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Preparation: The Key To Mediation Success
Most mediation advocates in commercial disputes understand that the process offers an opportunity for clients to save time and money, preserve relationships, and achieve creative or business-driven solutions not available in either litigation or arbitration. The flexible mediation process permits the parties to go well beyond the litigation positions, and delve into the underlying interests and needs of the participants.
Unfortunately, some mediation advocates, who would spend many hours preparing for a single deposition, spend insufficient time preparing for mediation. Perhaps it is a lack of familiarity with the process or the feeling that there is little likelihood of success.
For some, there is a sense that because mediation is not binding, there is no downside. Of course, there is a downside to lax preparation: It is an enormous loss of an opportunity for outcomes that can enhance the client’s business objectives.
This article offers a list of key issues and concerns to address, in advance of mediation, in order to enhance the likelihood of successful outcomes.
- Exercise Due Diligence in Selecting the Mediator.
Critical to the success of a mediation isthe employment of a highly skilled and experiencedmediator. Especially in a substantial controversy,a mediation advocate should engage indue diligence to assess the skill, experience, andstyle of a particular mediator candidate.
In addition to collecting the kind of data available on the Internet, a mediation advocate should speak with other persons who have employed a potential mediator.
It also is entirely appropriate to call a neutral to discuss his or her mediation style and approach. This conversation can include issues such as preparation, written submissions, use of joint versus caucus sessions, use of evaluative techniques and ways in which a mediator would approach an apparent impasse.
- Identify and Involve Client Representatives.
It is crucial to encourage the participation of a decision maker with full authority to make resolution decisions, even if this person does not have personal knowledge of the underlying facts at issue.
Including the decision maker enables the client to monitor and shape the impact that any outcome may have on the client’s business goals and objectives. Mediation advocates often assemble a presentation team that includes party representatives, but limits the representatives’ participation. If a party representative is articulate and persuasive, his or her statement directly to the other side can be far more powerful than any summation or advocacy statement by counsel.
In some instances, the client's interests are best served by having the mediation advocate and client representative divide their presentation. Whatever the arrangement, it is important to decide in advance who will speak in a joint session and what subjects each presenter will address.
- Determine Whether Information Exchanges Are Necessary.
Gaps in informationpresent one of the principal reasons that disputesfail to settle in mediation.
Especially in disputes’ early stages, it isimportant that parties understand the essentialbasis of claims and defenses including, inparticular, the basis of alleged damages. It isdifficult for parties to change their assessmentsand settlement decisions on a real-time basiswhen this important information is conveyedfor the first time in mediation.
Accordingly, a mediation advocate should use the neutral to promote an efficient exchange of such information. Any such request, however, should not be an excuse that substitutes for real discovery. All that is necessary is sufficient information to make an informed settlement decision.
- Prepare Arguments Supporting Legal Positions and Settlement Positions.
A mediationadvocate should develop an overall theme andprepare arguments supporting the merits ofclaims or defenses with the same dedication aswhen preparing for trial.
In addition, the advocate should also develop reasons why the other side should be wiling to move to a “reasonable” settlement proposal. Here, the advocate's goal is to persuade the other side to consider his or her client's proposal. Counsel should recognize and be prepared to advance reasons why the other side's interests are being served by a specific settlement proposal.
- Prepare a Confidential Written Statement to the Mediator in Advance of the Mediation Session.
Regardless of whether the mediatorasks for a confidential submission, a mediationadvocate can obtain a significant advantage bysubmitting, in an informal letter, a confidentialwritten statement summarizing the client'svarious litigation positions, including its rebuttalpositions.
Pleadings and other litigation documents usually do not provide the summary of the critical arguments and counter-arguments a mediator needs to understand in order to help the parties reach a resolution.
More important, a confidential submission also offers an opportunity to address the underlying issues, concerns and questions that often drive settlement decisions as much or even more than the litigation-risk analysis. Counsel should consider addressing issues such as timing; linkage to an unrelated issue or dispute; strategic issues; personal relationship issues; need for privacy; internal company issues and any impact upon the client's future; history of any negotiations that have taken place; suggestions concerning process; suggestions concerning substantive resolution; and any other factors which may favor or present a barrier to resolution.
A well-written submission, provided in a timely fashion, will enable the mediator to determine which paths are most likely to result in resolution.
- Prepare a Concise “Opening Statement” for the Joint Session.
Mediation advocates often say that there is no need for a joint session as the parties already understand each other's positions, or that excessive advocacy in a joint session will set the parties even further apart.
While there are some instances that call for dispensing with a joint session, joint sessions usually have a number of advantages. For the mediator, a joint session offers an opportunity to go over the ground rules, and to obtain from each party a commitment to listen respectfully and to engage in good-faith negotiations.
For the mediation advocate, a joint session offers an opportunity to have the other side’s decision maker hear the client's arguments, often for the first time, in a manner unfiltered by the other side's own counsel.
Once in caucus sessions, the mediator can then develop the issues by reacting to what he or she heard in the joint session without risking the loss of trust that might arise if the mediator developed the issues for the first time in caucus sessions.
- Make an Objective Litigation-Risk Assessment.
Mediation advocates usually advance arguments based upon what the client needs or wants, what is fair, what is right and what is true.
While all of these issues are appropriate for discussion, a good mediation advocate owes a duty to his or her client to make a realistic assessment and a responsible decision. In advance of the mediation, an advocate will serve the best interests of the client by discussing the only responsible benchmark for settlement decisions—comparing what might be achieved in settlement with the legal and business consequences of the litigation or arbitration alternative.
