A growing number of small businesses and individuals in Los Angeles are resolving their legal disputes online these days.

While alternative dispute resolution has experienced explosive growth during the past two decades, online settlement is the hottest new trend to hit the booming and highly lucrative private judging sector.

Particularly hot are so-called "online offer and demand exchanges," where parties log on to the Internet, enter relevant case information, then submit three "blind" (confidential) offers or demands.

"If the numbers submitted in the offers and demands fit within set parameters, the parties are sent a message telling them the case has been settled for a certain amount," said Rita Miller, president of Montrose-based 123Settle.com. "If the numbers don't match, the parties are notified that the case isn't settled and they can continue to negotiate without having played their whole hand."

Miller, in conjunction with a team of computer programming experts, began developing the online offer-and-demand technology in the late 1990s after years of practicing law.

"I was handling a lot of cases where the negotiations would go back and forth and back and forth," she said. "So much time was spent trying to negotiate and put forth numbers that both parties could agree on, so I thought that using the Internet for putting forth those numbers would be a great service."

Miller launched 123Settle.com in September 1999. Since then, a growing number of local businesses and individuals have exchanged offers and demands online, for a flat fee of $100 for each side.

"It's great for small businesses and smaller cases where the liability issues are clear and parties are willing to negotiate, but any size of case can be settled online," said Amy Newman, president of Alternative Resolution Centers in West L.A., which recently teamed up with 123Settle.com to offer a full range of online dispute resolution services.

Other advantages of exchanging offers and demands online, according to Miller and Newman, include increased flexibility and speed of resolution.

"Even before a lawsuit is filed, parties can negotiate via the Internet from their homes or offices," Miller said, adding that most offer-and-demand settlements are concluded within a day.

Other online services

In addition to exchanging offers and demands online, individuals and businesses involved in disputes can submit facts, evidence and arguments to a private judge via the Internet for an evaluation of potential liability or damages.

Parties can also settle disputes online through mediation and arbitration.

In mediation, the parties submit case information to a mediator who can offer suggestions, but the ultimate resolution of the disputes rests with the parties themselves. In arbitration, the parties present their case to an arbitrator for a legally binding ruling.

Miller's company has only been offering online settlements for eight months, so she hasn't tracked the exact number of cases settled online, but she said the settlement rate is "about 80 percent."

Both Miller and Newman see online settlements as a permanent trend. "Not that many people know about it right now," Miller said, "but it's great for small businesses and people who don't want to spend a lot of money on litigation and attorneys' fees."

Newman agreed.

"There seems to be a lot of room in the marketplace for settling disputes online, Newman said. "And it's a great supplement to mediation or arbitration, where some private judges are charging in excess of $300 an hour."

But not everyone is sold on the idea of online settlements.

"It may be convenient and cost-effective to the extent that parties don't have to pay for their attorneys to be present, but anytime you don't have face-to-face interaction, the quality of communication may be diminished or lost," said James A. Bascue, presiding judge of the L.A. Superior Court.

New protocol

Though online settlements are a new trend, analysts expect more business disputes to be settled through online mediation and arbitration as more companies enter the burgeoning B2B e-commerce arena.

Approximately $1.2 trillion was spent in B2B e-commerce in 2000 and analysts are projecting a $4.8 trillion market in 2004, according to the American Arbitration Association, a not-for-profit, public service organization dedicated to the resolution of disputes through mediation and arbitration.

Consequently, the association recently developed, in collaboration with key industry leaders, a new B2B "e-commerce dispute management protocol."

"Companies looking to profit from this growing marketplace need to learn to avoid the pitfalls of the protracted court battles that can last years and cost billions," said William K. Slate, president and CEO of American Arbitration Association.

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