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Disintermediating the Courts and the Legal Profession

Posted by Cyberbear on February 24, 2011 in Internet, Judicial Decisions, Tech News |

Development of the internet uniquely has disintermediated many industries.  Book, newspaper, and music industry publishers and distributors have seen their roles and revenues decline as the internet creates more direct marketing and other relationships between content creators and content consumers.  This googlization of the economy continues to revolutionize many industries.  Perhaps the latest and most surprising target is litigation and the complexities and delays the legal profession and the courts have engrafted onto dispute resolution.  While the  popularity of alternative dispute resolution (ADR) procedures, such as arbitration and mediation, over the past decades suggests a pent up demand to avoid the transactional costs and delays attendant to court litigation, the internet has now carried ADR procedures to an ultimate conclusion — by-passing both the legal profession and the courts entirely by crowdsourcing the process of dispute resolution over the internet.

 

Truveli now offers online what it calls a fast, free, and convenient way get “Trial by Jury’ (i.e. by a set of online neutrals) to resolve disputes.  It advertises that it can offer services to resolve disputes over civil rights and discrimination claims, internet purchases, business disputes, disputes over good and services, real estate problems, family and inheritance issues and many others.  Recognizing the increasing intellectual property issues created by the internet, Truveli even suggests it can offer services in this area despite the exclusive jurisdiction within the United States of the federal courts over many such matters.  Should it become accepted and popular, Truveli clearly has the potential to do what it says — provide an inexpensive, expeditious, convenient and neutral way to arbitrate disputes.  The interesting question is whether internet crowdsourced dispute resolution sites like Truveli have the potential to do to the courts and the legal profession what the googlization of the economy has done to the book, newspaper, music, and other industries.

 

While it is tempting to applaud the emergence of an inexpensive and efficient way to resolve disputes and many might cheer the disappearance of lawyers and courts, crowdsourcesd dispute resolution actually might not impact much of the legal profession or the courts.  First, in almost all courts, the criminal docket far outweighs the number of civil cases filed with the court.  In fact, the weight of that criminal docket constitutes one of the major factors causing lengthy delays in addressing civil cases.  While some states have already controversially privatized their correctional systems, it is not terribly likely that the society will tolerate privatizing the determination of guilt or innocence in criminal cases or the sentencing decision to deprive fellow citizens of their liberty (or, in extreme cases, their lives).  Thus, private, internet crowdsourced solutions almost certainly will not make any dent in the bulk of the cases heard by the courts.

 

But what about civil adjudication; can internet crowdsourced dispute resolution provide fast, convenient, and inexpensive vehicles for removing large portions of the civil docket from the courts and thereby make a major dent in the already dwindling business of the legal profession?  Will civil litigators soon be scrambling for a new business model in the same way that newspapers currently are scrambling to find alternative business models?  Two features of civil litigation suggest that the answer is no — the economics of the profession and the unique ability of courts to involuntarily resolve disputes.  Given the high transactional costs of civil litigation, too often only cases involving significant monetary damages or impacting major business, political, or governmental interests tend to actually get filed in and fully adjudicated by the courts.  As many middle class claimants with claims in the four and five digit dollar amounts often discover, finding an attorney willing to take such comparatively small claims (i.e. claims that are seen as quite large by the claimants but small in constellation of claims routinely heard by the courts) is almost impossible because the transactional costs of such litigation frequently outstrips the expected recovery or, more to the point, the potential attorneys fees.   Thus, much of the non-frivolous litigation that actually takes up court time and constitutes the bread and butter of civil litigators involves sophisticated business and governmental issues.  Such litigation generally is brought by and against business or governmental professionals and frequently involves fairly high stakes.  Such professionals generally demand a professional, sophisticated and predictable adjudicative process and for that reason the parties in such cases are far less likely to invoke a less predictable, non-professional crowdsourced solution.  Other cases, such as mortgage or car loan foreclosures, divorce, and probate require definitive court orders that only a court can provide.  While the underlying dispute in such cases often can be resolved through ADR or crowdsourced solutions, like Truveli, the parties still need to get a definitive court order to fully implement their resolution.

