Using Collaborative Law to Resolve Business/Commercial Disputes

Collaborative law, a way of resolving disputes without litigation, offers many advantages in resolving business/commercial disputes.

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In collaborative practice, the parties commit to resolving their claims outside the court system. This approach offers significant advantages to business owners involved in commercial disputes.

For those growing or managing a business, legal claims can be especially troublesome, costing precious time and resources, and too often produce an end result that is less than satisfactory for all involved. In addition, the cost of litigating a claim often makes the court system an unaffordable mode of resolving many commercial disputes. Stories of legal claims that ended up costing more to litigate than they were worth in the first place are all too common.

Unlike litigation, collaborative practice provides the parties with control over the resolution process, saves money, and most importantly, preserves, rather than destroys, business relationships. Here's a primer on how collaborative practice works, its advantages over litigation, arbitration, and other dispute resolution methods, and how to find a collaborative practice attorney.

How Does the Collaborative Approach Work?

The parties start the process by retaining lawyers specially trained in collaborative practice. The lawyers are committed from the outset to helping their clients reach an optimal settlement and bolster that commitment by signing an agreement that they will withdraw from the case if a settlement is not achieved.

Although the lawyers may be present during negotiating sessions, it is the parties themselves who take the lead in the negotiations. Additional specialists, such as accountants or financial consultants, may also be brought in to provide neutral expert advice as needed, depending on the nature of the dispute.

How Collaborative Practice Can Help in Business Disputes

The collaborative approach was first developed for use in family law. By fostering mutual respect and openness between the parties, collaborative practice reduces the destructive impact of litigation and nurtures post-divorce family relationships that are especially important when children are involved. (To learn more about how collaborative practice is used in family law, read Nolo's article Will Collaborative Divorce Work for You?)

These same considerations have direct analogies in the context of disputes involving business, partnerships, LLCs, and employment issues. Often commercial disputes have the potential to damage long-term business relationships and interests.

Partnerships, LLCs, businesses with employees, and commercial relationships with long-term suppliers and vendors all have family-like qualities and need to be preserved long after a particular dispute has been resolved. With these considerations in mind, a growing community of commercial lawyers are turning to collaborative practice as the preferred method of resolving their clients' legal disputes.

Advantages of Collaborative Practice

Advantages of collaborative practice over litigation include:

Parties maintain control over the outcome. In collaborative practice, the parties retain a far greater measure of control over the outcome, as opposed to rolling the dice on an outcome decided by a judge or arbitrator.

Those with the most knowledge do the negotiating. By giving the parties themselves the lead role in the negotiations, the final agreement is worked out among businesspeople who are best positioned to understand and preserve their business interests, as opposed to lawyers or judges.

Parties control the schedule. By avoiding the court system, the parties also have control over the schedule for the negotiations and have the opportunity to resolve their dispute in a timely manner, as opposed to having to adhere to a court-ordered litigation schedule, which may drag on for years.

Cost savings. Collaborative practice is usually much less expensive than using traditional litigation to resolve disputes.

Preserves relationships. The collaborative approach is designed to avoid the tremendous emotional costs and burning of bridges typically involved in traditional litigation. It focuses on preserving relationships and business interests through a process premised on mutual respect and openness.

Protects confidentiality. Because information about the dispute will not be in any public court records, the collaborative process is better suited to protecting confidentiality and avoiding unwanted publicity.

Collaborative Law at Work: A Recent Case

A recent case in Boston highlights the favorable results of the collaborative approach. A business partnership had become embroiled in a dispute with one of its partners, whom the other partners wanted to remove from the partnership. Rather than resort to traditional litigation, the parties used the collaborative approach.

With the partners themselves taking the lead in the negotiations, they came up with a creative solution that wouldn't likely have surfaced in the adversarial setting of the courtroom. The settlement of the case was accompanied by a press release heralding the formation of a new sister company by the departing partner, which was presented as the natural outgrowth of the business, without any reference to the prior legal dispute.

Although the use of collaborative practice in resolving commercial disputes is relatively new, it seems poised to match the explosive growth of collaborative practice in the world of family law, in part because the fundamental techniques of collaborative practice are far better suited to the business mindset than are those of traditional litigation.

The Legal Community's Resistance to Collaborative Practice

The collaborative practice approach to business disputes is not without its challenges. Some lawyers view the withdrawal provision -- in which the lawyers and any neutral advisors agree to withdraw from the case if the parties are unable to reach a settlement -- as a problem. Many business lawyers are unwilling to terminate their often long-standing client relationships if the collaborative process breaks down. For this reason, a business's regular lawyer may refer disputes to another lawyer trained in collaborative practice.

Yet despite these concerns (which may account in part for the resistance to collaborative practice in traditional legal circles), most collaborative practitioners say that, in practice, the withdrawal provision rarely creates a significant impediment to using the collaborative approach in commercial disputes. It may be more likely that the mainstream legal community's resistance to collaborative practice is due to the fact that collaborative practice replaces litigation, promises significant cost savings, and calls for substantially different skills from those needed in traditional litigation.

Collaborative Practice vs. Arbitration and Mediation

Collaborative practice also offers several advantages over more traditional forms of dispute resolution, like arbitration and mediation.

Though arbitration cuts down significantly on the cost and inconvenience of litigating claims, it still leaves the ultimate resolution of the dispute in the hands of an arbitrator rather than the parties themselves. (To learn more about arbitration, read Nolo's article Arbitration Basics.)

Mediation takes the important step of returning ultimate control over the outcome of the dispute to the parties, but does so by way of a neutral middleperson who guides the negotiations. (To learn more about mediation, see Nolo's& Mediation area.)

By contrast, one of the unique characteristics of collaborative practice is the way it places the parties themselves in the driver's seat -- right where most businesspeople would prefer to be -- with their lawyers as navigators.

Finding a Collaborative Practice Lawyer

For more information on civil and commercial collaborative practice, and for help finding a collaborative lawyer in your area, see the International Academy of Collaborative Professionals website, at www.collaborativepractice.com.

For More Information

For all the practical and legal information you need to run your business (including information on dispute resolution), see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo).

Updated by: , J.D.

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