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ECA: Perspectives Of Members Of CPR's Corporate ECA Commission (MCC)

November 2009

The Editor interviews Lawrence Chanen, Senior Vice President, Associate General Counsel in the Litigation Department and Head of the Workout and Bankruptcy Practice Group, JP Morgan Chase, and Duncan MacKay, Deputy General Counsel, Northeast Utilities.

Editor’s Note: As members of CPR’s Corporate ECA Commission, Messrs. Chanen and MacKay contributed their expertise and insights in connection with the development of CPR’s Early Case Assessment Guidelines (CPR’s ECA Toolkit). Editor: How extensively do you use early case assessment (ECA)? Are there types of disputes which are not suitable for ECA?

Chanen: Here at JPMorgan, we encourage all lawyers to make an early assessment of the risks of a case, which is obviously advantageous from a risk management and a cost-saving point of view. We are dedicated to effectively managing risk and ECA provides a structure that helps us do that.

There are types of disputes which are far more suitable for ECA than others, particularly where you have business people on both sides seeking a rational solution to the dispute. And, we do have cases of that nature where we utilize ECA either informally or through our own formal ECA program. As head of workout and bankruptcy litigation for JPMorgan in the litigation department, I sometimes encounter situations where one or more of the parties is intent on making irrational demands rather than engage in a realistic risk analysis. ECA, if viewed as a path to early case resolution, cannot accomplish that objective in those situations.

MacKay: At Northeast Utilities, we use ECA (both formally and informally) with respect to virtually all commercial (business- to-business) disputes, disputes that implicate our core business interests, and on any matters that may generate interest by, or attention from, our external stakeholders. I say that we use ECA “formally and informally” because our in-house lawyers generally always perform an informal (read “unwritten”) assessment of most matters that come in to the Legal Department, as part of our normal evaluation and triage of disputes involving the company.

Where the ECA takes on more formality is with respect to larger, more complex disputes involving the company, in which cases the ECA is typically embodied in formal written memoranda. I believe that, with the exception of routine types of matters (i.e., foreclosures, collections, smaller tort matters, etc.), most disputes lend themselves to some form of ECA. Indeed, one of the main reasons we have in-house counsel handling and involved in disputes relating to the company is their unique understanding of the business context in which a particular dispute has arisen and their ability – using that insight – to quickly and effectively develop (or assist outside litigation counsel develop) a case management plan that assesses the strengths, weaknesses and business implications of a dispute. Without an ECA and development of a case management plan, the company potentially loses an opportunity to position a dispute for early (and cost-effective) resolution through ADR, and leaves itself largely at the mercy of wherever expensive, time-consuming, and relationship-cratering discovery takes it.

Editor: Have you found that use of ECA reduces litigation costs or improves outcomes? Is management supportive of its use?

Chanen: If you have rational business people on both sides, even if they’re angry at one another, ECA, whether formal or informal, will reduce litigation costs and improve outcomes. If ECA is applied early enough it can result in the dispute being resolved before it ripens into litigation. The threat of expensive discovery can even be an important force in bringing the parties together to seek a solution.

MacKay: ECA does reduce the costs of litigation and provides better opportunities sooner for improved outcomes. Because ECA places an emphasis on a meaningful assessment of the factual and legal issues relevant to a dispute early on in a case, strategies and tactics can be developed more quickly, efficiently and cost-effectively. Additionally, our approach to ECA considers whether ADR may provide an appropriate path for resolving a dispute earlier in a dispute’s life-cycle, with our default assumption being that it does. Accordingly, many disputes can be positioned for early resolution on commercial terms through negotiation, mediation or arbitration, thus saving the costs of discovery and prolonged motion practice. As we are not in the business to litigate, management is supportive of a process that will result in more predictable, cost-effective and timely resolutions of disputes.

Editor: To what extent should CPR promote the use of ECA by corporations that may be opposing parties? What are the advantages to use of ECA by each party to a dispute?

Chanen: If you are dealing with rational people, ECA can be an effective tool to get to the heart of a dispute, particularly if used as a precursor to mediation. You may have some relatively high costs at the outset, but it can be a way ultimately to manage cost. Encouraging ECA can further inculcate in our corporate culture the idea that it is an effective way to manage legal risk and control legal expense. I think it’s something that CPR should promote.

MacKay: CPR should promote the use of ECA by member companies involved in a dispute because it will facilitate a more meaningful engagement by them in dispute resolution. Parties with a well-developed understanding of the legal and factual issues in their dispute are better poised to consider commercial solutions. This does not mean that all such cases can or will be resolved through ADR; however, the process will enable a narrowing of issues, making adjudication of the dispute more cost and time efficient, and the possibility of a later resolution through ADR more likely.

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