Arbitration and Mediation - The Difference and the Tactics

With trials in litigation often costing tens of thousands of dollars or more, there is incentive on the part of most parties to settle matters if they can or remove the extra cost of litigation trials by having the matter proceed to arbitration instead of trial by judge or jury. The reader should review our article on Arbitration for a full discussion of the advantages and disadvantages of that procedure.

Arbitration is the private trial of a matter with the decision of the privately selected arbitrator entered in any court of competent jurisdiction, the decision having the same effect as if the matter was tried in a court of law. Discovery may or may not be allowed, depending on the arbitration agreement. Absent agreement of the parties, arbitration can not normally occur in the United States.

Mediation, on the other hand, is settlement discussion supervised and facilitated by a mediator who is often trained in the business of making it easier to settle a matter. Mediation can not force a settlement. The parties, either during the mediation or afterwards, must voluntarily decide to settle or the mediation will have no effect.

Further the statements made in most mediations can not be used later in Court or in any other proceeding. As settlement discussions, the rules of evidence (and usually executed agreements between the parties) ban the use of such information in any way. This is done to help facilitate the open exchange of views and presentation of arguments.

Many court systems require parties to engage in mediation before trial. (Whether this is of use is disputed since parties forced to mediation are often not in the mood to be reasonable in the discussions.) More often, the parties agree to set up a mediation once their in person discussions fail to create a settlement and it is possible to have two, three or even a dozen separate mediation sessions before a trial as the parties seek to settle their differences. The cost of mediation can be substantial, often thousands of dollars a day for the mediator and whatever the attorney costs to be present during the mediation. It still is a much lower cost than that of the average trial. If the mediation fails, the parties simply proceed to trial or arbitration.

Does it work? Surprisingly well. A large industry of professional mediators has arisen, usually attorneys or retired judges, but not always, and most of these professionals receive extensive training in how to successfully mediate disputes. Anyone selected by the parties can be a mediator, including mutual friends or colleagues. Most parties wish a truly neutral professional, however, and there is little doubt that long experience and training in mediation can be useful. Our office has had successful mediations, however, with both professionals and with trusted mutual friends of the parties acting as mediators.

THE ETHOS OF MEDIATION:

As one of the best mediators known to this author once said, “Aggressive trial attorneys make lousy attorneys in mediation. They don’t know when to shut up and stop arguing.”

In that brief and curt statement lies the essential difference between mediation and litigation/arbitration. There is little point in convincing a mediator if you are right or winning points with the mediator since the party one is trying to convince in a mediation is NOT the mediator (who is not the judge or jury and has no power to make a judgment) but the other side. To attack the other side, to make speeches and “strut your stuff” is both pointless and a waste of time and money. The party who matters in terms of settlement is the opposing party.

Which is not to say that one must act mealy mouthed or weak. No one will settle a case if they feel the other side is giving up or frightened to go to trial. One must present one’s position strongly and firmly, but not with rancor or irrational vituperation. “Firm but Fair” is a good motto to utilize as the position one must take.

A common issue is how much of the case to give away to the other side. Attorneys often wish to hold back critical evidence or arguments to use at trial, afraid that one loses a tactical advantage if one shows all one’s most powerful evidence before trial or arbitration. This issue can be resolved by a good mediator who will listen to the evidence, not tell the other side what it entails, but tell the other side that there is evidence of some power that awaits them in the coming trial or arbitration.

Mediators do and can agree to keep fully confidential what is said to them, not telling the other side either arguments or evidence absent consent of the revealing party. That, and calm advice and counseling skills, are really what a good mediator brings to the table in achieving effective settlements.

THE USUAL PROCEDURE:

There are no “set rules” for mediation but most mediators work along the following lines:

1. The parties meet in the same room and the mediator introduces him or herself and explains how mediation works and that the purpose is not to fight but to settle the matter if possible. Confidentiality agreements binding the parties to keep all communications exchanged in the mediation confidential are executed.

2. The mediator then often allows each party to state their case. Often attorneys make the statement but parties can. The ability to “vent” and let the other side hear one’s grievances is an important aspect of the mediation and the mediator will calm the parties down if the exchange becomes too heated.

3. The mediator than normally divides the parties into separate groups in two separate rooms and engages in “shuttle diplomacy” moving from room to room with offers, counter offers and arguments. Usually the mediator will volunteer his or her own views on arguments presented and the “feel” of the process. Sometimes the mediator will freely advance an opinion as to whether a case is weak or strong and what it is worth. Each mediator has his or her own style but all take pride in achieving a settlement.

4. Sometimes the mediator will develop his or her own ideas for offers or types of settlement. Sometimes the mediator will suggest some evidence be exchanged (or not) or will suggest that an adjournment be obtained for some days for parties to make further investigations or analysis, reconvening later. Often a mediator will indicate that the process is premature and should occur months down the road after the parties have engaged in discovery or exchange of evidence.

5. For this reason, many attorneys remain convinced that mediation should be left until all discovery in the case is completed. Other attorneys feel that if contested facts are not a major aspect of possible settlement, mediation should be tried early before the tens of thousands of dollars that discovery can entail are incurred.

6. Mediations can last an hour or go on for days. It is an exhausting and, at times, exciting process. The skill and determination needed must not be underestimated. One excellent attorney known to this author commented that the experience and professional skill needed to be an advocate in a mediation is far greater and of far greater subtlety than that required in a full scale trial.

HOW TO PREPARE:

While each case is unique, most attorneys create a mediation brief to present to the mediator and the other parties before the mediation, stating their case and often summarizing their evidence. Some mediators insist upon much larger documents and full exchange of detailed information. Most mediators wish to keep the exchange of briefs to a minimum, relying on verbal communication between the parties to achieve results.