 

At the other end of the economic scale, most states have recognized that their formal court structures do not work well for small disputes and they have provided an alternative solution — small claims court.  Small claims court statutes or rules frequently limit the maximum amount in controversy to some maximum such as $1000 or $5000.  More significantly, in small claims court the rules are highly simplified, their procedures are expeditious, and frequently legal representation is not permitted.  Thus, for the smallest of claims, while crowdsourced solutions like Truveli may provide an alternative, they are not likely to make such, if any, dent in the livelihoods of civil litigators who often are prohibited by rule from appearing in such cases.

 

From this description, it should be evident that the greatest need exists for some process to resolve disputes above the ceiling of small claims courts and below the significant business and governmental cases that form the core of the revenues for civil litigators.  It is precisely these cases, often involving disputes between middle-class people (who are also a target demographic for the internet), for which crowdsourced solutions like Truveli may perform a valuable function.  Since it is extraordinarily difficult to get lawyers to take cases in this range, however, it is not likely that crowdsourced dispute resolution solutions like Truveli will adversely affect practicing attorneys who litigate.

 

The second critical question that limits the utility of such crowdsourced solutions is that both parties must agree to submit to Truveli resolution.  Since courts are backed by the power of the state, they will always have the single unique advantage of affording a vehicle for resolving disputes against parties who otherwise will not agree to resolution elsewhere.   For example, assume a middle class depositor has a serious dispute against her rather large banking firm, claiming she lost significant money through their negligence.  While she might like to invoke ADR or crowdsourced solutions, like Truveli, such firms are not likely to agree to such an unpredictable process. Indeed, they may resist any form of consensual dispute resolution.   Absent agreement of the bank, her only recourse is to the courts.

 

ADR and internet crowdsourced disputed resolution systems, like Truveli, certainly can perform an extraordinarily valuable function in providing fast, efficient, and inexpensive means for resolving disputes between amenable parties. Indeed, they may function best in precisely the vast middle-class hole between the jurisdiction of the small claims court and high-stakes business and governmental litigation that currently is badly served by both the courts and the legal profession.  In addition, where the disputing parties are in distant states or even countries and both sides of the dispute are agreeable, crowdsourced solutions like Truveli can cut through the jurisdictional limitations on court authority necessarily imposed by the geography of political boundaries.  Nevertheless, notwithstanding these advantages, it does not appear that such crowdsourced dispute resolution solutions on the internet are likely to disintermediate the courts and the legal profession in quite the same way that Google News, Craigslist, and Groupon have put the hurt on the print newspaper business.  Hopefully, the legal professional therefore will see such crowdsourced solutions as filling an underserved portion of the society and applaud the technological creatively in providing such solutions.

 

1 Comment

  • truveli says:

    Great article, Cyberbear! Thanks. You get it. You hit a number of very relevant points right on the head of the nail. Maybe we did do a good job after all? Having said as much, I do want to clarify a few points for your readers.

    The first point is Truveli’s genesis. The initial idea came out of the relatively significant number of resources online marketplaces need to dedicate to resolving differences between their buyers and sellers. According to the statistics we have seen, there is approximately a 4% rate of disputes generated, 3% of which are resolved through mediation handled by the marketplace owner’s staff, whereas 1% goes to arbitration/court. One small company, actually has 4 employees taking care of these issues! In our opinion, these resources are best dedicated conducting the company’s business and not mediating disputes, thus the perceived need for a service such as that provided by Truveli; free up internal resources to focus on the core business. In our opinion, a super value proposition for any online marketplace such as guru.com, odesk.com, elance.com, etsy.com, or even alibaba.com.

    As the number of online transactions increase, so do the number of contracts between the parties. Unfortunately, no matter how good the contract is, it is unlikely that it be enforced in a satisfactory manner given the distance between the two parties and the jurisdictional issues that may ensue. Not to mention, the time and money involved in pursuing such a claim in light the relatively small amounts transacted online.

    To date, there are only two commercially viable businesses that provide a service that can meet, at least in part, a solution to this challenge: eBay/PayPal and Cybersettle. eBay/PayPal have a state of the art mediation service offered to users of either service. Their mediation service is headed by Colin Rule, one of the earliest ODR specialists, and now one of, if the top, in the field. Cybersettle is a VC backed service that generates most of its business (as far as I know) through NYS small claims court. Although both are excellent services, the first requires using eBay or PayPal while the second deals well with monetary amounts but is weak on issues like interpreting contracts. Therefore, another solution is necessary.

