Mediation orders or contract provisions often require the participation of a business executive in the process.
For most executives, mediation is an enigma—it’s neither an arbitration nor a business negotiation—and attorneys need to educate their clients about mediation to ensure the highest probability of success and calibrate their expectations.
To Mediate or Not to Mediate, That Is the Question
Understanding the process is key to making an informed decision on whether to mediate. A voluntary mediation allows parties to negotiate, through a neutral mediator, without one or the other appearing to show weakness by asking to talk settlement.
But pressuring your client, or the other side, into a mediation generally is a bad idea. Mediation works best when both parties would prefer to settle rather than litigate.
Prepare Your Client for Failure
Mediation is often useless if either party is still wedded to its original positions in the dispute or want to fight it out in litigation. Warn your executive that early mediations in litigation frequently fail because neither side’s initial positions have been tested in motion practice or discovery.
For court ordered mediations, the best time to mediate is generally just before or after key rulings or just before trial. This allows both parties to evaluate their litigation risks and weigh them against their business interests.
Explain Different Dynamics of Mediation in Different Forums
For example, in arbitration or bench trials, the best time to mediate is typically after the hearing while waiting for a decision. This allows the parties to evaluate how the evidence played out in the hearing, which will impact their positions. A position that sounded good on paper may have fallen flat during the hearing.
Remember Why You Are There
Mediation is not an opportunity to talk the other side out of its case or to have a neutral mediator tell your opponent to give up. The mediator is there to settle the case, not advocate or rule on either party’s positions.
Executives should understand that “opening statements” are often counter-productive in mediations. While they may let the executives vent or the lawyers impress them with a compelling presentation, this forces opponents to tear down your position (and vice versa), making the process so adversarial that the ability to compromise may get lost.
Get Your Client Into a “Mediation Mind-Set”
A “mediation mind-set” is understanding a compromise will likely require your clients to take less or pay more than they think is a fair resolution. In a business deal, executives might be looking only at business factors, but in mediation they must weigh those factors in light of litigation risk and cost and burden of litigation.
Litigation risk depends on an honest evaluation of the facts, law and forum. Litigation cost and burden are not just attorneys’ fees and expenses, but the internal distraction and loss of productivity of key people who might be involved in the dispute.
While in theory a bench trial or arbitration should be more predictable, often people make the mistake of “drinking their own Kool-Aid” or giving what might have been “creative” or marginal positions when formed, greater weight as the litigation progresses.
Often witnesses are viewed as more persuasive and less vulnerable than they turn out to be under cross-examination. A highly qualified witness might be a poor presenter, while the other side’s less qualified witness might be a great presenter.
Make sure your client understands—prior to the mediation—the risks and uncertainties of litigation and how other people might perceive your positions.
Successful Mediation Often Makes Both Parties Unhappy
If the business is not prepared to make a deal that it does not like, then do not over-invest in the process or go to mediation at all. The executive must understand that if you settle, it will likely be at the number which is the most one party will pay, the least the other will take, and at least somewhat disconnected from the legal and factual positions either party used to evaluate their exposure.
Secure a Demand Prior to Mediation
Because mediators do not typically require the party asking for money to make a demand until the mediation starts, in a significant matter the parties have to at least know the “ballpark” for settlement with sufficient time before the mediation to decide who should go and with what authority. Even if the CEO does attend, the CEO may want the opportunity to vet the matter in advance with “the team” or the board.
Even a failed mediation can be valuable. It may reveal facts or circumstances you did not know or show your executive the other side’s point of view in the case.
Prepare your client for the possibility that the other side might have facts or proof not yet disclosed that they bring out at the mediation. A failed mediation may also set the stage for a later negotiation that does succeed, which is valuable in and of itself.
An executive who is informed on how the mediation process works, and what to expect, and what not to expect, is in the best position to bring a dispute to closure in mediation.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Danielle (DJ) Healey is a senior principal in the Houston office of Fish & Richardson PC. Over the past 30 years, she has participated in hundreds of mediations and arbitration proceedings in addition to litigating complex patent cases in federal and state courts.
The opinions expressed are those of the author and do not necessarily reflect the views of Fish & Richardson, any other of its lawyers, its clients, or any of its or their respective affiliates. This article is for general information purposes only and is not intended to be and should not be taken as legal advice.
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