Collaborative Law in the World of Business
By David A. Hoffman
In Boston, Cincinnati, and
other venues where Collaborative Law ("CL") has taken root and grown
rapidly in the arena of divorce practice, attorneys who practice in
other areas and who have received CL training are scratching their heads
and wondering: what about us? Why has CL been slow to develop as a
method for resolving tort cases, contract disputes, employment
terminations, and partnership break-ups?
CL got its start in
Minnesota in 1990, when a group of divorce lawyers and mediators formed
the Collaborative Law Institute ("CLI"). The CL process involves a
commitment to collaborative, good faith negotiation and a written
commitment by the lawyers and their clients to work together to achieve
a settlement, and to refer the case to other counsel if they fail.
Everyone's incentives are aligned toward resolution.
CLI founder Stuart Webb had
previously served as a divorce mediator and found that process
unsatisfactory. The main problem with mediation, according to Webb, was
the power imbalance: husbands and wives, negotiating the terms of their
divorce without lawyers present, were
seldom an even match in
terms of information or negotiating skill. Mediators usually find it
difficult to level this playing field without compromising their
neutrality, and they are prohibited by the principles of mediation
ethics from providing legal advice.
The CL process provides a
better solution, in most cases, than adding lawyers to the divorce
mediation sessions. A five-way meeting - with lawyers, clients, and
mediator all present - might seem like an ideal mix. However, in many
cases, the presence of the mediator simply permits the lawyers to be
more adversarial and positional than they would be in four-way meetings,
because the lawyers can look to the mediator to take responsibility for
urging moderation. Moreover, increased adversarialness can make
discussion of the personal issues that arise in divorce more difficult.
In theory, the CL method
should work every bit as well in non-family cases as it does in divorce,
where CL has become even more popular than mediation in some locales.
Yet, as reported recently in Lawyers Weekly USA, the business world has
been slow to embrace CL (see Nora Tooher, "Collaborative Law Stuck in
the Family Track," October 27, 2003). What has been slowing the adoption
of CL in non-family cases?
One of the reasons why this
question has been so hard to answer is that it may be the wrong
Instead of asking why CL
has been so slow to catch on in the world of business, a better question
might be why it has caught on so quickly in the world of family law. The
short answer to that question is that CL originated as a solution to a
unique set of problems that often exist in divorce cases and often do
not exist in business, tort, or employment cases. (For purposes of this
article, I am referring to all such cases as "non-family cases.") The
discussion below describes the nearly ideal 'fit' between CL and divorce
cases, and the reasons why that fit is not always as ideal in non-family
cases. The article concludes with a discussion of the potential for
adapting CL techniques in non-family cases.
Divorce Cases Provide
Fertile Soil for the Growth of CL
The following are some of
the factors that cause CL to be particularly useful in resolving divorce
interests. Divorce cases often involve children, whose emotional and
financial welfare can be safeguarded by reducing the antagonism and
transaction costs associated with the break-up of the marriage. Children
are seldom represented by separate counsel in divorce proceedings, and
therefore parents share an interest in protecting them from a
detrimental outcome. The often harsh allegations in divorce pleadings,
as in other court pleadings, are public documents - available for
children to read one day. Even when there are no children, the parties
in a divorce share a common interest in reducing transaction costs,
because there is a finite 'marital pot' of assets from which both
parties' attorneys' fees will be paid. CL reduces costs by motivating
the parties to stay at the bargaining table, reduces antagonism by
fostering collaboration and keeping the controversy out of the public
arena of the courtroom, and, where there are children involved, helps to
keep the children from getting caught in the cross-fire. In non-family
cases, the parties' interests may diverge - e.g., an injured tort or
discrimination plaintiff may prefer the public arena to 'send a message'
and may prefer an adversarial process to make his or her point. And, of
course, the parties in a non-family case are seldom paying their lawyers
out of a common fund.
