Driven to cyberspace by the pandemic, courts across the country purchased chatroom-like tools designed to help people resolve disagreements without the need for a full-on lawsuit, judge, or hearing.
Online dispute resolution, as it’s known, had already been growing in popularity as a means to make often costly, slow-moving court processes more efficient. The tools, pioneered by eBay and PayPal, were designed to settle millions of disputes in their own businesses quickly and with as little need for human oversight as possible.
But, it turns out, taking an e-commerce dispute platform and imbuing it with legal authority over everything from small claims cases to medical debt suits, child custody negotiations and eviction proceedings has its downsides. A lot of people either don’t understand the systems or don’t want to use them. Legal aid advocates also worry that the systems deepen imbalances of power between some parties.
Payday Lenders Are Big Winners in Utah’s Chatroom Justice Program
The state’s new online system for small claims cases was meant to help residents; instead they suffered
The Markup previously reported on how Utah’s online system for small claims courts ended up being a boon for payday lenders because defendants failed to log in. The Markup found similar issues elsewhere. Of the dozens of systems we examined in states around the country, we found enrollment in online dispute resolution was often low and technical problems that prevented litigants from using the services were common. Some courts have also struggled to afford their online dispute resolution systems and considered passing the cost onto users, potentially adding barriers for low-income people seeking justice.
Despite these challenges, online dispute resolution is far from a dying idea. Many mediators and legal technology experts say they have real hope that, if implemented correctly, chatroom justice could still fulfill its mission of making court proceedings less complicated and swifter. Some courts have declared online dispute resolution a success.
“More and more justices are now saying, ‘O.K., this is not just for giant e‑commerce companies to do their private justice with,’ ” said Oladeji Tiamiyu, a fellow at the Harvard Negotiation and Mediation Clinical Program. “The court system is viewing these processes and viewing technology with greater legitimacy.”
How Does It Work?
The Markup found more than 80 individual courts around the country that use or have used online dispute resolution since 2016. We identified the courts through internet searches, vendor customer lists, local media reports, and other public records. We also found seven state court systems—in Utah, Michigan, Ohio, Indiana, New Jersey, Delaware, and New Mexico—that have statewide or multicourt online dispute resolution programs.
Most courts we examined bought their systems from either Court Innovations, which sells the Matterhorn platform, or Tyler Technologies, which sells the Modria platform. Modria is an eBay and PayPal spin-off that Tyler Technologies purchased in 2017. The systems vary by court and case type, but they tend to follow a general procedure.
The plaintiff initiates the process by logging in to the court’s online dispute resolution system and entering basic information, such as the amount in dispute, a summary of what happened, and the name and contact information of the parties involved. In some courts, the process can begin without the plaintiff filing a formal lawsuit that’s entered into the public record.
The other parties in the case receive an email or written notice asking them to register for online dispute resolution. If they do, they may also have the opportunity to answer questions about the case, such as how much money they would be willing to settle the disagreement for.
The parties then move to a chatroom-like setting where they can negotiate back and forth. Most online dispute resolution systems also offer the ability to request the help of a trained mediator, who can participate in the conversation.
If the parties reach an agreement, the system automatically drafts a legal document, which is signed off on by a judge and entered into the public record. If they don’t, the case is usually placed back on the regular court track, becomes a full-on lawsuit, and is scheduled for a hearing before a judge.
What Kinds of Cases Are Handled This Way?
In Ohio, Utah, Indiana, Michigan, and, until recently, New Mexico the statewide systems are used for small claims cases. In Delaware, it’s for eviction disputes.
The Pinal Superior Court, in Arizona, is one of several The Markup found that offer online dispute resolution as a voluntary service for divorce, paternity, and child support cases.
One of the most popular uses for the technology so far—in jurisdictions like California’s San Joaquin County and Fort Collins, Colo.—has been in traffic and parking cases, where the disputes are relatively straightforward and the stakes are lower.
But some courts have also set up online dispute resolution for very niche cases. The Hamilton County General Sessions Court, in Tennessee, for example, only uses its platform to process medical debt cases brought by one institution—Erlanger Baroness Hospital.
Has Online Dispute Resolution Been Successful?
The Markup surveyed the courts we identified that use online dispute resolution to get a sense of how frequently the systems achieve their stated goal—resolving cases through negotiated settlements. Our response rate was low (19 out of about 80 court agencies we contacted), but among those who did supply answers, the results varied widely.
The Franklin County Municipal Court, in Ohio, was the first in the country to introduce online dispute resolution. Its results are often held up in academic research and industry literature as an example of the technology’s promise.
411 of 414
Number of traffic cases entered into online dispute resolution in Fort Collins, Colo., that were resolved within the system.
Before the court introduced online dispute resolution, 54 percent of its tax dispute cases resulted in default judgments—rulings by the court in favor of one party (usually the plaintiff, in this case the government) because the other party failed to show up to court or respond to the lawsuit. After introducing online dispute resolution for tax cases, the default judgment rate dropped to 44 percent, according to the court’s published data.
Based on responses courts sent to The Markup and published research, online dispute resolution appears to have been most successful when applied to traffic cases.
