Alternative Dispute Resolution for Startups: Interview with Jessica Sblendori
The economic impact of COVID-19 has triggered an increase in disputes. How can your start-up prepare for such disputes? How can your start-up avoid additional risks, and the cost and time of taking the case to court? What lessons should start-ups learn?
qLegal students Isadora, Enoma and Hafeez talk to Jessica Sblendorio, an LLM Candidate in the Comparative and International Dispute Resolution programme at QMUL and qLegal Student, who won Queen Mary’s annual negotiations competition and the CPR Institute’s International Mediation Competition. Jessica shares her experiences and lessons learned from competitions and explains how alternative dispute resolution can be a powerful tool for start-ups.
Even before the pandemic, founding and running a start-up was a challenging task. The outbreak of COVID-19 has posed additional difficulties for both small and emerging companies. For instance, customers have experienced delays in payment, contracts have been undermined and investment in certain sectors has substantially declined.
Not surprisingly, besides adding economic pressure on the start-up enterprise, the pandemic has triggered various disputes, many of which have been submitted to the courts. These disputes take many forms, such as contractual claims for non-performance; claims from disgruntled employees; claims regarding business interruption; and internal disagreements between founders, as illustrative examples.
This scenario raises concerns about how start-ups can deal with this additional challenge. Litigation is not always the best, or most efficient solution. Going to court is often time-consuming, public, costly and formal. Fortunately, alternative forms of dispute resolution can offer less expensive ways to solve disputes.
Today, we talk with Jessica Sblendorio, an LLM Candidate in Comparative and International Dispute Resolution at Queen Mary, University of London and qLegal Student. She won Queen Mary’s annual negotiations competition sponsored by Bryan Cave Leighton Paisner and Queen Mary’s Alternative Dispute Resolution Society and the CPR International Mediation Competition, both of which focused on negotiating simulated commercial transactions between various parties. Jessica shares her experiences and lessons learned from competitions, and talks about how alternative dispute resolution (ADR) can be a powerful tool for start-ups.
- Tell us more about yourself.
I am originally from New Jersey in the United States, and I qualified to practise law in New York and New Jersey after graduating from the University of Miami School of Law. Prior to starting my LLM in Comparative and International Dispute Resolution, I worked as an associate in a national boutique firm in New York City that specialised in intellectual property and commercial disputes. In law school, I developed an interest in alternative dispute resolution and decided to use the knowledge I learned as a litigation associate to pursue a career in international arbitration. Following the completion of the LLM programme, I hope to continue my career in private practice with a focus on dispute resolution.
2. You participated in two competitions and placed first in both. Can you briefly describe the experiences and the most important lessons you have learned as a result?
Prior to participating in these competitions, I did not have any formal negotiating experience and this was an important skill I hoped to develop, both as a young lawyer and a future ADR practitioner. Both competitions focused on building core negotiation skills and commercial awareness, which was critical in finding the best solution for the party I represented. Each round of the respective competitions was an evolution of both the sophistication of the issues and the challenges faced.
One important lesson I learned is that a critical part of the process is to gather information through asking questions and actively listening to the opposing party. Without this, it is difficult to evaluate a party’s goals and interests and to assess the strengths and weaknesses of your position, including whether there are options for leveraging interests.
A key learning point is to listen to the other party’s response and to not be afraid to challenge an answer or restate a question, particularly if that information is valuable to the client. A skilled counsel (or client) may articulate a response that diverts the conversation to an area which the client is more comfortable with. This ability, which is underpinned by the skill of active listening, can help a counsel or client representative avoid the conversation becoming tense and unfruitful.
3. Do you think that litigation is now an effective form of dispute resolution for start-ups?
Disputes that start-ups may face include breaches of contract, intellectual property disputes, and employment disputes, to name a few types of examples. In some instances, litigation can be an effective form of dispute resolution for start-ups when enforcing rights or seeking remedies on those critical issues, but it can also be costly and time-consuming, particularly for start-ups that are seeking to move their business forward and not be bogged down in legal disputes. Litigation can also tarnish the public perception of a start-up, which could also be damaging to companies in the process of establishing their reputations.
