Noah Hanft Publishes "A Winning Strategy: Redefine the Term" in Law360

April 16, 2015

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A 'Winning' Strategy: Redefine The Term
This article originally appeared in Law360 on April 15, 2015

By Noah Hanft, CPR

What does it mean to win? For many businesses facing commercial conflicts, it has traditionally meant attempting to destroy one’s opponent in court, whatever the cost — and, therefore, often at great cost, in terms of money, time and business disruption. And that’s if you win! Indeed, predictability is not the hallmark of our legal system and with at least two sides, there have to be losers ... often all involved. 

When I first came to MasterCard in the mid-1980s, I brought with me both a litigator’s skill set and mindset, assuming that the courtroom was the place to resolve business disputes. However, over my 13 years as MasterCard’s general counsel, and as the growing scope, risks and expense of litigation became ever more apparent, my mindset evolved. My company shared what had become the untenable choice of so many corporations — either pay the huge bill that accompanies litigation (and with no guarantee, mind you, of a resulting victory), or abandon your rights and open the corporate coffers. There had to be a better way.

Of course, certain matters required that we litigate, sometimes fiercely. But as I began to explore additional strategies, I found that I was able to resolve almost all of MasterCard’s ongoing cases through a mediation process. Often, the results we achieved by utilizing dispute resolution were more finely nuanced and tailored to our needs (and the needs of all parties) than any a judge could have handed us, and all the more so the earlier we had started the process.

Perhaps the best example was the resolution of the long-standing multidistrict class action over merchant fees for payment card transactions, involving U.S. retailers and MasterCard, Visa and most of the major financial institutions in the United States. Although this case was particularly complex and triggered a great deal of passion, through mediation we were able to reach a settlement that met the parties’ — and consumer — interests in a much more strategic and flexible way than we could have in court.

And not only is the cost to all parties a lot less, but when engaging in such mediation efforts, our business relationships were much more likely to be preserved — or at least not irretrievably destroyed, as is so often the case in “scorched earth” litigation.

If they are not already doing so, I firmly believe that the most evolved and innovative business leaders will soon similarly be concluding that there has to be a better way. They will increasingly understand the value of both litigating aggressively when warranted, but also of seeking alternatives (whether it be mediation, arbitration or otherwise) that might resolve disputes more quickly, less disruptively and at significantly lower cost.

More and more, prior litigants are finding themselves pleasantly surprised by processes that focus more flexibly on addressing their subjective needs, as opposed to purely formal legal rights and obligations. And resolutions that address the interests of the parties, as opposed to purely a redress of legal rights, give rise to better solutions and better long-term relationships. Increasingly, adversaries today are joint venture partners tomorrow, or working together to pursue common goals or respond to industry threats such as cyberattacks or challenges such as adverse regulation.

Companies’ general and other in-house counsel are realizing that, in order to be effective in today’s commercial climate, they must transform themselves into effective business enablers, focused on finding practical and creative business solutions that get everyone to “yes.” Indeed,  companies’ outside law firms, or at least those that are progressive-minded, are realizing that serving their clients at the highest levels requires embracing dispute resolution outside of the courtroom as an integral  part of the process.

And it doesn’t stop there. In a speech he gave recently, at the International Institute for Conflict Prevention & Resolution’s annual meeting, author and former Boston University School of Law professor Eric Green referred to developments pointing to a broader societal and evolutionary change through three primary stages of conflict resolution: primitive, adjudicatory and, finally, consensual, which he also refers to as “Stage III.” “The tide,” as they say, “is a turnin’.”

Sure, everyone loves to be the sole winner but an effective mediation will often lead to a win-win resolution. Even when it can’t, forward-thinking business leaders understand that commercial conflict resolution is no longer simply a game of winning or losing. Whether it be the ability to remove distractions and focus on innovation and revenue, the positive reaction from the investment community that derives from addressing uncertainties, or simply the significant save on legal spend, there is almost always a clear benefit in simply moving on, finding a mutually acceptable solution (and the sooner the better).

This is an exciting time. As the business community continues to recognize and embrace dispute resolution as a priority, it is potentially freeing up millions to be spent on jobs and innovation, instead of legal fees. More profoundly, as they make a thoughtful approach to dispute resolution the norm instead of an “alternative,” business leaders are collectively furthering the cause of corporate social responsibility and changing the tenor of how global business is conducted. This benefits not only their companies, but society as a whole. By any definition, surely, a resounding victory.

—By Noah Hanft, International Institute for Conflict Prevention & Resolution Inc.

Noah Hanft is the CEO and president of the International Institute for Conflict Prevention & Resolution in New York City, a nonprofit think tank that promotes innovation in commercial dispute prevention and resolution. He served as general counsel and chief franchise officer of MasterCard Inc. from 2001 to 2014. He can be reached at nhanft@cpradr.org.