A WALL STREET FIRM’S MED-ARB CLAUSE A Wall Street law firm adopted the med-arb clause excerpted in part below, after some highly publicized partner-departure cases in the early- to mid-1980s. The clause was one of several sample partnership-agree- ment ADR clauses published in a 1987 report of the Association of the Bar of the City of New York, and is reprinted with permission.

All disputes concerning the application of this Agreement to a particular partner as to which such partner would otherwise have the right to pursue litigation (“Disputes ’3 will be resolved as provided below. These procedures are for the settlement of Disputes only, and are not to be used for disagreements concerning f irm policy or organization. (1) I f a partner has a dispute with thefirm, he and thefirm will first seek to have the Dispute mediated by a n elder partner of thefirm chosen by agreement between the partner and management of the firm. I f no agreement can be reached, the Dispute will be mediated by the oldest elder partner willing to serve as mediatol: The mediatog after consultation with the parties, will determine the mediation procedures to be followed. (2) AllDisputes that cannot be resolved by mediation will be finally settled by binding arbitration by a single arbitrator under the following procedures.. . .

The partner who drafted the clause declined to iden- tify himself or his firm, but in an interview with Alterna- tives, explained some of the language and strategy:

1. “will be resolved.. .” The clause is mandatory. “Basi- cally, when lawyers become partners here they renounce the jurisdiction of the court over any legal claims they may have with the firm,” the lawyer said. Instead, all such disputes must be resolved by the terms of the ADR procedure.

2. “firm policy or organization ...” The clause “specifi- cally carves out day-to-day management stuff‘ from its scope, the lawyer noted.

3. multistep approach. The clause sets out a “multi- step” ADR process. Although the clause is silent on the subject of negotiation, there is a built-in assumption that informal negotiation with the aggrieved partner or former partner is the first step. If negotiation fails, mediation is tried; if mediation fails, the parties pro- ceed to the third and final stage, binding arbitration.

4. “oldest elder partner ...” Who will mediate? One of the firm’s own retired partners. First, the firm and the partner try to agree on which retired partner will mediate. Failing agreement, the dispute is mediated by the oldest retired partner willing to take on the job, “The oldest such partner is the one farthest away from the firm,” the lawyer says; he is thus the one most likely to be neutral and so perceived.

5. arbitration. If mediation fails, the case is arbitrated. Under the arbitration provisions (not printed above), the parties will try and agree on an arbitrator. If they cannot, the clause authorizes either party to petition the chairperson of the ADR Committee of the Associa- tion of the Bar of the City of New York, who will select an arbitrator, presumably from the bar’s arbitrator roster. After consulting with the parties, the arbitrator chooses the arbitration rules. The arbitration is confi- dential.

A big advantage to writing your own clause is the ability to “custom design” it for firm priorities, the partner said. Privacy is highly prized by his firm, he says, and this priority surfaces in several places in the clause: the use of the firm’s own partners as mediators, for instance, and the required confidentiality of the arbitration. The attempt to settle the case by negotia- tion and mediation before proceeding to arbitration shows another firm priority: consensual resolution.

Has the clause been invoked? Yes, he says, “we did a mediation in a departing-partner dispute. But we’ve never gone to the arbitration stage.” Should they ever need to, however, the clause covers that process.

(continued from page 25) Similarly, the sight of lawyers slug-

ging it out for cash in court does not burnish the image of the individual firm. And it sharply embarrasses the bar as a whole. “The frequency, com- plexity, duration and characteristic acrimony of such lawsuits has . . . gen- erated extensive media coverage about the apparent inability of the legal pro- fession to keep its house in order,” concluded a committee of the New York City Bar Association in a 1987

report. ADR, then, is clearly in a firm’s en-

lightened self-interest in these mat- ters. But another argument for using ADR turns on the firm’s ethical duties to clients.

Lawyer disputes have a “potentially dangerous impact on clients,” said the New York City Bar Association com- mittee. Four primary perils are “a dis- ruption or distraction of lawyers’ at- tention from the performance of legal services; the client’s need to make

choices regarding his or her future representation; the infusion of the law- yers’ dispute into the client’s affairs; and the potential unwillingness of law- yers to complete the client’s represen- tation. ”

Ethics and enlightened self-interest, then, point straight to ADR in law firm partnership disputes. For firms anx- ious to avoid the fate of the cobbler’s children, we recommend serious consideration of the accompanying guides. i