resources. Divorce means supporting two households on the income
that previously supported one. As a result, even when divorce
negotiations proceed smoothly, the economic impact of divorce can be
enormous, and there is often little, if any, money available for hiring
lawyers. Indeed, divorcing couples are routinely forced into debt to
hire professionals to help them through their divorce. CL solves this
problem by eliminating the most costly aspects of traditional divorce
practice - courtroom appearances for hearings and trial. Divorce lawyers
also see the value in this approach because it reduces the chance that
they will be left with unpaid fees as a result of the economic carnage
caused by a full-blown trial. In non-family cases, resources are often
less limited. Indeed, in some businesses, the cost of legal services -
and even paying judgments - is a budgeted item each year, and therefore
if the business is within budget for the year, the costs of litigation
may not be a strongly motivating factor for using CL. And for business
and tort lawyers, high-stakes litigation can be one of the most
profitable areas of law practice.
Results. In divorce cases, where jury trials are available only in a
few jurisdictions, judges often tell the parties in a pretrial
conference what the likely outcome of the case will be if it is tried.
Even without a pretrial conference, there are well-established
guidelines (e.g., child support guidelines) and customary practices
(e.g., with regard to property division and alimony) that create a zone
of likely outcomes. As a result, negotiations in family law cases
generally take place within a fairly well-defined 'ballpark.' In
non-family cases, however, there are often clear winners and losers, and
the results are often all-or-nothing. The possibility, in some cases, of
a huge jury verdict, multiple damages, or the recovery of attorneys'
fees adds to the incentive to litigate. Accordingly, the parties and
counsel in non-family cases are often willing to invest more resources
in a potential litigation victory because the stakes can be much higher.
4. Tightly Knit
Bar. The family law bar is a specialty area in which practitioners
tend to know each other very well. In some cases a lawyer will represent
the husband, and in others the wife - antidiscrimination laws discourage
lawyers from representing solely husbands or wives in their divorce
practice. As a result, divorce lawyers realize that extreme positions
can come back to haunt them in their next case and, as a result, some
degree of moderation is a feature of many if not most divorce
negotiations - the exception, perhaps, being the high-profile,
high-stakes divorce cases in which the most litigious counsel
participate. Even in contentious divorce cases, however, the lawyers
often get along fairly well (a source of irritation, sometimes, to the
clients) and usually are members of bar groups in which they frequently
see each other and share opportunities for presenting workshops and
seminars. In non-family cases, however, the ranks of litigators are much
larger and there is typically less collegiality (except perhaps among
the most experienced practitioners, who belong to elite groups such as
the American College of Trial Lawyers). Collegiality fosters
collaboration, and therefore it is not surprising that collaborative law
has been easier to grow among family law practitioners.
5. Tax Effects.
The attorneys' fees paid by divorcing couples are paid out of after-tax
dollars. The Internal Revenue Code provides only modest deductions for
such fees, and even then only when they are related to the production of
income and exceed 2% of the taxpayer's adjusted gross income.
Accordingly, divorcing couples have an added incentive to limit their
expenditures on attorneys' fees. For businesses, however, attorneys'
fees are generally deductible from income, and therefore there is a
not-insignificant tax benefit that comes along with the expense, and for
personal injury plaintiffs settlements and judgments, including the
portion paid to attorneys, are not taxed.
6. Need for
Ongoing Relationship. In many, if not most, divorces the parties
need to have at least some type of ongoing relationship. When the
parties have had children together, there will be occasions - ranging
from consultation on co-parenting issues to arrangements for family
gatherings - that require collaboration in order to be successful. Even
when the parties do not have children, they often have property that
needs to be marketed or transferred and there is an ongoing need for the
parties to ensure that they are taking consistent positions on their tax
returns. Collaboration provides a greater opportunity for success in the
ongoing relationship. In non-family cases, however, there is often no
ongoing relationship (such as in tort cases) or a very limited ongoing
relationship (such as in employment termination or breach of contract
7. Few Repeat
Players. In divorce cases, the parties often feel that there are
major issues of principle, but those principles are primarily personal
rather that political in nature. In other words, it is seldom the case
that a divorcing party will invest more in attorneys' fees in a case
than the likely benefit to the party simply because other husbands or
wives might benefit from the precedent set by the case. In non-family
cases, however, there are many repeat players (e.g., employers,
manufactures, and insurers) who have a vested interest not only in
establishing precedent but also in sending the message to lawyers and
the world generally that they do not compromise easily and are willing
to go the distance. This has the effect of discouraging frivolous
litigation against them, and therefore is considered by many businesses
to be a wise investment of resources.
