Legal Expert: Mediation Do's and Don'ts

Mediation can be a cost-effective means of resolving disputes without going to trial.

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Mediation can be a cost-effective means of resolving disputes without going to trial. Parties meet with a professional, neutral mediator to attempt to resolve the claim. Mediators have no authority to make any determination or force a settlement. Their job is to facilitate discussion that may lead to an acceptable resolution. Although most mediations are voluntary, United States courts expect (or formally require) that the parties mediate before they take up courtroom time for trial.

There is a small industry of professional mediators (usually retired judges or lawyers) who make their living mediating, often under the auspices of a service provider such as JAMS. Most mediators charge between $5,000 and $50,000 per day. Although there is no shortage of mediators, there is a limited number of those who are truly skilled; they are usually booked several months in advance.

The type of mediator you want will depend on the parties, the strength of the case, the issues involved and the participants' personalities. With a weak case, you may not want a mediator who will press the merits too hard, but one who will keep the parties talking and negotiating and then propose a resolution. If a client is hotheaded, you may not want a mediator who is going to confront them. On the other hand, sometimes that is exactly what you want: someone who is candid and direct. A mediator who merely relays offers and counteroffers back and forth is usually a waste of time.

It is important to learn whether the mediator has worked previously with the opposing party or their lawyer — that may lead to biases. As business people, mediators want to be hired for future mediations. Mediators whose focus is on the possibility of being rehired may not want to disappoint large institutional clients or law firms that hire mediators repeatedly. However, if you have a strong case, it is sometimes a good strategy to agree to a mediator proposed by the adverse party — they may take negotiations more seriously if their chosen mediator tells them they have a weak case.

When is the best time to mediate? There is no one answer. In many cases, it is not opportune to mediate until the evidence has been developed in discovery so both sides have had an opportunity to assess the facts' strengths and weaknesses. Sometimes, however, a mediation at the outset of the case — or even before it's filed — can be successful, saving time and money while keeping the dispute out of the public eye. All too often, cases are not mediated until the eve of trial, when most of the work preparing for trial has been completed and costs incurred. Having both spent a lot on the case, the parties may find it more difficult to settle.

Mediation usually takes place in a conference room at the mediator's office or one of the lawyers' offices. It is important that a client representative — with the authority to settle — attend. In advance of the mediation, attorneys should educate clients about the mediator and the process, preparing a negotiation strategy. The mediator will try to influence clients by speaking directly with them. Clients should be prepared to respond to the mediator and not betray any lack of confidence or weakness.

After the mediator is satisfied that the parties have explained their positions and that those positions have been shared with the other side, the mediator will move the parties into negotiations. The claimant usually will make the first initial demand, followed by a series of counteroffers. Because the process is slow, it is necessary to be patient and not move too fast. Among other things, do not make a "best and final" offer unless it really is your "best and final" offer, and do not do so early in the process. It is helpful to ask the mediator to guide your next move, as the mediator will have spoken with the other side. Doing this also gets the mediator more invested in achieving a successful outcome. If they have provided input into the proposal, they will push harder with the other party.

A mediation can be an opportunity to forge a creative resolution to a dispute. For example, the parties may agree to do future business together so that neither side "wins" or "loses," and both parties can profit from a future relationship. It can be helpful to consider a business resolution in advance of the mediation, which can be proposed if the parties cannot agree to a monetary settlement.

If the parties do not come to an agreement, the mediator may make a "mediator's proposal." This is a final settlement proposal that the mediator conveys to both sides with the instruction that each side tell the mediator only whether it is acceptable (and not make a counter-proposal). If both sides tell the mediator "yes," there is a settlement. If one side says "yes" and the other "no," there is no settlement. And, importantly, the mediator will not tell the party that rejected the proposal that the other side had accepted it. Thus, as far as the party who said "no" knows, both sides may have said "no." This way, there is no risk of giving up one's settlement position by saying "yes."

If the parties reach an agreement, it is good practice to put key terms into a signed term sheet at that point. This reduces the possibility of post-mediation disputes. It can be helpful to bring a draft term sheet to the mediation containing non-economic terms and then insert the agreed-upon economic terms, so that the settlement is documented, pending a more formal agreement, before the parties leave and have second thoughts.

Just because a matter does not settle does not mean that the mediation may not bring about a settlement or that the parties cannot settle on their own at a later time. Mediations begin a conversation that can lead to a settlement in the days, weeks or months that follow. Good mediators typically continue to talk with the parties to facilitate further negotiations.

The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.

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