Law Journal 2006.

• Author: Kinney, Ben
• Position: Sponsored Section

"I don't want a lawyer to tell me what I cannot do; I hire them to tell me how to do what I want to do." --John Pierpoint Morgan In its annual Law Journal, BUSINESS NORTH CAROLINA tries to do just that--provide information to tell business leaders how to do what they want to do. These 13 articles were written by some of the state's top business lawyers on topics including employment law, mergers and acquisitions and estate planning. If you run or own a business, all of these topics are important, but you might not be up-to-date on the finer details of the law because you usually are too busy running the day-to-day operations of your business. But legal issues don't wait for opportune times before they surface.

That's why we worry about these things. Who among us hasn't spent a sleepless night thinking about a contract or an employment agreement we aren't 100% sure about? We want to be able to do our jobs to the best of our abilities, and we have attorneys who help us in this endeavor. We need someone who is 100% sure about legal compliance and has the wherewithal to navigate businesses through the sometimes-turbulent waters of business law.

As you read these articles, ask yourself if all your bases are covered.

--Ben Kinney

Publisher

TRIAL IS OFTEN AN ERROR WHEN SETTLING DISPUTES

As a young federal prosecutor, I used to believe that all criminal cases should proceed to jury trial. As a business litigator representing corporate clients, however, I am equally convinced that a trial by jury is almost never in my clients' best interests.

In today's litigious society, two things are apparent: You cannot stop someone from suing you, and the more successful your company, the more likely it is to be sued.

Unfortunately, at every level of corporate activity, disputes can devolve into litigation. In these instances, a company's interests--indeed, the best interests of all parties--are almost always best served by the use of some alternative-dispute-resolution mechanism. The most common of these are mediation and arbitration. Whether the problem is a disagreement involving shareholders, a board of directors, key employees, vendors or customers, ADR provisions in the various agreements and documents that define those relationships offer many advantages over traditional litigation.

Before discussing the benefits of ADR agreements, it is helpful to first understand the basic processes involved in the two principal forms of ADR: mediation and arbitration. Mediation is conducted with an impartial mediator who is often a lawyer, and it is usually conducted in an informal setting. The mediator seeks to understand the key positions and concerns of all parties involved. Mediation typically begins with a private joint mediation session where the parties sit down at the same table and express their basic positions and concerns to each other. The mediator then typically moves each party into separate rooms and shuttles between them in private sessions, or caucuses, in an effort to help the parties understand the strengths and weaknesses of each other's positions and help them craft a solution. Mediation is a confidential process wherein the mediator is not empowered to reach a binding resolution. A binding resolution is reached only by agreement of the parties.

Arbitration is more formal than mediation, and it is conducted with as few as one arbitrator and as many as three. Arbitrators function as judges, and the parties usually express their positions in writing and through oral testimony. Arbitrators hear testimony from the parties and witnesses, consider the evidence submitted and then render a decision that is binding and enforceable on the parties. The arbitration hearing is similar to a traditional trial but differs in important ways. It is a private, abbreviated and more informal process that does not involve a jury. While mediation and arbitration are different ADR mechanisms, they are often used together. If the parties cannot reach agreement through mediation, they move to arbitration.

Two advantages of ADR are cost and expediency. Traditional litigation often involves a lengthy and expensive pretrial process with a complaint and answer, detailed discovery requests, depositions and pretrial motions. All of that takes a great deal of time and effort--by attorneys and company employees--and can increase expenses and decrease employee productivity. ADR, in contrast, typically costs far less than traditional litigation, in part because the ADR process is much quicker and far more efficient. A traditional lawsuit may take several years to resolve; ADR usually takes far less time. The discovery and prehearing process in ADR is usually streamlined and there are typically not many prehearing motions. Further, when a comprehensive ADR provision is set forth in company agreements, the company gets to choose in advance the rules and procedures that will govern the dispute and can often choose both the law that will apply and a convenient venue for resolution of the dispute. In this way, a company can insure that the ADR process will be quick, efficient, convenient and cost-effective. Because the ADR proceedings are usually less complex than traditional litigation--the rules of evidence tend to be far more relaxed, and the proceedings tend to be far more informal--individual litigants in ADR proceedings sometimes choose not to hire a lawyer at all.

