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Coming To Terms Without Bringing In The Lawyers

Cover Story


Lawyers for Pacific Gas & Electric, Union Oil, and Thermal Power were preparing to fight one of the largest suits ever filed in Sonoma County (Calif.) Superior Court, when the three top executives decided that there had to be a better way. Rather than spend a year at trial, the executives resolved most of the issues privately--without their lawyers. To do the rest, they called in an outfit based in Orange, Calif., known as Judicial Arbitration & Mediation Services Inc.

The JAMS mediator met often with the principals, even going up in a helicopter to survey the field at the heart of their contract dispute. The case settled last month, with JAMS's bill less than six figures.

Tapping into the fervor to cut litigation costs, JAMS is a part of one of the fastest-growing sectors of the law business: alternative dispute resolution. Started in 1979, it's the U.S.'s leading for-profit resolution company. This year, it expects to hear 14,000 cases and see sales grow to $30 million, up 25% from 1991. JAMS has 18 offices in four states and a panel of 175 former judges. With $15 million from E. M. Warburg, Pincus & Co., JAMS plans to keep expanding.

It's not alone. Washington-based Endispute Inc. is also expanding its dispute-resolution services. And Philadelphia-based Judicate Inc. boasts more than 600 former judges offering arbitration and mediation. It's easy to see the appeal. Alternative resolution techniques save on discovery and provide privacy and flexibility in scheduling.

But the driving force is the cost. JAMS charges between $300 and $350 an hour--a far cry from the $300 an hour a battery of lawyers might each charge litigants. And, unlike a litigated case, the typical JAMS case can be resolved in hours or days. "Alternative dispute resolution is like the hula hoop--why didn't someone else think of this before?" says JAMS CEO John K. Trotter, a retired state appellate judge.

Critics say problems arise when JAMS judges go beyond simple mediation and render decisions that can be appealed in the courts. Such private judging accounts for 1% of JAMS cases, but this tactic could soar in California, where parties can leapfrog the long court lines by getting a private ruling and then appealing it.

To head off government regulation, JAMS is developing guidelines for disclosing conflicts of interests, including prior contacts with parties. It's also devising a procedure for speedy handling of complaints. Given the need for faster and cheaper alternatives to the gridlocked courts, JAMS may soon be looking more and more like the Federal Express of the dispute business.Jane Birnbaum in Los Angeles, with Morton D. Sosland in Philadelphia

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