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April 2000

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Litigation Support

Online Services Speed Settlements

New Internet-based services offer neutral venues to help settle disputes.

By Christopher R. Christensen

AS ALL TRIAL lawyers know, before you can settle a law suit or claim, be it small or large, you just about always have to dance. During the negotiation tango, parties throw out "high ball" and "low ball" figures, until they usually find a middle ground. The dance may be short and painless, or long and expensive, if it winds its way through traditional legal channels. In the rare cases that don't settle, the negotiation dance finishes in a courtroom.

Now, there's new players that can speed up resolution of disputes. New "Online Dispute Resolution Services" (ODRS) are litigation support tools emerging with the growth of the Internet. Companies offering ODRS include, Inc., (U.S. Settlement Corp.), and

ODRS operate something akin to a "reverse auction" or a "blind-bidding system." The services do not evaluate merits of claims or the strength of legal positions; instead, they serve strictly as a neutral arena for offers.

Using the ODRS is a simple process. Typically, the defendant, (or, in most cases, his or her insurer), initiates the process, logging on to the ODRS Web site using an encrypted password. After uploading basic information about the claim, the defendant enters settlement offers. The defendant selects the amount of time that the offer will remain open, typically, 30 to 60 days.

The plaintiff's attorney then is notified that a settlement offers have been entered and is given a user name and password. The plaintiff can either accept or decline the invitation to participate. If the plaintiff decides to participate, he or she simply logs onto the Web site and posts the settlement demands. Once both parties have entered their demands and offers in the system, they are instantly matched on a round by round basis. If the offer and demand are within a certain range (typically 30 percent or $5,000) the parties agree to settle the case for the median amount.

Most ODRS systems operate using the same basic operational model. One program uses an "open bid" system whereby parties place a number of bids over a period of 60 days. Parties that use this system pay a fee each time they bid.

Another service offers a "three-round" bidding system, which sets parameters for the parties involved. This system helps keep negotiations within both parties' predetermined ranges. For example, in a three-round process, the first demand might be for $200,000, with a settlement offer of $40,000. Round two might produce an offer of $60,000 against a demand of $150,000. Round three might generate a demand of $100,000, an offer of $80,000, and a settlement at $90,000.

Obviously, online dispute resolution may not be the best tool for settling all types of disputes. ODRS is best suited for resolving small- to medium-sized personal injury or business liability claims that may not otherwise justify the expense of litigation or traditional alternative dispute resolution. It also can be effective for settling workers' compensation and subrogation claims.

One of the most attractive features of ODRS is that neither side ever has access the other side's figures. If the attempt to settle online is unsuccessful, both sides are free to take whatever future negotiating positions they want without fear that their adversary could use a previous offer or demand against them.

Fee Structures

Online dispute resolution services offer varying fee structures, and are generally less expensive than traditional ADR. Some services charge a fee to register a claim; others waive registraiton fees for cases submitted via the Web site. On some services, fees are based on both parties agreeing to participate in the offer/demand process; others base fees on the amount of bids that parties choose to enter. Usually an additional fee is charged if the case settles. Generally, if the claim does not settle, no further fees are accessed.

The real benefit to ODRS is that it can speed up claims resolution, which can lead to increased productivity. ODRS is available 24/7, which allows parties to enter demands or offers outside working hours. The system encourages early settlements of the more straightforward claims, allowing professionals to focus more time on complex claims that require a greater commitment and expense to resolve.

Of course, ODRS is not a panacea. Some cases require face-to-face negotiations, because of the complexity of legal issues, multiplicity of parties and other factors. It is sometimes impossible to determine the value of a case until certain legal issues are resolved by a court. But one thing is certain: Internet-based services such as ODRS will change both legal and insurance practices.

Christopher R. Christensen is a partner in New York City's Condon & Forsyth LLP. He specializes in Internet and e-commerce law, and and represents, Inc.

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