[PODCAST] JAMS Neutrals Discuss How Austin’s Growth is Shaping Dispute Resolution

In this podcast, JAMS neutrals Tracy W. McCormack, Esq., and Karl Bayer discuss how the legal and business needs have evolved in Austin, Texas, as it remains one of the fastest growing cities in the country. To set the stage, both neutrals discuss how Austin has grown as a hub for technology, innovation and entertainment, which has driven significant expansion in the area and made it attractive for new businesses and investment. From there, Mr. Bayer and Ms. McCormack discuss how the rapid growth and transformation of the region has influenced legal disputes and what general counsel can learn and apply to other cities. 

As the conversation continues, the neutrals weigh in on how companies are creatively tailoring ADR to meet the specific needs of their industries, such as designing unique solutions and also evaluating the national and international components of a dispute. Mr. Bayer and Ms. McCormack also address the value of a bespoke ADR process to support a company's long-term business goals and objectives, as well as how arbitration can be a helpful approach for resolving complex disputes. Finally, the neutrals conclude by extrapolating on how the growth in Austin—and the changes that have followed for the legal system—can hold broader significance for the future of ADR. 

[00:00:03] Moderator: Welcome to this podcast from JAMS. Today we're discussing challenges with resolving legal disputes in fast growing cities. With us are two JAMS neutrals, based in one of the fastest growing cities in the United States, Austin, Texas. Our guests are Karl Bayer, a sought-after mediator and arbitrator for over 30 years with experience as an engineer, entrepreneur and trial lawyer. We also have Tracy Walters McCormack, a senior lecturer at the University of Texas at Austin School of Law, and a former litigator at the Am Law 100 firm, Akin, Gump, Strauss, Hauer & Feld.

So we're recording this in mid-January, so Happy New Year. You two know each other quite well. Am I right about that?

[00:00:47] Karl Bayer: We've known each other a long time. We were both baby trial lawyers, when probably had cases with and against each other, gosh, a long, long time ago.

[00:00:56] Tracy W. McCormack: But Karl was less of a baby than I was.

[00:01:010 Moderator: For the record. So we're here to talk a little bit about legal disputes in fast growing cities, and Austin is that perfect example. Tell us a little bit, Tracy, about Austin's growth. What have been the main drivers and what has it meant for Austin's city limits?

[00:01:18] Tracy W. McCormack: Well, I'll start with, I checked it yesterday just to make sure, but Austin is now the 11th largest city in the United States. And for anyone who came here even 15 years ago, but certainly 30 years ago, Austin was a small college, the University of Texas, and a few smaller colleges around and a state capital city, and that was kind of it. So it's both exploded population wise, but it's also exploded in its industries, and that has made a huge change. And I think we're on the brink, even, of yet another change.

So, you know, we've gone from this small city to really it is now known as the second Silicon Valley. Meta, Google, Amazon, Tesla: they're all here. It's just been a proliferation of both the tech industry that's fueled, I think, and helped prop up a lot of the higher ed industry. Austin was always an entertainment capital, but it used to be just the live music capital. Now you have things like South by Southwest going on that have been going on. It's a huge film place. You have premieres happening here. You have a really vibrant film community here, and so all of that increases, not just the business space, but you get kind of what I call all the secondary the markets that help support all of those industries. And then you get things like sports and health care that go along with it. So, I think what happens is you've had a building of it may have started primarily with tech, but that tech-fueled entertainment, sports, health care, and now you kind of have, realistically, a pretty vibrant city.

[00:03:18] Moderator: And Karl, how has, you know, this transformation that Tracy just spoke about into a tech and innovation hub influenced the types of legal disputes, you know, that you see and businesses face.

