{"id":1484,"date":"2014-09-13T13:55:50","date_gmt":"2014-09-13T17:55:50","guid":{"rendered":"http:\/\/businessconflictmanagement.com\/blog\/?p=1484"},"modified":"2014-09-13T13:55:50","modified_gmt":"2014-09-13T17:55:50","slug":"collaborative-law-approaches-to-ma-disputes","status":"publish","type":"post","link":"http:\/\/www.businessconflictmanagement.com\/blog\/2014\/09\/collaborative-law-approaches-to-ma-disputes\/","title":{"rendered":"Collaborative Law Approaches to M&A Disputes"},"content":{"rendered":"

John Levitske<\/a> of Duff & Phelps, who serves as Vice-Chair of the ABA Business Law Section\u2019s Dispute Resolution Committee, assembled a provocative panel in Chicago on the topic: \u201cWhether Collaborative Law Can be Used to Effectively and Efficiently Resolve Post-Merger and Acquisition Disputes.\u201d\u00a0 He described it as an effort to articulate the intersection between a little-known technology and a felt business need.\u00a0<\/p>\n

Paul Faxon<\/a> of Massachusetts posed some introductory questions.\u00a0 Who should be the \u201csovereign\u201d of the dispute resolution process — the client, the neutral or the attorney?\u00a0 When in the life of the dispute should it occur?\u00a0 Should your attorney\u2019s interests be aligned with yours?\u00a0 Should the neutral be a subject expert?\u00a0 Are key relationships and reputation valuable as pertains to this particular deal?\u00a0 Are clients aware of the breadth of ADR options available?<\/p>\n

Anne Shuttee<\/a> explained that Collaborative Law is a tested method, first used in American family law but now accepted in many jurisdictions.\u00a0 The International Academy of Collaborative Professionals<\/a> noted that 86% of matters using the technique were settled, and more than 80% were satisfied with the costs and the process.\u00a0 It is a joint problem-solving process (and so many business issues are joint problems) that is voluntary in which lawyers are committed to find a resolution, and are not only not retained to prepare for litigation, but are contractually disqualified from pursuing litigation in the event that settlement effort fail.\u00a0 Thus the interests of lawyer and client are both aligned towards early resolution and resources are committed to settlement as a primary goal, rather than a tangential detour of a litigation effort.<\/p>\n

Meetings involve clients directly. \u00a0They are conducted pursuant to agenda, prepared, off-the-record, and confidential.\u00a0 There may or may not be a facilitator at the meetings.\u00a0 Concerns and goals are identified and articulated; relevant information is gathered, including from jointly engaged experts whose reports are not prepared for use in litigation; settlement options are developed and assessed for viability; and a selection is made.\u00a0 If the process fails, clients can engage trial lawyers and negotiate the utility of any of the information gained.<\/p>\n

Paul Faxon used this process in business disputes, successfully.\u00a0 He said that the use of a joint expert alone can advance the problem-solving effort and substantially reduce costs.\u00a0 Parties can include certain of these steps as provisions of a deal agreement, anticipatorily, rather than waiting for a dispute to arise.<\/p>\n

Christian Fabian<\/a> of Mayer Brown is an M&A attorney who came to the concept of collaborative processes in that context. \u00a0Fabian identified five buckets of private M&A disputes:\u00a0 Breaches of reps and warranties; purchase price adjustment disputes; disputes arising from expected earn-outs indicated prior to the deal; breaches of obligations post-closing (such as non-competes); and claims of intentional nondisclosure\/misrepresentation (fraud).\u00a0 Some of these are susceptible to collaborative problem-solving but others (such as breach of a non-compete or fraud) are not, in Fabian’s view.\u00a0 Issues such as technical compliance with GAAP might be amenable.\u00a0 Purchase price disputes could well be better resolved through collaboration than adversarial arbitration.\u00a0 Dissolution of joint ventures seem highly suitable \u2013 they involve, at heart, a business divorce.\u00a0 Fabian did have hesitations about the concept of disqualification of counsel from trial work, or ethical considerations that may be needed distinct from those that now exist.\u00a0 He also doesn\u2019t assume that the parties will always act in good faith, and wondered what the consequences may be from failure to do so.<\/p>\n

The consequences of disqualification were pursued by the audience.\u00a0 How does it work that an M&A firm can act as a collaborative lawyer, knowing that his firm would have to withdraw?\u00a0 Or should a different firm be brought in to do the collaborative process, with the firm retained as M&A and also as litigator.<\/p>\n

Christine Castellano,<\/a> General Counsel of Ingredion Incorporated, noted that her company doesn’t necessarily choose her deal lawyer\u2019s firm as litigators, and would likely retain a collaborative specialist to collaborate.\u00a0 Her company has grown almost exclusively through acquisitions.\u00a0 Without realizing it, she already engages in these practices.\u00a0 Litigation is a loss and arbitration not much more attractive.\u00a0 The company was already building “executive resolution” into its protocols, because the company relies on relationships.\u00a0 Joint experts are often used outside the United States, often appointed by the court, so its use was also familiar to Castellano.<\/p>\n

Anthony C.S. Pagano of Royal Bank of Canada echoed this experience.\u00a0 His company seldom enters ripe post-merger disputes because executive negotiation is by far the most effective means to resolve business issues. \u00a0By contrast, non-competes or restrictive covenants tend not to be negotiated because of a lack of shared interest or trust.\u00a0 Questions of future pay-outs and joint ventures are critical to negotiate because the relationship going forward is so important.\u00a0 The disqualification procedures of collaborative law do raise an issue for Pagano, increasing cost of bringing another firm on board in the event of failure of the negotiating process.<\/p>\n

Melissa K. Bjella of CF Industries Holdings agreed that there are concepts of collaborative law that are almost intuitively observed and practiced \u2013 using a \u201ctime out\u201d for business people directly to work on terms of resolution, or the informal use of joint experts.\u00a0 Disqualification posed problems and inefficiencies for her, too.\u00a0 For one thing, collaborative lawyers’ interests are not so aligned as one would think; the collaborative lawyer has a high incentive to settle on any terms and the client wants a settlement only on acceptable terms.\u00a0 The panel discussed why the disqualification principle needed to be \u201chard-wired\u201d for the process to be successful.\u00a0 Ms. Shuttee said that, at least in the case of family law, disqualification poses an obstacle for parties to leave the table and go to court.\u00a0 By contrast, a company wants to control its business, not to achieve wins, and sitting with a collaborative counselor is often more promising than sitting with a litigator.<\/p>\n

There may be a conceptual boundary to the applicability of collaborative law to business deals.\u00a0 Disputants in family law have shared interests that can almost always be satisfied without litigation as a fallback.\u00a0 By contrast, business disputes ought to be able to be settle by skilled negotiating and counseling lawyers, without the added burden and cost of a quadripartite agreement disqualifying counselors and adding costs and settlement pressures.<\/p>\n

\"\"<\/p>\n","protected":false},"excerpt":{"rendered":"

A panel of collaborative lawyers, outside counsel and in-house attorneys discuss whether the risks and rewards of collaborative agreements make sense in an M&A setting.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,24],"tags":[8,10,23],"class_list":["post-1484","post","type-post","status-publish","format-standard","hentry","category-conflict-resolution","category-systems-design","tag-adr","tag-conflict-management","tag-systems-design"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/posts\/1484","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/comments?post=1484"}],"version-history":[{"count":0,"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/posts\/1484\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/media?parent=1484"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/categories?post=1484"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.businessconflictmanagement.com\/blog\/wp-json\/wp\/v2\/tags?post=1484"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}