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Planning for Disputes: Social Media’s Impact on Dispute Resolution

Fri, 06/23/2017 - 09:37 -- admin25

by Frank Broyles

“Next Morning where the two had sat
They found no trace of dog or cat,
And some folk think unto this day
That burglars stole that pair away!
But the truth about the cat and pup
Is this: they ate each other up!”

-Eugene Field, The Duel

Like Eugene Field’s cat and pup, litigants often self-destruct and then wonder what happened. Winners routinely feel defeated by time, expense, and the unforeseen, while judges and juries are frustrated, or even angered, by the failure of litigants and their lawyers to act rationally and resolve their differences in a more amicable manner.

In an effort to combat the irrational and inefficient use of litigation, the American justice system has promoted litigation alternatives, including mediation and arbitration. The results, however, have fallen short. In 1994 Todd Carver and Albert Vondra published a thought-provoking Harvard Business Review study titled, Alternative Dispute Resolution: Why It Doesn’t Work and Why It Does. According to the study, much of the blame results from indifference by top management and a failure to recognize the connection between effective conflict management and financial results. The study concluded,

Companies that give ADR top priority—even in cases where they are sure they are right—are realizing immense savings of time, money, and relationships. In contrast, companies that let old litigious habits [e.g., litigiousness, arrogance, and greed] worm their way into the process might as well go back to court.

Without the commitment of top management, ADR quickly turns into litigation-in-disguise.

Social media is now forcing top management to become more involved in the conflict management process and creating mandates for comprehensive conflict management systems.

Social media is so impactful for two reasons. One, it provides individuals venues where they can easily, quickly, and publicly vent dissatisfaction, before the target can mitigate the damage. It also provides opportunities for careless and self-destructive responses. And two, these negative postings and inappropriate social media responses can damage what may be a business’s most valuable asset, its reputation.

The importance of business reputation in our current environment can hardly be overstated. Warren Buffet’s well-known philosophy, “We can afford to lose money—even a lot of money. But we cannot afford to lose reputation—even a shred of reputation,” succinctly describes the importance of business reputation.

A few decades ago, a corporation’s value to its shareholders was measured almost exclusively by the value of its tangible assets. That is no longer the case. The Reputation Dividend Report annually lists reputation’s contribution to the shareholder value of publicly traded corporations in the U.S. and U.K. Topping the list in 2016 was Apple, Inc., with a reputation contribution to total shareholder value (i.e., stock price) of $314 billion, or 56 percent of the total shareholder value for that year.

Two United Airlines incidents illustrate the threat social media can pose when minor conflicts are mishandled and C-level management intervention is required to minimize reputational damage.

In 2008 United’s baggage handlers damaged Canadian musician Dave Carroll’s Taylor guitar. When United, over a 15-month period, repeatedly refused Carroll’s request for payment for the damage he responded by creating an entertaining musical video called “United Breaks Guitars,” and posting it on YouTube. It was an instant hit, spawned a 2011 Harvard Business Review case study detailing the reputational damage to United and currently has over 17 million YouTube views.

More recently, United passenger Dr. David Dao was forcibly removed from an overbooked flight when Dao refused to voluntarily deplane. A smart-phone video of the traumatic removal posted on social media by a fellow passenger created an immediate, expensive, and well-publicized reputational nightmare.

Following the Dao incident, United’s CEO Oscar Munoz quickly and accurately identified the problem as a systems failure, not an employee failure. Munoz was required to appear before Congress and explain this failure, along with the changes United would implement to help prevent such incidents.

The impact of social media on the dispute resolution process offers conflict management lawyers rewarding opportunities. The United admission that there was a systems failure illustrates that opportunity. Conflict management lawyers will need to be systems and best practices focused so that even the apparently insignificant and unanticipated incident can be managed before social media elevates it to a reputational crisis.

Businesses that ignore a systems approach to conflict management and deal with disputes on an ad hoc basis only after they arise may find social media an unmanageable force.

Frank Broyles, of the Law Office of Frank L Broyles, can be reached at frank.broyles@utexas.edu.

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