Meeting this counseling responsibility is not always an easy task for a mediation advocate, because most parties view their facts with a degree of selective perception and most advocates cannot avoid a certain amount of advocacy bias.
Recent studies at the Harvard University Program on Negotiation and elsewhere establish that it is almost impossible for a party with an interest in the outcome, or its advocate, to make a completely objective assessment of their own case.
Mediation advocates, therefore, should make every effort to recognize and discard their advocacy bias when meeting their counseling responsibilities. Moreover, in disputes involving substantial dollars or strategic business interests, mediation advocates should consider retaining an objective third-party to assist in making a litigation-risk assessment well in advance of mediation.
- Explore Potential for Creative Solutions.
Many mediation advocates bring their litigation perspectives to mediation and focus almost entirely upon issues of fact and law. Many also engage solely in “distributive bargaining” where they exchange offers and demands in an effort to “divide the pie.” As a consequence, these mediation advocates and their clients fail to capture an opportunity
to create value.
In contrast, an advocate should encourage his or her client to engage in “integrative bargaining” and take a more collaborative approach to mediation in an effort to create value in the negotiations. Advocates should encourage their clients to focus upon the client’s underlying interests as well as their rights and to look for business-driven solutions, such as agreement restructuring, or the creation of new agreements. Even in pure monetary disputes, mediation advocates should explore the potential for creative means of monetary exchange such as, for example, a deferred payment obligation.
The search for creative solutions must begin well in advance of the mediation in order for the client representatives to have the time necessary to explore all of the possible business opportunities that may be available.
- Develop a Negotiating Plan.
Whether parties are engaged in a “pure dollars” dispute or a more layered, complex controversy, counsel and the client should prepare a negotiating plan in advance of the mediation. All too often, parties lose a significant advantage in mediation as the result of having thought about only their end goals.
Many mediations begin with the parties taking extreme positions, and expressing an unwillingness to bid against themselves. In these circumstances, counsel should consider the advantages of making the first credible move. Even a small move, if credible, may enable the mediator to meet with the other side and gain significant concessions.
Negotiation studies establish that the party making the first credible move can gain an advantage, referred to as “anchoring and adjustment,” by setting a recognizable benchmark from which settlement options are developed.
In recognition of the fact that counsel and the client will be engaged in a “negotiation” with the mediator as well as adverse parties, counsel should plan the extent of voluntary candor with the mediator. The degree of voluntary candor may depend on a number of factors, including whether the mediator is more facilitative or evaluative; whether the communication involves legal arguments, underlying interests or settlement positions; and whether the mediation is in its early or late stages.
In the final analysis, this judgment call is likely to depend on the level of comfort with the mediator and may evolve in the fluid environment of the mediation sessions. While a specific negotiating plan is essential, counsel should recognize the need for flexibility in the mediation sessions and should be prepared to reevaluate in light of new information received and the mediator’s suggestions.
- Prepare a Draft Settlement Agreement.
Mediators will insist, at the very least, that upon reaching a mutually acceptable resolution, the parties enter into a binding term sheet on all key issues.
This document is essential for avoiding a subsequent disagreement about the settlement terms, and to avoid the possibility of later remorse. Most neutrals ask mediation advocates to bring a settlement agreement draft covering the key economic and non-economic issues that need to be addressed in the event the dispute is settled in mediation.
Perhaps motivated by a feeling that the dispute is not likely to settle in a mediation session, many advocates don’t follow this instruction. As a consequence, at considerable expense, advocates often spend hours drafting a term sheet after achieving an agreement in principle at the end of the day.
At this point, advocates and their clients often find themselves tired and unprepared, find that they are without important information or key documents, and overlook key noneconomic issues. Drafting an agreement at the outset is valuable for preparing the final term sheet. It also is another vehicle through which client and counsel can articulate and review the client's direct and collateral goals and interests before entering the mediation.
Preparing for mediation requires an approach vastly different from the path an advocate takes when preparing for a deposition or trial. At the same time, mediation advocates can maximize the potential for successful outcomes by employing the same level of dedication and professionalism as when preparing for trial.
Ben Picker has an active ADR practice, serving both as a mediator and arbitrator in business disputes and as a trainer in mediation and negotiations. For the past 10 years, he chaired the firm's 13-lawyer ADR Practice Group.
As a mediator and arbitrator, Mr. Picker has successfully resolved several hundred domestic and international disputes with a cumulative value of more than two billion dollars. He has served as a mediator in complex business disputes in the following areas: corporate and commercial transactions, asset/stock purchase agreements, securities, employment, environmental, ERISA, intellectual property, health care, real estate, products liability, bankruptcy, construction, class actions, professional liability, and shareholder and partnership disputes.
Mr. Picker is a member of the Panel of Distinguished Neutrals and the Employment Panel of the CPR International Institute for Conflict Prevention & Resolution; a member of the Commercial Mediation, Arbitration and National Class Action Panels of the American Arbitration Association; and a fellow of both the American College of Civil Trial Mediators and the International Academy of Mediators. He is the author of Mediation Practice Guide - A Handbook for Resolving Business Disputes (Second Edition) published in 2003 by the American Bar Association Section on Dispute Resolution, and has written numerous book chapters and articles on mediation and arbitration.
Additional articles by Bennett G. Picker