Harvey Meller

Vancouver Sun - MOVES
March 9th, 2009

Harvey Meller has joined Ellis Business Lawyers as an associate lawyer focusing his practice on business law, business transactions and entertainment law. Click Vancouver Sun article or here for National Post article.

Billable Hours Giving Ground at Law Firms

By JONATHAN D. GLATER. Published: January 30th, 2009 - New York Times.

With clients watching costs, law firms are rethinking the billable hour, with some firms adopting flat fees instead.

Clients have complained for years that the practice of billing for each hour worked can encourage law firms to prolong a client’s problem rather than solve it. But the rough economic climate is making clients more demanding, leading many law firms to rethink their business model.

“This is the time to get rid of the billable hour,” said Evan R. Chesler, presiding partner at Cravath, Swaine & Moore in New York, one of a number of large firms whose most senior lawyers bill more than $800 an hour.

“Clients are concerned about the budgets, more so than perhaps a year or two ago,” he added, with a lawyer’s gift for understatement.

Big law firms are worried about their budgets, too. Deals are drying up, and only the bankruptcy business is thriving. Two top firms, Heller Ehrman and Thelen, have collapsed in recent months. Others have laid off lawyers and staff. So cost-conscious clients may now be able to sway long reluctant partners to accept alternatives.

The evidence of a shift away from billable hours is, for now, anecdotal, as few surveys exist. But partners at a half-dozen other big bellwether firms and lawyers at corporations, who sometimes engage outside counsel, say they are more often seeing different pay arrangements.

Mr. Chesler, who is an advocate of the new billing practices, said that instead of paying for hours worked, more clients are paying Cravath flat fees for handling transactions and success fees for positive outcomes, as well as payments for meeting other benchmarks. He said that such arrangements were still a relatively small part of his firm’s total business, but declined to discuss billable rates and prices in detail.

The system of billing by the hour has been firmly in place since the 1960s; keeping track of time spent provided a rationale for the amount charged. In earlier, perhaps more trusting times, firms stated a price “for services rendered,” without explanation.

But one has only to eavesdrop on a table of law associates comparing their workloads to get a sense of how entrenched the billable hour is, creating a pecking order among lawyers, identifying the best as the busiest and the most costly.

With a sigh that is simultaneously proud and pained, lawyers will talk about charging clients for 3,000 or more hours in a year — a figure that means a lawyer spent about 12 hours a day of every weekday drafting motions or contracts and reviewing other lawyers’ motions and contracts.

“Does this make any sense?” said David B. Wilkins, professor of legal ethics and director of the program on the legal profession at Harvard. “It makes as much sense as any other kind of effort to measure your value by some kind of objective, extrinsic measure. Which is not much.”

To be sure, lawyers may be talking a good game but secretly hoping that the economy will bounce back and everything will return to normal, said Frederick J. Krebs, president of the Association of Corporate Counsel, whose members work in the legal departments of corporations and other organizations. He said that lawyers cheerfully lamented the bad incentives created by billable time for years, even as they grew rich from the practice.

“I like to paraphrase Churchill,” Mr. Krebs said. “In all these conversations, never has so little been accomplished by so many for so long. It just hasn’t happened.”

But the crashing economy may achieve what client complaints could not, Mr. Krebs added. “We may well be at a tipping point here.”

Greed may also encourage lawyers to change their payment plans. Law firms are running out of hours that they can bill in a year, said Scott F. Turow, best-selling author of legal thrillers and a partner at Sonnenschein Nath & Rosenthal in Chicago.

“Firms are approaching the limit of how hard they can ask lawyers to work,” he wrote, in an e-mail response to a reporter’s query. “Without alternative billing schemes, lawyers will not be able to maintain the rapid escalation in incomes that big firms have seen.”
e legal business — the billable hour.

By JONATHAN D. GLATER. Published: January 30, 2009

Why Dispute Resolution is Better than a Civil Case

Dispute resolutions are methods of settling civil differences outside a formal court of law. They have various advantages over litigations, not the least of which is the significantly reduced cost. Dispute resolution plays a large role mostly in business and family affairs – either in the division of property when business partners separate or in the separation of husband and wife and the subsequent division of property and custody of children, most individuals prefer the relative anonymity of a dispute resolution rather than having to wash their dirty laundry in public.

