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Helping You Resolve Disputes to Your Advantage

Freeman Lewis LLP helps clients resolve disputes using the dispute resolution approach most suitable for and advantageous to that particular client and his or her situation. Below we provide a Primer on various methods for resolving disputes. By educating clients about the process we hope to demystify it and help them make more informed and effective use of it.

An Overview of the Dispute Resolution Process in the United States


There are many ways to resolve a dispute. In pre-historic days, physical violence, often resulting in death, was the standard method. As the British Philosopher Thomas Hobbes observed, in the state of nature life was “solitary, poor, nasty, brutish and short.” The Greeks had a court system that had many features of our modern system, including the taking of testimony and making of argument based on a law passed by plebiscites of citizens, which at that time was limited to propertied males. The Greek’s “civilized” judicial system was far from perfect, however, as its condemnation of Socrates to death for refusing to recognize the gods shows.

In feudal times, kings and their courts imposed their law on society. A person’s inherited station in life determined what kind of justice he received. Duels, whether with horses and lances or with swords, were sometimes used, especially where a man’s honor had been disrespected.

In early American society there was a fledging court system more or less patterned on the British, but guns were also used not only in the wild west but on the civilized east coast as well. As late as the 19th century, Aaron Burr, a prominent politician, killed Alexander Hamilton, one of the United States’ most important founding fathers and its first Secretary of the Treasury, in a duel.

Today we eschew physical violence in resolving civil disputes. Our justice system endeavors to accord all individuals, no matter their wealth or social status, a modicum amount of due process. Although arbitrariness and unfairness have not been eliminated, processes have been developed that seek to minimize these evils. The goal of the modern American dispute resolution process is to be thorough, fair, and efficient. As the discussion below demonstrates, those goals sometimes are in tension.

Freeman Lewis LLP understands that no two cases are alike and does not take a cookie cutter approach to them. We seek to employ that dispute resolution process or combination of processes that is best suited to each client's particular needs and goals.

Litigation

Litigation is the traditional, formal method of resolving disputes through the court system. The parties to a lawsuit ask a judge or jury to decide the relevant facts and to apply the relevant law to those facts in rendering a decision. Litigation is designed to ensure both sides every opportunity to fully investigate the case and present it to the judge or jury. Litigation typically involves several phases – the filing and answering of the complaint, discovery, that the parties exchange of information, motions for summary judgment, trial and appeal.

  • The Complaint, Motion to Dismiss and Answer

    • The Complaint is a formal document used to commence a lawsuit. In the complaint the complaining party, known as the plaintiff, sets forth his essential factual assertions and identifies those legal causes of action that those facts support.

      Because the complaint is the road map for the case, it is a very important document. Before filing a complaint on behalf of a client, Freeman Lewis LLP devotes considerable time and effort working with the client to get it right. This usually requires several, often lengthy meetings with the client, the drafting by the client of a chronology of events relevant to the matter, and sometimes interviewing third parties or consulting experts in the relevant field, such as finance or stock trading. At this stage, we also research the law to determine what, if any cause of action the facts developed through the investigation will ground.

      The party receiving a complaint, known as the defendant, must either move to dismiss or answer a complaint.

    • A Motion to Dismiss asserts that even if the court accepts all the factual allegations in the complaint as true, the plaintiff has failed to state a legal claim and the complaint must therefore be dismissed. If the defendant wins then the plaintiff losses and must give up his claim, unless he can amend the complaint to address the grounds for dismissal or prevail on appeal. If, on the other hand, the court denies the defendant’s motion, the parties commence the often long and expensive discovery process.

      To avoid the cost and the adverse consequences of a thorough examination of its wrongful conduct, a defendant will sometimes seek a quick settlement after losing a motion to dismiss.

    • An Answer must be filed within a few weeks of the filing of a complaint, unless a motion to dismiss is made, in which case the Answer is filed shortly after the court has denied the motion. In the Answer the defendant admits, denies, or states that he does not have sufficient knowledge or information to know the truth or falsity of each factual allegation in the complaint. Because of the obvious importance of the Answer, before filing it Freeman Lewis spends a great deal of time discussing it with the client, investigating the facts and researching the law. Freeman Lewis LLP has found that this upfront investment of time is essential and yields dividends as the case proceeds.
  • Obtaining Immediate Relief
    Often in business disputes time is of critical importance. Justice delayed is truly justice denied. In such cases, a party cannot realistically wait through several years of litigation to obtain some relief. By that time, all the harms has been done and no amount of money can comensate for that harm. In those cases a party can ask the court to make an emergencey ruling at the beginning of the case to enjoin or stop the other party from doing something that is harmful. Although obtaining an injunction or other immediate relief is far from automatic, courts will grant it where the party can show that without immediate intervention of the court they will suffer immediate, significant and irreparable harm.

