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From the Disputing Blog of Karl Bayer, Victoria VanBuren, and Holly Hayes.
Every mediation is unique. The mediator will work with the parties and counsel to devise the appropriate format for the mediation. In general, however, mediation has four stages:
Opening joint session
The mediation usually begins with a joint session. At this session, the parties will be seated and the mediator will introduce everyone to each other. The mediator will also set out some rules of appropriate conduct. Next, the mediator will explain the mediation process and its goals. This discussion will be general in nature. The mediator will also explain the mediator’s role. After this, the parties usually make their opening statements. Opening statements generally explain what the dispute is about, its affect on the party and the party’s desired outcome. The opening statement should be directed to the decision maker for the other side, not to the mediator. In most cases, the attorneys make these presentations. Clients can participate in the opening statement, but should they? The answer is usually “no” and “never” when the parties are very hostile to each other. But if personal hostility is not a problem, a very articulate, sophisticated client could make an effective opening statement.
Private sessions with each party make up the guts of every mediation. This is where each party can feel safe in talking about the dispute. The mediator may caucus with each party several times, if needed. These sessions have three functions: information gathering, negotiation and consensus building.
It is important to the success of mediation that the mediator discuss with each party the strengths and weaknesses of its case, its interests and needs, and its desired outcome. The mediator will engage in some reality testing causing the parties to reevaluate their positions on certain issues. The mediator will also focus them on possible ideas for settlement. When this information gathering is completed, the mediator shifts the focus to opening negotiations and the exchange of offers and counter-offers.
A question that every client wants to know is this: Who makes the first move in mediation? Some parties feel that making the first move signals weakness. But this perception has no foundation. Someone has to make the first move and the mediator, an expert facilitator who knows the strengths and weaknesses of each side’s case, will know what each side must do to move toward a mediated resolution. Usually, the mediator will first seek a consensus on the easy issues and then work toward an agreement on more difficult matters. Negotiations cannot be rushed. Once there is some movement, the mediator will try to keep productive discussions going. As the only person who has been in both caucus rooms, the mediator is the only person who knows how much flexibility each side has to negotiate and what it will take to achieve closure. The mediator may ask the parties to consider making a concession that is important to the other party but has limited value to them. The mediator will also recognize when it is necessary to “sweeten the pot” to complete the deal. Some deal sweeteners include offering to pay for settlement document preparation, writing a letter of apology, agreeing to continue to do business with the adversary, having one side or the other pay for the total amount of the mediator’s fee, or trading something of value.
When impasse happens
In many mediations the parties reach an impasse in negotiations. Sometimes this occurs because a party is frustrated and decides it does not wish to settle. Trying to overcome impasse is a challenge for everyone involved in mediation. The mediator might decide to bring the parties together in a joint session to explore means and methods for overcoming impasse or, if experts are involved, to have the experts go over the issues point-by-point to determine where they agree, where they disagree, and the basis for these opinions. This can help narrow the issues. The mediator also might ask counsel for permission to speak privately with the parties, singly or together, out of counsels’ presence, in order to develop new ideas or even add a new twist to old information that would assist in eliminating the impasse.
Invariably, the mediator will remind the parties what is likely to happen if a settlement is not achieved—developing a litigation budget and calculating the resources that will be needed for a long, drawn out, costly trial. If the client is a public corporation it also means carrying this as a potential liability on its books.
Settlement, recess or termination of mediation
If the parties reach a settlement, the mediator may orally summarize the main terms. The attorneys for the parties will prepare a draft summary of the settlement terms, which the parties and attorneys must sign. No one should be allowed to leave the mediation until this is accomplished. Later, one of the attorneys usually prepares a more detailed settlement agreement. This agreement is likely to state who pays the mediator’s and attorneys’ fees, and the interest rate that will apply on unpaid sums. Because disputes could later arise as to what the settlement terms were or what they mean, settlement agreements often contain a dispute resolution clause providing first for mediation and then arbitration. The parties may want to consider appointing the same mediator to handle the mediation if a dispute arises out of the settlement agreement.