Lawyers. It is not uncommon in divorce cases for the parties to
change counsel - sometimes more that once - during the pendency of a
case. Family law clients often get frustrated with their lawyers, in
part because of frustrations with the process itself and with the
intractability of their spouse on negotiated issues. Accordingly, in
divorce cases, the idea of having to hire a new lawyer to litigate a
matter that has resisted settlement is perhaps less daunting than doing
so in a non-family case. Moreover, from the standpoint of the divorce
attorney, the departure of a client is usually not a cause of grave
concern because the attorney's practice is 'diversified' - i.e., not
critically dependent on any one client or group of repeat clients. In
non-family cases, it is more unusual for parties to switch counsel,
though certainly not entirely uncommon. In addition, businesses often
establish long-term relationships with their attorneys - relationships
which they are not willing to relinquish simply because the other side
has been stubborn. From that standpoint of the lawyer, a business client
is much more likely to be a source of repeat business than a divorce
client. Indeed, the business lawyer's motivation to retain the loyalty
and billings from business clients provides one of the most powerful
disincentives for business lawyers to use collaborative law.
Arrangements. In divorce cases, contingent fees are generally
prohibited by ethical rules. Accordingly, the divorcing parties
typically pay a retainer and then monthly charges for their lawyers'
services. This fee-for-service model makes litigated divorces expensive.
In tort cases and some employment and business cases, however, it is not
uncommon for plaintiffs to be represented by counsel on a contingent fee
basis. Accordingly, in those cases, the plaintiff is not concerned about
the amount of time spent on the case by his or her attorney because it
has no direct impact on the amount the plaintiff receives and affects
the plaintiff economically only to the extent that s/he may be
responsible for certain out-of-pocket costs (such as deposition
transcripts, filing fees, and process server fees).
10. Privacy and
Intangible Costs. Anyone who has witnessed divorce litigation can
attest to the fact that it can be an emotionally wrenching experience.
The parties often feel some combination of rejection, betrayal,
vulnerability, worthlessness, anger, depression, guilt, or resentment.
Add to this mix a pair of gladiators (trial attorneys), trained to
search out and exploit - in a courtroom and in publicly filed pleadings
- every legally relevant shortcoming of the other party. Husbands and
wives fear this type of exposure because, having lived together for a
number of years, they know 'too much' about each other. And hearing
highly personal accusations hurled at them by complete strangers in a
public courtroom often destroys whatever modicum of good feeling the
divorcing couple might have been able to salvage from the wreckage of
their marriage. In non-family cases, the controversy may have emotional
elements (particularly in employment or partnership disputes), but the
parties are more likely to be able to distance themselves from the fray
because conflict is, after all, one of the 'costs of doing business.'
And in most tort cases, the parties are complete strangers, with no
prior relationship, who simply met by accident and will never see each
other again after their dispute is resolved.
Negotiations vs. Single-Issue Cases. Divorce presents a dizzying
array of decisions: custody, visitation, asset division and debt
allocation, alimony, child support, college expenses for the children,
life insurance, health insurance, taxes, estate planning, and more.
Divorce cases can be a trial lawyer's nightmare because proposed
findings and conclusions must be presented on each of these issues and
many others. Multi-issue cases are good candidates for collaborative
negotiation because they present opportunities for trade-offs that are
not present in the single-issue cases that are more typical in
non-family disputes. In those cases, the entire dispute may boil down to
a single question: Is the patent valid or not? Did the employer engage
in discrimination or not? Was the roof defective or not? To be sure
there may be complex sub-issues that underlie the ultimate issue, but
for purposes of settlement, a single-issue case requires compromise and,
for the litigants, compromise may be anathema.
