Business litigation reduces profit, distracts company leadership from corporate objectives, and often involves massive disruption of internal operations and staff who must respond to endless requests for discovery on accelerated timelines. State and federal rules of civil procedure allow potentially infinite factual discovery of finite disputes.

What if there were a simple two sentence clause that General Counsels or Chief Legal Officers could insert in their standard B2B contracts, in place of conventional dispute resolution clauses, that would reduce the cost and delay of business litigation by 40% or more? Thanks to the International Institute for Conflict Prevention & Resolution, (“CPRADR”), there is: the Civil Litigation Prenup Agreement.

The Civil Litigation Prenup, or “Economical Litigation Agreement”, is a clause developed by trial lawyers and inhouse litigation counsel to create proportionality of litigation expense to the value of a business dispute. The most expensive aspect of business litigation is discovery. Rule 29 of the Federal Rules of Civil Procedure, and the parallel state rules of civil procedure in most states, provides in part that “Unless the court orders otherwise, the parties may stipulate that . . . (b) other procedures governing or limiting discovery be modified. . .”

According to the Notes of Advisory Committee on Rules, 1993 amendment, “litigants ordinarily are not required to obtain the court's approval of these stipulations” unless the discovery agreement would interfere with the time set for completing discovery, for hearing on a motion, or for trial. Fed.R.Civ. P. 29(b). This rule empowers parties to a dispute to tailor discovery to fit the scope, value, and timeline of their disagreement.

So why do companies not take full advantage of this flexibility? Two reasons: First, while dispute clauses are important to litigation counsel, such clauses are the least concern of transactions counsel who usually add stock ADR language as an afterthought on the eve of contract execution. Second, it is too late to set the rules of engagement when the parties are already enmeshed in a dispute. If plaintiff counsel contacts defense counsel to limit discovery at the outset of the case, it is difficult for defense counsel to agree to such limits without knowing the consequences of that agreement.

Instead, the time to establish ground rules for disputes is during the formation of the contract itself, when both parties love each other and want to do business together. The Civil Litigation Prenup is incorporated as part of the contract, but with an arbitration clause for enforcement. That means that an arbitrator, rather than a judge, decides any discovery disputes between the parties with cost-shifting for disputes that should have been avoided.

The long delays and undue expense of the civil justice system reflect a level of service that one might expect of a monopoly on civil justice, but deleting costly discovery from judges’ plates will free up their time to consider and decide the issues for which they are uniquely qualified: dispositive motions and trial. And, unlike arbitration, companies that continue to rely on the civil justice system will advance the common law for their sectors which in turn will empower lawyers to practice preventative law based on precedent. Another cost saving.

The Civil Litigation Prenup can be inserted into B2B contracts in place of conventional ADR. The Model provided by CPRADR provides,

XX. Economical Litigation Agreement: Any Dispute arising out of or relating to this contract, including the breach, termination or validity thereof, whether based on action in contract or tort, shall be finally resolved by civil litigation in accordance with the International Institute for Conflict Prevention & Resolution Economical Litigation Agreement (2010 ed.), by a judge sitting without a jury. In jurisdictions where advance waiver of jury is prohibited as a matter of law, or where all parties to this agreement subsequently agree in writing, such Dispute shall be decided by a jury.

The Civil Litigation Prenup incorporates detailed rules on the CPRADR website that ensure the scope of discovery is finite and proportionate to the size of the dispute, with discovery disputes decided by a discovery arbitrator.

Business litigation is a drain on a company’s bottom line. By reducing waste, inefficiency, and delay by tailoring the litigation to the value of the dispute, the Civil Litigation Prenup will improve profitability and reduce the risk that litigation will distract corporate leaders, sales, and operations personnel from their mission of success.

Daniel B. Winslow is a former Massachusetts Trial Court judge and Silicon Valley tech GC who now practices law and solves problems with the Litigation Group at Preti Flaherty in Boston.