SC Lawyer, July 2004, #1. Staying ahead of the ADR curve in South Carolina.

• Author: By Van Anderson and Biff Sowell

South Carolina Lawyer

2004.

SC Lawyer, July 2004, #1.

Staying ahead of the ADR curve in South Carolina

South Carolina LawyerJuly 2004Staying ahead of the ADR curve in South CarolinaBy Van Anderson and Biff SowellAs Alternative Dispute Resolution moves from the margin to the mainstream of general acceptance and common practice, it likewise becomes more integrated into the lawyer's several roles as advisor, counselor and representative of clients.

Introduction

This is an exciting time to be a part of the legal system in South Carolina because it is on the verge of so much change. With the revised South Carolina Rules of Professional Conduct (SCRPC) nearing the final stages of promulgation and the implementation of a statewide court-annexed Alternative Dispute Resolution program possibly right around the corner, lawyers and judges alike can expect a continuing shift in the practice of law and dispute resolution. With the arrival of such changes comes the need to adapt to and embrace them. This article discusses some of these issues and offers suggested responses.

Competent representation

The fundamental first requirement in the SCRPC is competent representation. "Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation." S.C. App. Ct. R. 407, R. 1.1 (2004). With respect to mediation, every attorney should have an understanding about the fundamental rules pertaining to mediation and a basic comprehension of negotiation tactics.

Without this initial level of competence about ADR, it is unlikely that attorneys will be able to comply with other duties germane to ADR discussed later in this article, particularly relating to the duty to advise. More concretely, exceptionally inept or inexperienced attorney-negotiators can reach unfavorable settlements for their clients and therefore become in technical breach of the SCRPC. To satisfy the requirement of competent representation, the SCRPC encourage lawyers to "engage in continuing study and education." Id. at R. 1.1 cmt. 3. The Supreme Court's Commission on Alternative Dispute Resolution housed at the South Carolina Bar is dedicated to providing such a service and is a rich source of information concerning ADR. For more details about the Commission or CLE opportunities for ADR, visit www.scbar.org/adr or contact Andrew Walsh at andrew.walsh@scbar.org or (803) 799-6653, ext. 159.

The duty to advise about ADR

Currently, there is at most an implied duty to advise about ADR. This implied duty is derived from four sources within the SCRPC. First, the preamble to the SCRPC states that "a lawyer provides a client with an informed understanding of the client's legal rights and obligations and explains their practical implications." Id. at pmbl. Second, "a client also has a right to consult with a lawyer about the means to be used in pursuing th[e] objectives [of litigation]." Id. at R. 1.2 cmt. 1. Third, "a lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation." Id. at R. 1.4(b). Finally, Rule 2.1 states that "in rendering advice, a lawyer may refer not only to law but to other considerations . . . that may be relevant to the client's situation." Id. at R. 2.1.

These statements point to an implied duty to inform and educate a client about ADR when the lawyer deems it relevant and appropriate. Years ago, this argument for an implied duty would not have been as strong or evident. However, the proliferation of ADR in our system of justice has dictated a more thoughtful approach to dispute resolution. As ADR moves from the margin to the mainstream of general acceptance and common practice, it likewise becomes more integrated into the lawyer's several roles as advisor, counselor and representative of clients.

The 2002 Model Rules of Professional Conduct (2002 Model Rules) reflect this trend and take it a step further, concluding that "when a matter is likely to involve litigation, it may be necessary under Rule 1.4 to inform the client of forms of dispute resolution that might constitute reasonable alternatives to litigation." Model Rules of Prof'l Conduct R. 2.1 cmt. 5 (2002). This certainly creates a stronger duty to advise about ADR in appropriate situations and heightens the need for attorneys to achieve competency in it. The obligation to inform clients about ADR is perhaps greatest in cases where mediation or arbitration may be mandated as discussed below. Indeed, Family Court Mediation Rule 5(a) and its proposed successor Court ADR Rule 6(a) expressly mandate that attorneys fairly and objectively inform their clients about mediation and arbitration.

The South Carolina Supreme Court has not yet adopted the 2002 revisions; however, the process is well underway. In January 2003, the South Carolina Bar's House of Delegates approved the revisions in toto. Attorneys should be cognizant of the impact that the 2002 Model Rules will have on their practice and should monitor the adoption process. For a more complete discussion of the impact of 2002 Model Rules as they relate to ADR participants, see Comment, Alternative Dispute Resolution and Professional Responsibility in South Carolina: A Changing Landscape, 55 S.C. L. Rev. 191 (2003).

