Mediation: Day Two
I still identify as a mediation skeptic, but I feel better about it now than I did when I first wrote about the subject in early 2021. With the benefit of five more years of commercial dispute resolution, I decided to update this post to talk about the benefits and challenges of mediation.
Some kinds of disputes cannot be settled early on. Disputes where the parties need to vindicate themselves from allegations of gross misconduct or disputes where a large corporation is not afraid of the cost of litigation are two examples. Another example is where the parties are extremely far apart on the damages estimates: If one side asks for one hundred billion dollars and the other side firmly believes the claim is frivolous, no compromise at, say, $50 million is likely going to work. And so mediation for cases like these may be a waste of time.
The selection of a mediator is very important. It is not enough to get someone with a fancy resume or just someone who has been hired often. The job of mediator is not to be brilliant or to get the correct legal result. The job of a mediator is to tell both sides their initial case is bad and that they need to be realistic. So, yes, someone who has been hired often will have seen a lot of cases, and it’s helpful for the mediator to speak from experience, but that is not enough. Judges often act as mediators, and sometimes they do not use their experience in a way I find effective. A mediator also needs to be blunt, assertive, and direct. A good mediator encourages each side to move toward an outcome they can live with.
Mediation sometimes requires counsel to act against their own self-interest. If a case does not settle, that may mean the client has to go to trial, and the lawyer would then get more legal fees. A successful mediation may requires the lawyer to agree with the mediator and convince a client to abandon the fight. Good lawyers know when to do this. But sometimes a fight is appropriate, so the job of a lawyer in a mediation is to give the client good advice, which may or may not align with the lawyer’s personal interest.
Mediation can be boring! A lot of it is waiting around with your legal team while the mediator talks to the other side in another room. Sometimes this means idle chat between lawyer and client, which can be a nightmare for clients if the litigators they are stuck with may be dull or worse, they may think they are fascinating.
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Many lawyers recommend that parties in a dispute try mediation before spending a fortune on litigation. It makes sense for parties to consider a compromise, especially if the result costs less and does less damage to an important relationship between the parties. But in my experience, mediation is not always the right choice. It can still end up wasting time and money.
Why should you continue to read this post about mediation?
You have a dispute and want to know how to avoid large legal bills
I wanted you to read the whole blog, you didn’t want to read any of it, and we agreed that you would read this post as a compromise
You seek inner peace and have not yet realized that the heading does not say “meditation”
Conference room, ISM University of Management and Economics in Lithuania.
photo credit: Uodas at the Lithuanian language Wikipedia, ISM auditorija 2, CC BY-SA 3.0
How Mediation Works
One party may propose to the other that the parties mediate their dispute. If the parties agree to mediate, the next step is to hire a mediator. Some large companies provide mediation services, like the American Arbitration Association and JAMS, formerly Judicial Arbitration and Mediation Services. Sometimes a commercial contract will specify one of these organizations in a mediation clause. There are also great individual practitioners in mediation. And some government entities may provide mediators for certain types of disputes as well.
Once the parties hire a mediator and agree to her fees, the mediator may ask parties to each submit a statement with the facts of the case as they see it, the applicable law, and what each party is initially willing to offer to settle the dispute. The mediator will review these documents, and once she is more familiar with the case, she will schedule a meeting for the parties and their lawyers come to an office—or meet virtually—to resolve the dispute, ideally.
The lawyer for one party usually makes a presentation about why their client is right, but how they are willing to make a compromise. Then the lawyer from the other party makes a similar presentation. Then one of the parties and their lawyer leaves the room or is virtually blocked as the mediator speaks privately with the remaining party. Here, the mediator tries to get this party and her lawyer to see the weaknesses in her case and make a more generous offer. Then the mediator speaks to the other party and her lawyer and does the same thing, sharing how difficult their case is and trying to persuade them to accept a more centrist offer.
The mediator does not make any rulings. This is a core difference between mediation and litigation, so don’t expect a Hollywood vindication. Instead, all the mediator does is nudge each side toward making a deal. Her focus is settlement over continued litigation.
Problems I Have Seen in Mediations
Although mediation is generally considered to be less expensive than a full trial, this assumes the mediation is successful. An unsuccessful mediation can be costly and still fail to save any litigation costs. In a mediation, the parties pay for the mediator’s time in reviewing statements, preparing for the mediation, and attending it. Parties also need to calculate their own lost time and pay for the costs of their attorneys to draft the mediation statements and prepare for and attend the mediation. There may also be overhead fees, such as for office space and administration. Accordingly, for litigants on a budget, mediation has definite costs but uncertain benefits.
Mediation may not also be useful for parties who come from opposite corners of a dispute. For example, there may be no dispute about the facts, but if one side is convinced that the law permits their actions and the other side is convinced those actions subject the first side to substantial liability, a mediator will struggle to find a compromise between them. Moreover, if one side expects many millions of dollars in damages and the other is convinced that they have no liability, it may be difficult for a mediator to deflate both sides’ expectations. Although a good mediator may help one side see the other’s perspective, in my experience, lawyers are already aware of their adversaries’ points of view before mediation. We will have considered them and may not be easily persuaded to adopt a different position.
In my experience, parties often begin mediation very far apart and make incremental steps towards each other as the mediation progresses. After each side makes a few offers, each far apart from the other, often one side gives up on the process itself. At that point, mediators may shrug and say that there was nothing that could be done.
My Suggestions If You Consider Mediation
Even this skeptic has seen mediation work effectively at times. While it is only appropriate in specific circumstances, most would-be litigants should consider it. Regardless of how anyone feels about it, some judges apply firm pressure on the parties to give it a shot, and some contracts require it. When you and your counsel are entering mediation, I propose the following plan:
First, litigants should try to negotiate a settlement without a mediator. Attorneys are capable of negotiating claims and recognizing weaknesses in their own cases without incurring the costs of a third party.
Second, attorneys should consider the human effect of having their clients face each other in person. Mediation can be helpful if clients who had demonized each other in isolation see each other again in person and suddenly become more amenable to compromise. But more often, people who are suing each other get worked up when they see each other and sit through a presentation where a lawyer tells a stranger a twisted story that makes the other party look bad. And that anger can block settlements. (There’s only so much meditation you can do in a mediation.) As a result, some parties who are interested in settlement may prefer to avoid in-person mediation.
Third, litigants should only pursue mediation if its projected cost is not a substantial portion of the amount at stake. Spending $25,000 to mediate a $100,000 dispute may not make sense because, when the defendant includes other attorneys’ fees and the actual settlement payment, she may end up paying as much to settle the dispute as the defendant initially demanded or would have accepted without mediation.
Fourth, attorneys and litigants hire mediators with good records of settling cases and who seem genuinely interested in making a deal. Some mediators may be eager to accept the next case but, once they see the parties disagree, give up too quickly. A mediator is worth working with only if she is determined to overcome the parties’ differences. Litigants should listen to any mediator who suggests she is not the right fit for their case, and go find someone else.
And fifth, litigants should only go through with mediation if they have a good reason to believe their adversary will compromise. If an adversary conducts itself like it will never waver from its firm beliefs, then there may not be room for a litigant to do anything in the mediation but acquiesce to the adversary’s demands. There’s nothing wrong with sticking to your position, especially early in a dispute, but doing so throughout makes a mediation a waste of time.