Use Of The Latest Adr Technique, Early Neutral Evaluation, In Insurance Coverage Disputes Re: Intellectual Property/Antitrust And Business Tort Litigation
Procuring an early neutral evaluation can offer parties a reality check on the viability of their legal positions. In an era of increased litigation expense, where one party believes it is more likely to prevail than the other, selecting an early neutral evaluator is a sign of strength. It requires the other party to submit its position to dispassionate neutral analysis and be prepared to explain any shortcomings of its case to its client before it makes the investment to go forward to trial or continue expensive litigation.
For more information regarding ENE, see John S. Blackman’s article, Neutral Evaluation – An Adr Technique Whose Time Has Come, http://library.findlaw.com/1999/Sep/1/128447.html.
The Benefits of Early Neutral Evaluation of Insurance Coverage Disputes of Complex Business Litigation Matters
I have had occasion to serve as an expert witness and consultant in a number of coverage actions where the underlying lawsuits arose out of intellectual property or antitrust/business tort disputes. Knowledge of both the underlying tort and its intersection with insurance coverage generally offers a number of pertinent insights beyond the experience of many courts who do not routinely address such coverage issues...
As an author of a leading treatise, Insurance Coverage of Intellectual Property Assets (Aspen Law and Business 1999) (updated annually), as well as numerous articles on this and related topics and an active litigator of these issues, I have a vantage point about how courts have historically analyzed coverage issues that pertain to intellectual property and antitrust/business tort litigation. The same analysis pertinent to preparation of a thorough expert report may also properly address how courts are likely to construe coverage issues.
Where the litigation has yet to be filed, and choice of law remains undetermined, this early neutral evaluation can include an assessment of the viability of the various forums who may consider coverage in a case and alert parties to choice-of-law-related issues which may not have been the principal focus of the case prior to litigation.
A Number of Issues Might Be Usefully Analyzed by an ENE
Whether a demand to cease and desist seeking a damage remedy could constitute a potentially covered claim requiring an insurer to defend so that its early involvement in settlement might be properly implicated so that all parties could avoid litigation expenses and determine the viability of the coverage issues up front.
Evaluating the strength of coverage for an asserted complaint or counterclaim, especially where the jurisdiction whose law would be applicable looks only to the four corners of the complaint and the pertinent policy language. (Where extrinsic evidence is either considered because it is available or known to an insurer, consideration of this information following an insurer’s denial of coverage can help evaluate whether an obligation to defend may arise.)
Evaluating whether a proposed settlement would potentially fall within coverage so as to compel an insurer to reimburse it or whether the risks of proceeding to trial could lead to uncovered claims.
Benefits of ENE in Insurance Coverage Litigation of Intellectual Property/Antitrust and Business Torts
ENE can be scheduled early in a dispute, thus identifying issues promptly and avoiding litigation and administrative costs.
ENE can reduce the time executives and key employees are kept away from business matters.
ENE can illuminate strengths and weaknesses of a case so the parties can negotiate with full knowledge of their absolute and relative positions.
ENE can be used as an adjunct to mediation where an evaluation of the strengths of legal issues on which parties vociferously disagree can assist a mediator in resolving a dispute rather than requiring the parties to proceed to a determination before a court on cross-motions for summary judgment where the results, once attained, may lead to irrevocable changes in relative position and exposure beyond that deemed acceptable by either party.
ENE is also appropriate in unusual cases that have complicated legal issues when private resolution and speedy determinations are desirable.
The Relationship of ENE to ADR
Compared to other engagements, the scope of ENE professional engagements is easier to define, control, and render in a cost-effective manner.
Mediation can also follow an ENE if the parties are prepared to empower an early neutral evaluator to seek settlement based on his evaluative approach to the legal issues.
ENE can also be of benefit in the underlying intellectual property and/or antitrust litigation for many of the reasons noted here. See recent article by Kenneth B. Germain, ALI-ABA, February 28-29, 2008 New Orleans, LA Conference, entitled The Use of Subject-Savvy Early Neutral Evaluators to Suggest Solutions to Significant Trademark/Trade Dress Disputes in an Ex Parte and Inter Parte Situations.
Manner in Which an ENE Can Be Appointed
Voluntarily, through pre-dispute agreement, such as an ENE clause in an insurance contract.
Mandatorily, pursuant to court order, premised on either of the following approaches:
The ADR Act of 1998, 28 U.S.C. § 651 et seq., authorizes each U.S. District Court to promulgate and administer local rules requiring litigants to engage in listed types of ADR – which specifically includes ENE. “Congress passed the ADR Act to promote the utilization of alternative dispute resolution methods in federal courts and to set appropriate guidelines for their use.” In re Atlantic Pipe Corp., 304 F.3d 135, 141 (1st Cir. 2002). The ADR Act itself, however, does not authorize any specific court to use a particular ADR mechanism.
Some courts have concluded that they can order litigants to engage in non-binding ADR processes. In re Atlantic Pipe Corp., supra, at 144-145, distinguishing contrary cases; In re African-American Slave Descendants Litigation, 272 F. Supp. 2d 755, 760 (N.D. Ill. 2003). See A. Pew and R. Bales, The Inherent Power of the Federal Courts to Compel Participation in Forums and Alternative Dispute Resolution, 42 Duq. L. Rev. 1 (2003).
