When to Mediate and Why
If a company or person becomes involved in litigation, the parties eventually will either agree to, or be ordered to, participate in mediation. Mediation deserves deliberate and thorough consideration to make the most of an opportunity to resolve the dispute favorably and efficiently. Here, we kick off a series that examines what companies should know about mediation. This post describes mediation for the uninitiated and discusses an important threshold consideration: When to mediate.
What Is Mediation?
A common type of “alternative dispute resolution,” mediation is a process by which parties attempt to voluntarily negotiate a resolution of their dispute, aided by a neutral third-party—the mediator. Unlike traditional arbitration, where an arbiter hears and actually decides the case, mediation is non-binding: the parties are not required to reach a result unless they strike a bargain to which the parties agree.
The duration and tenor of a mediation vary depending on the complexity of the dispute, the sophistication and preferences of the parties, and the skill and style of the mediator. Generally speaking, mediation requires (a) decision makers from both parties, (b) the parties’ counsel, (c) a mediator, and (d) a location at which all of these people can meet.
With everyone in the same room, the mediator almost always opens the proceeding by introducing himself or herself and the process, while setting the parties’ expectations. The mediator then distributes and requires the parties to sign confidentiality forms that mandate the parties keep confidential what is said in the mediation. State law usually also protects the confidentiality of mediation. The parties’ counsel then deliver opening statements, which is a relatively short summary of the party’s view of the merits of its case. After the opening statements, parties and their counsel often (but not always) are moved to separate rooms. The mediator usually moves back and forth from there to facilitate negotiations in the hopes that the parties can reach a settlement that resolves all or part of the dispute.
The following are advantages of mediation over traditional negotiations conducted between the parties or their counsel without a mediator.
Generally forces each party to seriously consider their position, exposure, and goals;
May allow a mediator to correct a litigant or lawyer’s erroneous view of the strengths and weakness of their case;
Often facilitates more amicable resolutions, allowing an ongoing relationship or a more amicable parting of ways;
Greater transparency for the litigants because the mediator usually speaks directly with the clients and the lawyers; and
Often more creative solutions are crafted.
When to Mediate?
Sometimes, parties will have no choice regarding when to have at least one mediation. In some instances, the agreement at issue in the litigation demands that the parties mediate before filing a lawsuit or submitting a dispute to arbitration. And, even if not, litigants can count on courts ordering mediation at some point.
If the timing of mediation is left to the parties, conventional wisdom recommends mediation as early as possible to avoid unnecessary attorneys’ fees, expert fees, and other litigation costs. An early mediation may help save the parties’ ongoing business relationship before litigation tactics irreparably sour the relationship. And, there is little downside to an early mediation. Parties can mediate more than once during a lawsuit, though multiple mediations are not commonplace.
That said, if the parties are locked into radically different positions or do not have access to much of the factual information relevant to the case, an early mediation may simply waste time. That is, before the parties undertake even initial discovery, it may be impossible to make an informed settlement decision at a mediation. Through litigation, parties learn about their respective positions and the evidence supporting those positions. The litigation process also raises leverage points, such as summary judgment or key depositions. When such a point is upcoming, parties may want to settle to avoid a bad outcome. Or, if such an event has recently passed, the result or information learned may change the strategic calculus for one or both parties. And, receiving months of bills from attorneys often motivates parties to end the litigation. When considering whether the time is right to mediate, discuss with your lawyer (a) remaining factual and legal question marks, (b) an estimated budget for the case through different procedural stages, (c) and the other side’s likely possible perspectives.