Sunday, October 20, 2013

Would you bet on the future of Online Dispute Resolution (ODR)?

I would.  The best example of ODR I have come across is Modria, who's tagline is "Any issue, resolved."

Before dismissing Modria as a trivial Internet parlor game, consider this:  The technology and process at work here got its start at Paypal and Ebay.  Why did Paypal and Ebay become so good at dispute resolution?  Because their goal of becoming mega-volume businesses depended on it.  If you have millions of transactions daily, a huge volume of low-stakes complaints is inevitable.  If dissatisfied customers stay dissatisfied, they don't come back.  Worse, they'll talk to their friends.  

Now watch is video. Note that the target audience is businesses who (a) feel disputes are a drain on their time and energy, and (b) want happy, loyal customers who vouch for them to friends and family.  A prompt, fair resolution to a dispute actually deepens the trust relationship.  That's not speculation.  That's science.  And Modria, and it investors, know that.

In this book, Tommorrow's Lawyers, Richard Susskind talks about ODR as a highly disruptive innovation that will fundamentally alter the legal landscape.  It is hard to fully appreciate that claim without seeing concrete example, like the Modria business model, up and running.  Many businesses could be drawn to Modria, but so could/would many smaller governmental units.  Indeed, several (progressive) county governments have become clients (e.g., on property assessment appeals).

Modria is disruptive because so many forums for resolving disputes, such as courts, repeat-player arbitrations, and various government boards, are not perceived as prompt, fair, and/or just, often times because costs of dispute resolution are so high.  So even if the dispute is resolved correctly on the merits--for the subset who can pay the cost--there remains a large residue of dissatisfaction.

This is fundamentally a problem of institutional design. (The ReInvent Law folks understanding this.)   The goal, or ought to be, a speedy, low-cost, resolution that is maximizes on the uumber of user who perceived the outcome as fair.  Does any state or federal court think this way?   In Tomorrow's Lawyers, Susskind asks whether "court is a service or a place" (p. 99).  Alas, this is a staggeringly very large market. 

Check out the management team of Modia.  These folks come primarily from the dispute resolution programs in business and public policy schools.  It is worth noting, however, that Modria's Board and its big-time investors include several lawyers, including Jason Mendelsohn, a former lawyer at Cooley who now works as a venture capitalist.  Jason has invested in other businesses in the emerging legal vendor space.

Times are changing.  And the pace of that change is picking up.

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Paypal/eBay is a dispute resolution nightmare, unsatsifying to anyone who is constrained to use it. You mistakenly assume that it's volume somehow suggests people either like it or, at least, tolerate it for its own sake.

Quite the contrary, they have no choice but to use it if they use eBay. If it was a stand alone, it would be a graveyard. Even as the eBay method of dispute resolution, everyone hates it. I could explain at length what's wrong with it, but this is your soapbox, not mine.

While online dispute resolution may someday be viable, it remains hugely problematic. The shame is that it would serve a necessary function for low-amount cross-jurisdictional disputes, but until the massive bugs are worked out, it is, as you called it, a trivial internet parlor game. Another example of how praying at the alter of disruptive technologies sadly skews one's grasp of the difference between the viable and the trivial.

Posted by: shg | Oct 20, 2013 9:35:32 AM

Scott, come on. How much dissatisfaction with Ebay and Paypal's dispute resolution process is there relative to volume? Now compare that to any state or municipal court. Many of the stakes are too small to bring them there. At least there is a forum. In turn, these companies use complaint records and reputation to minimize overall disputes, primarily by eliminating bad merchants.

Modria's business is dispute resolution. It is not an add-on like Ebay, Paypal, or the credit card companies. Will Modria eliminate unhappy people involved in disputes? No. Will they reduce their total volume? They will try.


Posted by: Bill Henderson | Oct 20, 2013 11:51:30 AM

I'm curious to see what effect, if any, this has on the states' regulation of the practice, particularly initial licensure to practice and also malpractice. To the former, this may escalate the expansion of the UBE to facilitate lawyer mobility. To the latter, who knows, will there be more fee-splitting? more multi-jurisdictional practice - how will the p.r. rules keep pace?

Posted by: Greg Bordelon | Oct 21, 2013 1:50:57 PM

Thanks for the post. I am very excited about the future of this company.

Posted by: Jason Mendelson | Oct 22, 2013 3:50:27 PM

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