Resistance to CL in
The points outlined above
describe incentives (and disincentives) that influence the decision of
parties to use (or not use) CL. I have found that, because of these
incentives, many of my clients and potential clients in divorce cases
are immediately receptive to the idea of using CL, as opposed to
mediation or conventional representation. In fact, the appeal of CL is
so powerful in family law cases that the concept nearly sells itself: I
have had clients call asking for CL simply because they saw a
description of it on our web site.
My experience has been
quite different, however, with non-family cases. The clients typically
do not ask for CL, and, even after I describe CL, they are often
skeptical. They may like the idea of avoiding court if at all possible,
but they generally do not see the advantage of the disqualification
provision. They fear that they will be outflanked by a wily adversary
who is not as attached to, or confident in, their attorney, and thus be
forced to go searching once more for an attorney after spending time and
money educating the first one. Trust is usually absent in such cases,
and often (as in tort cases) there is no prior relationship on which
trust could be built. By contrast, in divorce cases, trust may have
taken a beating, but the parties generally know each other quite well,
and therefore they may rely on the other party's predictability, in lieu
of trust, as a foundation for deciding whether to take the risk of a
stalemate that will require both of them to hire new lawyers.
Many observers have noticed
that CL is a lawyer-led movement, which has now expanded to embrace
professionals from other disciplines. In other words, the growth and
development of CL has been driven largely by the energy of committed
professionals more than by the insistence of clients. In the growing
community of non-family lawyers who would like to see CL grow as quickly
there as it has in the field of family law, there is palpable
frustration - fueled in part by (a) the disparity between the
substantial efforts that have been made in Cincinnati, Boston and
elsewhere to grow the use of CL in non-family cases and the relatively
limited results to date, and (b) the comparatively easier way in which
CL has grown in divorce cases.
In addition, non-family
lawyers have been frustrated because the case for using CL in non-family
disputes seems every bit as compelling as the case for using it in
divorce. For example, many of the factors outlined above apply in
Such interests can be found, even if it is only in the reduction of
the transaction costs associated with resolving the dispute.
Even if the parties have deep pockets, a business's legal budget may
be quite limited.
Tightly knit bar.
In small towns and cities, business lawyers and litigators may be an
even more tightly knit group than the divorce bar in big cities, and
in specialty bars (such as patent, trusts and estates, and
construction), the 'regulars' know each other well even in big cities.
Need for ongoing
relationship. In many non-family disputes, the parties will
continue, even after settlement, to be tied to contractual
relationships. And in some cases, the performance of the settlement
will occur over time.
Setting precedents can be a two-edged sword. In some non-family cases,
the possibility of setting a precedent in a case with unappealing
facts may cause a trial to appear more risky than a collaboratively
A small group of law firms and business clients is beginning to
recognize the advantages associated with using lawyers who specialize
in settlement. Known as "settlement counsel," they may practice in the
same firm as litigation counsel, but the effect is similar to
disqualification in a CL process - management of the client's case
shifts to new lawyers if there is an impasse.
Although contingent fees and other novel billing arrangements - such
as blended rates and fixed-fee engagements - may mitigate the costs of
hiring an attorney in some non-family cases (especially for
plaintiffs), much if not most work in non-family cases (especially for
defendants) appears to be done on an hourly basis. Accordingly,
opportunities for savings abound if litigation can be prevented.
Privacy and intangible
costs. Litigation can be just as intrusive for businesses as it is
for married couples. Indeed, when a company is required to produce
voluminous business records and defend numerous depositions, the
imposition may be even greater, and most businesses face a greater
risk of adverse publicity because their cases are more likely to be of
interest to the press.
single-issue negotiations. While there may be only one or two
issues in a non-family case, the solution may be quite complex and
present opportunities for trade-offs and joint gains in settlement
Given the similarity of
incentives in both divorce and non-family cases, it remains somewhat
surprising that non-family disputes have provided less fertile soil for
the growth of collaborative law. It is not as if litigation is viewed
with particular favor in the business community: as David Porter once
quipped, "litigation is the basic legal right which guarantees every
corporation its decade in court."
I believe the answer to
this mystery can be found not only in the economic incentives described
above but also in the culture and sociology of litigation practice.