What kind of advice?

ADR is not the be all or end all for every legal dispute. In some cases it can be the optimal solution; in others it has limited utility. Generally, the type of advice that an attorney should give relates to five different issues: (1) the county in which the case is litigated; (2) good faith participation; (3) the side represented; (4) the complexity of the claims; and (5) the relationship of the parties.

* Location, location, location

The circuit and family courts of various counties participate in court-annexed ADR pilot programs, including Horry, Greenville, Richland, Lexington, Anderson and Florence. Attorneys should inform clients that cases brought in these counties are subject to court-ordered ADR, depending upon the nature of the claim, the cause of action and amount in dispute. For a useful summary of the South Carolina ADR Rules on this point, see Andrew M. Walsh, South Carolina Court-Annexed ADR: Past, Present and Future, South Carolina Lawyer, January 2004, at p.20; Comment, supra at 200. Furthermore, attorneys may want to provide a general description of ADR in order to communicate the procedure and objectives of litigation pursuant to Rule 1.4 of the SCRPC. Finally, in a court-ordered ADR county, the costs of mediation are so imminent that they should be affirmatively disclosed in accordance with Rule 1.5(b) of the SCRPC. Because of the indeterminate nature of the duration and outcome of ADR at this inchoate stage, the lawyer need only provide a ballpark figure. The most prudent course of action for the attorney is to stipulate who will bear the costs of ADR and other expenses in the engagement agreement. Incidentally, a case that recently arose in the Fourth Circuit, In re Anonymous, 283 F.3d 627 (4th Cir. 2002), could have been avoided altogether had the lawyer's engagement agreement contained such a clause.

In court-ordered ADR counties, reluctance to mediate may pose problems. If one or more parties does not want to mediate in a county that is not participating in an ADR pilot program, the case will proceed to court. However, in a pilot program county, if parties are predisposed to a courtroom battle and a judge orders the case to mediation, there is sometimes a temptation to go through the motions during the mediation to get back into the courtroom as quickly as possible. Attorneys should not be disingenuous during a court-ordered mediation conference nor should they counsel clients to act in such a manner. This behavior may result in sanctions to the transgressing party for failure to participate in good faith.

* Good faith participation

Good faith participation also includes attendance of the appropriate parties with full authority to settle. ADR Rule 5 enumerates the people required to attend, which includes the following: all individual parties or representatives of said parties with full authority to settle, the party's counsel of record and in the case of insured parties to the dispute, a representative of the insurance carrier - but not just the carrier's outside counsel - also having full authority to settle. S.C. Cir. Ct. Alt. Disp. Resol. R. 5(a)(2)-(4) (2004); see also proposed Court-Annexed ADR Rules 6(b) and 10. The attendance requirement is an attempt to ensure effective and meaningful mediation conferences by compelling the presence of parties empowered to make settlement decisions. There has been some ambiguity regarding the definition of full authority to settle, and that term becomes even more amorphous when claims for damages above and beyond actual past and future injuries are asserted, namely abstract damage claims such as punitives and emotional injuries. At the federal level, Judge David C. Norton has issued a standing order defining full authority to settle; however, no similar action has been taken at the state level. Judge Norton's definition states the following:

"Full settlement authority" for the defendant means an individual who can decide to offer the plaintiff a sum up to the existing demand of the plaintiff or the policy limits of any applicable insurance policy, whichever is less. "Full settlement authority" for the plaintiff means the plaintiff himself or herself or a representative of the plaintiff who can make a binding decision on behalf of the plaintiff or plaintiffs.

Standing Order to Conduct Mediation, United States District Court Judge David C. Norton, January 2002, www.scd.uscourts. gov/JUDGES/D_NORTON.asp (last visited April 14, 2004). Lawyers should be cognizant of the attendance requirement and adhere to it, because failure to do so could result in sanctions and other disciplinary consequences.

