% of all cases settle before going to trial. And cases most often settle through alternative dispute resolution (“ADR”). In fact, approximately threequarters of cases that go through ADR are resolved.

It is all but guaranteed that a party to litigation will have to participate in ADR. The State of Texas law strongly advocates the use of ADR, and the Texas Legislature passed the ADR Act in 1987 to carry out that policy. The ADR Act sets out procedures to facilitate non-adversarial negotiation, such as ensuring that the process is confidential, and encourages all Texas courts to refer matters to ADR. For example, the Travis County District Courts automatically refer all cases to pre-trial mediation. This is the predomipredominent policy in many Texas courts. For instance, Bexar County District Courts presume that all cases should be ordered to mediation and require that parties participate in an ADR hearing four months before trial.

Mediation is a confidential process during which a mediator facilitates settlement negotiations and discussions between the parties. The mediator is an impartial party that is typically an attorney who has completed required training for the mediation process. The mediation often starts with an opening caucus or joint session when the parties, their attorneys, and the mediator meet in the same room to discuss the case and their respective positions. The parties then split into separate rooms, and the mediator spends the rest of the time going back and forth to listen to the parties, clarify issues, and facilitate settlement negotiation. Mediations usually last a half day or a full day. If an agreement is reached at the end and reduced to writing signed by the parties, it is usually an enforceable contract. If an agreement is not reached, the parties may decide to continue settlement discussions, with or without the mediator, or the parties will proceed with litigating their cases at the courthouse.

The advantages of mediation are that it is flexible, voluntary, more economical, fast, and confidential. Allen Smith, the Chairman of our Commercial Litigation Section, describes mediation as an opportunity that allows his clients to “control their world” versus litigation where so many variables are left in the hands of opposing counsel and the court and out of the client’s control. Smith is an advocate of consideration of mediation prior to any lawsuit to address disputes efficiently and economically in a strategy that he calls as he calls “Litigation Mitigation”.

A soon to be published study in the Journal of Empirical Legal Studies concludes that settling can frequently be more beneficial than going to trial. “In just 15 percent of cases, both sides were right to go to trial – meaning that the defendant paid less than the plaintiff had wanted or that the plaintiff got more than the defendant had offered.” Given this finding and the very high likelihood that a court will order a case to mediation, it behooves all businesses to be familiar with the ADR process.

By J. Allen Smith and Daniel P. Tobin

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