Sometimes the story of how founders come to create their companies is as interesting as the product itself. In this Founder’s Story, we hear from Rich Lee, who co-founded New Era ADR, a startup that plans to shake up the dispute resolution sector.
From Engineering to Law
It all started when Lee was an engineering student. The plan was to do that and then become a patent lawyer, (although his family wanted him to go into medicine).
He explained that he always loved gadgets and was the early adopter of loads of new tech. When he eventually became a patent lawyer he found though that it was not quite as interesting as he’d hoped. Instead of working on whole products he had to work on tiny components of a new product, which in isolation didn’t have the same excitement.
‘I found that I wasn’t helping to patent a new smart phone, but one of 10,000 components that went into that phone,’ he said.
When he had to spend a huge amount of time working on a run-flat tyre patent and the chemical compounds used in part of that system, he realised that being a patent lawyer was ‘a great career, but not for me’.
Then he moved laterally to an IP investment group, which helped companies to divest IP that they didn’t want anymore. That led to work in Taiwan and after that he was back in the US and joined a fintech company as its GC.
After that there was a move to another company, which had been built by the data team behind President Obama’s 2012 campaign – considered the first in US history to have been heavily influenced by digital data analytics. Again, he worked as its GC.
Finally, in 2020 he left to create New Era with a group of other co-founders, several of whom had met through tech GC circles, such as Collin Williams, who had been a GC at several companies after first working as a lawyer at Greenberg Traurig.
From Law to ADR
So why ADR? Lee explained that dealing with disputes ‘was a pain that all of the founding team felt’.
‘Resolving disputes is such a massive cost to business and individuals,’ he said and added that he really wanted to eventually help people with Access to Justice needs, and has spent time working on legal aid projects in Chicago.
He recounted how companies he and his fellow founders had worked at, had been regularly bogged down by litigation that acted ‘as friction on growth and on innovation in the company’.
‘The problem is that disputes consume the leadership,’ he noted.
‘Even healthy companies do not have the time for this. Sometimes you have to walk away from claims which should (and could) have been won,’ he added.
I.e. he and the others had seen first-hand the little Hell that is never-ending disputes that drag on and on, costing the company time and money. Although, as Lee explained, it was not so much the money, but the time that really made an impact.
Leadership teams just wanted it over with. The monetary costs they could just about live with. It was the way disputes and the slow processes that went with them put a brake on the company’s activities, slowing the management down, diverting their attention, and generally stalling plans.
Every new dispute, even if they knew they’d win it, was an albatross around a company’s neck.
So what was the solution? You couldn’t stop the disputes, certainly not with America’s legal culture.
The answer then was to first drive everything to ADR, second to make the process around ADR so much smoother and faster that it ceased to be such a burden on companies.
First they started with the basics. Whatever they built had to be virtual. So no need to meet in-person, no flights across the country. Then they needed to improve processes, so they redesigned the ADR procedure, trimming it down and simplifying the steps – while also bringing in external legal experts to confirm that their approach was legally sound.
Next was the bringing in of experienced ‘Neutrals’, i.e. vetted mediators and arbitrators. This was essential. It also meant that the system was not necessarily going to be economically viable for very small claims.
That said, the goal was also to keep things affordable. For example, the neutrals are paid a fixed fee, not by the hour. This means they are incentivised to move to a resolution. Also, as these neutrals can then handle more cases, their effective hourly rate is way higher than before, Lee noted.
And the final part has been to build a suite of workflow and scheduling tools to help all of the above run efficiently. This also includes software that helps with case intake, payments and issuance of a decision.
Lee noted that this is not super-advanced tech, but it simply is essential, especially the scheduling tool. As he noted: ‘Scheduling is a bug bear when it comes to ADR!’
When it’s two businesses, they both pay to use the system, on a 50/50 basis, and that fee goes to the neutral and also New Era.
The plan is now to grow the platform and then build additional data-driven tools on top. For example, anonymised data from the cases, e.g. average settlement costs for certain types of dispute, could be fed back into the system to help everyone involved be more realistic about the outcomes, and speed a resolution.
Artificial Lawyer also asked about the marketing note that mentioned New Era is now in 50 million contracts – which seemed like a lot. Lee explained that this is because several large companies have added the New Era ADR clause to their online agreements, so people are accepting these online terms and conditions in huge numbers, although they may not always be aware of it.
Then there are the more traditional inclusions of the ADR clause in contracts written up by AmLaw 100 law firms, although clearly it’s the mass of online ‘clickwrap’ and ‘tick box’ assents to Ts & Cs that has driven the number up so massively.
Lee concludes by reiterating that once they get New Era scaled up, he’d really like to work on ways to help those dependent upon legal aid as well.
Overall, it’s a story of someone who went from an engineering student, to a patent lawyer, to a GC, to co-founding a legal tech start-up that could well change the way that a lot of commercial disputes in America are handled.
P.S. just as we ended the call, Lee made one final observation. He noted that there is so much attention in legal tech on eDiscovery, but the reality was that if you moved to ADR and aimed for a swift resolution, then you didn’t need eDiscovery in the first place.
I.e. why is the legal tech world so focused on technology that ultimately is part of an old way of doing things? Why not focus everyone’s attention on finding new and better ways to resolve disputes? Isn’t that what innovation is all about….?