Administrative Law and BusinessSome argue that government needs to increase its regulation of business for the good of society as a whole. Others believe that the marketplace is self-regulating and th

Completing the Civil Lawsuit and Alternative Dispute Resolution 3 I n Chapter 2, we discussed the first steps of a civil lawsuit. In this chapter we will discuss the second half of a civil lawsuit as well as some of the options for altern\ ative dispute resolution, mentioned in Chapter 2 as a way to avoid litigation.

3.1 Completing the Civil Lawsuit T o review, the first three steps in a civil lawsuit are:

(1) Determining a viable cause of action; (2) Deciding what state to bring the action in ( in personam or personal jurisdiction) and how to deliver the summons and the complaint to the defendant; and (3) Finding out what court in that state has the power to hear the case (su\ bject matter jurisdiction). Now that all these elements are in place, several preparatory steps follow.

Step Four: Preparing an Answer Recall that the defendant is served with the summons and the complaint to begin the lawsuit. Now the defendant has the opportunity to respond to those papers with a formal document called an Answer . The Answer responds to each of the numbered allegations in the complaint by saying that the defendant admits, denies, or doesn’t know. For example, the defendant could say, “With regard to plaintiff ’s complaint paragraphs 2 through 4, the defendant denies the allegations con - tained therein.” Here is an important fact to remember about the Answer: if the defendant fails to answer any of the paragraphs, even by mistake or omission, then the alle\ gations in that paragraph are admitted as true . Therefore, it is very important to check the Answer to make sure all of the plaintiff ’s numbered paragraphs are answered.

Sometimes the defendant receives the Answer and does not bother to respond at all. If the defendant does not file an Answer, then the plaintiff can continue to court and ask for a default judgment , meaning essentially that the defendant has not shown up for the proceeding and the plaintiff should be declared the winner. Why would a defendant risk a default judgment? One answer is that the \ defendant has no assets, and so the plaintiff is not going to get anything from the defendant anyway. sea80373_03_c03_037-046.indd 1 10/4/12 3:21 PM 38 Section 3.1 Completing the Civil Lawsuit CHAPTER 3 People often think that you have to show up for a court case, but in a c\ ivil proceeding, where the plaintiff is seeking money, this is not true; if there is no money to be had, then the plaintiff is going to end up with nothing, even if the plaintiff “wins” the case.

Step Five: Discovery Unlike in television dramas, where the testimony in court always seems to surprise every - one (including the lawyers), in real life the answers to all of the questions are usually known well ahead of time. This is the result of a proceeding before trial called discovery . Discovery allows any of the parties to gather information before trial in both testimony and documents.

There are two major forms of discovery: one is called interrogatories and the other is called a deposition . Interrogatories are a set of written questions that are sent to a party or witness to answer. Usually that party will sit down with his or her attorney and discuss \ his or her answers, and the attorney will actually write the response, which is under oath.

A question in an interrogatory might look something like this: 45. What type of homeowner ’s insurance do you have in place?

Please attach a copy of your policy to this interrogatory. Witnesses and parties must respond to all the questions in the interrogatories. If they refuse, the matter may go to court for a hearing on the issue of not responding. The judge will usually rule that a party must answer and, if the refusal is prolonged, may award the other side attorney’s fees . (Attorney’s fees are generally paid by the respective parties to their attorneys. However, if one of the parties is especially obstinate and refuses to cooper - ate, and as a result the litigants have to go to court to force the obstinate party to cooper - ate, judges have it in their power to make that party pay the other side\ ’s attorney fees.) Another type of discovery is the deposition. Unlike written questions, the deposition doc - uments oral testimony that usually takes place at an attorney’s office, where a hired ste - nographer is present to make a transcript. A typical deposition would have all the attor - neys present, as well as the parties to the lawsuit, and then the witnesses one\ at a time enter the room to “give their deposition.” When the deposition is transposed,\ it looks like this: Attorney Jenkins : Does your company have in place a nondiscrimination policy? M. Dutcher : Yes, we do. Attorney Jenkins : And what does that policy state? M. Dutcher : That we must follow all of the rules in the company handbook. sea80373_03_c03_037-046.indd 2 10/4/12 3:21 PM 39 Section 3.1 Completing the Civil Lawsuit CHAPTER 3 These documents are signed at the end under oath so that if the person giving the deposi - tion “changes his mind” in court, the deposition can be shown to t\ he jury to impeach or question the credibility of the witness.

