I want to start by readily acknowledging that some disputes simply cannot be resolved without litigation and/or arbitration and appeals. There are various reasons for the inability to resolve disputes by agreement, including the unreasonable intransigence of one or both parties often fueled by emotions rather than purely business concerns. These disputes can be resolved only by expensive and time-consuming litigation. The lawyers at Ichter Thomas are trial lawyers and love this kind of dispute, because what a true trial lawyer loves to do is try cases. A lawyer, however, cannot put his or her own interests ahead of the interests of the client, and in many instances, it is in the client’s interest, and it is therefore the lawyer’s duty, to attempt to resolve disputes without litigation or by softening up the other side with some preliminary litigation (a/k/a “a punch in the mouth”) to get the other side’s attention.
Most lawyers and clients explore settlement through direct negotiations as a matter of course, and when that fails, they conclude they have no choice but to litigate to the bitter end. For some reason, however, many disputes that the parties have tried but failed to resolve by direct negotiations can be resolved through mediation. How and why is that possible? In one instance the parties are negotiating directly with each other, and in the other (mediation), the parties are negotiating through a neutral party. Why would that make any difference? I am not sure I know all the answers to that question, but my experience tells me it does make a significant difference, even if that is not entirely logical and certainly not obvious.
After more than 37 years of handling disputes of every type for many different clients (individuals, small businesses, major corporations, and governmental entities), I have seen many instances in which one or both of the parties has or have decided that a negotiated settlement is simply not possible. One of the circumstances in which this happens is when at least one of the parties declares: “I have made my best offer, and I would rather lose than budge one inch. If I agree to mediate it will send a signal of weakness.” In these circumstances, when I have been able to convince my client to invest the time and money into one day of mediation to be absolutely sure there is no way to avoid the hundreds of thousands of dollars and enormous cost in diversion from attention to business and that the client has the absolute right to walk out of mediation at any time, a very surprising number of disputes have been resolved through the mediation process.
To try to determine how this happens, it is helpful to review what happens in a typical mediation process. Nearly all of the mediations in which I have represented clients have developed as follows:
- The mediator asks for pre-mediation statements of the case from both sides, usually with a fairly meager page limit (e.g. 5 pages) to give the mediator at least some idea of what the dispute is about.
- The mediation begins by the mediator bringing both parties and their lawyers together in one conference room, introduces himself or herself, and explains the process. The mediator will explain that he or she has no interest in how or on what terms the dispute is resolved; his or her only goal is to try to help the parties find a resolution they can both live with. Sometimes, the mediator will ask the opposing attorneys to make an opening statement, but sometimes the mediator will make the judgment that opening statements will merely increase the enmity between the parties.
- The mediator then separates the parties into two different rooms and begins a process of “shuttle diplomacy” holding “caucuses” with one party and then the other.
- In my experience, most of the time, one or both parties decides the whole process always was and now is confirmed to be a total waste of time and money and that he or she is leaving. Good, experienced mediators who are able to generate trust and credibility will ask the party ready to give up to “hang in here” a little longer. Often this plea is accompanied by a reminder that “you have already bought a day of my time, and you have blocked off the day for your business tasks and can keep in touch with your office while I am caucusing with the other side, so why not stay and play this out? If you think this is painful, wait until you have paid for and spent time in months or years of litigation.” Sometimes one of the parties gives up and walks out, but most of the time the parties give in to the mediator’s plea for patience.
- Lunch time comes, and the parties get to take a break and relax for 20 or 30 minutes, and the caucuses resume, and again by mid afternoon, at least one party declares that he or she has had it and is leaving, and sometimes that actually happens. The mediator will make another plea to stay a bit longer this time adding: “you have invested x hours already, why not play this out, because I still think there is hope.”
- In somewhere around 90 percent of the dozens of cases I have mediated, sometime between 5:00 and 6:00 “magic” happens, and the parties are signing a deal points memorandum memorializing their settlement.
Now that I have described what has happened in the vast majority of the mediations I have been in, let me address the harder question of why mediation works when direct negotiations do not. I do not purport to know the answer or answers, but I can speculate on factors that make mediation different from direct negotiations.
- A lawyer who points out the weaknesses of his or her client’s case, and there are weaknesses in every case, often appears unconfident and negative and to not “believe in” the client’s case. The mediator is not trying to keep his client happy, because the mediator has no client.
- Sometimes the lawyer for one or both of the parties is overconfident and is overstating the strength of his or her client’s case. The mediator will poke holes in the unwarranted bubbles of optimism right before the client’s eyes.
- The mediator, being neutral, can give the client an unbiased assessment of various positions being taken. The mediator can say, for example: “I realize you contend ______, and let’s assume that is absolutely true, but, even if your lawyer does a masterful job, your contention is so improbable that I seriously doubt that any judge or jury is ever going to believe that.” If the client’s lawyer were to have said that, the client’s answer would be: “It is your job to convince the judge or jury of what the truth is; if you can’t do that, I’ll find someone who can.
- The mediator can ask questions such as: “What do you estimate the cost to be of losing ___ man hours from your top executives in depositions, answering interrogatories, and supervising document productions?”
- A good mediator, who is also a very good lawyer, may raise problems or weaknesses in the client’s case that the client’s lawyer has not even thought of. When the client protests that “all you are doing is finding fault with my case, why are you for the other side,” the mediator will assure the client that the mediator is doing exactly the same thing to the other side.
- Sometimes the mediator can find one or more things that are valuable to one side but do not have much cost to the other side, setting up a basis for movement that does not require a sense of surrender.
- The very process, itself, is a grind. Both parties can imagine intellectually what it would be like to litigate for the next two years, but when they get an actual taste of it, the thought of doing so becomes extremely unattractive.
- Due to the process, most clients come to the realization that the degree of certainty of prevailing through litigation is not as high as he or she had thought prior to the mediation.
- Psychologically, by the end of the day, the client usually thinks two things: (1) I have spent the whole day here, if we don’t reach a compromise, I will have wasted all of that time and money; and (2) I just want this whole thing to be over so I can go back to making money by running my business.
- In a recent mediation, after spending most of the day with the parties much, much further apart on settlement, the mediator asked for a meeting with the lawyers for both sides without their clients. The mediator said: “Level with me. Where are your deal breaking points?” I said my client has instructed me to inform you and the other side that she will never agree to pay more than $200,000.” Opposing counsel said: “Then we are never going to be able to settle, because my client has instructed me to inform everyone that he will never accept less than $400,000. The mediator said: Jim, if with my help, the other side can get their client down to $300,000, would you be willing to recommend a settlement at that amount.” I agreed that I would. An hour later, the case settled at $300,000. Nobody was particularly happy about the amount of the settlement, but everybody was very happy about the war being over.
Again, I don’t know how or why mediation works when direct negotiations have failed; I can only speculate as I have above. I just know that sometimes “magic” happens in mediation and cases that have no possible chance of ever settling get settled.
If you have any questions or comments about this or any other legal issue don’t hesitate to contact me at any time. I would be happy to talk with you.