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MEDIATION VERSUS
ARBITRATION: THE DIFFERENCE AND SOME TACTICAL IDEAS
INTRODUCTION:
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:
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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.
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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.
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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.
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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.
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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.
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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:
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THE PERSPECTIVE OF THE MEDIATOR |
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This
includes bullet point from mediator colleagues at the
International Academy of Mediators.
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Create a “mosaic of party & attorney interests” as part
of your planning for mediation.
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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.
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Call
the mediator before the hearing to discuss concerns,
insights, internal difficulties and issues you feel will
be impediments to settlement.
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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.
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Anticipate a predictable start to the negotiation and
plan your initial position in a place that encourages
settlement and encourages a reasonable response.
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Rather than walk into the mediation with an amount you
consider your “settlement authority,” create a margin of
settlement value that would be acceptable.
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Have
the client explain the personal side of the facts to the
mediator.
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Seek
out the reaction of the mediator to: a) the story of the
case; b) the negotiation moves you are contemplating.
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In
the event you do a joint session, consider who your real
audience is and what their motivations are.
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Use
the client to speak in a joint session only if the
client will sell.
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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.”
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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.
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Reward good moves and punish bad ones.
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Plan
on dealing with deceptive moves and statements. Don't be
surprised by them.
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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….”
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Ask
the mediator for input on negotiation moves i.e. “we're
thinking of offering X dollars, what do you think?”
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Ask
the mediator hypothetical questions. It is a way to
gently reveal where you are at without being direct.
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Pull
the mediator aside if you need help with the client or
feel it would be easier to speak about a sensitive
subject.
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Deal
with collateral issues up front. These include:
confidentiality, taxes, etc. In fact, circulate a
settlement agreement or deal memo before the session.
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Avoid the “one size fits all” approach to mediation and
plan on improvising when necessary. Mediations morph and
you need to be flexible.
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The
ultimate goal is to find out the best offer the other
side is willing to make.
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Don't move the goal posts backward if the other side
makes a demand in excess of their previously stated
position.
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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.
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Make
sure you communicate to the mediator what you expect of
the process.
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Analyze and consider the other side's values in addition
to money.
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Avoid ultimatums. Figure out a way to keep the dialogue
open.
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Make
sure the mediator knows if there are decision makers who
are not at the table.
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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.
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Never start a session without having spent at least a
few minutes caucusing with the mediator and discussing
the game plan for the day.
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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.
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Demonstrate some compassion and respect for the other
side's position, even if you disagree with it
completely.
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Show
empathy for the mediator's task----you don't want a
quitter.
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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! |