As you can imagine, if one deposes all of the witnesses and parties befo\ re getting to trial, then every answer to every question is going to be answered well ahead of time. Some of the advantages of discovery include seeing how people are going to testify (Are they nervous? Believable? Will a jury feel sorry for them?), what they are going to say (Do they change their story? Do they seem dishonest? Credible?), and how prepared the other side is. In short, the attorneys will get a good idea of how strong the other side’s case is. If the case looks very strong, and the witnesses and parties seem believable, then it might be time to settle out of court.

The major disadvantage to discovery—and it is a huge obstacle—is t\ he cost. Few litigants can afford extensive discovery. The transcriptionist alone charges for each day and then, when the testimony is converted to a document, the parties must pay by t\ he page. Every hour an attorney sits in a deposition costs $200–$400. All told, this may run into many thousands or even hundreds of thousands of dollars, and that is before reaching the trial phase. For this reason, many litigants completely forgo or greatly limit discovery.

Step Six: Settling Out of Court At this pretrial phase, the attorneys have a great deal of information. If documents have been acquired in discovery, they know how much insurance coverage a defendant has.

Bank account balances have been revealed, as has the temperament of the plaintiff ’s prime witness. At this point, the costs are mounting, and each party is starting to wonder about cutting losses and settling out of court . Settling out of court is similar to entering into a contract. It is a le\ gally enforceable agree - ment that sets out terms for the agreement of the parties. It is typically negotiated between the attorneys for each side and involves the litigants signing a release in which they give up any further legal actions against one another. In fact, one should never settle a lawsuit without acquiring a guarantee that this is indeed the end of the lawsuit\ , which is the pur - pose of a release.

Attorneys have a legal and ethical obligation to present their clients with all settlement offers. At the very least, even if an offer is absurd, a client has the right to consider it and then reject it. If an out-of-court settlement is reached, and the parties agree, the attorneys will prepare the appropriate paperwork, and the suit will be formally dismissed by the court “with prejudice,” meaning that all rights under the lawsuit have ceased and t\ he lawsuit is over.

Step Seven: Going to Trial If the parties cannot reach a settlement, then the case will eventually proceed to trial. Many people are not aware that it takes years, sometimes from three to six, for a civil case to actually reach trial. Once scheduled and in the courtroom, the trial will begin with impan - eling a jury (unless a jury has been waived). Impaneling (also called voir dire, meaning sea80373_03_c03_037-046.indd 3 10/4/12 3:21 PM 40 Section 3.2 Alternative Dispute Resolution CHAPTER 3 “to speak the truth”) involves selecting jurors that each side feels will be nonbiased in their deliberations. Next, each attorney will make what are called opening statements , in which the attorneys will tell the jurors what they plan to present through the witnesses.

Next comes the presentation of evidence through witnesses by way of testimony and, finally, the closing statements. Note that all testimony is transcribed in cour\ t into what is called the Record , which has all the testimony, objections to evidence, and descriptions of the admitted evidence . Only admitted evidence can be considered by the jury when reach - ing its final decision, or verdict . At the end of the trial, the judge will read to the jury a set of instructions, which are a set of parameters for how the jury must reach its decision. The jury will then deliberate and reach its verdict, which in a civil lawsuit may include a dollar amount for the plaintiff, if the plaintiff prevails.

Step Eight: Enforcing Judgments You may think that now that the plaintiff has suffered through many years and has won the trial, the parties stand up, shake, and hand over to the plaintiff a sizeable check for damages. However, nothing could be further from the truth. The winning plaintiff may be completely without payment until another proceeding to collect the money. Sometimes the plaintiff will have to garnish the wages of the defendant by issuing a court order to have a portion of the judgment taken directly out of the defendant’s paycheck, of which the defendant will receive notice. Another method to obtain relief is to go to court to get an order to sell some of the defendant’s assets. That’s why it is so im\ portant before suing someone to know exactly where his or her assets are and how much they are worth, as the assets are usually what will be converted to cash to pay the final judgment.

