Online Settlements Revisited.

Over the weekend David Giacolone over at EthicalEsq et HaikuEsq, a blog that is quickly becoming one of my favorites, responded to my post concerning my disfavor of "online settlements". Apparently, another one of my favorites, Carolyn Elephant, had also come out in favor of the online settlement concept, although I missed her article. So, I thank David for his response, and for alerting me to Carolyn's article.

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In response to my challenge to tell me where I may be missing the boat on the value of the online settlement process to the client, David made the following observations:

• the Crain's article makes it clear that cases will be carefully selected (and will be low-end cases); certainly cases exist that are far too complex for such a simplified system
  
  
• the NYC program's facilitator will, per the article, ask for additional information, not merely a settlement offer, giving the lawyer the opportunity to marshall facts and arguments; there also doesn't appear to be any prohibition against contacting opposing counsel by letter or phone
  
  
• frankly, there are many cases in which the attorney brings little if any "added value" to the claim that the plaintiff brings to the attorney (see, e.g., this law review article, at 1213) -- this can happen when, inter alia, the claim is simple, the defendant readily acknowledges its responsibility, or the busy and/or lazy lawyer simply doesn't do much
  
  
• for many injured persons the highest forms of added value are expedition of the process and reduction of the lawyer's fees to reflect a quickly reached settlement; online settlement can hopefully lead to both results in a significant number of cases, with very little to lose by giving the process a try.

I will address each one of these in turn. With respect to the observation that the system will be used only for low end cases, it has been my experience that those cases need more negotiation than some of the higher end ones. In the "low end" cases, you find alot of the low impact, high damage matters, and usually there is alot of persuading that takes place through direct contact with the claims adjuster. I fear that this important interaction will be lost if online settlements follow the pattern that I personally experienced, which was that neither the adjuster nor the attorney have any direct contact about the matter.

As for asking for additional information about the case, in the one that I handled, and in others that I have received feedback on from others who participated in the process, the additional information tendered by the parties was not made available to the other party, but was merely gathered to make sure the case was one that was appropriate for the process in the eyes of the facilitator. While I think that is a good thing, the additional information does nothing to contribute to the actual settlement process if my understanding of its use is accurate.

As for cases where it is believed that the attorney doesn't add value to the case where the claim is simple, liability is admitted, or someone has chosen a lazy attorney, all but the last situation would seem to suggest that maybe an attorney would not be needed at all in those cases, especially if the claimants had access to the online settlement process. I agree that in simple cases, where liability is admitted, and the only issue is what the government will pay, and what the claimant will accept, that the trade off of efficiency over advocacy may be worth the risk, but I think it would be more beneficial for a claimant with such a case to handle the matter him or herself, and save the attorney's fee. If a lawyer really doesn't have anything meaningful to add to the process, don't add the lawyer.

As for the argument concerning lazy attorneys, it seems to me that creating a mechanism where lazy attorneys can become even more lazy, simply perpetuates or fuels an unacceptable trait in the profession, and that just the opposite concept needs to be encouraged. For example, in some states, insurance companies are required to certify what action has taken place in the handling of a claim filed with it, every 45 days, in some instances, as a way to assure that claims don't get lost in the mix, and claimants don't get put on the "back burner". If attorneys were required to do the same, or at least to maintain such records, there would be fewer "lazy attorneys" imposing on claimants. Perhaps if a claimant could terminate it's contract without an obligation to pay attorney's fees where an attorney failed to take action on a case within a reasonably specified time, the "lazy attorney" situation could be resolved.

While David raises some excellent points concerning the merits of online settlements, I think the most compelling would have to be the fact that quick settlements, especially in smaller, less complex cases are often of more value to the claimant than anything else, and with that premise I agree. However, it has not been my experience that attorneys handling such cases involving are reducing their fees, nor do I believe they should necessarily and here's why. We have already recognized that the online settlement process is being reserved for the simpler, lower end cases, which means that there is typically less money at stake. Those cases, when taken on a contingency fee bases, are very difficult for an attorney to make cost effective. The time taken in the initial interview, and in gathering documents on the claim can often exceed the value of the attorney's time, even before negotiations with a claims adjuster begin. Under those circumstances, I find it difficult to suggest to an attorney that they reduce their fee simply because an online settlement mechanism was available. The attorney still has to evaluate the case, understand the online process from a strategic stand point, and attempt to maximize the recovery for the client by trying to systematically arrive at the highest figure the attorney believes the adjuster would have offered to resolve the case.

It has also been my experience that the offer to submit the case to online settlement often occurs after the attorney has already put in substantial time evaluating the case, and preparing a traditional demand, and indeed in my case, the offer actually occurred after I had negotiated directly with the claims adjuster a few times. In these circumstances, a reduction of fee would have in my opinion unwarranted.

David is right about one other thing. Nothing in the process suggests that the parties cannot contact each other through their representatives and communicate directly, but then, if they were willing to do that, they wouldn't need the online settlement process. In my case, the online settlement process actually delayed the process since we submitted two rounds of offers and demands and the case didn't settle, until I actually contacted the adjuster again after the process was complete.

It should also be noted that there is a fee that is paid by the claimant to the faciliator if the case is successfully settled, so in some cases, the cost of resolving the case may actually be more. Perhaps New York has arranged to be responsible for the fee, and if they haven't perhaps they should be, since it is saving the city money to have claimants participate.

Now, having addressed David's points, I would agree that if settlements in smaller cases can occur more quickly, and less expensively for the claimant, that online settlements could offer benefits in limited circumstances. However, my experience with some of these alternative dispute mechanisms is that they start to be employed in a much broader fashion than what they were initially intended for, and then rights start to be negatively affected.

I would reiterate my original premise that online settlements serve to minimize the important role an attorney could play in representing a client in negotiations, and maybe that's our fault as professionals if we are allowing laziness on our part to make an option like online settlements viable. I believe there are more effective ways for clients to get the value they deserve without resorting to a system that minimizes an attorney's usefulness. How about starting with a commitment to schedule settlement negotiations for a time certain, instead of playing telephone tag with the other party. That is usually what results in the most delays concerning settlement. If I had to go online to submit my offer, I'd rather be talking directly to the "pocket book" instead of trying to guess what was in it.

Thank you to David and to Carolyn for their thoughts on this very important topic. Their input and positions on the issues have helped me to consider all sides of the equation.

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