L

ItV to the High Cost of Litigation

Center for Public Resources (CPR) New York, New York Vol. 6, No. 10 October 1988

Contents Battle Against Belligerence 162 ADR Plan Is Featured in Pending Product-Liability Proposals 163 $1 OOG Fine-and Firm Liable 163 Briefs

School Sale 165 Judge Honored 165

Drawing by Farris 165 Survey of 500 CEOs Finds Product Liability Has Significant Impact 166 From the Trenches: A Survey Selection 167 Quotation of the Month 168 Facing Future, ATM Group Banks on ADR 169 From the Journals 169 Miscellanea 170

CPR ‘Pledge’ List Nears 350 161 Corporate Policy Statement on ADR 17 1 Registr of Pledge Subscri ‘6 ers 172

CPR ‘Pledge’ c List Nears 350 1

Each year, Alternatives presents a reg- istry of companies that have signed

long as last year’s. From the 200-plus signers listed in 1987, the 1988 regis-

the CPR Corporate Policy Statement on ADR. Often called the “pledge,” the Policy Statement is a three-para- graph promise by subscribing corpo- rations that they will endeavor to re- solve any disputes with other signatories through negotiation or ADR before pursuing full-scale liti- gation. Signed by the company’s chief executive officer and the chief legal officer, the pledge is an au- thoritative pronouncement of cor- porate policy that extends to both the parent company and its domestic subsidiaries.

This year’s pledge registry-fea- tured in this issue-is half again as

try has grown to nearly 350 corpora- tions. The signatories, which span the spectrum of the industrial and service sectors, include many of the nation’s largest enterprises.

Though the pledge list has grown gradually since CPR introduced it in 1984, the recent growth is due in large part to a CPR initiative last summer. In June, the chairmen1 chief executive officers of five major companies sent a letter to the CEOs and chief legal officers of the Fortune 1000, urging them to sign the pledge and bring their companies into the CPR registry. The five CEOs were (continued on page 171)

Texas Teller-Machine Case Resolved by Law Professor

/ In late June, a major antitrust dis- pute involving fees charged at more than 4,500 bank-teller machines in the Southwest was resolved through an ADR process conducted by ‘Thomas E. Kauper, the prominent antitrust scholar.

The ADR procedure was a bind- ing arbitration, but several special features sharply distinguished it from garden-variety arbitration. The hearing was highlighted by Pro- fessor Kauper’s procedural innova- tions, for instance. And his expertise and prominence were a way in which the parties invested the outcome of this private process with preceden- tial prestige-both for other banks

facing similar disputes and for public agencies. Also, the parties crafted a creative agreement on the quantum of damages on one issue, should the neutral find liability on that ques- tion. And the parties further agreed to use ADR for any future disputes over the same matters.

“I can’t say enough about how good this procedure was,” said one of the case lawyers, Robert M. Cohan of the Dallas firm of Cohan, Simp- son, Cowlishaw, Aranza & Wulff. In interviews with Alternatives, the law- yers on both sides described the dis- pute, its resolution, and the “ex- traordinary” performance, as one (continued on page 164)

Vol. 6, No. 10 Octoher 1988 171 -- Alternatives

CPR Pledge List (continued j r o m Jront puge)

Rand V. Araskog of ITT, David T. Kearns of Xerox, David M. Roderick of USX, C. J. Silas of Phillips Pe- troleum, and R. J. Ventres of Borden.

The five knew whereof they spoke. Each heads a company that is both a pledge signer as well as a sus- taining member of the CPR Legal Program.

In their letter, the five senior busi- ness executives argued that “there is nothing to lose but much to gain” by signing the pledge. They noted that the pledge can lead to settlement early, “before litigation takes on a life of its own.” They explained that, as a predispute statement of official corporate policy, the pledge should dispel fears that an overture to nego- tiation or ADR will be construed as a sign of weakness or lack of confi- dence in a particular case.

And they said the pledge can bring a payoff of “substantial cost savings” for the signatory company. For proof, the five CEOs referred to a 1987 CPK survey of pledge signers. Sparking a 25 percent response rate, the survey revealed that 76 percent of the respondents had used the pledge to reach early settlement. And two-thirds of those using ADR in a particular case achieved signifi- cant savings of time and money, the data showed.

(See Alternatives, December 1987, for more details about the results of the CPR pledge survey. On the sav- ings achievable through ADR gener- ally, see Alternatives, May 1988.

The prospect of saving time and money in the resolution of disputes has spurred several prestigious busi- ness and legal groups to endorse the CPR Policy Statement on ADK, the five CEOs noted. Among these groups are the Business Roundtable, the National Association of Man- ufacturers and the American Corpo- rate Counsel Association.

With affirmative responses still coming in at this writing, the reac- tion to the CEOs’ letter has been markedly strong. By August 3 1, 112

of the solicited Fortune 1000 com- panies had signed the pledge, in- creasing the roster of signatories from 230 LO 342-a jump of about 50 percent.

Like the 230 who had subscribed prior to this year (half of those com- panies rank in the Fortune 500), the new group includes many very large enterprises. And, like the 230, the newcomers are engaged in a variety of economic endeavors.

To name but a few of the new sig- natories: Trans World Airlines Inc., Black & Decker Corp., Safeway

Unisys Corp., Warner Communica- tions Inc., Pennzoil Co., Bulova Corp., Diebold Inc., Hilton Hotels Corp., Grumman Corp., Raytheon Co., MCI Communications Corp. and Munsingwear Inc.

The 1988 registry of CPR pledge subscribers, featured in this issue, should provide a good reference tool for corporate law departments and law firms. For more information about the pledge and its use, please contact the CPR Legal Program, 366 Madison Avenue, New York, NY 10017-2311. Telephone: (212)

Stores Inc., General Electric Co., 949-6490.

Corporate Policy Statement on ADR

COMPANY

We recognize that for many business disputes there is a less expen- sive, more effective method of resolution than the traditional law- suit. Alternative dispute resolution (ADR) procedures involve col- laborative techniques which can often spare businesses the high costs of litigation.

In recognition of the foregoing, we subscribe to the following state- ment of principle on behalf of our company and its domestic subsidi- aries: *

In the event of a business dispute between our company and another company which has made or will then make a similar statement, we are prepared to explore with that other party resolution of the dispute through negotiation or ADR techniques before pursuing full-scale litigation. If either party believes that the dispute is not suitable for ADR techniques, or if such techniques do not produce results satisfactory to the disputants, either party may proceed with litigation.

CH I t F EXLCL’I‘IVE. OFFICER

(;HIEF LEGAL OFFICER

DAI‘E

*Our major operating subsidiaries are: