17
Mediation, Arbitration, and Collaborative Dispute Resolution

Because the difference between justice and being right is called “legal fees”

“How much are we talking about?” The answer is always the same: It’s your adversary who largely determines the cost of litigation. Litigation is about spending your time, money, and energy defending and countering what the other guy is throwing at you. If he’s vindictive, he can turn litigation into a very expensive war of attrition.

Don’t be fooled by the “let’s go to trial” television dramas. They don’t show the motions. The posturing. The look on your lawyer’s face when she discovers that, until a few weeks ago, the judge assigned to your case against a contractor was a family law judge. You guessed right. The judge isn’t that familiar with construction defect litigation.

In the New Normal, those in the know are opting for alternative dispute resolution, “ADR”: mediation, arbitration, collaborative law, and their emerging conflict-busting hybrids.

Mediation

Waging peace

What is mediation?

Mediation is a process. An impartial person, the mediator, skillfully helps parties resolve conflict when they’re unwilling or unable to resolve the conflict themselves.

What is a mediator?

A mediator isn’t a judge, an arbitrator, or a decision-maker. A mediator is a settlement facilitator. A skilled neutral.

A mediator is a confidant, an empathizer, a harsh realist, a diplomat, and a magician.

A mediator is an evaluator, a questioner, a reality checker, a persuader, and a peacemaker.

A mediator is tenacious. He’ll be persistent even when the parties have given up hope of resolution.

By the way, you don’t need to be a lawyer to be a great mediator. Mediators can be child psychologists, contractors, architects, physicians, landscapers, and anyone with subject-matter expertise and a knack for problem-solving. Does that sound like you? Read on. You’ll discover tips and tactics for being at the top of your mediation game—whether you’re a mediator, a party, or a party’s lawyer.

Why mediation?

Direct negotiations between the parties would be counterproductive because one of the parties has a no-holds-barred adversarial style.

Unlike court litigation, nothing happens in mediation unless you choose for it to happen.

Mediation is the litigation alternative. Here’s the trouble with litigation:

With litigation, there is always the possibility of a runaway jury’s extreme award or an appeal by the losing party. Mediation avoids outcome uncertainty. Here’s how I caution clients that anything can happen with a jury. In Monte Carlo, Monaco, Charlie Chaplin entered a Charlie Chaplin Look-Alike Contest. He placed third. No one can ever argue that Chaplin’s position wasn’t strong enough for a slam-dunk win.

Wasting time is a natural part of the litigation process. Time frames are largely set by the court and your adversary. In mediation, dates, times, and places require your consent.

No one is comfortable in a courtroom. Court trials are public. Mediation is private.

A jury may be influenced on how a party speaks or looks, or that person’s ethnicity. There are no appointed judges or juries in mediation. In mediation, the parties select the mediator who will provide biographical information and references.

Litigation takes an emotional toll on individuals, families, and businesses. Talk to someone who’s in litigation and ask what he or she thinks about at 3:00 a.m.

It’s hard to collect money from someone who thinks the judge or jury didn’t understand the case.

There is a higher degree of commitment to a mediated outcome because the parties have agreed to do something rather than being ordered by a judge to do something.

Litigation always creates a loser and a winner. Litigation is about who’s right and who’s wrong. Mediation is about discovering creative trade-offs. In mediation, the parties settle and walk away shaking hands. In arbitration or litigation, no one will ever say, “This is the right outcome for both of us,” and then shake hands.

In mediation, resolution is possible in stages, increments, or phases. Complex issues are effectively dealt with because the parties set and prioritize the mediation agenda.

Knowledge is power. You’ll be better ready for trial if the mediation doesn’t succeed.

Skilled mediators settle 80 percent or more of their cases!

The Mediator’s Role

A mediator is a thermostat, not a thermometer

Conflict Assessor: Assesses where the parties agree and disagree. Learns why the dispute wasn’t settled directly by the parties. Was it because of a lack of communication? Emotions clouding good business judgment? Holding back information for “shock value” at time of trial? Not identifying issues? Information missing to evaluate the case? A desire to be retaliatory? Or were they swept up by the process into an uncontrollable web?

Communication Facilitator: Keeps parties on track and the dialogue flowing by making transitional statements. Continuously summarizes, restates, questions, prompts reactions, and makes observations. Does not permit interruptions, arguments, disruptions, or cross-examination.

Transformer: Puts a business or personal relationship back on track by focusing on the “people problems.” Calls upon the transformative power of apologies, shares blame, flushes out misunderstandings, and acknowledges mistakes.

Coach: Provides insight and perspective in private caucus meetings. Determines reasonable parameters. Points out flaws and unrealistic expectations.