    Such immediate injunctive relief is often needed in business disputes, such as when one business has illegally taken informaton or employees from a competitor.
  • Discovery
    Discovery is the process by which each party to a lawsuit obtains information from the other party and from third parties needed to prepare its case for trial. The American legal system allows very broad discovery, much broader than other countries in the world. Discovery devices include interrogatories, requests to admit, bills of particular, requests for documents, and depositions.

    • Interrogatories are written questions posed to a party. A party receiving an interrogatory must generally respond to them in writing, under oath. Interrogatories are best used at the beginning of discovery to obtain very basic information, such as the name and address of possible witnesses. We have found that more substantive Interrogatories often yield obscure and non-informative answers and that the better device for asking questions is the deposition (see discussion below)

    • A Deposition is the pretrial taking of oral testimony under oath. Depositions are usually held in the law offices of the attorney taking the deposition (that is, asking the questions). Present at the deposition are the attorney taking, the person answering the questions, that persons attorney, and a court reporter which transcribes verbatim the questions and answers. Sometimes the parties to the lawsuit also attend.

      Depositions are usually the most efficient and productive means for obtaining information from the other side about their case. The transcript of the deposition can later be used to cross examine the witness if the witness appears at trial and in some cases as a substitute for testimony at trial. Deposition transcript can also be to support or oppose a motion for summary judgment or other motions made before trial.

    • A Request to Admit is an assertion of fact relevant to the case that one party asks the other party to admit. Once a fact is admitted by the opposing party it is assumed true throughout the remainder of the litigation and the party propounding it does not have to spend the time or money necessary to prove it. A Request to Admit can be used to narrow the issues in dispute, thus saving both sides and the court time and money. In some instances, if the opposing side refuses to admit a fact, the proponent of that fact can obtain costs and attorneys fees expended to prove that fact if it succeeds in proving it at trial.

    • A Bill of Particulars is a request by one party that the other more particularly set forth its factual contentions. It is useful in getting the other side to admit to a version of the facts that they cannot later deny. Such a discovery device assists the other side in knowing what position the other side will take at trial, thus allowing it to be better prepared to rebut it.

    • Document Requests are formal requests for the other side to provide copies of documents or physical things relevant to the case. Traditionally, producing documents pursuant to a Document Request involved sorting through the hard copy files of the responding party and culling those documents that were requested. Today, with computers and e-mails the search for responsive documents often involves mining the computer data bases using key word searches.

      Document requests are one of the most important and potent forms of discovery. Something written in a document two years ago is frozen in time. It likely reflects the state of mind of the author or recipient, a critical issue in many lawsuits. Documents also give the receiving party the basis for asking questions of the other side either in writing, in pre-trial testimony or at trial.

      At any time that the parties to a litigation cannot agree on a discovery issue, such as which documents should be produced or which Interrogatory questions should be answered, either party may ask the judge to make a ruling on the matter by filing a Discovery Motion. Making and responding to these motions often requires a great deal of client and attorney time. Courts have in recent years grown increasingly frustrated with litigants and lawyers who cannot resolve their discovery disputes without court intervention. One result is that before a discovery motion may be made many courts require the party seeking the discovery to first make a concerted and good faith effort to resolve the dispute with the other side. Competent attorneys working in good faith can usually resolve discovery issues in a manner that protects both their client’ interests and avoids expensive discovery motion practice.
  • Summary Judgement Motions
    A summary judgment motion asks the court to decide the case in favor of the movant (the party making the motion) without a trial. In deciding such a motion, the court asks itself whether there is any realistic chance that a reasonable trier-of-fact could decide the case in favor of the non-moving party. If such a possibility exists then the motion is denied and the case is tried.

