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Mediation by monitor

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Property owners in Durham, N.C., upset about their tax bills now can go online and challenge them – often with a satisfactory result – without ever talking to anyone in county offices.

New Yorkers with insurance disputes soon will have them resolved in the cloud.

Those are just two examples of how online dispute resolution is changing and broadening the scope of mediation and arbitration. Where some see the awakening of a disruptive technology, others see an opportunity for mediators to assist in resolving a greater number of disputes.

“We believe we are going to bring more and more disputes to the mediation process and alternative dispute resolution professionals,” said Scott Carr, president and CEO of three-year-old Silicon Valley startup Modria. While there are other players in the marketplace such as Rezoud Corp. and Youstice, Modria appears to have become to online dispute resolution what Google is to Internet search engines.

henderson Henderson

Modria received a $5 million round of venture capital funding last year and since has parlayed that into contracts with municipalities including Durham County, N.C.; and agencies such as the American Arbitration Association, which processes more than 100,000 New York No Fault insurance disputes annually. The association announced that this quarter it will begin using Modria’s platform to mediate disputes.

In its short existence, Modria already claims to have processed more than 400 million disputes.

“I think it will be a necessary part of the skill set that mediators will need to do their work,” Ethan Katsh said of online dispute resolution. Katsh chairs the Modria board of advisors and is co-founder of the Center for Information Technology and Dispute Resolution at the University of Massachusetts.

From giant roots

Colin Rule and Chittu Nagarajan co-founded Modria and hold leadership positions in the company. Both have backgrounds in ADR and worked to develop the online dispute resolution systems at online commerce giants eBay and PayPal. Because of their sheer volume of customers, those companies had to learn to efficiently handle disputes to build trustworthy reputations.

Modria’s co-founders “really dedicated their careers to how to apply Internet technology to resolve disputes,” Carr said. Because eBay and PayPal had developed systems that were capable of resolving 90 percent of complaints without intervention of a neutral party, the founders believed the same strategies could be applied to a wider variety of disputes.

“The market itself is large. We estimate 1 to 3 percent of all transactions online and offline result in some dispute,” Carr said. Companies and organizations typically have in-house systems to deal with dissatisfied customers, but Carr believes those systems can gain efficiency and better resolve disputes through an always-accessible online platform.

“We’re all used to anytime, anywhere access to services and products, and we find disputes fall into the same category,” he said. “I don’t want to wait till 9 a.m. Monday,” to lodge a complaint.

People who use Modria’s dispute resolution platforms may never realize it, Carr said. For instance, the Durham, N.C., homeowner with a tax bill beef will go to the county’s website and use forms that Modria has developed for the county. The taxpayer also has the option of uploading exhibits and supporting information for an appeal.

The data is stored securely on cloud servers. In cases where online resolution isn’t possible, neutral mediators or arbitrators get involved, and the initial paper trail from the Web-based complaint will be available.

“What’s happening is we’re building an electronic case file,” Carr said. And in the case of government workers in Durham, their time is freed to focus on tougher tax-appeal cases that may be likelier to wind up in litigation.

Modria doesn’t currently have any clients in Indiana, but it’s pitching to them.

“I can think of many government agencies in Indiana that can benefit from online dispute resolution systems,” said Modria adviser Ruel Williamson, who has been in discussions with officials from public and private organizations in the state. Along with property tax appeals, he said public-health service claims and business-license disputes also could be well served.

“Many government agencies have taken the first step by allowing people to file claims and processes online,” Williamson said. “The next step is to fully embrace an online dispute resolution methodology that helps take a filing through resolution.”

What lies ahead?

Unresolved for alternative dispute resolution professionals is whether Modria and other online dispute resolution companies will bring new sources of business or undercut the work mediators currently do.

Rezoud, a St. Petersburg, Fla.-based startup, announced in March a proprietary “technology-enhanced dispute resolution” system that it promoted as a “disruptive innovation.”

“Dispute resolution and legal industries have become monolithic, ineffective, time-consuming, costly and non-consumer friendly,” the company said in a news release.

Indiana University Maurer School of Law Professor Bill Henderson has written about Modria and online dispute resolution’s portent for ADR, but he doesn’t quite envision such a sea change. “It’s a breakthrough when you think about it.”

A huge number of disputes don’t get resolved because of the small underlying value, Henderson said, and he sees Modria and others opening this latent market. “These are kind of low-stakes, highly voluminous types of transactions where disputes are going to arise,” he said.

Henderson said the minds behind Modria ran with protocols developed through the Harvard Negotiation Workshop, which found some near-universal bases for dispute resolution. “If we follow a few simple rules, most disputes go away,” Henderson said of the Harvard protocols.

It’s human nature to complain, pleasing when a complaint is heard, and rewarding when it’s resolved. “People are predictable,” Henderson said. “We think we’re special snowflakes.”

Simply asking a complainant what would make her happy can resolve a good number of complaints quickly and without complication, for example. Responses also may help organizations improve their processes and customer satisfaction.

Katsh said ADR practitioners should find Modria useful. “It will increase their effectiveness,” he said. “Technology, in general, in all our lives has provided something new that we have to live with; and a lot of it is complicated, and a lot of it is empowering.

“I think Modria has the technology to handle more disputes than any previous dispute resolution company, so it has a large investment in technology, and there’s a need for this technology,” Katsh said.

Henderson likened Modria’s entrance into ADR to an emergency room triage setting: The most serious cases are going to require the most personal attention. Modria and other online dispute resolution providers are situated to take care of those that just might need an aspirin or bandage, he said.

But he also noted that venture capitalists have been very receptive of Modria’s platform and promise.

“What maybe lawyers should be thinking about is Modria might move upstream and begin to eat into the business a little bit more over time,” Henderson said.•

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