Within the bar, there continues to be a reverence for trial as the
lawyer's ultimate test. Trial practice presents enormous intellectual
and emotional challenges. Negotiations can also be enormously complex,
but they are not conducted on a public stage. As a result, trial work is
still considered one of the highest forms of work done by 'real
lawyers,' as opposed to those 'touchy feely' lawyers who study
alternative forms of dispute resolution, look for 'win-win' solutions,
and find solace in "Getting to 'Yes.'" This may be a gross caricature of
today's legal culture, but even caricatures contain an element of truth.
To be sure, the inherited
culture of the bar is changing, but the emphasis on trial, as opposed to
negotiation, in television shows and movies about law practice continues
to distort the image - in the minds of clients, and perhaps some lawyers
as well - of what 'real lawyers' do.
Inside law firms, a similar
culture prevails. Status and influence flow from revenue production, and
litigation is often a primary engine for producing revenue. CL may be
viewed as a threat to the firm's livelihood, and the idea of referring a
long-term client to another firm so that the other firm can handle the
most lucrative aspect of resolving the conflict (i.e., litigation) is
virtually unthinkable. Will the client return after the trial? What are
the long-term prospects for a firm that refers out its most lucrative
opportunities? I say this with disappointment, borne of personal
experience in trying - unsuccessfully - to persuade my colleagues in a
145-lawyer Boston firm of the value of CL.
Adding CL to the
Non-Family Lawyer's Toolbox
lawyers have, in recent years, added mediation, arbitration, and case
evaluation to their standard toolbox. Indeed, the tremendous success of
mediation in resolving non-family cases stands as one of the primary
obstacles, in my view, to greater acceptance of CL. Unlike divorce
cases, where mediation is generally done without lawyers and therefore
can create a dangerously un-level playing field, non-family cases are
typically mediated with lawyers present. Commercial mediators report
settlement rates in the 70-90% range and higher. For non-family
litigators, there is a tendency to think 'if it ain't broke, don't fix
it.' For them, CL may appear to be a solution looking for a problem.
However, mediation and CL
often work successfully hand in hand. In some divorce cases, the parties
may go first to mediation and then realize that they need to hire
counsel to advise them during that process. The CL roster provides a
uniquely suitable list of lawyers who support negotiated resolutions. In
non-family cases, the parties may turn first to counsel, who can point
to mediation, arbitration, and case evaluation as impasse-breaking
techniques that make the use of CL less risky for the client if the CL
CL attorneys have also been
experimenting with variants of collaborative law. As noted by Prof. John
Lande, in "Possibilities for Collaborative Law: Ethics and Practice of
Lawyer Disqualification and Process Control in a New Model of Lawyering"
(64 Ohio State Law Journal 1315 (2003)), the negotiation strategies,
techniques, and norms used in CL may have enormous value even if the
parties do not sign a formal CL agreement containing a provision for
disqualification of CL counsel in the event that litigation is
necessary. Some CL attorneys have referred to this form of practice as
'CL-lite,' but this term is misleading, because the essence of CL is the
disqualification of counsel from any form of litigation.
The use of settlement
counsel, described above, solves the disqualification problem if the
settlement attorney is in the same firm as the litigating attorney. (For
an excellent description of the settlement counsel process, see William
Coyne, "The Case for Settlement Counsel," 14 Ohio State Journal on
Dispute Resolution 367 (1999), and James McGuire, "Why Litigators Should
Use Settlement Counsel," 18 Alternatives 1, 3 (June 2000).) In addition,
attorney Mark Perlmutter has described a model of litigation in which
attorneys agree in advance to 'fight fair' - i.e., to seek a court
decision on the merits without taking advantage of any inadvertent
procedural mistakes and without obstructing the exchange of necessary
information. (See "Cooperative Versus Competitive Strategies: Rewriting
the Unwritten Rules of Procedure," by Mark Perlmutter, available at
There are also lawyers who have decided to handle cases solely on a
collaborative, non-court basis (see Les Wallerstein's article on
"Unilateral Collaborative Law," Collaborative Law Journal (Boston, MA),
Fall 2003). Such a role is, in some ways, analogous to that of a
business's in-house counsel who refers litigation matters to outside
To be sure, neither 'CL-lite,'
'cooperative' litigation, 'unilateral CL,' nor settlement counsel should
be confused with CL, but they may be good alternatives to CL in a
setting where either the client or the attorney's firm is not willing to
It also seems highly likely
that CL will become more widely used in the business community over
time, just as mediation grew from early acceptance in divorce cases to
greater acceptance in the world of business. As more and more non-family
lawyers receive CL training, a critical mass of attorneys will develop,
and they will in turn lead clients to CL as an option to consider in
appropriate cases. Such a development could be particularly effective if
a critical mass were achieved in those specialty areas of the bar where
practitioners know each other well. With more training, non-family
lawyers will begin to see that certain of their cases - perhaps the ones
that are most like divorces, such as employment terminations and
business break-ups - are excellent candidates for CL.