3.2 Alternative Dispute Resolution A lternative dispute resolution (ADR) is the name given to settling a dispute between people (or businesses) without going to court. Perhaps best known as a way to prevent couples from embarking on contested or adversarial divorce proceedings, ADR is also useful in business-related disputes. It can take many forms, but some of the more popular are negotiation , mediation , and arbitration . We will discuss each of these, and their distinct advantages and disadvantages, in the f\ ollowing sections.

Negotiation Negotiation is generally considered a form of dispute resolution in which the parties try to work out the problem between (or among) themselves. It can take the form of a discuss\ ion over a cup of coffee or a formal negotiation session in which both sides are represented by attorneys, such as in a labor dispute. Negotiations are usually less formal than litiga - tion and have the advantage of being quick, private, confidential, and i\ nexpensive; in fact, since negotiations don’t necessitate hiring anyone, this makes them the least expensive form of dispute resolution. sea80373_03_c03_037-046.indd 4 10/4/12 3:21 PM 41 Section 3.2 Alternative Dispute Resolution CHAPTER 3 One drawback to a negotiation is that the parties may never reach an agreement. But sup - pose they do. Another drawback is that even if they reach an agreement, that agreement is a contract. (This is true even if the agreement is oral, as most oral contracts are enforce - able.) The problem with a contract is that the only place it can be enforced is in court, which is what the parties were trying to avoid in the first place. Here is the reason: No agreements between any parties are enforceable unless the parties can go to court. In court, the “force of the law” means that the loser ’s assets can be sold and the property converted into money; thus, enforcement means that the winning party gets a monetary award.

Conversely, two parties can agree to anything, but trying to enforce the agreement outside of court is no simple matter! You might try persuasion; if that doesn’t work, threats; and if that doesn’t work, greater threats, until you run the risk of committing a crime. The bot - tom line is that if someone chooses to go back on his or her word, court is the only place that can effect a remedy.

Mediation One drawback to negotiation is that the parties may not be able to arrive at a mutually agreeable solution, and that is where mediation has an advantage. In mediation, a third party enters the scene to help the two parties figure out a reasonable solution to their dif - ficulty. Like negotiation, mediation is fast, inexpensive, private, and confide\ ntial. When a mediator is necessary, there are numerous online sites available, with perhaps the most highly recommended being the American Arbitration Association ( www.adr.org ). Note that this site has training for businesspersons who need to learn how to\ mediate as well as free access to state and federal laws.

Many towns and cities also have mediation centers, often free of charge, that provide mediators. These are available by using the search term “free mediation services.” And many courts, especially small claims courts, have mandatory court-ordered mediation in cases such as child custody and divorce, in an effort to cut down on the number of cases they must hear.

Students often find the role of a mediator confusing because mediators do not make a decision about who is wrong or right. Instead, they listen to the controversy and make suggestions for different ways to approach resolution. A clever mediator might make sug - gestions that the parties had not considered or be able to frame them in more palatable ways. The parties are not obligated to accept any of the suggestions. Instead, a persuasive mediator might be able to help the parties see the benefits to arriving \ at a satisfactory agreement in mediation as opposed to going to court.

Like negotiation, however, mediation has the same drawback of lack of enforcement. Even when the parties agree to a proposal by the mediator, their agreement is still a contract, and if one of them fails to follow through, then court is the only place to go for enforce - ment of the agreement. sea80373_03_c03_037-046.indd 5 10/4/12 3:21 PM 42 Section 3.2 Alternative Dispute Resolution CHAPTER 3 A Closer Look: Mediation Mediation is a form of alternative dispute resolution that can help you to save time and money by settling a dispute out of court. View the two video clips showing mediations in progress and then consider the questions that follow.

Questions to Consider http://www.youtube.com/watch?v=heUcre2d9wg&feature=related 1. What are the four phases of the mediation process that you witnessed in this video?

