Introduction:
Litigation is costly, and the longer it goes on, the more expensive it is. This simple truism often compels clients to suggest methods to cut it short, and a favorite is formal mediation. As discussed in other articles on this website, mediation is a process whereby an agreed-upon third-party neutral seeks to have the parties voluntarily settle their dispute. The mediator, unlike an arbitrator, cannot force a decision, only persuade. In the last decades, this method has become widespread with numerous entities, such as JAMS and the American Arbitration Association, offering specially trained mediators to perform this function. JAMS mediators are often retired judges.
Mediation is a formal process, and in most cases, the mediator, after meeting all the parties and their counsel, has the parties sit in separate rooms and goes between rooms seeking to find common ground. It can take hours; it can take days; we have had some take over a week. Usually, a good mediator will let the parties state their positions and, especially if a judge, will advance their own views to try to make the parties soften their stand.
It is expensive to mediate. JAMS mediations can cost tens of thousands of dollars for the mediator, and most mediators want the parties to submit briefs and evidence ahead of the mediation, so the mediator is fully familiar with the issues. Those briefs can be truly substantial in complex cases, and the attorneys charge for their time both in the mediation and in the preparation of briefs. Quite often, the cost of preparing a mediation well can almost equal the cost of preparing for an arbitration or summary judgment motion.
Most cases settle before trial, whether or not mediation is used. At least ninety percent of cases do not go to trial. Since that is the norm, the question arises as to when to engage in substantive settlement discussions or perhaps to have mediation at the beginning rather than towards the end of a case.
But to the surprise of many parties, early mediation is often a costly mistake. Parties end up spending twenty or thirty thousand dollars to find themselves still immersed in the litigation without any progress towards settlement. Why this often happens and how to gauge when to mediate is the subject of this article.
The Basic Issue:
Parties go to court because they cannot agree. Simple as that. If they had been able to agree on a solution, they would not have elected to utilize a court of law or arbitration to force a result one side wanted. The very act of filing suit is an aggressive and expensive exercise that normally further hardens the sides against each other. As one elderly attorney told the writer, “They don’t come to us to use sweet reason to resolve the case. They already tried that. They didn’t need us to try that. They come to us to fight. Once we fight long enough, sweet reason may return, or the judge will impose a decision.”
And the dispute is usually over a significant matter, and the parties believe strongly in the rightness of their position; it is too expensive to file suit not to be committed to thinking you will win. After the filing of suit, when each party has spent tens of thousands to hire counsel and commence legal proceedings, those feelings have not softened.
Further, neither side has engaged in the type of formal discovery that may allow investigation of what happened or gain access to key documents that may support or undermine their case. Discovery, which consists of demands for production of documents or access to locales, interrogatories that are answered under oath, and depositions which allow the parties to cross-examine witnesses, including opposing parties, under oath, normally begins months after filing suit and can last a year or more. Such discovery, of course, is one of the greatest expenses of litigation. It is also the tool that allows the parties to better understand the relative strengths and weaknesses of the case.
Such discovery is the most powerful tool to have a party rethink their position. Finding documents that do not support one's argument, hearing witnesses testify against you in deposition, and being forced to answer questions while under oath that are hurtful to your case; all these are educational events that can compel a more reasonable approach to settlement. As one party commented after a harrowing day in deposition, “I don’t want to go through that again in trial.”
So, until discovery is completed, there is little that has occurred to compel a party to rethink their position: they simply have not had access to the evidence. Voluntarily exchanging evidence could perhaps accomplish the same thing, but there is always the suspicion, often justified, that the other side is holding back evidence or not being truthful since they are not under oath.
Nor can a mediator have much to work with so early in the case. While each side will provide a brief and documents to the mediator, they are not being produced under penalty of perjury; some documents may not be delivered, and without the tools of discovery forcing disclosure, such briefs are not particularly powerful. Neither side, nor the mediator, is likely to consider the informal discovery that revealing.
When faced with the oncoming cost of discovery, often in the many tens of thousands, clients sometimes hope for the best. Convinced of the rightness of their case and feeling that it is "obvious" that they will win, they are anxious to put the matter before the mediator who will “convince the other side.”
That seldom works. The mediator can only persuade and must maintain an aura of impartiality. Most never "take sides." They will explain the evidence you have presented, but since no formal discovery, it will have little impact. The key is that the other side is equally convinced that they will win, and the mediator, without the tools of oath-based discovery, will have little to work with.
And with the mediator often costing five thousand dollars or more a day, sometimes much more, it is an expensive process to try. All too often, the parties hear the mediator, after a day of attempts, tell them to come back when discovery has developed the evidence.
Solutions:
Have realistic expectations of mediation: One judge put it well during a mediation: Only when both parties want to settle, regardless of motivation, can mediation have a chance of working. An old axiom among lawyers is that it takes all parties to settle a matter and only one party to veto a settlement. That desire to settle often comes from going through discovery or being presented with powerful proof, and that success in the case is doubtful. Both are seldom available before discovery has occurred.
Be ready to compromise. If you intend to settle for nothing less than victory, there is no incentive for the other side to settle. Before engaging in expensive mediation, examine your cost-benefit and what you are willing to compromise on. If you are convinced you must have everything, it is too early to engage in mediation. If you are willing to budge, then your next step is to determine what the other side is thinking at this stage of the litigation. Is there anything you can say or show that they will believe that will lead to a settlement? If not, you need discovery to develop that evidence.
Consider a mediation midway through discovery. This will save some money, and if you have developed sufficient evidence, it may be worthwhile stopping discovery long enough for a mediation. Assuming more discovery is needed, you can always ask the mediator for a second session some months down the road.
Do a "quick and dirty' mediation. Tell your counsel to negotiate a fast and cheap mediation, with very little briefing and a session to last no longer than half a day. This will allow you to see if there is any chance of success this early in the case.
Sit down with counsel and discuss the discovery plan so that there is a greater chance of developing the type of evidence that may convince the other side, as well as the mediator, that your case is strong. Here, you may encounter resistance from your own attorney. Many attorneys, including most large firm attorneys, have a set plan of discovery that usually requires large sets of interrogatories, then a large production of documents demand, and numerous depositions. By asking your attorney to skip to only those parts of discovery that may lead to powerful evidence, your attorney may object that such slapdash discovery will miss critical evidence. They may argue that they will only get one chance at a particular deposition and do not wish to waste it. You will have to decide if the chance of a relatively quick mediation is worth the risk: cost-benefit is the name of the game. How much of the otherwise possible discovery is critical to your case is the vital question.
Consider a mediation that can become an arbitration. An arbitrator is a private judge. This office has agreed with opposing counsel in the past that if the mediation does not result in a settlement the first day, then the mediator becomes an arbitrator, can have the parties present evidence as in an arbitration, and make a decision. The value of this method is that both parties are further incentivized to have the mediation work. They have more control over the outcome. The disadvantage is that you may have said things to the mediator that you would never say to the arbitrator.
Instead of a professional mediator, see if both sides have a trusted advisor who would be willing to act as a mediator early in the dispute. His or her recommendation is likely to be taken more seriously than an unknown mediator; he or she will know the sides well and know what will convince them, and the cost is likely to be much less.
Conclusion:
Mediation is a useful tool and is often recommended by our firm. But, as with so much in litigation, it is an expensive tool, and the timing of its use is an important step and requires cost-benefit analysis. To engage in mediation before that analysis and before discovery is largely completed can be an expensive mistake. It is vital to understand what it can and cannot accomplish and to consider how your opponents will react to an early request for mediation.