When a settlement is reached during mediation, counsel and client should discuss the client’s reactions the next day. Some parties experience what is known as “buyer’s remorse.” When this happens, counsel should remind the client of the many reasons for mediating in the first place, including the ability to get back to business and move forward with life.
If the parties do not agree to a settlement, the mediator will review the progress the parties made during mediation and advise them of their options. One option is for the parties to gather and exchange additional information, and meet again later for further mediation or negotiations.
We have seen several cases settle in a second mediation after a recess. In a recent mediation, the sole owner of a successful business died unexpectedly. The business needed to be sold to support his ailing widow. The widow and her four daughters agreed that the eldest daughter would purchase the business, since she had been active in running the business. But the price and payment terms needed to be resolved. On the one hand there was the widow to provide for, since her children wanted her needs to be met for the rest of her life. On the other hand, the oldest daughter was concerned about how much the business could afford to pay. The mediation was recessed, and a second mediation was scheduled with the mediator and a financial planner who helped establish a financial plan and budget for the widow to the satisfaction of her children and a business plan for the purchasing daughter. The interests of each participant was addressed using objective criteria furnished by the planner. The fears of each family member was addressed and overcome by the mediator.
Another mediation involved the owner of a steel mill, its financially impaired contractor, and the surety that issued the performance bond. The owner claimed that the contractor failed to provide an adequate waste disposal plan. The contractor disputed this, contending that if formulated an adequate plan that met the owner’s needs. At the mediation, the contractor’s project manager took a hard line, disavowing any liability to the owner. The surety was in a difficult position because it had not seen the plan and could not realistically assess its exposure to liability. The mediator wisely recessed the mediation. The surety hired a consultant to review the contractor’s waste disposal plan. The consultant identified some deficiencies. When the mediation resumed, the mediator recommended that the project manager not attend. The dispute was settled with with a payment by the surety to the owner.
Part X will conclude this series by discussing the secret for a successful mediation. Stay tuned.
[Ed. note: the contents of this post were first published on a different form in the May/July 2008 Edition of the AAA Dispute Resolution Journal.]
Kent B. Scott is a shareholder in the law firm of Babcock Scott & Babcock in Salt Lake City whose practice focuses on the prevention and resolution of construction disputes. As a mediator and arbitrator, Mr. Scott currently serves on the AAA’s panel of mediators and the AAA’s Large Complex Construction Case Panel. He also serves on the arbitration and mediation panels for the U.S. District Courts (District of Utah), State District Court (Utah) and Utah Dispute Resolution. Mr. Scott is a founding member of the Dispute Resolution Section of the Utah Bar and a Trustee for the Utah Council on Conflict Resolution.
Cody W. Wilson is an associate in the law firm of Babcock Scott & Babcock, concentrating his practice in the area of construction law, is licensed in all courts in the State of Utah, the U.S. District Court of Utah, the 10th Circuit Court of Appeals, the U.S. Court of Federal Claims and is a member of the ABA Forum on the Construction Industry. They can be reached at email@example.com and firstname.lastname@example.org.
While in law school, Victoria was a Graduate Research Assistant for Professor John S. Dzienkowski, from The University of Texas at Austin. She was responsible for selecting cases for inclusion in the textbook International Petroleum Transactions. Victoria was particularly involved in researching the areas of international business litigation and arbitration. She also performed extensive research on political and economic risks within the context of international licensing agreements.
Having lived and studied in Mexico, Canada, and the U.S., Victoria brings a unique perspective to Karl Bayer. Right after high school, Victoria moved to Canada to study English and French. Born and raised in Mexico, she is a native Spanish speaker and a graduate of the Monterrey Institute of Technology (Instituto Tecnologico y the Estudios Superiores de Monterrey), where she concentrated in Physics and Mathematics.
- American Bar Association, Young Lawyers
- American Intellectual Property Law Association (AIPLA)
- Association of International Petroleum Negotiators (AIPN)
- National Hispanic Bar Association (NHBA)
- State Bar of Texas, Intellectual Property
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