[00:03:33] Karl Bayer: Well, for one thing, now that the major multinational companies all have fairly substantial presence here, we now have substantial in-house counsel staffs and disputes are actually arising in the Austin, what I'm going to call the Metroplex Austin, more precisely these days, is from Waco in the north down I-35 to San Antonio in the south and then east over to Bastrop. And why do I mention Bastrop? Well, just to be very clear about name dropping in some of the areas that Tracy mentioned, entertainment for sure, Joe Rogan is now here in Austin, and it reflects a cultural shift I believe. Elon Musk is in Bastrop again, reflecting a cultural shift, not just the technology, but a cultural shift. And then, of course, in the health care area, Peter Attia is now here and doing his writing and podcasting and all from here, and I'm sure there are others. I don't want to drop it out, but those are illustrative, I think, of how Austin changed from Willie Nelson at the Broken Spoke to gigantic, gigantic industries now with lots of creative talent, certainly in the art, but also in the technology area. There are all sorts of talented young people here working in the technology space.

So, the types of disputes now, as opposed to 30 years ago. Thirty years ago, it was banking, real estate, car wrecks, family law, and now it still includes those, but there are very large, complex business and certainly construction cases and intellectual property cases that are being tried. Probably the largest patent docket in the world now is up in Waco, Texas. People don't necessarily realize that.

[00:05:43] Moderator: Tracy, you're obviously familiar with the infrastructure needed to support businesses in resolving disputes. Where is Austin in that and how do you look at the impact that the growth of the city has had on that infrastructure?

[00:05:58] Tracy W. McCormack: Well, I think that's where ADR can really play a real role in and what happens with the expansion and kind of the rapid growth of any big city is, first of all, it doesn't confine itself to the city limits or the county limits, and Austin's been exactly like that because it's Texas and land is easy, that the sprawl is outside the city. So, while Travis County may have kind of, you know, and it does have a really good, solid judiciary, Tesla, you know, the plants aren't always in Travis County, and they're not in Travis County. They're in Williamson County. They're in Bastrop County. They're in Hays County. Well, those court systems are still rural and relatively small, and so one of the things that happens is our court systems don't keep up with the pace of growth of the city, so not just in the volume of cases that are, you know, that the courts have to handle, but the complexity of those cases, and so I don't think we're unique in that way. I think this is something that happens across the board, is that the expansion expands to smaller counties, smaller cities where they aren't equipped to handle a heavier docket or sometimes the complex docket.

I mean, if you thought about a mass layoff that one of your employers has, where the plant is technically outside the city limits or the county limits, now you've got a very small court system trying to handle what could be hundreds of cases, and they're just don't have. It isn't anything about the quality. That's just a quantity issue. I think with complex cases, it's the time issue, and that's where I think ADR can really help support both those court systems but can also support the industries and the litigants by giving them alternative resources to help resolve those conflicts.

 [00:08:15] Moderator: Karl, we're talking about Austin today. We could be talking about another city tomorrow. But are there lessons that GCs can learn from Austin's growth?

[00:08:25] Karl Bayer: Yes, absolutely. The old days, GCs were not necessarily that much in charge of the litigation that might go on in Austin. They picked an outside trial counsel, and after that, the outside trial council made essentially all the decisions and everything. Austin was a small enough legal community that there were a few well recognized outside trial firms that you want to hire. The landscape has changed dramatically. Now there's plenty of lawyers that are excellent that that in-house counsel are probably not even going to know. There's a big competition for in-house by outside trial counsel to try to get some of the business from each of these major companies that's here. And frankly, over the last 10 to 15 years, the power, if you will, that outside trial counsel now has in the decision-making process, both internally for the business clients as well as externally, in picking the outside trial firm and in managing the litigation, the power has shifted in large part towards in-house counsel.