2. What was the issue between the parties?

3. What steps did the mediator take to resolve this issue?

4. What are your impressions of the process? Do you think it is an effective way to resolve disputes? http://www.youtube.com/watch?v=H0_h1BDOhtw 1. How would you describe the dispute taking place between these parties?

2. What are the biggest obstacles to successful resolution of this dispute?

3. What steps did the mediator take to resolve this dispute?

4. What did you learn from watching this mediator that might help you in resolving problems in the workplace? Arbitration Arbitration is the most formal form of dispute resolution. Here a third party is brought in to actually resolve the dispute by pronouncing one person the “winner” and the other the “loser.” In short, an arbitrator is akin to a judge and jury who listen to the dispute and then decide the case.

Arbitration is often used because the parties submitted to an arbitratio\ n agreement. For example, if you purchase a new car, you probably agreed somewhere in the fine print that if you had a problem with the car, you waived your right to sue in court and agreed to submit the dispute to arbitration. The arbitration panel, in such a case\ , is established and chosen by the manufacturer, putting the consumer at a severe disadvantage.

It is true that arbitration is faster than litigation, private, confidential, an\ d compared with litigation, much cheaper. Arbitrators, however, can be very expensive, depending on their qualifications and experience. There are numerous disadvantages to arbitration. There is no discovery, so parties enter the fray without any knowledge of the other side’s case. If there is an error in the paperwork, there is no one with the power to dismiss the case, as there would be in court. Nor can parties appeal the decision of the arbitrat\ or, even if it is erroneous.

If arbitration is a good fit for a particular dispute, the rules of evidence are not needed, and reliance on an arbitrator won’t be a problem, then it might be a viable option. Gener - ally, however, parties are better off taking a chance with a jury. sea80373_03_c03_037-046.indd 6 10/4/12 3:21 PM 43 Section 3.3 The Role of the Manager in Hiring an Attorney to Help Resolve Disputes CHAPTER 3 Private Judges Some states allow people to hire a private judge to hear a dispute. Usually the judges are retired from the bench and hire themselves out at a $400 or higher hourly rate. If the disputants can afford the rates, the hearings are private, confidential, and very fast, but expensive. One huge advantage is that the decision of the judge is appea\ lable and that the rules of evidence apply; thus, for example, there are motions filed and cases can be dismissed. For an excellent article on hiring a private judge, go to http://www.dgslaw.com/documents/articles/NLJ-PrivateJudges.pdf . 3.3 The Role of the Manager in Hiring an Attorney to Help Resolve Disputes T he day might come when you need to work with an attorney on a problem, or per - haps you might need legal advice for your business. As a manager, it is crucial to know how to find the best attorney for your needs and what to expect when work - ing with an attorney.

Hiring an Attorney When searching for an attorney, your first temptation may be to pick up the telephone and call a trusted advisor, like a family member or buddy from college, and ask for the name of his attorney. But is this the best way to choose a lawyer for your business? What is\ the cost of legal advice? And what kind of work is it realistic to expect from a lawyer?

As you are aware, a law student is a graduate of a four-year college and goes on to an addi - tional three-year graduate program that results in a J.D. (juris doctor) degree. Attorneys who graduate from law school must then pass a bar examination and an ethics test before they can be licensed, a process that usually takes six months after law school graduation.

While there are law schools with specialties, such as international law, many lawyers are generalists who take on a wide variety of cases such as simple traffic tickets, wills and estates, real estate closings, and simple contracts. In law, as in medicine, there are general practitioners, or lawyers whose practice covers a wide variety of topics, and there are spe - cialists, some practicing in very narrow areas of expertise. A friend’s lawyer who helped him with a speeding ticket is a much different type of attorney from one who sets up busi - nesses or reviews contracts.

There are certain types of law for which it is better to get an expert. These ar\ eas include copyright, trademark, trade name, patents, business formation, and discr\ imination suits that end up going to trial. Most lawyers have no experience with these o\ n a daily basis; thus, it is essential to hire someone with experience.

