Preparing For Pre-Litigation Mediation

The relative owns a manufacturing business embroiled in a contract dispute. One of her major suppliers began shipping marginally defective parts. Although they may fit the specifications, the final product will suffer. To complicate matters, the supplier employs the relative's nephew.

She tried negotiation, but with minimal success. She has heard of mediation, and wants to try it, as opposed to traditional lawsuit. The relative (we'll call her Sam), has an attorney. However, after talking to her attorney, she definitely believes the attorney is a good tactical litigator, but lacks when it comes to being a counselor. She can and will give you a large retainer and is known to pay all her bills promptly. You know of a mediator and he agrees to act in that capacity, should you proceed.

You set an appointment and Sam shows up on time. How are you going to advise her? From experience both as a litigator and mediator, I've found that preparation for mediation is just as important as preparation for litigation. What follows is a suggested road map for preparation. Initially, just as in a matter to be litigated, make certain there are no conflicts of interest, with the other party and the other attorney.

Then, you should carefully evaluate the potential of any statute of limitations problem. Make certain that the applicable statutes of limitations will not run while you are engaging in the dispute resolution process. Let Sam know that it may be necessary to file suit during the process and you will inform the other party you may need to do so. This establishes you are a stand-up person and prevents surprises that could compromise the resolution.

Get a handle on the amounts of monies that are in dispute. Just as in litigation, you need to initially evaluate the potential return. Determine whether there may be insurance coverage for any of the amounts. This will aid you in advising whether mediation is the only route to take, for if the amounts are small or the recovery potential is small, a large investment in a lawsuit is not worth a little recovery.

Now, you are ready to analyze whether mediation is the proper resolution arena for Sam. The reasons for choosing mediation over litigation include but are not limited to the five enumerated below. Each needs to be explored.

The client wants to keep costs down. There is no doubt that resolution by mediation costs far less than full litigation of the dispute. Formalities of litigation create the necessary (and sometimes unnecessary) use of attorney time, with attendant costs per hour. The necessity of formal procedures for proof add costs of attorneys, experts and consultants. Sam has other projects to spend her money on, such as improvement of manufacturing processes and updating administration. To not do so could put Sam at a competitive disadvantage.

The client wants to keep negotiations and resolution confidential. Sam may not want her competitors and customers to find out about her present problems while she makes all efforts to resolve them. At the end, Sam may not want her competitors to know of the resolution. And, Sam's supplier may not want others to know of the problem.

The client wants to keep a relationship with the other party. A lawsuit generally creates ill will. Sam may not want to alienate the supplier, as it may be the only source of the parts, or Sam just doesn't want to go through the upheaval that is caused by finding a new supplier. The supplier doesn't want to lose a customer for its parts and have to find new customers for its products. And don't forget about the nephew.

The client may want other than simply money recovery. Mediation allows for more creative solutions than simply money changing hands. A good mediator is trained to look for the interests behind the positions of the parties. You should do the same. Perhaps Sam's interests are only those of the above paragraph. But Sam and the supplier may have others.

Specification changes may be needed. The supplier may not be able to achieve the profits expected from Sam's contract. Simple reformation of the contract could be in order. There can be and are many possibilities. To adequately advise Sam, you'd better dig behind the position.

The client wants a prompt resolution. Sam doesn't want to go through the disruption of a protracted lawsuit. We've discussed business disruption. Sam just wants to get this resolved and get on with it.

You also need to see whether going into mediation is adverse to your client. Exploring reasons why mediation is not the proper resolution mechanism are just as important.

One party may refuse to mediate. If the supplier abjectly refuses to mediate, it's over. You may be able to mediate later, but first you'll need to file suit. In the business, this is known as the mule and the two-by-four theory. Find out if Sam's supplier has indicated a willingness to mediate.

You need to prevent immediate, serious harm. If Sam's business life is being threatened by the inability to get proper parts, at minimum a letter must go out informing the supplier of the necessity for Sam to stop paying and possibly, you may need to seek an injunction. Under these facts, neither seems likely, but it should be explored. Be careful though. Don't explore your way into Sam deciding it's an emergency.

Your client is unreasonably looking for a large recovery of money. Sam doesn't appear to believe she has the mega-bonus number in the lottery. She is looking to resolve a nasty situation. But, surprising as it may seem, litigants often believe a dispute is their ticket (first class) to a retirement in Bali. If Sam is greedy, she should be told that the ONLY way she can get a large sum of money is from a runaway jury. Highly unlikely.

Your client believes she has an absolute, indefensible dead bang winner. Although I've personally been involved in such a mediation, it is difficult to persuade one party of its untenable position. Even if the other party has no defense, that party still will have to put one up. And, a defaulting party is not usually an easy one to collect a judgment from. But, if you are certain of COMPLETE success, the extra cost of mediation is not a good idea.

You need to set a legal or factual precedent. There may be a question of law involved that needs to be resolved, as it may come up often in your client's business activities. Once that issue is resolved, legal aspects of any future, like disagreement are blunted. Also, if your client has many present and potential disputes of one certain factual nature, success at trial makes the rest easier to resolve. Sam's facts don't indicate this.

This completes the initial analysis and you are ready to proceed to preparation for the actual mediation.

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