At least in one circuit good faith participation means more than just physical attendance of parties with full authority to settle. In Redbone Alley of Columbia, Inc. v. Florence Restaurant Supply, Inc., No. 00-CP-21-902 (S.C. 12th Cir. Feb. 22, 2002), the court held that "the mediation process will be completely thwarted and avoided by the defendants and their carriers if the rules simply require the physical attendance of someone at the mediation conference, even though that person might have no knowledge of the file and no ability to discuss and negotiate a settlement." Id. at 7. Two consecutive times, the defendant sent someone to the mediation conference who had full authority to settle, but had virtually no knowledge of the legal and factual issues in the case. Consequently, the court awarded the plaintiff reasonable attorney's fees, its portion of the mediation fees and service of process and court reporting fees. Thus, good faith participation may also include the attendance of parties with sufficient knowledge of the situation to participate meaningfully in the mediation conference. See also Draft Resolution On Good Faith Requirements For Mediators And Mediation Advocates In Court-Mandated Mediation Programs, December 1, 2003.

* Which side of the "v." are you on?

If the plaintiff has not filed a complaint or if one was filed in a county not participating in an ADR pilot program, attorneys should consider other factors in advising clients about ADR. In these situations, attorneys - not judges - have the discretion over whether to pursue ADR, so they must determine if it is in their client's best interest. First, the nature of the litigation and which side of the "v." you are on greatly affects the potential utility of ADR. For example, it may be in the plaintiff's best interest to litigate a wrongful death action based on a strong factual and legal foundation. This claim may fare better at trial, where a jury - a sympathetic and sensitive panel of the plaintiff's peers - has wide latitude in awarding damages. However, the injured plaintiff should also be warned that garnering such an award might require several years of trial and appellate work. ADR could greatly expedite the process of recovering money and moving on with life. In this same case, counsel for the defense might encourage a pretrial resolution to reduce the exposure to liability and defense costs and to minimize media coverage. On the other hand, a weak case founded upon tenuous facts or a novel legal theory may be one where ADR would be more beneficial for the plaintiff, but the defense would rather take its chances on a motion for summary judgment.

Timing can also be important when critical motions - like a motion to change venue or a motion for summary judgment - are pending. Often depending upon one's side of the motion and its strength, a party must decide whether mediation is best timed before or after either (1) a hearing on the motion or (2) a ruling on the motion. Like litigation, there is cat and mouse in mediation too.

* What kinds of claims are at issue?

Another consideration is the complexity of the case at hand. Many product liability actions, claims that typically require massive amounts of discovery and expert involvement, are not ideal candidates for early ADR. Without extensive discovery concerning causation and proof of defect, often neither party really knows who was at fault and the amount that would fairly compensate the injury. However, there are other forms of ADR that are appropriate in this situation. Some types of ADR act more as litigation lubricants than dispute resolvers. For instance, early neutral evaluation (ENE) can be geared more towards case management than avoiding the courtroom and can be extremely beneficial in complex cases requiring a lot of pretrial work. On the other hand, there are certain product cases that do benefit from early mediation. Examples are an asbestosis case or an SUV rollover case. The lawyers on both sides typically have substantial experience with these types of cases. These cases are mature in the sense that the lawyers, because of their experience, already have a good idea about which factors are important to the outcome and therefore what the range of values are in each case. In other words, the cases have become formulaic, and therefore both sides can effectively evaluate and mediate them at an early stage.

* How are the parties related?

Attorneys should also consider the relationship of the parties to a dispute. One of ADR's main advantages is that it avoids the adversarial setting of the courtroom. ADR is a great solution for parties on either side of a dispute that want or need to maintain an amicable relationship. For instance, mediation has been particularly useful in intra-family disputes such as divorces between parents who must share custody of children. Also, parties interested in preserving a symbiotic business relationship or even a friendship after resolution of a dispute can benefit from ADR.

Conclusion

To sum up, the representative attorney has a duty, whether implied or express, to advise clients about ADR in appropriate situations. Its acceptance and widespread use in the legal community is a sign that it is here to stay. To this end, lawyers should become proficient in it, from being able to determine which cases are good candidates for ADR to effectively negotiating the best deal for the client. Finally, representative attorneys need to stay abreast of the state of the law concerning the SCRPC and court-ordered ADR programs. The revisions to the SCRPC should soon be promulgated, and attorneys need to understand how they affect the vital roles that they play. Moreover, this state is on its way to adopting a statewide court-ordered ADR program, which would change every attorney's practice.

Van Anderson is completing his final year at the University of South Carolina School of Law, pursuing a joint JD/MIBS degree, and Biff Sowell is a partner at Sowell Gray Stepp & Laffitte, LLC in Columbia.

Copyright (c) 2004 by the South Carolina Bar. All rights reserved. No part of this publication may be reproduced without written permission.