For example, businesses that are seeking to build a brand (including through the use of trade marks), or seeking to protect other intellectual property rights, will need to register these rights or take protective measures to ensure these rights are properly secured and can be enforced. Litigation is a helpful tool to accomplish the goal of enforcing and maintaining such rights. Furthermore, where there is a disagreement between an employer and employee, litigation may be appropriate to enforce the rights of the business (particularly if the theft of proprietary information or trade secrets are at issue).
On the other hand, the threat of litigation — or even arbitration — can also increase pressure in a commercial negotiation (i.e., the process by which different parties negotiate on the terms of the business transaction they are involved in to find a mutually acceptable solution). This can happen as it suggests that the party is ready and willing to enforce its legal rights and seek damages — that is, compensation. Such tactics can be effective when negotiations are stalled or one party feels that the discussions are not moving to a resolution stage. Using litigation as a negotiation tactic, when appropriate, can be effective in applying pressure on the other party to more meaningfully engage in the discussion.
Additionally, when faced with a dispute, it is important to always weigh all options and alternatives and discuss them with counsel, as each case has different objectives and considerations that must be taken into account. In some instances, exploring mediation (a form of ADR) first may resolve the dispute without incurring significant costs and would provide a neutral setting without the pressure of the court or arbitration proceedings.
There are also steps start-ups can take early on when negotiating commercial deals to lessen legal costs and avoid disputes, including setting a clear agenda of issues to discuss for the specific deal, drafting a set of common goals each party hopes to achieve from the commercial deal and approaching the negotiation with an appropriate mindset of what the companies are hoping to achieve. It is therefore important to enter a negotiation with an informed understanding of the process. For example, if companies are looking to merge and build a new company based upon the commercial initiatives and viability of both or engage in a joint venture, the main objective is to finalise the deal, and not to approach the negotiation with the mindset that one party has wronged the other. Having commercial awareness of what is important to the business you represent is critical to success in negotiations and may also encourage positive outcomes.
With respect to both the negotiation of an agreement or in a mediation, being prepared to disclose information and provide non-monetary solutions can alleviate tensions and align common interests. There will always be issues within a negotiation or dispute that will be more contentious than others. Focusing on issues where agreement can be reached can establish goodwill, create additional points of leverage and increase the likelihood of progressing the negotiation. It is possible to have a collaborative approach while still remaining assertive in your position and this is something to keep in mind.
Lastly, it is important to gather information to ensure that the parties can come to an agreement. Based on that information, a party can evaluate if its interests and the other party’s interests can fall within a “zone of possible agreement”. If this is not the case, then it may be prudent to discuss alternatives and establish priorities to negotiate. Be mindful of what the commercial aims are for the business and ensure such aims can be achieved through legal consideration and planning to avoid disputes. It is also important to be prepared to enforce any rights or remedies when necessary through litigation.
4. Based on your experience, how can ADR be used to improve business outcomes?
Businesses, and the people who run them, do not enter into transactions expecting failure. They enter to further the objectives and commercial aims of the business. It is important to remember that you are negotiating with people and that each party comes to the negotiation table with different interests and positions. As such, start-ups should incorporate a dispute resolution mechanism in their contracts prior to any disputes arising.
The use of ADR, particularly mediation, may provide opportunities for parties to resolve disagreements without resorting to litigation or arbitration. Mediation provides an opportunity for information gathering and candid discussions of issues with a neutral third-party. There may be some instances where a dispute is not progressing towards resolution because of a misunderstanding or misinformation, and exploring this in mediation may resolve such issues. Additionally, even where a business is in a dispute with another business in the same industry, they may want to continue doing business in the future or have other commercial obligations to this party. Mediation provides a forum to resolve these disputes in a potentially more amicable and private way through facilitated discussions.
These are some considerations to keep in mind, but overall, ADR is an effective tool to resolve business disputes in a productive and cost-effective manner and to ensure commercial relationships are maintained.
This article was written by Isadora Werneck, Enoma Agbontaen and Hafeez Adeniyi Apena who are participating in qLegal as part of their Law Masters studies at Queen Mary, University of London. qLegal provides pro bono legal advice to start-ups and entrepreneurs on intellectual property, data protection, corporate and commercial law. See the qLegal website for more details and to book your appointment now. Follow us on Twitter and LinkedIn for regular updates on issues relevant to your business