That being said, quite frankly, it never ceases to amaze me at how little coordination sometimes there is just because of the, you know, presses of time, traditions, those sorts of things that keep in-house counsel from really using mediators in particular, but arts also arbitrators and outside trial counsel in the ADR process. And so, I think there are four or five lessons that can be learned, and now there is a large set of digital tools that can actually really, really help with a lot of this stuff, so you don't have to do things in person, namely Zoom, or any kind of the video conferencing. Outside counsel, in-house counsel can meet a lot more frequently, a lot less expensively, and stay on top of the litigation from the negotiation to the end. Outside counsel can meet with business people to get a bit better idea of what the businesses are doing. Ability to communicate with each other 24/7, 365, that's all changed with the digital world. You know there's a robust mediator community here in Austin that's been here since probably 1988 when it first got started in Texas and in the country. So, there's a chance, I think, for in-house counsel and outside counsel to really, really develop close relationships and to benefit from each other, and the use of ADR that, frankly, just wasn't there before. And so I'm very, I think Tracy and I are both very excited about that, because it's so, for lawyers and clients that want to be creative and advance their business interests, it now presents so many opportunities to do that.

[00:11:48] Moderator: Tracy, speaking of that kind of creativity, have you seen companies tailor ADR to address their specific industries?

[00:11:56] Tracy W. McCormack: I think they do it a little. I'd love to see companies do that more. And I think that's what the ADR community can offer to them, whether it's business to business, right? Whether it's B2B, what you want is to be able to have successful business relationships. You don't want to spend your profit margin being in litigation of any sort. And so I think there's both. I think we can expand the universe where, when it's B2B, you can look at thing and say, 'How can we help you resolve this conflict?' Whether it's in the early stages of litigation, or whether it's before you've even gotten to litigation. Or, how can we help you design a system that's going to allow you to address these conflicts, where you might be using early ADR, early mediation, we may be arbitrating a piece, we may be litigating a piece. So, I think there's ways to do that. I think the second thing to think about is a lot of these businesses now there's both the national the international piece of it, but they're also still situated here in a particular legal environment and community. And so, when you can find dispute resolution professionals that both know the local community, but also understand the larger impacts of those conflicts, I think all of that can be more efficient and more helpful.

And part of the beauty of Austin, I think, is its creativity, is its tech ability. So, you know, if you're having mass tort claims, mass employment claims, people can help you develop the technology to do those more efficiently and more quickly. I mean, not you know, there's both the universe of complex claims, sometimes it's the universe of I've got lots of small things, and I think that's where we can really start to tailor things industry specific. Is this an employment issue? Is this a tech issue? Is this an IP issue? And then now we've got the universe where employment and trade secrets and tech are going to overlap, and IP is going to overlap. So, I think kind of both being grounded in the community really helps but also having that broader knowledge. I think that's what allows companies to ultimately be able to start tailoring. How does this work for me in health care? How does this work for me in entertainment? How does this work for me in tech?

[00:14:38] Moderator: Karl, you want to jump in there in terms of the specifics of how that, how that plays out in a real example about.

[00:14:46] Karl Bayer: Yeah, yeah. So I think it's not even just tailoring it to a specific industry as you ask in your question, it's like we now have the opportunity to tailor every mediation every arbitration and every court master appointment to the very specific facts of the case we can develop, if you will, a bespoke ADR process that fits the case to help accomplish these long, longer term business goals. For example, Tracy touched on the confluence of employment and intellectual property law. Years ago, I only saw federal court cases involving patent. With the growth in Austin, the expansion of technology almost every, it's hard for me to tell you what a technology company is anymore. Every business seems to be laden with technology and laden with trade secrets. The old days were somebody got a patent, employee had a non-compete, didn't have many rights in Texas, and left and was basically locked up for a good while. That's no longer the days for a number of reasons. Non-competes themselves, despite and no matter what happens in the federal regulatory environment, they're being frowned upon. So now there's also somewhat of a disillusionment with patent law, simply because in the technology space these days, the market can change two or three times before the patent can be granted or even prosecuted.

