Escrow Dispute Management and Resolution

About ART Escrow & SeedTrust - Dispute Management

SeedTrust was honored with the opportunity to speak on an escrow panel called, “Escrow Is Your Friend (until it’s not)” during the SEEDS 6th Annual Spring Conference. The panel discussed what escrow is, why it matters, critical areas for consideration, and best practices. Over the coming weeks, we will share some of the most important issues with you and explain SeedTrust’s approach to each.

In this article, we explain dispute management, which elicited a great deal of discussion within the industry and remains one of the most critical roles of an escrow fund manager. To effectively handle disputes, an escrow provider must be collaborative, qualified, and independent.

Collaborative

Most disputes are easily resolved with direct communication and universal collaboration among the parties. Often, issues arise due to a simple lack of understanding of the underlying contract by one or both parties. Other times, problems arise due to gaps, vagueness or ambiguity in their Contract. Nearly always, these issues can be resolved by communicating with the Intended Parents, Surrogate or Donor and giving them the opportunity to explain their position and hear the other’s position explained to them. In the rare occasions where the Parties cannot agree on an outcome, collaboration from the parties’ respective agency and attorneys becomes essential, and a good escrow fund manager will actively coordinate and steer the discussion between them to ensure a mutually agreeable outcome is reached in a timely manner. The primary goal for the fund manager then becomes making sure to keep everyone engaged in the process, open to hearing the other side’s view and focused on reaching a mutually acceptable final decision. Cooler heads will prevail so long as everyone truly feels heard.

Qualified

It is essential that the escrow provider has a transparent dispute process and an understanding of the underlying contracts. Great escrow fund managers make themselves readily available to their clients and encourage them to reach out whenever they come across a possible issue and make it as easy for them to raise their issue. After all, what good is a resolution process if no one knows how it works? Moreover, it is not enough that the escrow provider be able to read and interpret the contract at hand, it is also critical that they possess enough experience in the industry to understand the trends and norms; especially when it comes to situations that involve contracts that do not discuss the specific issue and nuance must be utilized to resolve the dispute. In order to ensure transparency and experience, it is a best practice to work with a specialized ART escrow company that employs experienced, independent attorneys and paralegals.

Independent

Independence matters most during a dispute.  For example, If the escrow holder is also the drafting attorney for the Intended Parent, Surrogate, or Donor, a conflict of interest exists for the attorney as they are professionally required to always act in their client’s best interest. However, if the attorney represents multiple parties involved (e.g., the Agency, the Intended Parent and/or the Surrogate), then whose best interests are they truly defending and promoting when there is a dispute among the clients? This conflict of interest problem also arises when the Agency holds escrow for the parties. When one of the Parties raises an objection to a payment or non-payment of a disbursement request, how can the Agency make a truly independent decision when they are under contract with one or more of the parties, and those parties’ interests are not aligned? Once the lines of loyalty and duty start blurring, dispute resolution can become complicated and, worse yet, impartial.  With a completely independent third-party escrow fund manager, impartiality in the dispute resolution process and elimination of whose best interests are truly being protected as the fund manager owes an equal fiduciary duty to all parties.

How does SeedTrust handle dispute management?

We must keep in mind that no two disputes are the same. Each carries with them a different underlying contract and a set of circumstances unique to any other. SeedTrust understands this and places that consideration at the forefront during its dispute resolution protocol, which is the only consistency in every dispute. If one party raises an issue on payment disbursement that the other party disagrees with, we start by carefully examining the underlying contract and individually reaching out to each party to understand their positions and explain our assessment based on our collective industry and legal expertise. If we cannot get an agreement on the issue, we then reach out to the Agency Staff (if there is an Agency involved and if we have not already done so) as they, typically, maintain a much closer relationship to the parties and are therefore more likely to succeed in changing their opinions on any given matter. If the Agency is unable to get the parties to agree on a resolution, we submit the dispute to the respective attorneys, allowing them to come to terms and provide us the final mutual decision. If no agreement is reached among the respective attorneys, SeedTrust will then either file an Interpleader Action, dropping all remaining Trust funds into the court registry for the court to determine, or, depending on the nature and exigency of the situation, make the decision for the parties and continue holding the remaining funds. Both outcomes are very rare and only exercised in the most extreme cases and only after thorough consideration of the totality of the circumstances.

How does SeedTrust handle disbursements ultimately found to be made in error by SeedTrust?

One of the most significant benefits in working with SeedTrust is that we accept all liability for the cases we manage. If, during the course of managing the Trust Assets for a Journey, SeedTrust learns of a disbursement it approved that violated the terms of the underlying GSA in one way or another, then SeedTrust will reimburse the Intended Parents for the money disbursed in error as it is our duty to make sure all payments made are made in accordance with the provisions of the underlying contract. These are, of course, rare situations as Disbursement Requests are reviewed by our specialized attorney and paralegals.

Related Posts