There are three kinds of dispute resolution:

• Mediation: involves an amicable resolution to the problem in the presence of a neutral individual whose main role is to smooth ruffled feathers and help them reach an understanding. A mediator is not someone who tries to bring a reconciliation between the two warring parties; rather, his or her role is limited to remaining an almost silent spectator as both parties try to reach an amicable settlement, stepping in only to prevent potential flare ups and physical altercations.

• Neutral Evaluation: A neutral evaluation is similar to a court trial in that an expert on the law, like a judge or senior lawyer, is provided with details of both sides of the case and asked to provide his or her opinion on the ruling both parties can expect if they take their differences before a court of law. Each of the parties, or their individual lawyers, present the facts of the case either as written statements or as oral depositions, and wait for the neutral third party arbitrator to provide his or her version of the outcome.
  

• Arbitration: involves a third party adjudicator who listens to both sides of the case and pronounces a ruling, as is done in a court of law.

Mediation and neutral evaluation are different from arbitration because:

• Both parties have to agree by the decision of the arbitrator as opposed to mediation or neutral evaluation where the parties are free to seek the services of other mediators if they are not satisfied with the present advice or are unable to reach an amicable solution to their differences.

• A ruling in an arbitration is similar to the ruling of a judge in a court of law. But, while it has a whole lot of similarities with a civil case, there are a number of differences:

1. It’s not as expensive, although you do have to pay for the services of the arbitrator for their time and expertise. Court cases are notorious for draining you of all your resources, what with having to pay for attorneys, expert witnesses and the cost of a trial. Compared to this rigmarole, arbitration is a cheap (yet legal) option.
2. You don’t have to wait for the court calendar to clear before your case is heard, thus saving yourself precious time in which you can recoup your losses and get on with your work and life rather than waste time in limbo waiting for your case to come to trial.
3. And best of all, your private affairs remain private. Dispute resolutions are not open affairs like court cases where the proceedings are transcribed by a court reporter and saved for posterity. This saves you the ignominy of losing both existing and future clients as a result of the ugliness of the dispute.

This post was contributed by Kelly Kilpatrick, who writes on the subject of the colleges for criminal justice. She invites your feedback at kellykilpatrick24@gmail.com.

FAQ'S - Business Dispute Resolution

Business Dispute Resolution
Business dispute resolution can involve mediation as well as litigation, but my orientation from the outset is always going to be: how do we get into a position to resolve this dispute? I am always trying to arrive at an efficient, effective resolution of the dispute without spending unnecessary amounts of resources. I am looking at an alternative to the typical litigation process, which can often take months or years to reach a resolution. I try to find an opportunity to use mediation or negotiation at various stages, but I will always attempt to resolve the dispute from the outset by encouraging dialogue between the parties, giving them both an opportunity to explain where they are coming from and create an opportunity for resolution. This doesn’t happen in every situation, however.

Sometimes, by the time they have contacted a lawyer, the relationship between the parties has soured, and some litigation will be necessary. What we do then is start the litigation process and take as many steps in that process as are necessary.

Any lawyer who is dealing with business dispute resolution needs to be competent at litigating and using the various litigation tools that are available, as well as having skills as a problem solver. Those problem solving skills involve analytical skills to understand what is going on with the business disputes. Having a sound understanding of business helps a lot in this area too, and I think my previous experience as a business owner and the business manager of various businesses including a public company gives me that background. A knowledge of business is helpful as well as expertise and experience with alternative dispute resolution methods, primarily mediation and negotiation.

Mediation
The benefits of mediation in business dispute resolution.
Litigation is a fairly expensive process, particularly civil litigation. The disadvantage is not only the cost of litigation but also the time involved. A typical civil case can take 18 months to two years to resolve. On the other hand, mediation can be done in a couple of days or in an afternoon, and within a few weeks of understanding the issue. Certainly a major advantage of mediation is its reduced cost and time efficiency.