So now all of a sudden, you've got trade secrets that can walk out the door with a very talented employee, and so how does the employee get treated fairly, but also the business that's helped develop that trade secret get treated fairly? And there's all sorts of opportunities for creativity and resolving that dispute outside the more structured public litigation process, and secondly, frankly, as a practical matter, in most courts, it's a trade secret, but most courts around the country, state and federal, have a strong belief in the courts being open to the public. And so if you're trying to enforce your trade secret in a public forum like a court, guess what? You might win the case, but all of a sudden your trade secret becomes widely known. It's what happened to Listerine mouthwash, for example. Moreover, you can pick the type and qualifications of the arbitrator. You can pick where it's going to be tried, where, what the law is going to be that's going to govern the agreement. And so there's so much more control over the process.

[00:16:41] Moderator: Tracy talk a little bit about complex dispute and why arbitration can really be a really game changer for parties in a fast-growing city like Austin.

[00:18:13] Tracy W. McCormack: Well, I'll give you a prime example. So, Austin and San Antonio have what's known as a central docket, and that means that you get any judge that's available for any motion on any day, as opposed to having the same judge hear your dispute from start to finish. We love it as lawyers, as litigators, we always love it. There's nothing wrong with it, but it is different. And so, I think one of the real advantages to arbitration is not just with what Karl was saying about being able to craft an arbitration clause that gives you a lot of predictability about the skill level and the knowledge base of the person who's going to be hearing your dispute, but it's that it's one person. When you're giving me that dispute, I have the time and the ability to focus on your dispute and your dispute only, if that's what it requires.

And so, I think being able to have both the predictability of I know what I'm going to get in arbitration, or I can at least control the people who are going to decide the dispute. I think that's a huge advantage when you're talking about regulatory and political uncertainty, or change. The confidentiality of those proceedings, while we may all have views about whether we think that's a good or bad from a business perspective, they want uniformity, they want confidentiality, they want predictability, and that's what arbitration gives. And I also say that in the sense of it's also what supports our judiciary. They really don't have the time or the ability to take on a piece of complex litigation at the expense of the rest of their docket, and so it's not necessarily, I think choosing one over the other, I think it's a compliment to that system. But I think for businesses, being able to arbitrate more of your disputes is just so much more efficient and effective and streamlined because it's allowing you all those control mechanisms that you don't get in court.

And also, I echo Karl's comment about the public nature of proceedings. A lot of times what I counsel people is things that get said in court can't ever get taken back. They are open. They are on a record. Sometimes there's no coming back from things that are said. And so I think allowing people the space to be able to explore resolution in a more protected and confidential setting is of a huge advantage, especially when you're talking about complex things. And I would point out that this isn't always a growing city dynamic. I'm from West Virginia, so tiny state, but they're in the middle of a huge uptick in oil and gas type litigation. So, this is a problem wherever you have either a population or the creation of a nature of a dispute that just outpaces the resources your judiciary has to offer. And so that's why I think it's really important and valuable for people to really understand how useful arbitration can be to them.

[00:21:45] Moderator: And Karl, obviously, when a dispute is behind closed doors, you can maintain business relationships, which is obviously crucial for a community.

[00:21:55] Karl Bayer: Yes, that's certainly true, and people aren't probably willing to play it as much in the press. One thing I wanted to say is a follow-up to Tracy, just as an example of rapid growth in Austin and in Texas. Austin, Texas, has one, count them, one fortunately very skilled, very competent but only one federal judge right now. We have to get visiting judges now and so eventually, with the criminal cases that deserve first choice and some of the other civil matters, it's going to be harder and harder and harder to have enough Federal Court resources in Austin, Texas, to get to complex cases, and I think it's an opportunity, not only for arbitration, but also for the use of court-appointed neutrals. Now they used to be called special masters, but you can see how that could be useful. That's actually a public proceeding, but much of that can be also kept private. Similarly, in the rural courts that Tracy was talking about, that might be home to a gigantic multinational technology company, those courts could use court-appointed neutrals to help with by handling either parts of a big case or the entire case.

