The new Uniform Collaborative Law Act was recently signed into law in North Carolina and takes effect on October 1, 2020. What is in this new law and why is it good for business?

Collaborative law, a type of alternative dispute resolution (ADR), offers parties in a dispute a new alternative to lengthy, public, and expensive court proceedings. Picture these scenarios:

  • A family business in which the partners have agreed to go their separate ways, but there are disputes about ownership stakes, compensation, and how to operate the business going forward.
  • A building owner and contractor are facing a dispute about a project. They have worked together for years and have other projects in the pipeline.
  • An employee, subject to a non-compete and non-solicitation agreement, departs one employer and goes to work for a competitor in an industry and location where the competitors regularly cross paths. The competitors need a practical business resolution without alienating their customers and spending precious time and resources litigating the dispute in Business Court.

In these instances, a problem clearly exists, but engaging in protracted litigation is not ideal and could very well destroy longstanding relationships. In collaborative law, each party to the dispute has his or her own lawyer, with whom they meet privately, as needed. However, unlike the traditional litigation model, all of the parties in collaborative law also meet together, along with each of their respective lawyers, over a series of conferences. At each conference, the parties and their lawyers all sit at the table together — or meet virtually — to freely and openly share information about the circumstances of the dispute.

Next, collaborative lawyers help the parties to identify business interests, operational issues, and practical needs. The parties may also choose to jointly retain a third-party consultant (e.g., an appraiser, business valuator, or accountant) to provide information that may aid in the resolution process. With the guidance of collaborative attorneys, the parties jointly brainstorm possible solutions. The goal of the collaborative process is for the parties to find a resolution that meets everyone’s business interests, is sustainable in the long-term, and does so without inflicting any further harm to the business or personal relationships between the parties. In the collaborative law process, the parties maintain autonomy and self-determination as they work together to reach a practical business solution to their legal dispute. The focus is not on who is right or who is to blame — but where and how to go from here.

Collaborative law may be especially attractive to businesses that find themselves embroiled in a legal dispute for the following reasons:

1. Alignment of Values

For those who value dignity, integrity, respect, and autonomy, the collaborative law process is a good fit. The bedrock of this form of ADR is integrity and dignity. In litigation, an outcome is determined by a judge … it’s essentially outside of the parties’ hands. Collaborative law provides a way to maintain autonomy and have input on the outcome. Furthermore, the parties and their attorneys make a commitment to engage in the process and avoid litigation. Should any party choose to exit the participation agreement, then the attorneys representing them cannot also represent them in court. This ensures that all parties are aligned with the goal of reaching a mutually satisfactory resolution.

2. Emphasis on Relationships

In addition to solving the legal problems of the parties, the collaborative law process focuses on maintaining and even repairing important relationships. The collaborative lawyers coach their clients to negotiate in a way that effectively meets their needs, while also listening to and understanding the perspectives of the other parties. It has been said, “if you don’t understand the other side’s perspective, then you don’t understand the problem.”* Collaborative attorneys are trained in the interest-based negotiation model, which focuses on a client’s genuine interests. Once those interests are known and presented in a non-confrontational way, the pathway to a compromise or resolution often becomes clearer. For those with ongoing business relationships, including employer-employee, vendor-buyer, contractor-subcontractor, and family businesses, maintaining and even improving working relationships both during and after a disagreement is critically important.

3. Efficiency

Because collaborative law is conducted outside of the traditional litigation process, it is not dependent upon the court schedule. Collaborative conferences can be scheduled as quickly as the parties’ and their lawyers’ schedules allow. In fact, when civil court in North Carolina largely came to a halt this spring because of COVID-19, collaborative conferences seamlessly pivoted to Zoom without any delay. The speed with which parties can resolve their legal disputes using the collaborative law process is critical for most businesses and their operations.

4. Cost-Effectiveness

Compared to protracted litigation, collaborative law offers parties excellent legal counsel at a fraction of the cost. Parties also save money on court costs, deposition fees, and expert witness fees through the collaborative process.

5. Privacy and Confidentiality

The collaborative law process is completely confidential. The parties agree to keep the process private and confidential. Additionally, there are often no court filings, which are typically matters of public record.

One of the important things about the Uniform Collaborative Law Act is that it pauses the running of the statute of limitations. Should they decide to terminate the collaborative process, the parties are not losing any rights that they otherwise might have to pursue in court.

Anytime there is a conflict at an impasse, it would be wise to consider the collaborative law process and determine whether the numerous advantages and opportunities it offers may serve you or your business. Navigating a dispute within a closely held business can be stressful and challenging. When personal and professional relationships are paramount and parties seek an efficient means to resolve their legal issues without going to court, the collaborative law process may be a good fit.

About the Authors

Colleen Byers, JD, MBA, RYT200, is a collaborative lawyer and certified mediator at Bell, Davis & Pitt. Colleen represents individuals, families and businesses in contract, employment, corporate, professional negligence, estate, trust, guardianship, and fiduciary disputes. She serves on the Board of Directors of the North Carolina Civil Collaborative Law Association.

John Sarratt, JD, is an attorney with Harris Sarratt & Hodges, co-chair of the Civil Collaborative Committee of the North Carolina Bar Association, and President of both the North Carolina Civil Collaborative Law Association and the Global Collaborative Law Council.