Another advantage is that the mediation process is not adversarial. The litigation process in Canada is adversarial: it places two parties in opposition to each other in order to test and arrive at the truth. The adversarial process can create a lot of bitterness. A mediation setting encourages discussion between the parties and encourages both parties to have input into the resolution, and so the damage to the relationship is much less.

Mediation is also beneficial because both parties have a role in creating the resolution. They have an investment in it and they are usually happy with the outcome because they have some control versus an outcome being imposed on them by a third party, such as a judge or an arbitrator.

Mediation is a win-win proposition whereas going to litigation is a win-lose proposition. In litigation, one party usually prevails and one loses, and the cost of the litigation goes to the victor. In mediation, both parties have an opportunity to come out as a winner, as long as they go there with an open mind and with a real view to resolving the dispute.

There are some other advantages as well. In mediation, the parties can control the outcome in a way that they cannot in a litigated solution. In litigation, both parties present their best case before the judge. The judge then makes a decision and at times that outcome might be very surprising. Also, mediation aims at encouraging the parties to put their interests, as opposed to their legal position, forward. Often in mediation you will find that a party may have taken a legal position throughout the dispute. This position is based on a legal entitlement but they haven’t explained what their real interest is behind that position. A mediator tries to understand what the underlying interests are. Once those interests come to the foreground, a resolution is usually a lot easier to achieve because now there is a mutual interest in resolving the dispute, not just in saving money or in some other hidden interests. The mediation process encourages the parties to put those interests on the table. That just does not happen in a litigation procedure, which is based on more technical legal positions.

The final benefit of mediation is confidentiality. Civil cases take place in an open courtroom, which means that all of the pleadings and all of the testimony is available to the public. Mediation can take place in a confidential setting and typically a mediated settlement will be confidential unless the parties agree otherwise. There are many situations in business where confidentiality has a high value. So that’s another significant advantage of mediation.

Mediation
Overcoming the disadvantages of mediation in business dispute resolution.
One of the real problems in mediation occurs when the parties have unequal bargaining power. This means one party is a lot stronger than the other.

In a business context, fairly typical situations would be ownership disputes, shareholder disputes, or partnership disputes. One shareholder may be the majority shareholder and also the one who controls the company’s board of directors and all of the resources. This party controls the bank account and can pay for legal fees through the company. As well, he has access to all of the company records and all the financial information about the business. In this situation, it is pretty tough to go in as a minority shareholder and mediate that dispute because of the complete lack of knowledge and negotiating power. One party is holding all the cards.

Mediation is least effective when one party stands to gain a lot and the other party only stands to lose a lot. Our approach is to use litigation to level the playing field because mediation works best when both parties go into the process in the same position: being able to lose the same amount.

Reasons for consulting a lawyer in a business dispute resolution.
It would be great if you could develop a computer program and put it up on the Internet to help people conduct business resolutions themselves. But in reality, there is tremendous skill required to use all of the tools that are available through the litigation process, the court, and mediation. Even choosing the right mediator requires skill in order to match the personality of the mediator with the parties involved. There are a lot of these intangible skills that a dispute resolution lawyer brings to the table in order to help the client resolve disputes more effectively than they could themselves.

A certain number of cases are straight forward, commercial debt for instance, and if the client has a relationship with the third party, the client could probably resolve that by picking up the phone and talking to the person who owes them the money about why they have not paid. Often I recommend that strategy. If it’s a straight forward dispute, then the client can proceed by himself and save the cost of hiring a lawyer. I will even give a prospective client a few tips. We do not typically get involved unless we both believe that legal representation can add some value to the process of resolving the dispute. A lawyer offers a combination of legal experience and business experience, all of which we have gained by resolving hundreds of business disputes.

