Practical Insights for Business Owners
Client Q&A: What is Mediation?
My company has a dispute with a vendor, and our contract says we have to mediate before anyone files a lawsuit. What's mediation?
In a mediation, a neutral third party—a mediator—tries to help the parties reach a mutually-agreeable negotiated resolution to their dispute. The thing that distinguishes mediation from arbitration or litigation in court is that, while participation might be mandatory, any resolution is up to the parties; a mediator does not decide how the dispute is resolved. Rather, the mediator’s job is to help the parties reach a negotiated solution.
If It's Voluntary, Do I Have to Go?
While mediation is non-binding, that does not mean that you do not have to participate if your contract requires it. Indeed, if you ignore a mandatory mediation provision of your contract and instead bring a lawsuit, your lawsuit could be dismissed for failing first to mediate. In some circumstances, this is no small thing. Not only is there the cost of re-initiating the lawsuit if the mediation fails, but if the lawsuit was filed near the end of the statute of limitations period, your claims may be time-barred by the time you file a new action.
Who are Mediators?
There are high-profile companies who employ full-time professional mediators—often retired judges—who often are hired to help resolve large, complex disputes. But there also are mediators who are sole practitioners or who also work as litigators or transactional lawyers. For example, many lawyers at Schlam Stone & Dolan are trained mediators. Some mediators—particularly in non-commercial disputes—are not lawyers at all. Most courts and bar or professional organizations have rosters of trained mediators, so there are plenty of resources available to you if you are seeking a mediator.
Because there is no state or national licensing or education requirement to be a mediator, there are no set qualifications to be a mediator as a general matter. However, many professional organizations have formal mediator training programs. Further, many court-operated mediation programs have mediator training standards and mediator codes of ethics.
What Happens at the Mediation?
There are no fixed rules to mediation. In general, unless the parties agree to do so, there is no obligation to exchange evidence before the mediation. Typically, the parties send the mediator a written statement of their position before the mediation begins so that the mediator knows what the dispute is about and what the parties’ positions are.
The mediation itself is typically held in a conference room. Usually, the mediation begins with the mediator, the parties and their lawyers meeting together so that the mediator and the parties all can hear each side's story. At some point, the mediator usually begins to meet separately with the parties so that they can discuss issues that a party might not want an opponent to hear, such as the amount they are willing to pay or receive to settle the matter.
Very generally, the mediator's job at the mediation is to try to bring the parties together. There are many ways of doing this, including trying to get each side to understand the other’s position, suggesting different ways of resolving a dispute and giving a party feedback on the strength and weaknesses of their position and the possible consequences of not settling. There are myriad techniques mediators use to bring the parties together, but the common theme in mediation is that the mediator is a neutral third-party who does not take sides and is only there to help the parties agree on a negotiated solution to their dispute.
What Are the Advantages and Disadvantages of Mediation?
Mediations typically are relatively quick and inexpensive. Sometimes the only way to get a dispute to the point where the parties will settle is to go through years of discovery and motions at the cost of hundreds of thousands of dollars—or more. A mediated settlement can sometimes get the parties to that same point in weeks at a tiny fraction of the cost.
Even more, mediation typically gives the parties a chance to meet face-to-face (with their counsel) and tell their story. Because most commercial lawsuits settle, this is something that many civil litigants never get. And for some disputes, this makes a big difference. Sometimes the disputes in civil litigation, while technically just about money, are taken very personally by the litigants, who want a chance to tell their side of the story. Mediation provides this chance, and that is part of the reason mediation can be so effective.
Something that is both an advantage and a disadvantage is that the parties in a mediation decide whether and how to settle. It is an advantage in that, unlike a court decision, which is restricted to the rights and remedies the law allows, the parties can craft a resolution that works for them and their particular circumstances. In court, there usually is a winner and a loser. In mediation, the parties can try to negotiate a settlement that can be a win for both.
Still, because the mediator cannot force the parties to settle, mediation does not work when one or both parties are recalcitrant litigants.
Further, because mediation has no (mandatory) process for the exchange of evidence, it can be difficult to reach a mediated resolution when one or both of the parties feel that they have not been provided adequate evidence—evidence to which they would be entitled in a lawsuit—to judge the strength of their opponent’s arguments. For this reason, in some cases, mediation works better after the parties have exchanged evidence as part of a lawsuit’s discovery process.
If a Pre-Litigation Mediation Fails, Can You Try Again Later?
Yes. This is not uncommon. Indeed, in many courts, there are programs where the court can order the parties to mediate after the lawsuit has begun. And parties can mediate without being told to do so. Still, whether the mediation is voluntary or court-ordered, whether it results in a settlement is up to the parties.
Whether it is through a mandatory pre-suit mediation provision, a court-ordered mediation program or at the choice of the parties, mediation is a common part of commercial litigation. Not only is it a standard part of our litigation practice, many of us are trained mediators, and so bring special experience and skills to mediations in which we represent our clients.