    Although summary judgment motions can be made soon after the action has commenced by either party, it is most often made at the end of the discovery phase.
  • Trial
    If summary judgment motions are denied, the case goes to trial. At a trial both sides present evidence, consisting of testimony and documents, that they believe supports their position. They also have an opportunity to cross examine the other side’s witnesses. Some trials are before juries, some before judges. In a jury trial, a group of people from the community where the trial is held (most unschooled in the law and without expertise in the subject matter of the case) are asked to consider often conflicting evidence and decide the facts. The judge, who supervises the trial, decides what evidence the parties can present to the jury and instructs the jury on what law applies to the case.

    In a bench trial the judge not only makes evidentiary and other legal rulings, he also assumes the fact finding role of the jury.

    The Constitution of the United States and most state constitutions give parties the right to a jury trial in causes of action recognized at the common law in England. A person can waive such a right, and business contracts often have jury waiver clauses.

    Jury trials are generally longer and more costly for the parties than bench trials.
  • Post-Trial Motions and Appeals
    After the trial, the losing side can appeal the case. To prevail on appeal the losing side must convince the appellate court (consisting of three to five judges) that the trial result is based on a fundamental error committed by the judge or jury.

    On appeal there is no new trial. The appellate court simply examines the record below (that is, the documentary evidence presented and a transcript of the testimony and proceedings below) and determines whether there were errors made, and if so, whether they were of such seriousness that the result should be upset. If the appellate court decides to overturn the decision, it can either decide the case in favor of the appellant (the party who appealed) or send the case back to the trial court for a new trial or reexamination of a particular issue based on the appellate court’s ruling.

    In any appeal the threshold question for the appellate court is what standard of review to apply to any particular issue raised. Where the issue is one of “law” the appellate court will review the issue de novo, that is, it will decide the issue without giving any deference to the decision of the trial court or jury. If an issue is deemed an issue of fact, then the appellate court will give significant deference to the result below and will reverse only where it finds that the factual finding was clearly erroneous, that is, no rational trier-of-fact could have reached the decision reached by the trial court fact finder. Obviously the appellant (the party appealing the trial court decision) seeks to frame the issues as an issue of law so that no deference is given to the finding below, whereas the appellee (the party seeking defend the result below) seeks to frame the appellate issue as issues one of “fact”.
Arbitration

Over the last several decades, parties to business transactions of all kinds in the United States and abroad have increasingly turned to arbitration as an alternative to resolving their disputes in the courts. By arbitrating, the parties seek to reduce costs, shorten the time for resolution, and present their dispute to a person or persons with particularized knowledge or experience in the area in dispute. Instead of a judge or jury, the parties hire a private individual (known as an arbitrator) to decide the case. Although parties can agree to arbitrate at any time, most frequently this agreement is reached before a dispute arises when they enter their business transaction.

A plethora of organizations now provide arbitration forums for parties, including the NYSE, NASD, and the American Arbitration Association. Each organization has its own rules of procedure, though they are for the most part quite similar. The arbitration organizations have a staff of attorneys that coordinate the arbitration and assist the parties in choosing an arbitrator.

Arbitrators are typically business people or lawyers with some background or expertise in the subject of the dispute. For instance, if the dispute concerns the sale of a power plant, the arbitrator might have experience working with power plants or with the sale or purchase of large businesses. Sometimes the parties choose to have more than one arbitrator, especially when the matter involves large sums of money.

Discovery in arbitrations is more limited than in litigation. In most cases depositions are not allowed and document production is more limited. Consequently, the discovery process is generally shorter and less costly.

Arbitration also has its drawbacks. Because discovery is limited sometimes parties do not feel they have had a full opportunity to learn about the strengths and weakness of their opponent’s case before the arbitration hearing, and are thus less prepared than they would like to be. Because there are very limited rights to appeal an arbitration ruling, the parties must generally accept the ruling of the arbitration panel even if it is contrary to the law or based on an erroneous conclusion about the facts. In addition, whereas a judge in a government funded court system does not charge the parties a fee for deciding the case, in arbitration the parties must together pay the arbitrator or arbitrator, whose fees typically are several hundred dollars per hour, as well as the arbitration association for handling administrative matters. Although arbitration usually costs less than litigation because it is more streamlined and requires less attorney and client time, in this respect, it is more expensive than litigation in courts.

