If you have a case that seems intractable, but should and could be resolved outside of the courtroom for any number of reasons, what are your options? Mediation can be an effective way to resolve complex and sensitive commercial disputes. However, because relying on a neutral third-party to help reach a resolution is very different from litigating in the courtroom, it is important to understand how it works.
How Mediation Works
Mediation is one of several types of(ADR), which can serve as an alternative to traditional litigation. In mediation, a neutral third-party is called on to help negotiate the differences in the parties’ positions in order to lead to settlement of all or some of the issues in dispute. Unlike a judge or jury, the role of the mediator is to help the parties find common ground rather than make any binding decision regarding the dispute. Therefore, it’s important to choose a mediator with the skills, experience, and temperament who will not only understand the legal issues involved but also work with the parties and counsel to break through the stalemates that are likely to exist.
Mediation differs from arbitration. While arbitration also involves a neutral third-party appointed to resolve the business dispute, the arbitrator’s decision is generally final. The arbitration process is much more formal than mediation, but still offers many potential advantages over litigation, including a faster and less-costly resolution.
Mediation is generally voluntary, meaning that the parties are not required to participate. Nonetheless, in complex commercial cases, judges will often urge the parties to first attempt to settle the case via mediation. Even when mediation is court-ordered, the parties typically still select the mediator and the format, determine the issues to be mediated and decide how much time to devote to mediation.
Mediation also differs dramatically from litigation in that it is conducted in a private forum. While court documents and courtroom proceedings are almost always public, the mediation process is confidential. In fact, it is considered communication in the course of settlement negotiation under Rule 408 of the Federal Rules of Evidence.
Advantages of Mediating Complex Commercial Disputes
Mediation offers several potential advantages over litigation. Below are some to consider:
- Less Time and Money: Like other alternative dispute mechanisms, mediation is almost always less costly and time-consuming than going to trial. This is particularly true for complex cases involving complicated issues and/or multiple parties.
- Confidentiality: No one wants their company’s “dirty laundry” to be aired out in a public courtroom or for something they say to come back to haunt them. Mediation allows the parties to maintain the confidentiality of the proceedings and encourages the parties to be candid with both the mediator and each other.
- Reduced Risk: Putting your fate in the hands of a judge or jury is always a gamble. In complex commercial cases, the parties run the risk that the decision-maker will not fully grasp the claims/defenses they have raised and award a much higher verdict than is warranted. Mediation allows the parties to have greater control over the outcome because the chosen mediator will presumably be able to quickly grasp the legal and factual issues involved.
- Informality: Compared to the courtroom, mediation is fairly informal. During mediation, the parties and their counsel typically have the opportunity to meet privately with the mediator. During these sessions, you can clarify issues and answer questions that the mediator may have about your positions. In addition, you can often get a good sense of which arguments the mediator is having difficulty accepting and which he or she feels are persuasive.
- Preservation of Business Relationships: Litigation is usually contentious and often destroys meaningful and profitable business relationships. Mediation can preserve those relationships by encouraging the parties to work together to find a mutually-beneficial resolution. Additionally, a skilled mediator can act as a filter and sounding board, hearing out all of the parties’ arguments, but taking emotion out of the negotiation process by focusing the parties on the matter of substantive importance.
- Flexibility: Unlike turning a case over to a jury, mediation also allows the parties to maintain control over the ultimate resolution. Unlike a judge who is bound by statute and case law, a mediator is empowered to propose creative solutions that are tailored to the unique facts of the case.
- High-Rate of Success: While mediation is not binding upon the parties, statistics show that about 80 percent of claims mediated in the federal courts ultimately settle. Even when mediation is not successful at fully resolving the case, it can often narrow the issues that remain in dispute and require court resolution.
Mediation isn’t the best fit for resolving every complex commercial matter. It is important for clients and their counsel to carefully evaluate the strengths and weaknesses of the case, as well as weigh the risks and benefits of each course of action.
Once you decide to go down the path of mediation, selecting a mediator is one of the most important steps in the process. It is important to conduct due diligence, as a poor mediator can sometimes do more harm than good.
When considering mediators, issues to consider include the mediator’s demeanor, training, experience, and success rate. An effective mediator will have a reputation for intelligence, patience, and fairness, while also being forceful enough to keep the process moving forward. If the case involves highly-specialized subject matter, it is also important to verify that the mediator has the requisite expertise.
Finally, in order for mediation to be effective, the parties must also be committed to the process. Simply “going through the motions” will generally not yield a successful resolution. However, if the parties are engaged in the process, mediation is likely to be a worthwhile endeavor.
If you have any questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Raymond M. Brown, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.