In San Joaquin County Superior Court, about 90 percent of traffic cases—5,633 out of the 6,287—entered into online dispute resolution during 2021 were successfully resolved within the system, according to Stephanie Bohrer, a spokesperson for the court. The settlement rate was even higher in Fort Collins, where 411 out of the 414 traffic cases entered into online dispute resolution last year were resolved within the system, according to Patty Netherton, the court administrator.
But that success has not been universal.
When The Markup conducted a detailed analysis of Utah’s online dispute resolution system, we found that at least in one courthouse that used the system the move coincided with an increase in default judgments and a big benefit to payday lenders who sued their borrowers. That was due, in large part, to the fact that users had no idea the system existed or how to access it—and Utah’s unique decision to require people to use the online system and enter default judgments against them should they fail to sign up.
Other jurisdictions have experienced similar accessibility problems. Most eligible cases in Michigan, for instance, never make it to online dispute resolution.
“One of the biggest problems we’ve had has been that issue of not getting the second party to come in or register in the system,” said Michelle Hilliker, manager of Michigan’s Office of Dispute Resolution. “That’s an extremely high number.”
When both parties register, about 54 percent of cases end in settlements, according to Hilliker. That’s fewer than the 70 to 75 percent of cases that end in settlements after in-person mediation, she said, but many of the people who negotiate online might not have been able or willing to make it to in-person mediation under the previous system.
But she estimated that 65 percent of eligible cases don’t get processed through online dispute resolution at all because the second party never registers for the system. That’s often because neither the plaintiff nor the court has an accurate email address for the party being sued. In some cases, Hilliker said, plaintiffs have entered made-up email addresses for the people they want to sue.
California’s Stanislaus County Superior Court launched online dispute resolution for small claims in July 2021. During the last six months of 2021, only two out of the 700 cases entered into the online dispute resolution system resulted in settlements, according to Julie Dodge, the court’s managing self-help attorney.
“Theoretically it’s a great idea, but I wouldn’t consider it user-friendly, and I consider myself to be computer savvy,” Dodge told The Markup.
In New Mexico, only 2.4 percent of the 6,770 cases filed through the statewide online dispute resolution system since its launch in 2019 resulted in settlements, according to the results of a recently concluded independent audit, which The Markup obtained through a public records request. The auditors described the system—which cost $150,000 per year, according to contracts—as “ineffective and inefficient.”
New Mexico suspended its online dispute resolution system in July 2021 so that it could conduct the audit.
“We believe the online platform provided additional options for engaging in the legal process,” court spokesperson Barry Massey wrote in an email. “Historically, many defendants in consumer debt cases did not respond to the lawsuits, and that resulted in default judgments. ODR offered another opportunity for the parties to try to resolve the money dispute.”
The state is considering online dispute resolution for traffic cases, he added, but doesn’t currently have plans to reintroduce it for small claims cases.
Florida’s experiments with online dispute resolution have been a microcosm of the broader, national experience.
The state’s 18th Judicial Circuit court, which covers Brevard and Seminole counties, has been using online dispute resolution since 2019. In 2021, the court referred about 1,800 cases to online dispute resolution and roughly 40 percent resulted in negotiated settlements, according to Deborah Haataja-Deratany, the court’s dispute resolution director, which was seen as a win.
But when the state piloted online dispute resolution in six other courts, the results were far different. Three withdrew because of technical issues with the systems. A fourth launched its system, but no one signed up to use it.
Florida’s 11th Judicial Circuit, which was testing online dispute resolution for traffic cases, processed the target number of cases during the pilot, and users were generally pleased with the system, according to the state’s final report on the project.
But in the state’s 9th Judicial Circuit, which was testing online dispute resolution for small claims cases, participation was low (both parties signed up in only 21 percent of cases), and only 5 percent of cases resulted in settlements within the system.
In the end, the 9th Judicial Circuit decided against online dispute resolution because it couldn’t absorb the $25 per party cost, said Matt Benefiel, the court administrator.
“We were big proponents of ODR, and I honestly thought it would really take hold,” he said. “Because we weren’t able to pass that cost on to the user, we weren’t able to sustain it.”
Is Online Dispute Resolution the Future?
In 2016, only one court in the country—Ohio’s Franklin County Municipal Court—had an ODR system.
By the end of 2019, 66 courts spread across 12 states did, according to an American Bar Association survey.
During that time, legal aid groups successfully fought off the implementation of online dispute resolution for consumer credit cases in New York State, arguing that the systems would create a “substantial imbalance of power” between well-resourced plaintiffs and low-income defendants.
Since the pandemic, the number of online dispute resolution systems has jumped, and New York and other states have embraced the idea, in some forms, after earlier reticence. The New York Unified Court System launched a pilot online dispute resolution program for small claims cases in Manhattan in 2021.
“It’s quite remarkable the changes that have been occurring not just in the behavior of the courts but in the attitude of the judges,” said Ethan Katsh, a professor emeritus at the University of Massachusetts Amherst who is widely considered to be the founder of the field of online dispute resolution. “ODR was basically a private sector, out-of-court kind of process for 10 to 15 years. Not only now is it widespread, but nobody’s necessarily claiming we should go back.”