The Legal System and ADR Analysis
One aspect our company utilizes to expand is purchasing smaller lucrative expanding companies. As we proceed with these procurement actions we must ensure we act in good faith, if not we may find ourselves in a similar situation as USA Truck and Knight Transportation are currently besieged in.
USA Truck Inc. of Van Buren, Arkansas filed a breach of contract lawsuit against Knight Transportation Inc. of Phoenix, Arizona, because Knight Transportation is attempting to buy out USA Truck. The lawsuit, filed in Crawford County Circuit Court, alleged Knight unacceptably utilized USA Truck's proprietary company information to facilitate a hostile procurement of USA Truck for an unreasonable amount, which does not reflect the Company's real value. The lawsuit requests Knight to divest the USA Truck shares they currently have, which USA Truck accuses Knight obtained by violating the confidentiality agreement the two companies agreed to. Knight increased its ownership in USA Truck from 8% to 12% after the company publically announced it was trying to take it over. USA Truck's Board of Directors is very disenchanted with the way Knight Transportation acted when they promised they would not do what they are being accused of doing, which was utilize confidential information expressed to them via friendly private discussions regarding an agreed upon transaction between the companies. When USA Truck’s Board of Directors refused to agree to the terms Knight Transportation decided to take the offer straight to the shareholders. USA Truck retained the legal services of Kutak Rock LLP of Omaha, Nebraska and filed the lawsuit (Turner, 2013).
The lawsuit was filed at the Crawford County Circuit Court, a general-jurisdiction trial court, no hearing date is set. General-jurisdiction trial courts proceed over cases such as felonies and civil cases over a specific dollar value (Attorney, 2014). Depending on the ruling from the circuit court, the next level is the intermediate appellate court (Cheeseman, 2013). The Arkansas Court of Appeals reviews the records from the lower level courts to determine if there are any errors which would warrant a reversal or modification of the trial court's decision. The ruling by the Arkansas Court of Appeals cannot be appealed to the Arkansas Supreme Court, which is highest state court. The opinions of the appellate court may be reviewed by the State Supreme Court via an application by a member of the appeal, upon a request from the Court of Appeals, or if the Supreme Court decides the case ought to have been originally assigned to it (Judiciary, 2013). Litigation, by the means previously described, is expensive and unpredictable; this is why most cases are resolved by an alternative method of dispute resolution.
The variables associated with trials cause the prices to fluctuate. Some of the variables are the responses by the other parties lawyers, the facts may result in a full trial as opposed to a ruling based on initial written motions, and the judge who proceeds over the case may resolve the case quickly or require countless hours of work by the lawyers. The more work the lawyer has to do the more the cost is driven up. Not only is there the unpredictability of the judge’s rulings there is the unknown cost factor associated with litigations (Crumpton, 2011). The Kutak Rock LLP’s hourly attorney fees, in 2012 were $375 (Management, 2012). The average time for a breach of contract lawsuit is about 45 hours. Based on the amount of hours and the average court reporter cost of $8,175, the USA Trucks company is looking at an average cost of $25,050 to take their lawsuit to court (Crumpton, 2011). In addition, to the uncertainty of the cost there are other aspects of litigation which need to be considered and compared to alternative methods of dispute resolution (ADR).
There are benefits to using litigation as well as ADR. The company’s will have to do a benefit analysis to determine what is in their best interest to come to some type of resolution. A benefit of ADR is the proceedings are private, unlike a court hearing which is public. Based on the information already provided, USA Truck’s stated their proprietary information was used by Knight Transportation; it may be advantageous for USA Truck’s to utilize ADR instead of litigation because the company will have to divulge the information in court and it will become public knowledge. Also, Knight Transportation may not want their reputation tarnished if they did do something wrong, so they may also want to utilize the privacy aspect of ADR. A decision from litigation is enforceable, just like it is from ADR. Decisions from court cases can be appealed. If there is no decision from ADR the parties still have the right to pursue litigation. There is a substantial lower transaction cost for ADR. Traditionally, companies which utilize ADR will preserve a continuing relationship with the other party because the issue was resolved based on problem solving and finding a common ground by both parties, which resulted in resolution. After a litigation ruling traditionally, both parties do not continue their working relationship (Ketchen, 2009). Both parties in this cause need to determine which course of action is best for them litigation or ADR. The clients have no idea how long the litigation may continue, so the client has no idea how much it will cost or if the case will end in their favor, this is why many disputes are settled by alternative methods of dispute resolution.
