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Product Liability Toolkit International Institute for Conflict Prevention and Resolution 575 Lexington Ave., 21st floor | New York, New York 10022 Phone: +1.212.949.6490 | Fax: +1.212.949.8859 | [email protected] Visit us on the web at www.cpradr.org Copyright © 2014 by International Institute for Conflict Prevention & Resolution. All rights reserved. CPR Product Liability Toolkit Executive Summary............................................................................................ 3 Tab 1: The CPR Protocol for the Early Resolution of Product Liability Claims ........ 5 Tab 2: CPR 21st Century Pledge and CPR Pledge .................................................................. 17 Tab 3: CPR Model Mediation Clauses ....................................................................... 21 Tab 4: Economic Litigation Agreement ..................................................................... 25 Tab 5: CPR Corporate Early Case Assessment Toolkit ........................................... 45 Tab 6: CPR Suitability Guide ...................................................................................... 69 Tab 7: Early Case Assessment Executive Summary ................................................115 Tab 8: Sample Agreement .........................................................................................117 Tab 9: CPR Global Rules for Accelerated Commercial Arbitration, Rules11-12 ....119 Tab 10: CPR Mediation Procedures ............................................................................143 Tab 10a: CPR Mediation Procedure .................................................................... Tab 10b: CPR European Mediation Procedure ................................................... Tab 11: Success Stories ..............................................................................................161 EXECUTIVE SUMMARY CPR’S TOOLKIT FOR THE EARLY RESOLUTION OF PRODUCT LIABILITY CLAIMS The Business Case for Early Resolution of Claims Fewer than five percent of all product liability cases filed in court are tried to final judgment. In litigation, time is money and it is in the parties' interests to minimize the amount expended in transactional costs—including counsel and expert fees and discovery costs. Settlements struck on the courthouse steps are often less favorable than settlements obtained earlier in the process and the transactions costs of waiting to the eve of trial can more than offset any perceived benefit of later settlement. Time spent by business on litigation is time taken from focusing on the core business. THE CPR PROTOCOL FOR THE EARLY RESOLUTION OF PRODUCT LIABILITY CLAIMS [Tab 1] provides a disciplined framework within which business can consistently achieve more efficient and cost-effective outcomes in product liability litigation. The Protocol consists of five elements: A Corporate Pledge to use the Protocol in all product liability cases—The Pledge serves as a “neutral” basis for beginning negotiations with the other party without any implications of weakness or fault. [CPR 21st Century Pledge and CPR Pledge—Tab 2] Whenever possible, incorporation of an Early Resolution process in any contractual agreements of a type that may result in product liability claims. Where that is not possible, a commitment to transform standard court-adjunct mediation (which is now nearly universal) into a substantive Early Resolution process using skilled settlement counsel and/or mediators. [CPR Model Mediation Clauses—Tab 3; Economic Litigation Agreement—Tab 4] Early Case Assessment to analyze the strengths and weaknesses and financial implications of a claim at its inception. The results of the Early Case Assessment form the foundation of the strategic plan for the case, including identification of necessary information exchange, identification of any issues that may require a decision prior to Early Resolution efforts, optimal timing of Early Resolution efforts, and the form of Early Resolution (negotiation or mediation) most likely to result in the desired outcome. [CPR Corporate Early Case Assessment Toolkit—Tab 5; CPR Suitability Guide—Tab 6; Early Case Assessment Executive Summary—Tab 7] Limited Early Information Exchange designed to assure that both parties have sufficient information upon which to reach Early Resolution. [Sample Agreement—Tab 8; for other examples, see CPR Economic Litigation Agreement—Tab 4 and CPR Global Rules for Accelerated Commercial Arbitration, Rules 11-12—Tab 9] Initiation of an Early Resolution process leveraging the results of the Early Case Assessment and Early Information Exchange and using skilled settlement counsel and/or a mediator to maximize the likelihood of success. [CPR Mediation Procedures— Tab 10; See discussion of roles and approaches in the Protocol—Tab 1 and Success Story—Tab 11] TAB 1 TAB 1 TAB 1 The CPR Protocol for the Early Resolution of Product Liability Claims CPR’s Protocol for the Early Resolution of Product Liability Claims INTRODUCTION Manufacturers are confronted regularly with a substantial volume of personal injury and property damage claims arising from use of their products, alleging defects in design, manufacture or inadequate warnings. A substantial number of individual product claims and suits against manufacturers can be settled early, on reasonable terms, without adverse consequences to the broader interests of the claimant or the manufacturer, by adopting procedures encouraging best practices in managing claims towards early and fair settlement. The following are some of the factors to be considered in formulating a statement of best practices in product cases: 1. It is in all parties' interest to minimize the total amount expended in transactional costs, including the time of lawyers, corporate executives and experts. 2. Substantially more discovery is required – and, thus, substantially more expense is incurred -- in preparing for trial than in preparing for settlement negotiations. 3. Fewer than five percent of all product liability cases filed in court are tried to final judgment. 4. Settlements struck "on the courthouse steps" are not necessarily more favorable to either claimants or defendants than settlements obtained earlier in the process. Thus, many cases can be settled earlier than they currently do, on fair and reasonable terms. 5. When a claim is first asserted, the parties often lack the information needed to determine its value. Thus, some amount of information exchange is required to provide a platform for negotiated settlement. In truth, many product cases that are destined to settle will actually settle much earlier, if a. early on, and by informal means, the parties exchange sufficient information to evaluate the case; b. rigorous settlement negotiations are opened promptly thereafter; and c. in the event of an impasse, mediation is implemented rather than the negotiations' failing. ADOPTING AN ADR POLICY AND PROCEDURE The Committee recommends that companies adopt a general form of policy embracing alternative forms of dispute resolution when confronted with commercial disputes, including product liability cases. A form of such general policy statement is set forth in Exhibit A. The Committee also recommends that companies confronted with product suits (a) identify the types of cases which are likely to be suitable for early settlement efforts; and (b) adopt a practice of making early good faith efforts: (i) to arrange with the plaintiffs attorney for an informal exchange of information necessary to evaluate the case; and (ii) following such evaluation, to strive for a fair disposition of the case. Senior management "buy-in" is critical. Some attorneys find that certain of their clients remain concerned that proposing settlement early will signal weakness or lack of confidence in the product which is the subject of the claim, or that it will result in an increase in claim volume. The proposed procedure should be discussed with senior management, whose support should be sought. The economics of early settlement, versus the traditional approach, should be explained. If some managers believe a particular product should be defended regardless of cost, their views should be heard. We recommend that the general counsel, after appropriate consultation with staff, provide ground rules as to the types of cases for which early settlement should be attempted. The degree of risk of loss in litigation in a particular case should not influence the determination as to whether to propose early settlement efforts. However, the defendant's appraisal of risk of loss should and will influence the amount for which the defendant is prepared to settle. That appraisal may well change as the proposed procedure unfolds. The general counsel should consider how best to assure implementation of the procedure. For most companies, words of encouragement or a written general policy statement need to be followed up by detailed procedures. THE ROLE OF EARLY CASE ASSESSMENT In today’s highly litigious business climate, many legal departments have worked to develop new definitions of “value” and “win” by treating disputes as a business process, and protracted litigation as a defect to be remedied. One effective tool for controlling disputes and reducing or eliminating litigation is the Early Case Assessment (ECA) process. An ECA procedure provides a structured approach for conducting early evaluation of a dispute and can be adjusted by in-house counsel to meet the particular needs of their business. It can be applied in whole or part depending on
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