It's litigation Jim but not as we know it

Our postman is a fan of Doctor Who.  He evidently believes that, like the Tardis, the letterbox in our house is holistic, i.e. greater than the sum of its parts and larger than it appears on the outside.  So I am driven to conclude from his monthly attempts to cram the latest edition of “PC Pro” Magazine, together with obligatory free CD ROMS through an inadequate brass opening designed a century earlier.  Presumably in those days anything exceeding the dimensions of an invitation to the latest Holyrood Garden Party were handed to the chambermaid for onward transmission.

The girth of the aforementioned periodical neatly focuses one of the central points of this discussion.  Out of 487 pages of text, only two are devoted to a regular column offering (English) legal advice on Internet and computer issues.  Could it be that the IT community at large remains unconvinced of the relevance of our profession to on-line activities?

All the more odd when one considers the undoubted enthusiasm with which the legal profession has embraced at the least general concept of maintaining a presence on the world wide web.  Many legal websites are superbly thought out, easy to navigate, and on the face of it provide potential clients with all the information they could wish to know about firms able to service their needs.  Whilst there are few truly abysmal efforts there are also a huge number of sites falling somewhere in the middle of the spectrum which appear not to have been updated since they were first placed there in a wave of boyish enthusiasm.

The central question is this.  Even if the legal profession has got the message about the world wide web, and even allowing for the vast amount of information readily available about law firms and their services across the globe, does any of this matter so long as lawyers retain traditional notions of service provision and fee charging?  An already reluctant public is less likely to tolerate the purchase of advice by way of letter, meeting or telephone at the rate of £125 per hour if it can acquire the same advice, or an adequate summary of the law, over the Internet either free of charge or at nominal cost.  Nowhere is this market force likely to be felt more keenly than in the field of litigation advice, which is generally regarded as a “duress purchase” to use the American parlance.  There is already evidence that unless litigators radically rethink the way in which they provide their service - including if necessary a root and branch pruning of the court procedures under which they have to operate - there is every possibility of traditional litigation skills rapidly becoming subsumed to, or a mere adjunct of, on-line dispute resolution.  Two American websites which are examined below may contract and reshape the litigation market place beyond recognition in the next 12 to 24 months.

Presently, the prospective client who searches the world wide web for “Alternative Dispute Resolution” using the AltaVista search engine will discover no less than 35,585 web pages awaiting his or her attention.  The same search using Yahoo! throws up a mere 143 pages.  A search for “Scottish Solicitor” using Alta Vista discloses 781,250 web pages.  Running the same parameters using Yahoo! discloses a mere two Scottish law firms.  This teaches us several things.  Not the least of which being that most Scottish law firms have a great deal of work to do in improving their search engine listings!  The important point however is that no potential client will be willing to sift through such vast numbers of web sites.  The purchasing public tend to head for a known brand with a proven track record.  Sites which are already up and running have an invaluable head start.

www.ClickNsettle.com

ClickNsettle is owned by NAM corporation which provides national arbitration and mediation services, and associated software for insurers, law firms and local government.  ClickNsettle offer the following quotes in their web site:

“Mentioned in the same breath as eBay and Amazon.com, ClickNsettle.com boasts log-on litigants from small claims clients to large corporations.  At $15 a bid, cyber haggling can save money and time because it cuts to the chase and by-passes the posturing. ‘I will see you in court’ may be replaced with ‘Let’s settle in cyberspace’.” [ABC World News]

“We have worked with [the parent company] for a number of years.  They are a technologically innovative company and the development of ClickNsettle.com is a true testament to that.  Any tool that helps us settle claims quickly and inexpensively is a tool we want to incorporate into our settlement strategy” [See next para]

Litigation lawyers who have read this far, and who remain cynical, would do well to note that the second quote is attributed to a claims manager of Royal & Sun Alliance, USA.  Other USA insurers are cited as being regular users.

ClickNsettle say their product applies to any dispute.

How ClickNsettle works

ClickNsettle uses a formal referral by the parties to an existing dispute.  At least lawyers are not totally redundant, even if all they did was polarise the parties!  Parties agree to be bound by the terms of an on-line form.  Having signed up to these terms, parties then have sixty days to submit offer and counter offer through the medium of the software.  However, each party’s bid is kept confidential.  Each time a new bid is entered, the system compares it to the last amount submitted by the opponent and notifies parties of the result.  There is no bidding order.  Parties can either bid back and forth in the traditional fashion or cluster several bids together in an attempt to settle the dispute.  The software will pronounce a settlement at the mid point between the bids whenever the pursuer’s demand comes within 30% of the defender’s offer.  This produces the following result shown in the panel.