    So, the question we asked ourselves is how to build an online dispute resolution system that any online business can use? How can we make it effective; enforce the verdicts? How can we make it unbiased; eliminate jurisdictional/cultural issues? How can we make it inexpensive?

    Our solution was to leverage the power of the social web while applying the time tested method of trial by jury to dispute resolution.

    In adopting this approach, we take the resolution process out of the courtroom and put it online thus making it available to everyone and eliminating the time and cost associated with the tradition process. This brings me to my second clarification, As you quite rightly point out, this will not significantly effect the legal profession – I would add – in the United States. But outside the U.S. this can have a significant impact because justice is meted out very slowly and inequitably elsewhere. Likewise, most countries do not have a jury of your peers system but a bunch of crusty magistrates who do what they want. Outside of the U.S. Truveli’s impact may be significant. The fact that we have users from Laos, Senegal, Turkey, Italy, France, Norway, Sweden, … 20 countries is not insignificant in our view.

    It is just this diversity that allows us to provide an unbiased resolution to disagreements between parties. What we did is open the jury selection process up to all users. To be more precise, if the litigants are American and Chinese then their jury pool consists of users from any nation except the US and China. I know. I know. This goes against doctrine. That’s OK. I like to stir things up a bit. This means that the five jurors the two litigants agree on must come to a unanimous agreement that cuts across any number of cultural divides. The only unifying aspects that create a connection between the users is the use of the Internet, the English language and having signed up for the service. Aside from these it could be a challenge.

    This brings me to my third point, the long term. One the principles of the Internet and of Truveli is openness. Consequently, all the documentation of each case is archived for future consultation. Any litigant can be searched to see how many cases they may have initiated or have been initiated against them. Every judge and juror can be reviewed to see how they behaved and/or voted. the transcript of every discussion is saved, the arguments, evidence and testimonies are saved, deliberations and verdicts are saved. But this is the short term. Over the long term, patterns can begin to emerge. Patterns that reflect more universal values. These values can serve as the basis for an entirely new standard making body to which people may want to subscribe. In much the same way that users contribute to opensource software development, by using Truveli they are building their own system to regulate relations. After all, the law is code. No? So, who is to say that the future contracts between parties not have a dispute resolution clause where the jurisdiction is truveli.org instead of the state of… or country of….?

    Lastly, I want to conclude with my total disagreement regarding the predictability of the law. Undoubtedly in the U.S. the law is more predictable than elsewhere but elsewhere it is not predictable at all. It is because of this unpredictability that lawyers have asked us to develop a “professional” version of truveli. They prefer to submit their cases to a panel of their peers than go to court. For example, IP lawyers want the possibility of submitting a case to 5 IP professionals instead of a judge or arbitrator. Likewise, construction litigation is all the rage and lawyers in this field have asked the same of us. It seems that many issues are too technical for most judges to develop an objective about in so short a period of time that they based their rulings on factually incorrect assumptions and premises.

    In conclusion, I would like to add that although just about everyone sees the opportunity to achieve significant productivity gains in dispensing justice by using the Internet most efforts have fallen short because of the constraints the law poses on procedure. A very simple example, is the principle that everyone has equal access to the law; this would require the state to guarantee Internet access to every citizen. Consequently, it is important to start to think about and develop a system that grows out of the Internet toward the judiciary, like Truveli is trying to do. The natural monopoly of the state makes this not only inevitable but necessary if we want to maintain – if not develop – a truly equitable system of justice.

    I will stop here because I could go on and on with this subject. Wouldn’t want to bore anyone. But there are a number of issues that I didn’t touch on such as the increasing number of Pro Se cases at the State and Federal level in the U.S., the de-bundling of legal services by lawyers to keep costs down, the lag time between changes in society and their adoption by the judiciary, the failure of U.S. foreign policy to spread democracy in part because of a weak judiciary in those countries, and so on and so forth.

    Thanks for your time.

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