What the Disappearing Jury Means to You
from
July/August 2006
by Randy Myers
Traditionally, getting embroiled in a hairy lawsuit meant preparing yourself for years of legal wrangling, a nasty court encounter, and, of course, endless expense. Today that is increasingly unnecessary—at least as regards the unpleasant court encounter. Fewer civil cases are actually making it to a jury. University of Wisconsin law professor Mark Galanter has examined the record going back to 1962 and uncovered a remarkably dramatic drop. That year 11.5% of federal civil lawsuits went to trial; by 2004 only 1.6% did. The National Center for State Courts documents a comparable decline in state civil actions.
Attorneys and academics generally cite two reasons. One is the growing access to a broad array of alternative dispute-resolution mechanisms, most notably mediation and binding arbitration. The other reason, generally given more weight, is the exponentially expanding cost of taking a case to trial. Litigation was expensive 40 years ago, but it is much more so today. During the 1990s alone, some businesses reported a tenfold increase in their legal costs, says Thomas J. Stipanowich, president and CEO of the International Institute for Conflict Prevention and Resolution in New York City, a nonprofit alliance of global corporations, law firms, scholars, and public institutions that promotes alternative dispute resolution. Adds Kathleen Havener, a partner with the Cleveland-based law firm of Hahn Loeser & Parks who concentrates on complex commercial litigation: “As everything in our lives becomes more complicated, as more laws are passed and more paper is generated, the number of places you look to find fact and learn about what really happened in a case increases.” All that leads to higher costs.
Alternative dispute-resolution (ADR) programs began sprouting in the 1970s, partly as a means of escaping the high cost and uncertainty of litigation, but also as a route to more palatable resolutions in business conflicts. This approach has grown in popularity; according to Ann Endress Skove, an analyst at the National Center for State Courts, the state courts alone work with thousands of ADR programs built upon mediation and arbitration. The arbitrators and mediators are often attorneys, former judges, or academics.
Both mediation and arbitration employ a neutral third party to help resolve disputes, but only in arbitration does that third party make a binding decision. In mediation, by contrast, the parties involved in the dispute must mutually agree on the outcome; either side can walk away at any time.
Arbitrators act much like judges, reviewing evidence and handing down decisions. Some cases employ one arbitrator, others a panel of three or more. Each side might choose one arbitrator, and those two will then pick a third to round out the panel. Mediators usually work alone.
Baxter Healthcare Corp., a Deerfield, Illinois, manufacturer of medical devices, recently turned to mediation to resolve more than 170 product-liability claims filed against it between 1994 and 2000 in connection with its Gammagard product. Produced from 1986 to 1994, Gammagard was an intravenous immunoglobulin therapy that helped patients with suppressed immune systems fight infections. But beginning in 1994, some users claimed to have contracted hepatitis C after using it. The cases were so scientifically complex that both sides recognized the risk of proceeding to trial, says Michael J. Bolton, Baxter’s senior counsel. Ultimately attorneys for the two sides agreed to have the cases mediated by a court-appointed “special master” and, in some instances, private mediators. By the end of 2005 they had resolved approximately 90% of the lawsuits without going to trial. Bolton estimates that Baxter saved “tens of millions of dollars” by not having to prepare for and litigate those cases in courtrooms across the U.S.
Mediation is used more frequently than arbitration, partly because arbitration is becoming expensive—although still less so than a trial. Arbitration retains more of the trappings of formal litigation; both sides are represented by attorneys, and discovery is often allowed, though nearly always on a more limited basis than in litigation.
Attorneys also complain that arbitration programs frequently suffer from maddening delays and, at least in business-to-business cases, do less than mediation to help maintain relationships between feuding parties. But arbitration has become the contractually mandated norm in some arenas, such as disputes between securities brokers and clients. Thomas Stipanowich says that arbitration also seems to be thriving in international business-to-business cases, “where there is a reluctance by business parties to submit themselves to the jurisdiction of foreign court systems.”
Professor Galanter attributes part of the movement away from jury trials to a shift among judges, who, he says, increasingly view themselves as “dispute resolvers” rather than adjudicators. In part, that’s the doing of Congress. The Civil Justice Reform Act of 1990 encouraged federal district courts to develop ADR programs, and the Alternative Dispute Resolution Act of 1998 required them to authorize the use of ADR in civil actions. Sheila L. Birnbaum, a partner at Skadden Arps Slate Meagher & Flom, says the decline in jury trials may also represent business executives’ lack of faith in the jury system. “That’s understandable,” she says, “based on some of the runaway verdicts we’ve seen.”
Attorney Kathleen Havener says the trend suggests that corporate directors whose companies are caught up in litigation should focus less on finding the next Clarence Darrow and more on finding a lawyer who will carefully assess what the company really wants out of its litigation and work with it toward that goal. “The up-and-coming lawyers who are going to run the world are the ones who are the thinkers and strategizers, not the ones who are the best courtroom performers,” says Havener. “They may be less vibrant, perhaps less stentorian, but they will be much more careful, strategic, and collaborative partners with their clients.” Indeed, most lawsuits settled before trial still result from voluntary face-to-face negotiations between attorneys.
As Birnbaum says, “Sometimes early settlement will make sense and sometimes it won’t, but you can’t wait until the time of the trial to try to understand what the potential liabilities and damages are. You have to manage the process much more closely.”
“Companies have to be very proactive in managing litigation, and relatively few are,” agrees Stipanowich, who says that taking charge can be rewarding. He cites the example of Georgia-Pacific Corp., which in 1995 implemented a program of early assessment and settlement, augmented by mediation, to resolve commercial contract disputes. Over the first eight years of the program, Stipanowich says, the company saved $1 million to $6.5 million annually.