The perceived advantages of this system are the removal of “posturing” and the willingness of parties or their lawyers to negotiate over the Internet in a way that they never would face to face, at a speed to which they may be unaccustomed.  Further, if the 60 day time period expires without a settlement, neither party has given up any leverage because that party’s bids are never revealed to the opposing party.

www.cybersettle.com

Cybersettle.com say they were first online resolution site.  They point out their process is the subject of a patent application which predates ClickNsettle.  Cybersettle’s majority shareholder is XL Capital, an offshore casualty insurance company that underwrites special classes of re-insurance.  Cybersettle.com describes itself expressly as an online computer assisted method for settling insurance claims.

This system again appears to assume that a dispute is already under way: again, a further crumb of comfort for lawyers perhaps!  The system also assumes the defender or its insurers will initiate the negotiations.  Further, so far as can be gathered from the website FAQs, there is no mutuality involved in the decision to resort to Cybersettle: the first the pursuer knows of the intention to settle the case on-line is when his or her solicitors receive an e-mail from Cybersettle.  This e-mail will indicate that the case is “available on-line for settlement”.  Prior to the sending of that e-mail, the defender will have posted three ascending offers and a time period within which they are available for acceptance.  In response to these offers the pursuer can post up to three counter offers.  The software compares figures.  If the final offers are within thirty percent of each other, then the case settles for the median amount.  If a settlement is reached, the software notifies both parties immediately and issues a written confirmation.

ClickNsettle v Cybersettle?

ClickNsettle.com recently abandoned the “three round” process still favoured by Cybersettle.  It says this was because the first two rounds were being “wasted”.  Particularly, in the first round the parties would enter the amount that would give them an outright win.  In the second round parties usually submitted the amount at which they had evaluated the case.  Not surprisingly by the time parties reached round three they were often poles apart.  The use of only three rounds meant that having reached round three parties were left with no choice but to enter their “take it or leave it” number.  Unsurprisingly this led to a lower proportion of cases settling.  This, say ClickNsettle, is why they recently modified their site to allow an unlimited number of settlement bids.

How much?

The inevitable sting in the tail for the lawyers?  The charges of ClickNsettle and Cybersettle are modest indeed.  Charges are about $15 per bid plus a maximum admin fee of $200, with lower fees for claims under $10,000.  Remember this is for 60 days’ use of the software.

www.onlinemediators.com

This service functions on the basis of an agreed referral by the parties.  Each party communicates by the mediator via e-mail, with responses being passed to and from the parties by the mediator.  Disputes under $2,000 the first two hours cost $50 after which fees are negotiated.

Disputes between $2,000 and $10,000 parties are charged £200 for the first six hours after which fees are negotiated.  Disputes valued at over $10,000 require a negotiated fee.

www.domainmagistrate.com and three others

Domain name disputes are spawning their own on-line forums.  The newest of these is DomainMagistrate, offered by the US company, Network Solutions.  From 1/1/2000 anyone registering a domain name with Network Solutions will find two procedures adopted by reference into their name Registration Agreement.  These are: the ICANN [Internet Corporation for Assigned Names and Numbers] Policy on Domain Names Disputes dated 26th August 1999; and the associated Rules dated 24th October 1999.  In a domain name dispute, the complaining party selects an ICANN accredited Provider to complain to, and the dispute is processed by the Provider, ultimately being adjudicated by an Administrative Panel.  There are three Providers at the moment:

• www.disputes.org [a consortium of eminent academics and practitioners in the US and Canada]
• www.arbforumcom [The US National Arbitration Forum]
• www.WIPO.com [The World Intellectual Property Organisation]

Because each Provider says it will handle domain name disputes for any name, and not just Network Solutions registrations, each has its own procedural rules.  These are additional to the framework above!  The procedures look similar to each other and to traditional arbitration.  The ICANN Policy is sometimes difficult to follow.  For example, the preamble to clause 4 of the Policy seems to state the ICANN procedure is mandatory in cybersquatting cases; but subclause 4(k) says either party may resort to traditional court proceedings either before resorting to the mandatory administrative procedure or after the mandatory administrative procedure is concluded.  Possibly still a role for lawyers here, one feels!

Where does this leave us?

If online settlement sites are doing as well as they claim, the reason for that success probably has less to do with the public’s desire to embrace IT and more to do with a desire that litigation lawyers and insurers cease “posturing” and begin negotiating sooner.  Maybe the public feels the Internet is more user friendly, or perhaps the public think they already know. enough about the value of their claim to risk negotiating with experienced insurers direct.  If lawyers think they can add value to the process the message seems to have been lost and needs to be restated through the web and elsewhere, with renewed vigour.

The message will have got home when a legal website can claim the same number of “hits” in a year as ClickNsettle.com or claim the annual case turnover of Cybersettle.  That’s one million enquiries and 300,000 cases by the way!

Paul Motion is an Associate and Solicitor Advocate with Ledingham Chalmers, Edinburgh, specialising in Internet Law, IT and IP.