It is probably unrealistic
to expect the use of CL to grow in large firms. The economic incentives
at work in a large firm do not reward the 'un-bundling' of legal
services (i.e., dividing legal services into sub-components, such as
research, advice, negotiation, and courtroom representation). On the
contrary, the purpose of a large firm is usually to serve a full array
of clients' needs. In small firms, however, where the majority of
lawyers in the United States and Canada practice, CL may turn out to be
an appealing option - especially where the firm does not handle
litigation or tends to refer large-scale litigation to bigger firms. In
those cases, it may even prove useful to identify outside litigation
counsel at the outset, so that everyone knows who will be handling the
case if the CL process ends in stalemate.
In my view, one of the
promising areas of practice for CL-trained non-family attorneys is
transactional work. CL is, by definition, practiced in the arena of
conflict - i.e., cases that could be headed for the courtroom but for
the commitment of attorneys in the CL process agreement not to go there.
Many CL-trained attorneys, however, also handle contract negotiations
and other transactions and have acquired a reputation for collaboration.
Nine years ago Professors Ronald Gilson and Robert Mnookin predicted
that lawyers could differentiate themselves from their competitors - and
possibly even charge more for their services - if they became known for
their commitment to collaboration. (See Ronald J. Gilson and Robert H.
Mnookin, "Disputing Through Agents: Cooperation and Conflict Between
Lawyers in Litigation," 94 Columbia Law Review 509 (1994).) Gilson and
Mnookin suggested that by "choosing lawyers with reputations for
cooperation, clients might be able to commit to cooperative litigation
strategies in circumstances where the clients themselves would not
otherwise trust each other." (See
To be sure, collaborative
strategies in transactional work are not the same as CL. However,
growing the ranks of CL-trained attorneys in the world of deal-making
will serve to create the fertile soil necessary for the fuller use of
the CL process in those non-family cases where litigation would
otherwise be the default mode of dispute resolution.
Many have described CL as
an idea whose time has come. That description is accurate. In the world
of business, however, that time is coming more slowly than many would
have predicted. CL originally developed as a uniquely well-suited
alternative to mediation in the area of divorce. In non-family cases,
mediation generally works well, and attorneys can use it without risk of
disqualification if the mediation reaches an impasse. Accordingly, CL is
currently a less prominent feature of the business law landscape than it
has become in the world of divorce. CL has nevertheless added a valuable
tool for non-family lawyers - a tool that may prove to be particularly
useful in smaller, non-litigation-oriented firms or in cases where, as
in divorce, the end of a relationship needs to be managed with care. In
addition, lawyers have already adapted from the CL model variations of
practice that may fit their clients' needs more precisely than CL
itself. While the term "collaborative law" should be reserved for the
original model, the spirit that led Stu Webb to create CL in the first
place lives on in the lawyers who are creating new tools to place side
by side with CL in the non-family lawyer's toolbox.
[David A. Hoffman is an
attorney, mediator, and arbitrator at Boston Law Collaborative, LLC ("BLC").
He is the co-founder (along with Rita Pollak) of the Massachusetts
Collaborative Law Council, and chair of the Section of Dispute
Resolution of the American Bar Association. Prior to founding BLC, David
was a partner at Hill & Barlow, a commercial law firm where he practiced
for 17 years. David can be reached at
©2006, Re-printed with
permission of author for members of MCLA.