It is vital to know the facts and to have a strategy for possible settlement offers (and responses to same) thought out ahead of time. The roles of the participants (who says what in the opening statement) and the amount of authority of the participants must be discussed. It is pointless to have a mediation in which the participant does not have realistic authority to settle. Further, if the person with authority is not to be there, that person should be ready to rely on the actual participant to fully describe the dynamics of the mediation and to take into account any new evidence, arguments, or developments deriving from the mediation

Attorneys are vital for the success of the mediation since legal advice and analysis of the legal arguments presented is critical. However, it is also necessary to make sure the attorney understands the difference between the skills needed in mediation and the skills required for an adversarial hearing. It is wise to determine if the attorney has conducted mediations previously and how they developed.

Some mediations slip into arbitrations if the parties consent. Often the mediator is liked by both sides sufficiently that they trust him or her to do the “right” thing and actually make a binding settlement for the parties. This can only be done with the parties full consent, of course, but that possibility should be considered both during and after the mediation.

GUIDANCE FOR ATTORNEYS AND PARTIES:

The article below, written by one of the most experienced mediators known to this writer, gives an excellent series of points to be considered by both the attorney and the party contemplating engaging in the mediation:

THE PERSPECTIVE OF THE MEDIATOR

This includes bullet point from mediator colleagues at the International Academy of Mediators.

• Create a “mosaic of party & attorney interests” as part of your planning for mediation.

• In selecting the mediator, be proactive. There is a dark side to ADR in which some neutrals are not completely impartial. Go with a professional and don't worry about the cost.

• Call the mediator before the hearing to discuss concerns, insights, internal difficulties and issues you feel will be impediments to settlement.

• Prepare your client(s) to interact with the mediator in a personable manner. This is not like a deposition where you suggest that your client only answer with “yes” or “no” statements.

• Anticipate a predictable start to the negotiation and plan your initial position in a place that encourages settlement and encourages a reasonable response.

• Rather than walk into the mediation with an amount you consider your “settlement authority,” create a margin of settlement value that would be acceptable.

• Have the client explain the personal side of the facts to the mediator.

• Seek out the reaction of the mediator to: a) the story of the case; b) the negotiation moves you are contemplating.

• In the event you do a joint session, consider who your real audience is and what their motivations are.

• Use the client to speak in a joint session only if the client will sell.

• Approach each dialogue in the mediation in a cooperative fashion. Remember Professor Axelrod's little motto: “Start cooperatively, retaliate if necessary, be ready to forgive, and be clear and consistent in your messages.”

• Acknowledge risk while expressing confidence. Make sure your moves are credible. Resist the temptation to do the complete opposite of what the other side's moves. You can control the negotiation agenda by showing credibility.

• Reward good moves and punish bad ones.

• Plan on dealing with deceptive moves and statements. Don't be surprised by them.

• Avoid stock phrases like: “This is a waste of time;” “I can't negotiate against myself;” “That demand is insulting;” “We're out of here unless….”

• Ask the mediator for input on negotiation moves i.e. “we're thinking of offering X dollars, what do you think?”

• Ask the mediator hypothetical questions. It is a way to gently reveal where you are at without being direct.

• Pull the mediator aside if you need help with the client or feel it would be easier to speak about a sensitive subject.

• Deal with collateral issues up front. These include: confidentiality, taxes, etc. In fact, circulate a settlement agreement or deal memo before the session.

• Avoid the “one size fits all” approach to mediation and plan on improvising when necessary. Mediations morph and you need to be flexible.

• The ultimate goal is to find out the best offer the other side is willing to make.

• Don't move the goal posts backward if the other side makes a demand in excess of their previously stated position.

• In the event you need to reevaluate the case because of authority issues, acknowledge to the mediator that you have internal problems convincing decision makers. The mediator can help come up with a game plan that steers the case in the direction of settlement.

• Make sure you communicate to the mediator what you expect of the process.

• Analyze and consider the other side's values in addition to money.

• Avoid ultimatums. Figure out a way to keep the dialogue open.

• Make sure the mediator knows if there are decision makers who are not at the table.

• Put yourself in the other side's shoes and consider how an opening statement might sound. Then craft your statement to best influence the listener.

• Never start a session without having spent at least a few minutes caucusing with the mediator and discussing the game plan for the day.

• The real mediation session begins during the litigation. Show respect for your adversary and give courtesies such as reasonable extensions on discovery. This attitude will flow into the mediation.

• Demonstrate some compassion and respect for the other side's position, even if you disagree with it completely.

• Show empathy for the mediator's task----you don't want a quitter.

CONCLUSION:

Over ninety percent of all civil cases settle before trial. The fact remains that prior to most settlements, the parties often spend tens if not hundreds of thousands of dollars in litigation costs. Such costs are often necessary as the parties vie for position and develop evidence which can determine the actual value of the case.

But there can be little doubt that once such discovery is achieved there is often cost benefit in exploring settlement and the involvement of a professional mediator can often facilitate such efforts without halting the trial preparation efforts of counsel should the settlement not be achieved.

Some parties are worried that asking for mediation may make them look weak. A famous trail attorney known to the author once commented that he never had the slightest reluctance to discuss settlement no matter how strong or weak his case was. “If my case is strong, I have nothing to fear by checking out settlement. If my case is weak, and I refuse to talk, I am simply setting myself up for failure in trial. No matter what, a party is wise to at least explore the possibility and asking for mediation does not necessarily show anything other than a desire to end the matter quickly and save the cost of litigation. All people should feel that way, whether the case is strong or weak.”

But another word of advice: Mediations fail. Do not become so fixated on the likely settlement that you fail to prepare for trial. Be open to discussion-but keep your powder dry!