The What, How and Why of Mediation
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If you or your business is ever involved in a lawsuit, there’s a good chance your attorney will talk to you about mediating your case. You may even be required to mediate before your case can go to trial. This article will discuss private mediation, but some courts (such as U.S. District courts) conduct “settlement conferences” with a judge or magistrate, that follow a similar form and have similar objectives.
What is mediation?
In mediation, a neutral third party acts as a go-between to help parties reach agreement. Unlike a judge or an arbitrator, the mediator does not issue a ruling for one side or the other; instead, he or she will talk to you and the other party (sometimes privately, sometimes together) and tries to develop a compromise.
There are several important differences between mediation and a court proceeding such as a hearing or trial. First, it is much less formal. Mediation normally takes place at the mediator’s office and does not follow the rules of protocol typical in a courtroom. Although there are rules governing the mediation as it relates to the litigation as a whole, you may speak freely at the mediation and you are not bound by courtroom rules of evidence or procedure. Many mediations open with a joint session in which you and the other parties have an opportunity to make your own statements. Although the attorneys are also present for such meetings, this may be the first opportunity in a long time (or ever) for you to talk directly to the other side about the case.
Also unlike most court proceedings, mediation takes place in private. Before a significant court hearing, the parties often file briefs and other documents with the court and serve them on each other. In a court proceeding, you may not discuss the case privately with the judge, and hearings will likely occur in open court and be recorded or transcribed. In mediation, by contrast, all proceedings are confidential. The parties will often submit a “mediation statement” to the mediator ahead of time explaining their position in the case, but unlike a brief, the mediator will not show it to the other side without your permission. Additionally, unlike a judge, the mediator can and will meet privately with each side to discuss the merits of their positions, carry messages back and forth, and attempt to broker a compromise. Finally, statements you make during mediation are not admissible in court.
Because the goal in mediation is to reach an agreed solution rather than to convince a judge to rule one way or the other, the tone between the parties may be different, although this can often be a matter of degree and varies from case to case. You must still present a strong position to the other side and the mediator, but you will also talk to the other side to understand each other’s interests and positions.
How does mediation work?
Mediation can occur at any point in the case. In cases where there are relatively few issues in dispute, it might make sense to mediate early in an attempt to resolve the case quickly and for as little expense as possible. In other cases, you may mediate on the eve of trial. In most civil litigation, the court will enter an order requiring you to mediate on or before a certain date. In most cases, the parties to a case select a mediator by agreement (as a last resort, if they cannot agree, the court may select one).
Before the mediation, talk to your attorney about what you hope to accomplish in the case and what outcome would be acceptable to you. Be objective; even the strongest case has its weak points, and the better you understand the strengths and weaknesses of your case the more likely you will be to resolve the case before trial. Make sure your attorney understands the big picture – you may be concerned not only with how much money changes hands, but also with protecting customer relationships, or keeping sensitive information confidential, or preserving your business’s reputation.
Most of the time, your attorney will draft a mediation statement and send it to the mediator ahead of time. This will include a statement of facts and general background on the case to get the mediator up to speed. It can be relevant, for example, how much pre-trial discovery (exchange of information and testimony between parties) has already occurred, or whether major motions have been filed and ruled upon, because that can affect how much uncertainty each party faces. It will also include a discussion of the relevant legal issues. Unlike a brief, the mediation statement will summarize the state of settlement discussions, usually including the last demand and offer amounts and identifying which party made the last offer, so that the mediator knows how close the parties already are to an agreement and which party must make the first offer at mediation. Because the mediation statement is confidential and the mediator does not pick a winner or loser, your mediation statement may acknowledge weaknesses in your position more candidly than you would in a court proceeding.
At mediation, the mediator might conduct an opening session with all parties present, or he or she may meet with you and the other parties separately. The mediator will begin by explaining the process and his or her role, and then you will have the chance to explain the case and your position. After that, the mediator will meet with whichever party whose “turn” it is to make an offer – normally, the last party to receive a settlement offer before mediation – and will develop an offer to take to the other side. When the mediator confers with you, he or she will explain the other side’s offer, ask questions, and may suggest a counteroffer. You might decide how to respond while the mediator is present, but you may also excuse the mediator so you can confer privately with your attorney. Eventually the mediator will meet with the other side to convey your offer, and the cycle will continue. There is usually considerable downtime during a mediation, during which you can discuss the case with your attorney but may also have time to return urgent phone calls or emails.
The goal in mediation is to negotiate a resolution of your dispute that everyone can accept. If you reach an agreement, the mediator will draft a term sheet for all of the parties and their attorneys to sign. Within the next few days, the parties’ attorneys will prepare a more formal settlement agreement to conclude the case. If you are not able to resolve your dispute, the mediation will end, although you may still be able to build on the progress you made in later settlement discussions. Either way, the mediator normally files a report with the court. The report will state that mediation occurred and will tell the court whether or not the matter resolved, but it will not include more detail than that.
In many cases, the short answer is “because you have to.” Courts often order the parties to mediate before their cases can proceed to trial, and in many cases before the court will rule on major motions that can determine the outcome of the case. There is no guarantee that mediation will resolve your case, of course, but the court will likely require all of the parties to work hard and in good faith to settle the dispute before it spends its own time and resources reviewing and ruling on it.
But that is not the only reason, or even the best one. Any negotiated outcome (not just a mediated one) can offer a host of advantages over a final court judgment: there is less risk to both sides, it can come sooner and at considerably lower expense, the parties can craft a precise agreement that accommodates their particular needs, and you can keep sensitive business information or “dirty laundry” out of the public eye. So why bring in a third party? Many times, parties dig in and don’t reconsider their positions as the case proceeds; even if that doesn’t describe you, it may describe the other side. An outsider looking at the case for the first time provides a fresh, objective point of view and can help overcome this resistance. A mediator who talks openly to each side about their motives in the case might be able to propose a solution neither side had considered: if the mediator learns that a particular issue is very important to you, and unimportant to the other side, that information could be critical to settling the case.
Finally, there can be a certain “boiler room” aspect to mediation. Unstructured settlement discussions can drag out for months, particularly if both sides want to settle but neither wants to be the first to make a significant move. This both delays resolution, and drives up costs. Mediation generally requires the parties to attend in person. After a long day of discussions, with slow progress by both sides, the prospect of ending the dispute today (or tonight!) can provide a powerful incentive for both you and your opponent to reach an agreement so that you can turn your attention and resources to other matters.