Alternative Dispute Resolution (Costs, Issues, Role of the Financial Expert)

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Alternative Dispute Resolution (Costs, Issues,
Role of the Financial Expert)
Presented by Judith K. Fitzgerald and Michael
A. Shiner of Tucker Arensberg and Mark M.
Gleason and William G. Krieger of Gleason
Associates
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ALTERNATIVE DISPUTE RESOLUTION

• Why ADR?
• Generally, minimize risk of adverse litigation
  outcome
• Generally, thought to be less costly
• Generally, retain better control of time
  constraints
• Mandated by many courts
• Items to Consider
• Separate emotion from economic reality
• Early involvement of professionals/experts
• Managing client expectations

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Types of ADR

• Mediation
• Process of resolving or settling differences by
  working with all the conflicting parties
• Various theories and types but all involve
• Agreement among parties to mediate
• Disinterested mediator
• Often subject to same disqualification rules as a
  judge
• Confidentiality
• Report to the court, if in litigation, re results

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ADR - The Mediation Process

• What is the typical process?
• Conflicts check
• Engagement letter
• Initial call or meeting to establish guidelines
• Usually submit position statements
• Limited discovery prior to or during mediation
• Scheduling sessions where and when convenient
• Time limits?
• Need the principles to be present
• Generally meet separately with various parties
• Until ready to close the deal
• Leave with a term sheet when possible

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Arbitration

• Arbitration
• Submission of dispute to the judgment of an
  impartial person or group appointed by mutual
  consent or statutory provision.
• More like traditional litigation
• A neutral third party handles the dispute
• Could be actual litigation
• Could be motions practice

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Arbitration based in contract

• Process agreed to in a contract
• As a mandatory substitute for litigation
• Imposes a final and binding decision
• Enforceable by the courts
• Generally, no effective appeal process

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Types of Arbitration

• Binding
• Non-binding
• Baseball
• AAA
• AIA

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Arbitration Issues

• Expense
• Choosing the format
• Choosing the arbitrator(s)
• Who chooses the experts
• Lack of appellate process

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Early Neutral Evaluation

• Early Neutral Evaluation (ENE)
• Advice of an experienced attorney concerning the
  strength of the case
• Appropriate for smaller cases
• Appropriate for technical and financial issues

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ENE

• Purpose
• Objective evaluation intended to move parties
  away from unrealistic positions
• Provide insight into strengths and weaknesses.
• Success dependent on the parties' faith in the
  fairness and objectivity of the neutral

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Settlement Conference

• Settlement Conference
• Effort to arrive at mutual agreement without
  need to complete litigation
• Judge by judge process
• Parties can request a settlement conference with
  the court
• Formal with a judge
• Informal by the parties

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Pennsylvania ADR

• Mandatory in most districts
• WDPA requires ADR early in case
• CCP (Allegheny) judges use ADR shortly before
  trial as conciliation conference
• Consult counsel for drafting ADR clauses
• Meet and confer as first step
• Selection process
• Specialized facilitator(s)
• Fee shifting
• Choice of rules/law/forum

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Selecting the neutral

• Retired or former judge
• Seasoned trial attorney
• Professional mediator/arbitrator
• National vs. Local
• Non-attorney, Lay person
• Person with specialized knowledge/expertise

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Defining the Financial Expert

• Who?
• What?
• Where?
• When?
• How?

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Role of the Financial Expert

• Early damage assessment
• Identifying issues in dispute
• Marshalling facts/discovery assistance
• Bringing key elements into focus
• Financial experts help clarify issues
• Articulate issues from an outside perspective
• Present financial facts in a clear and concise
  manner

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Role of the Financial Expert (cont.)

• Financial expert as a neutral evaluator
• Provides opinion (does not represent one side or
  another)
• Cost savings
• Conclusion
• Arbitrators hiring financial experts
• Shared cost of the financial expert
• Financial expert report issued
• Slightly higher cost than an expert
  determination/neutral evaluator
• Conclusion

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Consultant vs. Expert

• Consultant
• Consultants do not have to be designated
• Advice, guidance, confidentiality
• Are not deposed or retained by opposing party
• Expert Witness
• Needs to be designated
• Subpoenaed for deposition
• Obligated to prepare reports / discoverable
  materials
• Testify at trial

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Consultant vs. Expert (cont.)