While it may seem overwhelming to sift through all the information online to locate the right attorney, there are ways to limit your search to make it more accurate and productive. sea80373_03_c03_037-046.indd 7 10/4/12 3:21 PM 44 Section 3.3 The Role of the Manager in Hiring an Attorney to Help Resolve Disputes CHAPTER 3 One good beginning point is the bar association in your state, if for no\ other reason than to check that any attorneys you consider have a valid license and are admitted to practice law in that state. The bar association usually regulates licensing and conduct of attor - neys, and many keep websites where you can check to see if they are in good standing or have malpractice actions pending. To find the appropriate website, just type into a search engine a phrase like “bar association for the state of Florida” or\ “attorneys in good stand - ing in Colorado.” You should look for the state bar website and then follow the links to th\ e information for admitted, reputable attorneys.

Another way to search for a specialist is to search for attorneys who have won cases on the same topic as the one for which you need a lawyer. For example, if you need representa - tion for a workers’ compensation–related eye injury, search for that in the particular state and add phrases like “won largest settlement,” “heads the workers’ compensation section of the bar,” or “nationally known for his work in the field of workers’ c\ ompensation.” Search using any phrase that may lead you to reported news clips about attorneys who have “won big” in that particular subject area.

One of the oldest and most reliable sources for attorneys is Martindale Hubbell, located at http://www.martindale.com/About_Martindale-Hubbell/index.aspx . This service pro - vides the names of attorneys by specialty and ranks attorneys with an “\ AV” or “BV” or “CV” rating, with “AV” being the highest. So, for example, you could search for an attor - ney in a particular state and town who specializes in immigration law. If you look at all the attorneys listed, you can next pick the ones with an AV rating. Ratings are made by judges and fellow attorneys, so they are based on information from competitors and adversaries, and an “AV” rating speaks very highly of one’s standing. Note, however, that an attorney has to have been in practice for at least 10 years before receiving an AV rating; thus, there are many excellent younger attorneys who are rated BV. Many other places to locate an attorney can be found on the Web or at your local law library.

Working With an Attorney How are attorneys paid? The answer is that there are different types of fee arrangements.

If you hire an attorney to draft a will, you may be charged a flat fee that is given to you up front. There are a number of services similar to will drafting for which flat fees are the norm, including house closings and writing a simple letter. If the matter is more compli - cated, however, most attorneys charge by the hour. Attorneys so hired keep a form for each client that shows work performed per 15 minutes, or quarter of an h\ our. If the attor - ney talks to the client on the phone for 15 minutes and bills at the rat\ e of $200 per hour, then that phone call will be charged $50 toward the client’s bill. As you can see, these fees can quickly add up to large sums. Every time you pick up the phone to ask your attorney a question, the attorney is logging the phone call and it is going on yo\ ur bill.

In personal injury cases, it is typical not to charge clients any money up front but instead to take a percentage of the money won in the lawsuit if it succeeds. The attorney is \ taking the chance that the jury will award a substantial money verdict to cover his or her time expended in the preparation, discovery, and trial of the case. Attorneys typically receive 33 1/3% at the end of a successful trial and 50% at the end of a successful\ appeal. For an attor - ney with a winning record of very large claims, this will add up to a fortune. Most attor - neys, however, do not win every case, and very few win cases that entail million-doll\ ar sea80373_03_c03_037-046.indd 8 10/4/12 3:21 PM 45 admitted as true If the defendant does not answer the allegations in the plaintiff ’s complaint, then the allegation in the com - plaint is considered true.

allegations in the complaint The individ - ually numbered paragraphs in the plain - tiff ’s complaint.

alternative dispute resolution A way to settle a dispute, sometimes using a third party, without going to court.