The process of preparing a client for mediation in a business dispute.
We spend time with the client at the beginning, analysing the case, determining what legal rights and legal entitlements our client has. One way to increase the effectiveness of mediation is to use litigation to ensure that both parties are on equal terms at the outset. If one of the parties conducting the litigation has control of the company’s bank account and can pay for the company lawyer to handle the dispute, that party is going to be at a significant advantage over the party who, for instance, has been squeezed out of the business, has no income because he has been cut off from working at the business and has no access to company resources. We will start the litigation in order to obtain court orders that will level the playing field somewhat. For example, the court can order the other side to disclose all of the relevant documents through the document discovery process. Without litigation, that information may not be available. The person controlling all the key documents is often reluctant to release documents that would be helpful to the other side. We develop a plan at the beginning of the process in order to take a few steps in the litigation process to put our client in a strong position to negotiate. The mediation will be much more likely to succeed if our client is going in with full disclosure.

We also spend a lot of time having the client prepare a chronology of key events. At a certain stage, we will determine what witnesses and documents will be required to prove our client’s case. Once we have that material, we are in a position to mediate, but not before.

Sometimes we turn to expert witnesses, but we use them sparingly because they are very expensive. In certain cases, expert witnesses will be helpful. In business disputes, the main expert we use is a financial expert. Often, business disputes come down to accounting, so accountants are very helpful witnesses in determining the value of a business asset or determining what a business is worth. Business evaluation experts, who are accountants with a specialized designation in business evaluation, can be helpful in cases where the business is going to be split up. They can help determine what the value of that business is. Often the resolution is the process of bridging the gaps between the competing experts: one party’s expert says his value of assets is a million dollars and the other party’s expert values them at half a million or two million dollars. A big part of the job then is to get behind those evaluations and assumptions and find ways to bridge the gap between the two positions.

We are strong proponents of mediation and dispute resolution, but we also know that we have to use the court system as a strategic resource to level the playing field. There are all kinds of other ways you can resolve disputes, other than litigation, once both parties are on an equal footing

Scenarios that require the expertise of a lawyer to resolve a business dispute.
We are often required to assist with either a shareholder or partnership dispute, which is basically an ownership dispute. This would be an internal dispute between the owners of a business sometime after the business has been established. Such disputes are often the result of the lack of considered structuring at the outset of the business venture. Partners or joint venture participants often go into a business arrangement with a lot of enthusiasm but have not really taken the time to think about the future. Quite often when businesses are started, the partners are equal going in and no one has put any thought into the question of what happens if the two equal partners disagree on the direction of the business or on a particular decision to be made. If they are 50:50 owners of the partnership or 50:50 owners of the shares to the company, there is no easy way to resolve a deadlock. A lot of disputes arise from that scenario. The participants have not agreed on a proper structure for the business from the outset and later on when one partner decides he or she wants to leave and focus on other enterprises, a dispute arises about how to deal with that.

Another kind of dispute that business owners face involves a third party. This category includes a number of situations such as contract disputes; payment disputes where a third party fails to pay for the goods and services; and intellectual property disputes, where someone is using someone else’s intellectual property.

Ownership or shareholder disputes and third party disputes are the major categories of situations that arise in business and require dispute resolution services.

May 20, 2008, Case Management Conference

On Tuesday, May 20, 2008, we appeared before Madame Justice Griffen, our assigned case management judge to discuss the next steps in the class action law suit.

After listening to our summary of the case, which the other lawyers both agreed with, Madame Justice Griffen directed the following:

(1) that the defendant’s motions to strike our pleadings pursuant to Rule 19(24) be set down for a 2-day hearing (it has now been scheduled for September 4th and 5th, 2008);

(2) that the defendants be required to deliver a full written legal argument well ahead of the hearing; and that plaintiff will have an opportunity to respond with its full written legal argument; and,

(3) that the plaintiff be entitled to bring its application to add or substitute the representative plaintiff at the same time the defendant’s motions are heard.

If the plaintiff succeeds in these motions the next step will be the plaintiff’s certification motion.

604-688-7385

Ellis Business Lawyers - New fax number

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Let’s talk it out - Negotiation and Mediation

Published in BC Roofing Magazine - Spring 2008

Negotiation and mediation better than court to solve business disputes

As a lawyer engaged in the area of business disputes, I have experienced a shift in my practice from traditional litigation towards more flexible, cost-effective approaches to settlement, such as mediation and negotiation.