Alternative Generator: Generates fresh theories, options, and alternatives to keep the dialogue flowing and to better understand each side’s interests and perceptions.

Resource Expander: Suggests outside resources (such as engineers, technical personnel) to assist in clarifying and gathering critical information.

Reality Tester: Tests the merits of a party’s arguments in private caucus meetings.

Perspective Creator: Asks, “If you can’t settle and go to a court, how many depositions will need to be taken? How many days of trial preparation will be needed to show you’re right? What is the cost of winning? How much more work/money/ time will be needed if there is an appeal?”

Scapegoat: Helps a party save face when his announced position needs to be changed. The mediator, as a scapegoat, takes responsibility for the needed change.

Process Controller: Keeps power balanced so that the weaker party isn’t overpowered by an aggressive, overbearing, or more skillful opponent. Never bolsters one side’s case in the presence of the other side.

In a real-life mediated dispute between two partners, Joe and Jim, the testimony of the contractor who had done work for their partnership was critical. Joe claimed that in exchange for getting the job, the contractor inflated his construction costs and gave secret kick-backs to Jim.

Joe knew that the contractor was a devoutly religious man. He also believed that contractor would lie even if the mediator had him swear to tell the truth. Mediator’s solution: The mediator would take the sworn testimony of the contractor at the contractor’s church in the presence of the contractor’s priest.

A mediator has a duty to be neutral and fair. But what should be done when there are under-represented or poorly represented parties? Impaired or incompetent parties? Parties who don’t understand their rights? These are a mediator’s ethical issues.

Scribe: Keeps a record of offers, counteroffers, and agreed-upon settlement components. Upon reaching settlement, assists the parties in preparing a settlement agreement.

3 Pre-Mediation Tips

Tip 1: Timing is critical. Don’t rush into mediation without knowing the weaknesses and strengths of your case. An under-prepared case will be seen as by your adversary as a weak case.

Tip 2: Parties need to reach a certain level of tension before they’re amenable to mediation.

Tip 3: Make a solid “in the ballpark” pre-mediation settlement demand. Popular myth: Without that demand you have more room to maneuver. Surprise demands usually result in no settlement.

Step 1: Convening

“Eighty percent of success is showing up.”—Groucho Marx

Convening is a mediation term of art. Convening starts the mediation process and takes place to establish the procedural ground rules; define issues to be mediated; designate persons who will be participating (insurance adjusters, corporate officers), experts who will express opinions; agree upon mediation dates and places where the mediation will be held.

Joint convening meeting—now is the time to:

Discuss the mediator’s fee. How much? Are there minimums? How are fees paid? What expenses and costs (travel, photocopying) will there be? Are there cancellation charges? Where will the mediation be held? Will either side present evidence? If so, what will the evidence be? Will witnesses or experts be testifying?

Agree in writing that all discussions are confidential unless otherwise agreed.

Decide who will attend. Will the folks in attendance have the absolute authority to make binding decisions? Can the president of a condominium homeowner’s association make decisions without the board’s concurrence? An insured party without the consent of her insurance adjuster? A corporate officer without Board of Director Authorization?

Identify where the parties agree and disagree. Will there be pre-mediation depositions? Pre-mediation on-site visits to relevant places? Pre-mediation briefs? What exhibits (such as contracts or e-mails) will be attached to your brief? Will briefs be for the mediator’s eyes only? Or will they be exchanged with the other side?

Tip: Confidential pre-mediation briefs help the mediator quickly loop into the case. The brief doesn’t need to be a formal document. Include information about the parties’ historical relationship and the settlement efforts to date.

Private convening meeting—now is the time to:

Reveal sensitive information to the mediator in confidence. “Margaret” privately disclosed that “how much” was not as important to her as “how soon”. She had terminal cancer and before dying wanted to set up an education fund for her grandchildren.

Meeting separately with the parties enables the mediator to determine how to best lessen hostility, avoid undue posturing, and set a platform for creative problem solving.

Step 2: Opening Joint Session

Dissident Land is now formally open

The parties are usually not present at convening if they have lawyers, but everybody is present at the joint session.

Comfortable people are less resistant, and more open to alternatives. Mediation is about emotion management, not emotion avoidance. In her opening statement, with all parties present, the mediator:

Humanizes that process: “Sounds like we’re in a terrible place right now. How do we get to a better place?”

Thanks the parties for coming together in the spirit of resolution. She’ll explain mediation and the role she’ll play.

Reminds the parties that “You’re not negotiating with me, but with each other. I’m just helping.”

Encourages full participation. “Your attorney did a great job explaining your position. But is there anything you would like to add?”

Identifies what’s already agreed to and the remaining issues to be mediated. The mediator’s credibility comes from showing she understands the situation.

Announces ground rules, time frames, and constraints that were established in convening.

