ARTICLES

Mediation: Settling Business Disputes

Mediation as a negotiation tool utilizes an independent, neutral mediator to assist parties in reaching a settlement.  Mediation can serve as either an extension or a substitute for the parties’ own negotiations. Typically, however, mediation is the first and only substantive negotiation between the parties and their lawyers.  Private and confidential, it is normally held in a private office or meeting room with no public record  made of the proceedings.  If no settlement is reached, any statements made during the proceedings are generally inadmissible as evidence in subsequent litigation.

Mediation is an informal process, involving a discussion of the dispute by the parties with the assistance of a mediator.  There is no formal presentation of witnesses and evidence. Mediation, therefore, allows the parties to make their own decisions and fashion their own settlement.  The mediator's role is to assist the parties in their negotiations by identifying areas of agreement and developing strategies to overcome the obstacles to settlement.

The Mechanics of Mediation: How Does it Work?

At an initial “housekeeping” meeting, the mediator will introduce the process, explain the format, and discuss the confidential and non-binding nature of the proceedings.  There will be a mediation agreement for the parties to sign acknowledging the confidentiality of the proceeding and any applicable mediation fees.

The session typically begins with each party making a brief presentation – jointly or privately, depending upon the particular situation.  In addition, mediators will often request a written mediation statement (where the lawyers introduce the facts and law) a few days prior to the mediation.  In complicated cases, the mediation statement is vital to the process  – allowing the mediator to spend focus on a resolution rather than spending time gathering the facts necessary to understand the controversy and the applicable legal authority.

Following the initial meeting, the mediator will usually separate the parties and begin a series of private, confidential meetings called "caucuses."  In other words, the mediator will engage in shuttle diplomacy to narrow the issues in route to a potential resolution.  In these caucuses, the mediator works with each of the parties to analyze their case and develop options for settlement.

Normally, the mediator will caucus numerous times with both sides until the case either settles or it becomes apparent that settlement will not be reached.

Why Mediation Works

Mediation is a specialized skill – assisting the parties to reach their own best result does not come from legal training or experience. In litigation, attorneys are often forced into posturing the claims of their clients rather than resolving disputes.  However, unlike a courtroom, mediation provides an opportunity for all parties to meet at the bargaining table for the express purpose of discussing settlement. 

Mediation also assists the parties in developing sound options for settlement.  The more options available – monetary and non-monetary – the greater the chances of success.  While attorneys excel in developing facts that support their positions, they tend to bog-down when it comes to developing settlement options with a business solution.  The mediator can assist the parties in clarifying their real objective(s) and to facilitate the consideration of alternatives that might be overlooked by attorneys engaged in battle.

Mediation also provides a safe environment for negotiation because the mediator can control and direct the communications.  As a result, unproductive discussions can be avoided, and concessions or proposals will be communicated only if they are likely to lead to a settlement. Since the mediator's job is to keep the parties focused on exploring productive avenues to settlement, posturing and hard bargaining are often reduced or eliminated.

Because of its resolution-based format, mediation allows each side to "test market" a settlement proposal by privately conveying the proposal to the mediator in a caucus.  This allows each side to fully explore settlement options without negotiating against themselves or appearing to "give in.

Preparing for Mediation

Know the strengths and weaknesses of the case. Typically, if one side has a superior position on all fronts, there would be no basis for a lawsuit. Litigation occurs because there is a dispute in which each side has significant risks in time, legal fees, lost opportunities or a potential judgment. If these issues are not understood, it becomes very difficult to reach a satisfactory resolution short of a trial – in which a judge or a jury will decide the outcome.

Know the bottom line. A resolution of a dispute generally leaves both parties dissatisfied and unhappy. However, the pain of settlement is often less than that experienced from the time, expense and emotional commitment of continued litigation. Not knowing the bottom line in settling can be a serious impediment to resolving the case, as it is impossible to measure the value of continued litigation.

Understand all possible opportunities in a potential settlement. Lawsuits can be resolved based upon both monetary and non-monetary terms that may have more value than an actual cash payment to a party. It is imperative that these potential opportunities be thoroughly explored. For example, a well-worded press release announcing a settlement or a binding non-compete agreement may be far more valuable than a monetary settlement.

Conclusion

Litigation is an expensive battle where true winners rarely emerge. At some point in the process, litigating a dispute requires a change of mindset toward that of mitigating further loss. Mediation provides the opportunity for that to be possible. As a litigant, use this opportunity to maximize the potential of resolution through a well thought-out mediation strategy.

Skjold ▪ Barthel’s Mediation Services Group strives to make the mediation process painless and productive for all parties involved. Our Qualified Neutrals are able to assist with a wide variety of business disputes. Please contact us at 612-746-2560 for more information.