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Law Office of Robert J. Ambrogi
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March 2001

Resolving Disputes Over the Web

By Robert J. Ambrogi

As use of the Internet to communicate and conduct business grew, disputes were inevitable. Thus it was that alternative dispute resolution took a foothold early on in the development of Cyberspace.

The range of potential disputes in the virtual world is as wide as in the tangible one - copyright or trademark infringement, misappropriation of trade secrets, defamation, fraud, deceptive trade practices, invasion of privacy - the list grows ever longer.

Early in 1996, operating on the assumption that disputes that arise online are best resolved online, a group of Internet trailblazers established The Virtual Magistrate, the Web's first forum for online arbitration and fact-finding. Proceedings were to be conducted entirely by e-mail, moderated by an impartial magistrate drawn from a pool of neutrals with experience in computer and Internet law.

The Virtual Magistrate came with high pedigree, backed by the National Center for Automated Information Research, the Cyberspace Law Institute, the American Arbitration Association, and the Villanova Center for Information Law and Policy. But its first decision issued a few months later - an unenforceable default judgment against the non-participating America Online, in favor of a complainant who was affiliated with the Virtual Magistrate - drew controversy, and the program subsequently became dormant.

The Virtual Magistrate still lives on the Web, now "new and improved" and hosted by Chicago-Kent College of Law, at www.vmag.org. But while it remains largely inactive even today, plenty of other online ADR programs have sprung up in its wake, providing what has come to be known as ODR - online dispute resolution.

Conciliation By Computer

Of this new generation of online dispute-resolution services, the most high tech are those that substitute software for arbitrators and mediators, resulting in a kind of conciliation by computer.

One of the first of these was Cybersettle.com, an automated, online tool for resolving insurance claims. Either an insurer or a claimant can initiate the process. Cybersettle then invites the other party to participate. If it agrees, the two sides are given three opportunities - or rounds - to settle. For each round, each side submits an offer or demand. Software automatically compares these. If the offer and demand are within 30 percent or $5,000 of each other on any round, the claim is settled for the median amount. If an offer is the same as or greater than a demand, the claim is settled for the demand amount. Started by two former trial lawyers, Cybersettle has the participation of a number of insurers and self-insured companies. Parties to a dispute pay only if they reach a settlement. The fee ranges from $100 to $1,000, depending on the amount of the settlement.

Along the same lines is ClaimSettle.com, an automated settlement program that works by splitting the difference between two settlement offers provided they are within an agreed range of each other. Each party confidentially submits a proposed settlement amount. If the amounts submitted are within a specified range, the program splits the difference and settles the case. If not, the parties can continue to submit settlement figures for a pre-agreed number of rounds. ClaimSettle's default is that the amounts must be within 25 percent or $5,000 of each other, although the parties can agree to something different.

Bring In The Humans

Another service that employs this automated approach to dispute resolution is clickNsettle.com, but it differs from some of its virtual competitors in that it also offers a full range of traditional, live mediation and arbitration in addition to online dispute resolution.

clickNsettle's online service is much like those of others who use computer programs to compare each party's offer and split the difference when they come within a certain range of each other. If the amounts are within 30 percent of each other, clickNsettle will split the difference and settle the case. If not, the parties can continue to submit new offers, which must be at least five percent better than the previous amount. If a settlement is not reached within 60 days, clickNsettle, which was formerly named National Arbitration & Mediation, refers the parties to its panel of arbitrators and mediators. Fees are based on the value of the case and the duration of the settlement process.

When an eBay sale goes sour, the Web auction site refers its users to SquareTrade, for help resolving their disputes. So do the Web businesses DoveBid, Onvia.com, HelloBrain.com, Digimarc and eSASA. SquareTrade uses proprietary technology together with a roster of more than 250 trained mediators to provide online dispute resolution.

Like clickNsettle.com, it employs a two-tiered process. Parties to a dispute begin with SquareTrade's patent-pending Direct Negotiation. The parties exchange messages regarding their positions using a secure case page hosted by SquareTrade. The Direct Negotiation tool suggests possible resolutions and helps parties work directly with each other towards resolution. If the first tier fails to resolve the dispute, the parties can request a mediator to assist them in coming to terms. All communication is done via the case page. Parties are charged nothing to use the Direct Negotiation tool. If they elect mediation, the cost varies depending on the Web business that referred them. For example, an eBay customer who files for mediation is charged $15. A customer from HelloBrain is charge $20, plus 50 percent of the value of the transaction over $1,000, up to a maximum fee of $2,500.

