The justice system in California—the largest in the nation—is among the hardest hit by the latest round of budget cuts. In the fiscal year alone, the judicial branch reports that courts have faced $544 million reduction of funds. Local court funding will be cut by $235 million, affecting courts who have practiced prudent budget management in the past. An additional $150 million of cuts will be applied to all trial courts on a pro rata basis. The remaining $240 million redirects court construction funds which will impact new court construction that support existing court operations.

Notably, the American Tort Reform Association (ATRA) released its annual list of “Judicial Hellholes” with California earning the #1 slot for (among other enumerated reasons) the devastating cuts in the judicial branch, bordering on crisis. As of November 2012, in Los Angeles County alone, there were 329 layoffs, 574 vacant positions, elimination of staffing in 56 courtrooms, elimination of more than 100 management and administrative positions, and a significant reduction in court reporter services.

The significant reduction in funding present huge dilemmas. Civil court services are at the greatest risks for reduction of hours and the closure of many courtrooms. Criminal courts are protected to some degree due to the constitutional protections afforded to those in criminal court such as a speedy trial. Consequently, the impact on public safety and access to justice in civil courts will therefore be the greatest.

Is “Delayed Justice” really justice?

As a result of the cuts, it now takes longer to obtain a restraining order in domestic violence cases. Custody hearing cases are being pushed back by months. Homeowners fighting foreclosures are facing significant delays. Self-help or family law facilitator services for the public are being reduced or cut entirely in many courts. The closure of more courtroom, more layoffs, and further reduction of services and hours are inevitable. With the budget cuts, a case that took fifteen months may now take five years to litigate. It now takes months sometimes nearly half a year to get a court date for discovery motions when it used to take only a few weeks.

Litigation is becoming more costly and timely. Research released by the Straus Institute for Dispute Resolution at the Pepperdine University School of Law shows that 53% of Fortune 1000 companies spent more than $1 million each on litigation in 2011, with the total annual litigation spend of $21.1 billion representing more than half of the overall legal budget. One study conducted by Micronomics estimated that from 2009 through 2013, delays in dispute resolution could cost the United States $52.2 billion in lost economic output. A spokesperson from a State Bar Association, Bill Weisenberg, said “When the system is not adequately funded it slows down and people literally can’t get their day in court in a timely fashion.” For most people, facing years in court is simply not an option. For businesses in this tight economy, the effects could be detrimental.

How can we solve this problem?

Court-offered mediation and settlement programs are falling to the wayside as part of the budgetary funding reduction. However, private organizations are stepping in to offer cost-effective solutions which utilize Alternative Dispute Resolution (“ADR”). Mediation is an affordable alternative. With long lines in the civil justice system, mediation often offers a much quicker resolution. With technology rapidly developing in the field of ADR, new organizational structures are also making mediation and other negotiation tools more accessible now than ever.

The landscape of ADR in the business world is changing.

The International Institute for Conflict Prevention & Resolution (CPR) recently announced its new “pledge” by Fortune 500 elites to commit to sustainable dispute resolution management systems to reduce costs and boost global competitive edge. Hon. William H. Webster, Chair, CPR Board of Directors says “The 21st Century Corporate ADR Pledge ushers in a new era for ADR and revolutionizes the culture of litigation that has hampered Corporate America.” He adds, “If the majority of our businesses and their leaders pledge to pursue the policies and practices we propose and adopt an integrated conflict resolution program, collectively, we can significantly reduce the time and financial burdens associated with litigation, more effectively bolster our position among the global business elite and, ultimately, evolve to become a culture of conflict prevention and resolution.”

Among the shift in approaches away from litigation, is Streamline Settle. The Agency for Dispute Resolution (the “Agency”) recently launched Streamline Settle, a new litigation management service for businesses. As the economy continues to struggle, many businesses are starting to rethink their litigation budget. The Streamline Settle approach gives corporations a way to effectively manage their legal portfolios, while offering a fixed-fee alternative for mitigating risk and reducing contingent liability. Mark Fotohabadi, Managing Principal of the Agency for Dispute Resolution, stated that, “Streamline Settle helps in-house counsel resolve ‘below the waterline’ cases in a strategic and efficient manner, and our fixed-fee pricing brings certainty to an unpredictable effort.”

Taking advantage of recent advances in cloud-based computing, the Agency bills a flat fee, regardless of how long a case takes to settle. The Agency has invested well over $1.2 million in sophisticated infrastructure to create the high efficiency needed to offer this alternative fee arrangement.

Streamline Settle quickly and confidentially removes dormant cases from internal dockets, which helps move M&A transactions forward when risk-averse buyers would rather kill the deal entirely than assume the risk of successor liability. Streamline Settle can also help reduce a company’s litigation portfolios, which is otherwise a constant risk. By reducing litigation portfolios, Streamline Settle allows companies to save.

With the current court funding crisis, cases will take longer to resolve as litigation gets stuck in court gridlock, perhaps for years. Technology and increased social connectivity has empowered investors to “read between the lines” and analyze how contingent liabilities buried in annual reports can impact the viability of a company. By unlocking shareholder value, freeing up cash, and bolstering stock price, Fotohabadi said, Streamline Settle is definitely an idea whose time has come.

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