Mouse-click method of settling disputes

Online arbitration saves consumers time, and can minimize lawyers' involvement

January 28, 2002

Consumers disputing everything from online auctions to home purchases may now find a resolution that is only a click away.

Mirroring the offline trend toward legal self-help, websites are offering the chance to end arguments quickly without costly visits to courtrooms.

Such sites can link online buyers and sellers who have no other way to face off. They also offer an easy way out in disputes where only money is at issue.

That's what Connecticut trial lawyer Francis DiScala Jr. and his client, an auto-accident victim, found after logging onto Cybersettle.com.

Mr. DiScala says he had argued his client's claim with the other driver's insurer for a couple of years - but had a settlement within days after submitting three offers on the Web.

"It was extremely efficient, it was exciting, it was easy," says DiScala. "It's the way settlements should be made. We know what the case is worth and they know what the case is worth. Why not break it down to the numbers?"

Cybersettle says it has handled more than $250 million in similar insurance disputes by comparing three bids submitted by each party. A computer calculation compares each side's high, medium, and low bids. If any fall within the same range, the case settles.

That system ensures that claims get settled faster and reduces costs per case by about $75 per month, says Cybersettle's John Zissu.

The company's fee for settling a claim runs from $100 to $200, and it accepts cases only from attorneys and insurance companies, not directly from individuals.

But blind bidding may someday break up the monopoly that lawyers currently enjoy over what constitutes fair settlements in insurance disputes, says Stanford Law professor Deborah Hensler. As the technology progresses, the Internet may eventually eliminate the need for lawyers to serve as referees in conflicts ranging may from divorces to workplace disputes. "There's going to be less work for lawyers in [the most routine] disputes," Prof. Hensler says.

But Roy Israel, CEO of the National Arbitration and Mediation Corp.'s clickNsettle.com, says he found insurance companies that tried blind bidding online still prefer using a live arbitrator or mediator. So his company is now using its website only to refer clients to mediators.

Other websites go beyond disputes over money, helping to fill the gap left by e-commerce sites that can't handle all their customers' complaints.

For example, most online auction users who find what arrives in the mail doesn't match what they bid on may have no way to challenge a seller located hundreds of miles away.

More than 170,000 users of eBay's online-auction service have found relief on SquareTrade.com, where buyers or sellers can submit a description of the problem and the resolution they'd like.

If that doesn't lead to a solution, either party can ask for a SquareTrade mediator. The mediator interacts with each party separately on a password-protected Web page. The filing party pays $15 for the mediator, while eBay subsidizes most of the cost.

"It provides people with a high degree of control over the resolution of their conflicts," says SquareTrade's Cara Cherry Lisco.

Unlike court judgments, however, most online settlements are nonbinding. So actually resolving the problem still depends on both parties' abiding by the results. SquareTrade says about half of parties agree to participate and 90 percent of those who do resolve their disputes.

Last fall, SquareTrade partnered with the California Association of Realtors (CAR) to offer home buyers and sellers a place to resolve their conflicts.

"Any time you're dealing with dollars, you're dealing with emotions," says Robert Bailey, president of CAR, which plans to expand the service to disputes between real estate agents who may disagree about who landed a client first. "This opens another avenue for communication between the parties."

Online mediation can also offer the physical distance needed to settle emotional disputes involving parties that can't even bear to look at each other.

Maryland mediator Robert Ketcham of Easton, Md.-based Lifebridge Mediation Services, had estranged family members log on from separate locations. A mediator in a third location monitored their exchanges and listened to each family member's feedback.

But Mr. Ketcham says he found some of the benefits of face-to-face confrontation were lost online, adding that written exchanges could even make matters worse.

"The written word has a certain extra power that's different from the spoken word," he says. Written words carry more weight in that they can be read repeatedly and lack the inflection of a spoken word, while words used in a face-to-face discussion are more fleeting.

Mr. Israel of clickNsettle says online mediation also suffers from not having the parties meet face to face with an experienced mediator. Mediators, who are often retired veteran judges, can give the parties a dose of reality about what they could realistically get by going to court.

"That's very helpful in settling a case," Israel says.

Legal experts say users should be watchful about who is maintaining and underwriting sites where an undisclosed formula determines settlements.

"If you don't know who is running the site, a company might be favoring the industry," says Anita Ramasastry of the University of Washington Law School's Center for Law, Commerce and Technology.

Consumers should also remember they can always turn to an attorney for advice even if they choose an alternative form of dispute resolution.