Answer The formal paper filed by the defendant in response to the plaintiff ’s complaint.

arbitration The process of hiring or employing a designated third party as an arbitrator who renders an opinion that is binding on the parties. attorney’s fees The amount paid to an attorney for services rendered, which may include an hourly fee or a percentage of a final judgment in a civil case.

default judgment A judgment entered by the court when the defendant fails to answer the complaint or show up for the court proceedings.

deposition A form of discovery whereby the parties can ask questions about the upcoming lawsuit and the other side has to answer. The deposition testimony can be in the form of a written record, an audio - tape or videotape, or both.

discovery Prior to a civil trial, a proceed - ing in which the evidence and testimony are divulged to the other side. Key Terms CHAPTER 3 verdicts. As of 2011, the average yearly salary of an attorney was $137,000 according to the Bureau of Labor Statistics ( http://www.bls.gov/oes/current/oes231011.htm ). Bearing in mind that the attorney is paid by the hour, if you work for a company that is being sued, you want to make sure your company structures its time with the attorney so that people are not interrupting each other or engaging in idle chitchat. Management should put one person in charge of organizing any meetings with the attorney and finding out what the attorney needs to know to avoid long and costly and unproductive meetings.

Once you find out what the attorney wants, it is essential to organize materials. If the attor - ney is preparing for litigation, for example, and needs to talk to members of the\ organiza - tion’s staff, it is helpful to provide a list of the names of employees to interview, phone num - bers, times to call, e-mail addresses, and a paragraph summarizing what each one knows.

That way, if what they know is irrelevant, you have saved perhaps an hour of the attorney’s time. If the attorney wants documents, make sure they are clearly labeled and organized.

If you are an entrepreneur and need to start a business, it is essential that you hire an attor - ney with experience in forming a business and experience with tax issues\ . For a detailed discussion of forms of incorporation, see Unit VII, Business Organizations, Chapters 27–31. You will most likely enter into a fee arrangement. To see a website setting forth different fee arrangement letters, go to http://www.americanbar.org/newsletter/public ations/gp_solo_magazine_home/gp_solo_magazine_index/sampleengageletters.\ html . For an excellent website on hiring an attorney, consult Understanding the Legal Fees Agree - ment: Consumer Rights at http://practice.findlaw.com/financing-a-law-firm/understand ing-the-legal-fees-agreement-consumer-rights.html . Key Terms sea80373_03_c03_037-046.indd 9 10/4/12 3:21 PM 46 Key Terms CHAPTER 3 Critical Thinking and Discussion Questions 1. In a civil lawsuit, what is the most important document to acquire from the defendant during discovery, and why? 2. In a civil lawsuit, what are the most important questions to ask the defendant during discovery, and why? 3. Under what circumstances might one consider settling out of court? What are the advantages and disadvantages of doing so? 4. What are the advantages of employing a private judge over a mediator or arbitrator? 5. Why is it important to spend the time to find the right attorney for you\ r specific legal situation? 6. You are asked by the attorney for your company to review the responses to a law - suit. The attorney presents you with the Answer and asks you to look it over. What are you looking for? What should you ask for to properly complete the task? 7. As the manager of 15 employees, you have 2 who cannot get along and have\ reached an impasse. Describe what forms of alternative dispute resolution you could use and the advantages and disadvantages of each. Do research online to see how much it would cost to bring in a third party to help you resolve the dis - pute. Report the costs in your town/city and state. garnishment of wages A court proceed - ing against a defendant who refuses to pay a judgment. In it, money is taken out of the defendant’s paycheck and given to the plaintiff.

impaneling a jury Choosing the jury; also called voir dire . impeach To place the integrity and verac - ity of a witness in doubt by demonstrating before a jury the inaccuracies and contra - dictions between the witness’s testimony and deposition.

interrogatories A form of discovery whereby the other side is given a set of written questions to answer.

judgment The final order by a court in which one side is declared the winner and the other the loser; the declaration that the loser has to pay the winner a certain sum of money. A monetary judgment.

mediation Bringing in a third party to assist with a dispute. negotiation Attempting to work out a res - olution to a dispute with the other party.

opening statements In a civil trial, the phase in which the lawyers tell the jury what they are going to prove in the trial.

private judge, consultation with Another form of alternative dispute resolution in which a former practicing judge is hired by both sides to make a decision.

Record, the The bound transcript of the trial, which includes all the testimony, objections, and admitted evidence.

settling out of court When both sides agree to a monetary settlement rather than having the case go to trial.

testimony The statements made by wit - nesses in court that become part of the Record.

verdict The final decision of a jury about guilt or liability. sea80373_03_c03_037-046.indd 10 10/4/12 3:21 PM