Mediation


Mediation is a process by which a neutral third party (known as a mediator) seeks to help the parties to a dispute resolve their dispute voluntarily, that is, without a decision from a court or arbitrator. Increasingly, parties to business disputes are using mediation in an effort to avoid the costs attendant arbitration and litigation. Too, often a mediated resolution can be better tailored to the parties particular needs and circumstances than one imposed by an arbitrator or court. Mediation can sometimes bring about a win-win solution for the parties and tends to diffuse the antagonism that often attends arbitration and litigation.

Mediation is often used in combination with litigation or arbitration. For instance, after the parties have engaged in discovery, but before trial or a formal arbitration hearing, the parties will attempt to resolve their dispute by hiring a mediator.

Investor Disputes with Brokers and Investment Advisors

Investors often have complaints about their brokers or investment advisors. In recent years, a growing number of investors have sought compensation for losses caused by their broker or investment advisors.

Historically such disputes were resolved in court. However, legal and attitudinal changes in the 1980’s caused a sea change. Today, virtually all of the brokerage firms in the country are required by self regulating organizations of which they are members, such as the NYSE or the NASD, to provide in their brokerage contracts for arbitration of any disputes between them and their customers. And courts have welcomed this form of alternative dispute resolution as part of the solution to their over crowded dockets. Arbitration is generally less formal, speedier and less costly than litigation. However, some brokerage firms intentionally seek to slow the process down and make the process costly for the claimant. A customer can usually successfully confront this strategy at obstruction and delay by aggressively pushing the process forward from the beginning and seeking arbitrator involvement at the first sign of obstructive conduct. In recent years several major brokerage houses have been sanctioned by arbitration panels and their self regulatory organizations for intentionally hiding or destroying evidence in arbitrations.

Typical claims in the customer/broker case include (1) that the broker traded the customer’s securities without authorization, (2) that the broker put the customer into securities that were unsuitable given the customers age, sophistication, aversion to risk, financial resources etc., (3) that the broker extended excessive margin to an account in violation of securities regulations, (4) that the broker traded the account excessively to increase his commissions and fees; and (5) that supervisors of a rouge broker failed to competently supervise his activities.

Despite efforts by the SEC, NASD, and NYSE to make the investment/brokerage process more transparent and "user friendly," it is our sense that it remains opaque and confusing to most investors.

The opening account forms that brokerage houses have investors sign are rarely clear; they are written in legalese and are often internally contradictory. We have found that often the broker himself does not understand the forms and that short of hiring a securities trading expert or a securities lawyer before opening an account, an investor is left to rely on the good faith of the brokerage firm and broker. The result is that investors (and often the broker) are unaware of their rights or obligations, which leads to misunderstandings and disputes. Our advice to investors is to read all forms provided carefully and to be inquisitive; if the broker cannot clearly answer your question call a lawyer.

We have also found that the brokerage houses seek to obscure the way in which they and their individual brokers make money on the account. We are unaware of any plain speaking document that any brokerage house provides to the client about fees and commissions and how they are determined. Monthly account statements show the fees but often in a confusing and unclear manner. And when questioned about it, brokers often give confusing and or wrong information. Even a sophisticated investor can find it difficult, if not impossible, to obtain clear information on how the brokerage firm/broker are compensated.

We believe that this lack of transparency respecting compensation creates an environment in which brokers succumb to the temptation of trading securities for an investor for the purpose of obtaining commissions or fees, even when the trade is not in the investor's best interest. In our experience, even in arbitrations, brokerage houses are very reluctant to turn over brokerage compensation information and will only do so if compelled by arbitrators. Once the veil of secrecy about compensation is pierced through the arbitration process it often becomes clear why the broker did what, on the surface, seems unwise or negligent.

Finally, we have noticed that brokerage firms often try to take advantage of foreign investors who, because of cultural difference, language difference, and time zone difference have more difficulty understanding or policing their broker's activities. Once again, brokerage firms are using the investor's ignorance to their advantage. This is a problem that the SEC and the Self Regulating Organizations should address at the risk of losing much of the foreign capital. Nonetheless, with perseverance and help from an experienced securities lawyer in the United states, foreign investors can and have succeeded in obtaining justice through the arbitration process.

In our experience, pre-filing investigation and analysis of claims is of critical importance to obtaining a fair award or settlement. We work carefully with the investor client to anticipate possible defenses and how best to respond to them.