Computer-less Conciliation

While the sites above all use computers to resolve disputes, some still do it the old-fashioned way, using only real people.

One of these is Montreal-based eResolution, which offers international, online dispute resolution services with respect to domain name and keyword disputes, and provides general mediation and arbitration services for e-business disputes. It is one of only four organizations in the world accredited by the Internet Corporation for Assignment of Names and Numbers to resolve domain name disputes. A person with a dispute submits it through the Web site, after which eResolution will contact the other party and assign a mediator or arbitrator. Fees vary, with domain name disputes starting at $1,250.

Rather than rely on ADR professionals, iCourthouse, strives to be a sort of virtual judge and jury, providing jury trials via the Web. Parties submit opening and closing arguments, documentary evidence, and "testimony" (actually written statements), collected into a "trial book." Jurors - who can be any Web surfer who registers - select the cases they would like to decide from a docket of open cases. They review the contents of the trial books, and are able to post questions to the litigants.

After all the jurors have rendered their verdicts, the parties receive a verdict summary that includes the number of votes cast, the median award to the plaintiff, if any, and a compilation of juror comments about the case. The parties can choose whether the verdicts are binding or advisory. This, of course, assumes both parties agree to the proceeding in the first place, since, not being a real court of law, iCourthouse has no way to coerce defendants to participate.

Of far greater interest to lawyers is iCourthouse's JurySmart, a feature that allows lawyers to test the strengths and weaknesses of a case by previewing it to a pool of Internet jurors. Lawyers present their claims in the same manner as would other parties. At the end, they receive a written report of the results, which includes each juror's verdict, comments and questions, along with a profile that includes each juror's age, sex, occupation, education, occupation and annual income. At a cost of $189 per report, this is an economical and effective way for lawyers to assess the merits of a case.

Other ADR Sites

The sites above are only a sampling of the growing number of companies and organizations providing online dispute resolution. Beyond ODR, the Web hosts a surprisingly large number of sites that, while not directly providing dispute resolution online, contain information and resources about ADR in general. While there are far too many of these sites to review here, some merit mention for lawyers seeking general ADR information.

Start with the American Arbitration Association. The AAA was a pioneer in the field of ADR, and its Web site is the pre-eminent ADR resource on the Internet. Here you will find information on ADR in labor relations, employment, commerce, the construction industry, and international disputes. The site has the text of AAA rules and samples of several AAA forms. It includes the full text of federal and state arbitration statutes. There are also a number of useful guides to ADR in various industries.

A surprisingly useful site is ADR Resources, hosted by Dallas mediator Stephen R. Marsh. Although amateurish in appearance, it offers an array of information and resources that make it worthwhile for both ADR professionals and those seeking to learn more about the field. Start with Marsh's collection of essays, divided into four "volumes," each addressing successively more complex topics, ranging from checklists for preparing for and appearing at a mediation to the use of mediation in estate planning. Marsh's monthly newsletter, Mediation On-Line, is useful, among other reasons, for his regular updates of new Web sites related to ADR, and his collection of links to ADR resources on the Web is fairly extensive.

The University of Massachusetts, Amherst, is host to the Center for Information Technology and Dispute Resolution, which uses the Internet to explore how disputes that arise there can be settled online. Directed by UMass Professors Ethan Katsh and Janet Rifkin, the center hosts a number of innovative projects. It operates the Online Ombuds Office, a free program for resolving disputes that arise out of online activities, and it pioneered a program for resolving disputes between buyers and sellers on eBay. The center publishes a monthly newsletter on the Web, ADRonline Monthly, and hosts an electronic discussion list about ADR, "dispute-res."

For help keeping up with the latest developments in dispute resolution, go to Recent Developments in Dispute Resolution. Every other week, this newsletter arrives via e-mail, delivering news of court opinions, legislation, regulations, books and articles on the subject of ADR. It comes courtesy of the faculty and students at Oregon's Willamette University College of Law and its Center for Dispute Resolution. You can subscribe from the site, or, if you prefer not to receive the e-mail, you can read the current issue here, as well as all previous issues back to June 1997. Best of all, it is entirely free.

Another source for breaking news in the field of alternative dispute resolution is ADRWorld.com. It provides daily summaries and full text of court decisions related to ADR, and tracks legislative and regulatory developments in the field from the federal government and all 50 states. Much of this is archived, creating a searchable, full-text database of ADR-related court opinions, statutes, rules, policy documents and news stories. Summaries are free, but access to full text requires a paid subscription, which is $245 a year for a single user.

© 2005 Robert J. Ambrogi.