Litigation is the process of pursuing a legal contest by judicial process that is ultimately decided by a third-party adjudicator, usually a judge. Litigation is often described as a “win-lose” process, or a “zero-sum” game, with one party prevailing in the end and the other losing. As any business owner that has been faced with lawsuit knows, litigation is expensive and often everyone loses, even the victor in the court proceedings, given the high cost of legal fees and the inevitable delays involved. Other approaches to resolving disputes, such as negotiation and mediation, are often described as “win-win” processes, where both parties to the dispute have a role in creating the solution. Although these processes are often referred to as alternative dispute resolution methods, or ADR, vastly more civil cases are ultimately resolved by negotiation and mediation than by adjudicated outcome. Indeed, it is widely acknowledged that only two percent of civil lawsuits that are initiated end up in trial.

“Many a litigation lawyer
has reached settlement
of a dispute on the courthouse steps
the day a trial is scheduled to proceed
or even in the courtroom corridor
after the case has commenced.”

What is important is the approach and attitude of the professionals involved. For example, does a lawyer actively approach a business legal dispute from the perspective of traditional litigation, or does he or she approach it from the perspective of solving a problem?

Negotiation
Negotiation can lead to a settlement at almost any stage of a legal process. Typically,
negotiations in legal disputes are informal and usually occur between the lawyers involved rather than the parties themselves. Many a litigation lawyer has reached settlement of a dispute on the courthouse steps the day a trial is scheduled to proceed or even in the courtroom corridor after the case has commenced. Yet, to achieve the real economic benefits of a negotiated settlement – reduced legal costs – it is incumbent on the parties to resolve their dispute at some earlier stage.

Mediation
Mediation is a process for facilitating settlement or agreement between two or more disputants and is facilitated by a mediator who is trained to encourage dialogue between the parties and uncover the underlying interests of the parties. In mediation, the parties themselves define the terms of their agreement rather than having a decision imposed by a third party adjudicator. Business owners are increasingly recognizing the many advantages of mediation processes versus traditional litigation paths.

Advantages of mediation:
The main advantages of mediation to small businesses are as follows:

1. Certainty of outcome: In mediation, the parties themselves control the terms of the settlement; nothing is imposed on them by a third party adjudicator. The mediator facilitates settlement but the parties make the final decisions. Mediation, therefore, eliminates the huge factor of uncertainty that is present in all courtroom trials, given that the final outcome in a trial is within the power of the judge and out of the control of the parties.
2. Focus on interests rather positions: Mediation focuses on the underlying interests of the parties and attempts to create solutions that meet those interests. Skilled mediators are adept at ferreting out hidden interests that, once dislodged, may facilitate settlement. For example, a party’s concern about the confidentiality of the terms of settlement, or concern about an ongoing business relationship with the other party may be significant factors in why a case will settle in mediation. By contrast, the court process is open and adversarial which often can damage business relationships.
3. More durable agreements: Mediations often result in more durable agreements because the parties themselves have negotiated the terms rather than having terms imposed on them by a third party. It is presumed that parties will have a greater investment in honoring their own terms versus those that are ordered by someone else.
4. Cost effective and faster: Perhaps the most important reason business owners choose mediation is that it is almost always less expensive than marching on with court proceedings. A typical civil case can take years before a final outcome at trial, and even after a successful trial outcome it can take months or even years to implement or collect on the judgment. By contrast, a mediated settlement can often be resolved in one or two sessions over a few days or weeks. And the terms of settlement can be implemented immediately. Litigation is expensive, despite constant efforts by the court system to streamline procedures. The benefits of litigation can often be outweighed by its costs.
5. Confidentiality: Unlike most court cases, which are matters of public record, most mediation is confidential. With the advent of the Internet, the final judgment in a court case is disseminated around the world the moment it is pronounced. The terms of a mediated settlement are confidential and do not leave the mediation room.

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Meldon Ellis, BA, LLB is a business dispute resolution lawyer in Vancouver. His firm, Ellis Business Lawyers (www.ellislawyers.com) practices in the areas of commercial debt collection, and business and tax litigation.