And so I think other forms of ADR can be particularly helpful in growing areas like this, through nobody's fault, but it's just a quicker way to get resources in the right place at the right time. And as we all know, having the public resources keep up with the private needs has been a difficulty now for a long time just through funding. In terms of maintaining relationships, the gold standard is still, I think, mediation. It's such a pleasure, I think, for both Tracy and me to have really skillful outside counsel that know how to be advocates, not only in the courtroom, but the other special advocacy skills that can be developed to handle mediations. Businesses that are willing to be creative and discuss their business interests rather than who's right who's wrong on a matter of law whatever, but to try to come up with creative solutions that maintain those interests but also allow both companies to go forward and profit well in their respective marketplaces. So I think those benefits have been around in the past, but not necessarily stressed. I think they'll get stressed more and more as you see business pick up again.

[00:24:54] Moderator: Well let's wrap up by looking a little bit ahead. How might Austin's continued growth shape the future of ADR and the broader legal landscape, Tracy?

[00:25:04] Tracy W. McCormack: I think Austin's kind of a microcosm for lots of places. We're seeing both, you know, you've got businesses that are national and international, but they live in a specific community, and so they want to be known as a good corporate citizen, as a good corporate player. I think when Karl's talking about, you know, resolving things. You want, if you end up at the courthouse, you want to be known as a problem solver not the problem, so that when you get there, the courts know that you have already tried to mediate. You have already tried arbitration. You have already tried to work this out. So, I think Austin can be kind of that kind of microcosm for how businesses, ADR and a judicial system can work compatibly with each other. But I also think part of the beauty of Austin, being a university town, being a tech hub is I think we can really help start develop ways in which we can make judicial resources in the broadest sense, including ADR, more and more accessible, more and more available to the public, so that we can deal with the small cases and preserve our very scarce judicial resources for the more complicated cases that require that level of resolution. And so, I think just kind of allowing us to integrate ADR and business and the growth and development of a city, and being part of that, and all of us working in harmony, allows us to create a system that's going to work for all the individual players in it.

[00:25:04] Karl Bayer: I want to say something provocative here and deliberately so. I think Austin is uniquely positioned because of its long history of ADR professionals, because of its current history of high-tech businesses and the growing venture capital world here. We're going to see, not only good mediators and good lawyers, we're going to see new products, new software, new artificial intelligence-related things that are funded for startups that will be used in the dispute resolution, in the dispute resolution area. I honestly believe, within a not far distant future, some of the cases that now take up the scarce judicial resources, that the consumer and the public will be happy to have actually AI handle a portion of the case, or in some situations even make the decision. And I think those businesses are growing. I know for a fact, a couple have actually talked to me about it in different aspects and areas of the law, and I can see how it could be wonderful, and they seem to be able to raise money now. So I think for the ADR community in Austin, Texas, and the shape of the future of ADR, I can't imagine a better place in the country right now.

 [00:26:55] Moderator: Well, this has been a fascinating conversation. Austin is a city to really watch out for. I mean, if I could just, you know, summarize from what I've heard, there is a lot of legal talent in this city, there is a lot of innovation going on in a fast-growing cities. There's often just not enough judicial resources to accommodate and resolve the disputes that will inevitably arise and so I do think, as you all pointed out, we are likely to see companies really taking matters into their own hands and sort of getting creative with using ADR and resolving their disputes. So Tracy and Karl, thank you for this conversation.

[00:29:11] Tracy W. McCormack: Thanks for having me

[00:29:13] Karl Bayer: We enjoyed it.

[00:29:15] Moderator: You've been listening to a podcast from JAMS, the world's largest private alternative dispute resolution provider. Our guests have been JAMS neutral Karl Bayer and Tracy Walters McCormack. For more information about JAMS, please visit www.jamsadr.com, and be sure to subscribe to follow wherever you get your podcast to continue learning valuable strategies and insights from some of the most respected neutrals in dispute resolution. Thank you for listening to this podcast from JAMS.