• Crossing Over
• An expert who is retained as a consultant is not
  necessarily limited to the consultant role.
• It is possible to retain an expert to consult on
  a case then later designate them as a financial
  expert.
• Consideration of overall case strategy.
• The cross over from an expert to later become a
  consultant is not recommended.

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Case Study 1 - Early Damage Assessment

• FLSA employment class action lawsuits often
  involve hundreds or thousands of plaintiffs and
  require the analysis of massive quantities of
  data to understand potential liability issues and
  estimate damages.
• Whether analyzing the commonality or typicality
  of plaintiffs claims in the class certification
  litigation phase, or quantifying the potential
  range of damages to assist counsel with mediation
  or settlement discussions, the retention of a
  financial expert in the early stages of
  litigation can provide an enormous benefit.
• Gleason Associates was engaged by a national
  specialty retailer to assess potential damages
  for its alleged non-compliance with labor laws.

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Case Study 1 - Early Damage Assessment (cont.)

• The plaintiffs alleged that they were not able to
  take a required meal period at the appropriate
  time during their shifts or for the appropriate
  length of time because the employer did not
  provide adequate coverage for the store.
• Gleasons Role
• Collaborated with the client and its counsel to
  understand damage theories, varying threshold
  definitions of the applicable states labor laws,
  and the financial exposure associated with each.
• Obtained more than 100,000 data records
  containing individual employees daily time in
  and time out during the alleged damage period.
• Using data validation processes, we formatted the
  records for uniformity and developed a database
  of employee time-entry data.

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Case Study 1 - Early Damage Assessment (cont.)

• Gleasons Role
• Incorporated additional information obtained from
  various human resource records (i.e. employee
  titles, promotion dates, etc.) and queried the
  database in real-time to perform the numerous
  analyses requested by the client.
• Filtered the data to exclude employees who were
  not eligible for a break.
• Categorized the population into groups to
  facilitate additional detailed analyses that
  cross referenced inadequate breaks with periods
  of inadequate employee coverage.
• Calculated the potential damages associated with
  each situation.
• Repeated analysis using subsets of employees and
  various break intervals for the named plaintiffs.
• Building upon these queries, we completed
  numerous alternative analyses and rearranged the
  data to aggregate instances by year, by retail
  location, and by employee.

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Case Study 1 - Early Damage Assessment (cont.)

• Results
• Armed with our analysis and conclusions, the
  company entered mediation equipped with extremely
  powerful tools including (a) financial damage
  estimates and (b) related supporting data.
• Our analysis demonstrated that 80 of the alleged
  noncompliant instances had adequate employee
  coverage, thereby, disproving the plaintiffs
  allegations.
• Had this company waited until after mediation to
  seek financial consultation, counsel may have
  only had a general understanding and a less
  compelling argument to support the defendants
  position that the actual damages incurred were
  minimal.
• As a result of the successful mediation, the
  client negotiated a favorable settlement of the
  employees claims and avoided prolonged class
  action litigation.

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Case Study 2 Financial Expert on an Insurance
Appraisal Panel

• Dispute between a steel company and its insurer
  concerning the amount of business interruption
  lost income sustained by the steel company
  resulting from an equipment breakdown.
• Gleason was hired by the steel company to be part
  of an appraisal panel.

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Case Study 2 Expert on an Insurance Appraisal
Panel (cont.)
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Strategies for success

• Know the strengths and weaknesses of your case
• Understand the ground rules for the process
• Work closely with your consultants/experts
• Provide opportunity to client to express opinions
  
• Prepare client for ultimate compromise
• Know your bottom line

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Contact Information

• Judith K. Fitzgerald
• jfitzgerald_at_tuckerlaw.com
• 412-594-3933
• Michael A. Shiner
• mshiner_at_tuckerlaw.com
• 412-594-5586
• Tucker Arensberg, P.C.
• 1500 One PPG Place
• Pittsburgh, PA 15222
• 412-566-1212
• www.tuckerlaw.com

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Contact Information

• Mark M. Gleason, CPA, CVA, ABV, CLP
• mgleason_at_gleason-cpa.com
• 412-391-9010
• William G. Krieger, CPA, ABV, CFF, CGMA, CFE
• wkrieger_at_gleason-cpa.com
• 412-391-5404
• Gleason Associates, P.C.
• One Gateway Center, Suite 525
• 420 Fort Duquesne Blvd.
• Pittsburgh, PA 15222
• 412-391-9010
• www.gleason-cpa.com

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