Foreign Parties Participation in the American Dispute Resolution Systems

Freeman Lewis LLP often represents foreign companies or individuals involved in a dispute that is being resolved in a United States forum or otherwise involves the United States or its citizens. Language, cultural and legal system differences can make it difficult for a foreign party to understand and fully participate in the process. In our experience, however, these barriers can be overcome if the lawyer and client are aware of them in the beginning and work to address them up front.

One of the “peculiarities” of the American litigation system is our very broad rules of discovery. As discussed in detail above, in American litigation both sides have rights to obtain a great deal of information from the other side before the case is presented to the judge or jury for a decision. Documents with any reasonable connection to the dispute, including electronically stored documents, must be turned over to the other side if requested. Before a trial, the parties have the right to take the pre-trial testimony under oath of anyone with knowledge relevant to the case. The discovery process often lasts several years. By contrast, in most other legal systems discovery is limited to only the essential documents directly relevant to the case and pre-trial testimony is not taken.

Another oddity of the American system for many is the jury system. Under our constitution, a party has the right to a jury in many cases. In civil cases the jury is composed of between 6 and 12 citizens who live reasonably near the courthouse; in criminal cases involving felony charges there are always twelve jurors. Although lawyers, doctors and other professionals can and do sit as jurors, the majority of jurors are non-professionals, many without college degrees.

Freeman Lewis LLP is committed to helping our foreign clients understand the American legal system so that they are not surprised or disadvantaged by it and can be full particpants in it.

Criminal Investigations

Criminal investigations come in different shapes and sizes. They can be conducted in an hour or run for several years. The investigation is typically led by a prosecutor, working closely with a law enforcement officer, such as an FBI Agent. The investigators seek to uncover evidence of a crime though various means, including conducting interviews or taking grand jury testimony of witnesses, issuing subpoenas for documents, executing search warrants, surreptitiously recording telephone calls or person-to-person meetings using court ordered wire-taps or hidden microphones, or using confidential informants or undercover agents to inflitrate the criminal organization.

A target of an investigation often is unaware that he is being investigated, as there is no obligation for the government to inform him of his status before his arrest, which occurs after formal charges are brought through complaint or indictment. However, through various means, targets may become aware of an investigation pre-arrest. In such instances, a lawyer is often retained to advise the target. A lawyer obtained during a criminal investigation can often aid his client by interviewing witnesses, speaking to the government investigators or prosecutor or working out a pre-arrest plea agreement.

The sooner a target employs a lawyer the more effective and helpful the lawyer can be in protecting the target’s rights and minimizing his or her criminal exposure.

In many instances, government investigations will have both a criminal and a civil component. For instance, many investigations of fraud in connection with securities transactions are subject to both criminal sanction and civil sanction. The interplay between these two enforcement arms of the government is often complicated and requires an unerstanding of both. Because Freeman Lewis LLP lawyers have extensive civil and criminal law experience, we are well situated to help clients who find themselves the target of both criminal and civil investigations.

Contingency Fee Representation

One deficiency of our legal system is that it often unfairly favors those who can afford to expend large sums of money on lawyers, investigators, and experts. One way in which this unfair advantage is ameliorated is through a system unique to the American legal system known as the “contingency fee” representation. A contingency fee is a fee given to the lawyer only if his client is awarded something of value as a result of the litigation. The contingency fee is usually a percentage of whatever monetary award the client receives. In this way, the client uses his cause of action as an asset to afford top notch legal services.

Contingent fees can be structured in a variety of ways. In some cases, it is in the client's and attorney's mutual interest to have the attorney paid solely on a contingency basis. In other instances, it is best for the client to pay a portion of the attorney’s regular hourly rate and give the attorney a smaller contingency or success fee.

Freeman Lewis LLP seeks to work out a fee arrangement whether contingency or hourly, or a combination of the two, that is best for the particular case and client.

Referral Business from Large Law Firms

Both founding partners of Freeman Lewis LLP worked as associates and partners at large corporate law firms before forming the firm. For that reason we are well suited to take referral work from large law firms where conflicts, the size of the matter, or the nature of the representation prevent the law firm from handling the matter. We often represent individual employees or directors or officers of corporations who, with the corporation, are involved in litigation or an investigation and conflicts arise making it impossible for the large firm to represent both the corporation and the individual.