Protracted disputes remain a major concern for most businesses where time truly is money. Most disputes (95% - 99%) are resolved before they get to trial or the arbitration hearing. Yet too often parties and their attorneys do not hire mediators until late in the litigation, after months or years of expensive and distracting discovery and other pre-trial activities. Since most cases eventually settle, companies and their attorneys should prioritize, plan, and implement strategies for resolving disputes as early as possible, before the costs, disruption, and risks mount.
The typical rationale given for delaying mediation is that the parties need more information about the claims before they can make an informed settlement decision. Another frequent assertion is that the parties are “not ready” to settle and need to feel some “pain” of litigation before they will be motivated to make meaningful compromise. So almost by default, litigation discovery and motion practice often take on a life of their own until the parties either become exhausted with the process or otherwise reach a “sweet spot” where they are ready for mediation and serious settlement discussions.
Rather than wait for a settlement “sweet spot” to occur through protracted litigation, parties and their attorneys can hire a mediator experienced in early dispute resolution to actively help create conditions for a successful early mediation soon after the dispute arises. Depending on the circumstances, the mediator can be hired before or after a lawsuit or arbitration is filed, but the mediator should be hired early enough to be able to help the parties and their attorneys collaboratively develop a dispute resolution process tailored to their needs and circumstances.
Although the process should be tailored to the unique aspects of each dispute, there are several key common features of a successful early dispute resolution process.
1. Agreement to mediate
Of course, since mediation is a consensual process, the parties must first agree to mediate. The best time to agree on an early dispute resolution is when negotiating and drafting the dispute resolution clause in the contract, while the parties are still in the “honeymoon” stage. The clause typically will require mediation before litigation or arbitration is filed, spell out when and where the mediation is to occur, and provide other details of the mediation process. To further streamline the process, the parties can also designate a mutually agreeable mediator by name in the dispute resolution clause.
If there is no mediation clause in the contract, the parties can – and should – agree to mediate as soon as practical after a dispute arises that cannot be resolved by direct negotiations. Despite the commonly held misconception, a request to mediate is not a sign of weakness.
2. Early retention of a mediator
Retaining a mediator as early as possible, before significant pre-trial discovery and motions, is key to the early dispute resolution process. If mediation is delayed until late in the litigation process, the parties may be ready – or feel forced – to negotiate, but the parties’ relationship will likely have deteriorated and their positions become further entrenched, making settlement more difficult. The parties should retain a mediator experienced in the early dispute resolution process as soon as possible so the mediator can help customize the settlement process for their situation. If one party is reluctant to participate in early dispute resolution, the mediator can confidentially explain why it may be in that party’s best interest.
3. Mediator’s confidential fact-gathering and diagnosis
With the parties’ consent, the mediator then works independently and confidentially with the parties and their attorneys to gather important information, review possible roadblocks to settlement and develop an appropriate settlement process. The mediator may interview key players to understand the real dynamics involved and the underlying settlement needs of the parties, not just the issues raised in legal briefs. The mediator also determines whether there are other parties that need to be involved, such as insurers or subcontractors, and which individuals should attend the mediation session.
4. Document and information exchange
The mediator then works with the parties and their attorneys to determine what additional documents and information needs to be exchanged to make an informed business decision on settlement. While the parties clearly need some information about the claims to make an informed settlement decision, significantly less information is needed to make an informed settlement decision than to present a case in trial or arbitration.
5. Customizing the settlement process and mediation
Based on information learned during the initial review, the mediator works with the parties and counsel to customize the settlement process and mediation session to have the best chance of success. For example, could the issues or gap between the parties be narrowed if the expert witnesses exchanged preliminary reports or met before the mediation session? What topics should be covered in the pre-mediation briefs, and should the briefs be confidential or exchanged between the parties? Should there be joint sessions where the parties and/or their attorneys make presentations, so the parties feel they have had “their day in court”? Or should there be caucus sessions only with the parties separated from the beginning? Before the mediation, the mediator should also help the parties anticipate and navigate possible roadblocks to settlement.
6. Continued involvement of the mediator after suspension of negotiations
Many disputes that do not settle in the mediation session itself settle sometime thereafter because of the progress made in the mediation. This is especially true where the parties continue to use the mediator to help continue or jump-start negotiations. In many cases, it makes sense for the parties to continue to work with the mediator, either by telephone or in person, to help close any gap remaining after the mediation session.
7. Customizing an arbitration process for disputes that do not settle
Finally, the mediator can also help the parties and their attorneys customize an arbitration or other ADR process for disputes that do not settle in mediation. With informed consent by the parties, some mediators will agree to change roles and serve as arbitrators to decide disputes that do not settle in mediation.
With some forward thinking and planning, and the timely retention of a mediator experienced in the early dispute resolution process, parties can resolve disputes better, cheaper, and faster and thereby help minimize risk, protect their bottom lines and preserve business relationships.
After a long career as a construction lawyer with Frost Brown Todd LLC, Scott Gurney started Gurney Dispute Resolution LLC to focus on resolving construction disputes efficiently and fairly, without litigation. Gurney has received mediator training from Pepperdine University, is on the American Arbitration Association’s National Rosters of construction mediators, construction arbitrators, and large complex case arbitrators, and is a frequent speaker and writer on alternative dispute resolution.