Kutak Rock lawyers regularly represent their clients in alternative methods of dispute resolution. They are impartial, unbiased, and through their experience and training they assist parties in reaching a mutually acceptable resolution of their dispute. The ADR methods are: negotiation, settlement agreement, arbitration, mediation, mini-trial, or fact-finding. Based on the information provided from the USA Trucks versus Knight Transportation the recommended methods of ADR are negotiation, settlement agreement, arbitration, and mediation any one of these can solve the situation prior to going to litigation. Utilizing negotiation both parties will engage in effective discussions to attempt to reach a voluntary settlement of their dispute meeting each other at some type of equitable position. The negotiation may take place either before a lawsuit is filed, after a lawsuit is filed, or before other forms of alternative dispute resolution are used. Since the lawsuit is already filed, this is the perfect time to utilize the negotiation method of resolution. A settlement agreement is another ADR method, which the parties voluntarily entered into and the agreement settles the dispute. The settlement agreement is effective when both parties sign it. After the settlement agreement is signed it is submitted to the court, and the case is dismissed based on the implementation of the settlement agreement. Through arbitration, the USA Trucks and Knight Transportation choose an impartial third party to hear and decide the dispute. The neutral party is called the arbitrator. After the arbitrator hears all the facts he or she renders an arbitration agreement, which describes the exact procedures to follow for a case to proceed successfully through arbitration. The final ADR method which can resolve both companies’ issue is mediation. This form of negotiation in when a neutral third party aids both companies in reaching a settlement of their dispute, this can be done by problem solving or brainstorming. The neutral third party, mediator, is an expert in the area of the dispute, a lawyer, or a retired. A mediator’s role is to facilitate the communication between both parties to reach an equitable solution for both companies.
As companies continue to expand there is a right way and a wrong way to do it. A breach of contract lawsuit leads to a situation where the two parties are not working well together and litigation may ensue. If this is the situation the road to resolution could be costly for both parties involved, so another course of resolution is ADR. Through the use of ADR individuals resolve conflicts and the parties involved have their privacy, may have saved time and money, and overall the two entities may be able to continue working together. References
Attorney, O. (2014, January 10). Circuit Court. Retrieved February 23, 2014, from 21st Judicial District, Crawford County Arkansas: http://co.crawford.ar.us/circuit_court.htm
Cheeseman, H. (2013). Business Law: Legal Environment, Online Commerce, Business Ethics, and International Issues, Eighth Edition. New York: Pearson.
Crumpton, M. (2011, March 14). Cost of Litigation - Case Study. Retrieved February 23, 2014, from Fizzlaw: http://www.fizzlaw.com/article/cost-of-litigation-case-study
Judiciary, A. (2013, December 15). Court of Appeals. Retrieved February 23, 2014, from Arkansas Judiciary: https://courts.arkansas.gov/courts/court-of-appeals
Ketchen, E. G. (2009, July 15). ALTERNATIVE DISPUTE RESOLUTION (ADR) FOR LESS COST AND RISK. Retrieved February 23, 2014, from Creative Disputer Resolutions: http://creativedisputeresolutions.com/docs/AlternativeDisputeResolutionforLessCostand Risk.pdf
Management, R. (2013, May 1). Our Community Our Commitment. Retrieved February 23, 2014, from Orange County Government: http://cams.ocgov.com/Web_Publisher/Agenda07_17_2012_files/images/O00212- 000757E.PDF
Turner, L. (2013, October 11). USA Truck Files Lawsuit Against Knight Transportation for Breach of Contract, Wants Stock Divested. Retrieved February 22, 2014, from Arkansas Business: http://www.arkansasbusiness.com/article/95131/usa-truck-sues-knight transportation-for-breach-of-contract