Another important advantage of ADR is the preservation of ongoing relationships. Often a business will find itself in a continuing relationship with its opponent long after the dispute has been resolved. A disadvantage to traditional civil litigation is that it is often a formal, rigid, contentious, time-consuming and adversarial process. This does not lend itself to preserving ongoing relationships. However, ADR can be structured to be a "softer" process that is informal, quick, and flexible.

ADR can also produce results that traditional litigation simply cannot. Traditional litigation often is controlled by lawyers and judges or juries. The litigants often are not vocal participants in the process, the ultimate decision is reached by a judge or jury, and the remedies awarded are usually just money damages.

ADR in general, and mediation in particular, invites direct participation by the parties, and it allows them to craft a wide variety of solutions to their disputes. This often gives the parties a greater measure of control over the outcome of their dispute than they would have in traditional litigation, and it can result in creative "win-win" solutions that could never be achieved in a courtroom--solutions that might include such cost-effective measures as a simple apology, which could never be part of a court judgment.

Furthermore, ADR in general, and mediation in particular, is a flexible, inclusive process that seeks a solution that all parties to the dispute can agree upon. In contrast, traditional litigation is a rigid system that often only produces one clear winner--and one clear loser.

Traditional litigation takes place in full public view and can result in the unwanted public disclosure of sensitive corporate information to both the media and competitors. Conversely, ADR is a private means of dispute resolution that is not subject to the same public scrutiny as traditional litigation. This may afford the company a beneficial measure of privacy when unpleasant or sensitive matters are involved. Finally, ADR avoids endless appeals that sometimes attend contentious litigation.

There are many advantages to the inclusion of ADR provisions at every level of activity in a corporation, including shareholder, director, employee, vendor and client agreements. The result may well be a dispute-resolution process that is faster and cheaper than litigation, affords you more control and input into the process, produces a better outcome for all parties involved, is confidential and takes place out of the public eye and preserves beneficial ongoing relationships between your company and others.

Kieran J. Shanahan

Kieran J. Shanahan, principal of Shanahan Law Group and certified mediator, with substantial trial experience, represents small and medium-size companies in business disputes. He spent five years prosecuting white-collar crimes as an assistant U.S. attorney. A graduate of East Carolina University, he received his law degree from UNC Chapel Hill. He is admitted to practice in North Carolina and Georgia.

NANOTECHNOLOGY: THE NEXT REGULATORY FRONTIER?

The U.S. Environmental Protection Agency defines nanotechnology as "the creation and use of structures, devices and systems that have novel properties and functions because of their small size" (about 1 to 100 nanometers in any dimension) with "the ability to control and manipulate matter on an atomic scale." A nanometer is one-billionth of a meter or about 1/10,000 the diameter of a human hair or half the diameter of DNA.

A March 2005 survey found more than 1,600 nanotechnology companies operating in the U.S., a figure that is expected to increase during the next decade. It is predicted that, by the year 2014, products incorporating nanotechnology will constitute about 15% of global manufacturing output. The National Science Foundation has stated that nanotechnology will have a $1 trillion impact on the global economy by 2015 and will employ as many as 1 million American workers.

There are more than 80 commercially available products using nanotechnology, including cosmetics, sunscreens, clothing, computers, eyeglass coatings and medical devices. If approved, "nanoparticles" (vehicles for delivering drugs and vaccines directly into cells) could be delivered orally, injected into muscles, inserted beneath skin or inhaled. That could revolutionize the treatment of various disorders such as diabetes. Since the 1920s, insulin has been given by frequent, costly, painful injections. Nanoparticles potentially could deliver insulin...