Sets the agenda: Which issues are dealt with first? Which issues can be linked?

Tip: Hearing your opponent’s statement is your chance to reevaluate and reassess your own position’s strengths and weaknesses. And it’s a chance to assess your adversary’s jury appeal in the event there is no settlement.

The mediator may decide not to have a joint session (or have a joint session without opening statements) if she feels there is a great deal of personal hostility. On the other hand, an opening statement gives the parties an opportunity to vent.

Venting in a joint session can be a vital part of the resolution process. The ability to express feelings, frustrations, and emotions makes it possible to transition from anger and hostility to rational and deliberated conversation. No one will listen until they are ready to hear. Letting the parties “have their say” gives them the feeling that they “had their day in court.”

The mediator also asks questions. But questions asked in joint sessions can’t be pointed questions or questions that suggest the mediator’s feelings about the case’s merits and shortfalls. General questions that don’t sound judgmental can be asked. “Can you tell us more about your reasoning?”

Step 3: Caucusing

A time for flexibility and innovation

The joint session is followed by the mediator’s caucus meetings. These are private and confidential meetings held with one side at a time.

It’s the mediator’s judgment call as to who he shall meet with first. Should it be the party who didn’t speak first at the opening joint meeting? The defendant or responding party? (Tip: The responding party may acknowledge valid portions of the claimant’s case. Fewer contentious issues make the mediator’s job easier.) The party that has the furthest to move for the conflict to be resolved? Or the party that seems dissatisfied with the opening joint session?

Head’s up: Clients sometimes ask: “Why is the mediator taking so much time talking with them?” Mediation may take on an adversarial tone as the parties set up in “camps” for caucuses. It’s an aura that gives rise to an “us” against “them” uneasiness.

For some, playing hardball seems a safe mediation strategy. After all, in the wings is a mediator standing at the ready to finesse a moderate ground for settlement. In caucus, the mediator discourages overreaching or counterproductive offers. Offers that are made as final offers, best offers, or take-it-or-leave-it offers.

A skilled mediator won’t let the mediation turn into a contest of wills. Mediation is about settling, not winning. The caucus goal is to develop a realistic proposal that the mediator can then submit to the other side.

A mediator continues to shuttle between caucus rooms until a mutually acceptable path to resolution has been developed. Sometimes, there will be joint meetings between caucuses.

In caucus, a mediator unlocks sealed lips and closed minds by asking questions. When you ask better questions, you’ll get better answers. In Chapter 8 and Chapter 10 you learned how to craft better questions.

Step 4: Finessing a Resolution

The mediator has a choice of three paths: distributive, integrative, and evaluative. Most mediators segue between paths.

Distributive mediation: What one side gains, the other side loses

Distributive bargaining is a tug-of-war. A contest of wills over a “fixed pie.” No future relationship with the other side is at stake. It’s what’s called a “Zero-Sum” Game.

The mediator’s job is to keep the negotiations going by maintaining an atmosphere for realistic, reasoned, give-and-take.

The “Mediator’s Dance” is a behavioral reality: Each concession made will likely be half of that party’s prior dollar increase or decrease. For example, if your first offer is $1,000, your next offer will likely be $500 more ($1,500), and then $250 more ($1,750).

The dance’s reality continues: Each concession a party makes will likely take twice as long as the one before it. Settlement will likely be a number reached halfway between the parties’ first two reasonable offers. The mediator’s goal is to get a reasonable offer from each side. It’s only then that the mediator can suggest splitting the difference.

A real mediated distributive case

Here’s a case I use in my workshops. What would you do if you represented one of the parties? If you were the mediator?

Greg is an adult with a child’s intelligence. Greg has been steadily employed for 10 years as an animal shelter assistant. He had an excellent credit rating, charging the necessities of life and timely paying his car payments, rent, and other ongoing obligations.

Knowing Greg loved animals, he was approached by Gary, a con-artist, offering a horse stable investment opportunity. Greg would be a part owner and would be in charge of caring for the horses.

Greg fell for the scam, giving Gary his personal credit information and permission to use that information to help finance the stable project.

Gary used that information to help Greg open four American Express credit card accounts. Gary was a supplemental cardholder on each account. Gary’s address was used as the billing address. Greg had no prior American Express accounts.

Gary used the accounts he opened in Greg’s name for his own personal purposes and kept the credit ball in the air by making periodic payments to American Express. When the ball fell, Gary had racked up $40,000 in charges.

American Express collectors started to call Greg, who, feeling intimidated, paid American Express $1,000 over several months.

American Express sued Greg for $40,000 arguing that (1) Greg’s identity wasn’t stolen. Greg intended for the accounts to be opened and gave Gary the personal information necessary to help him open the accounts. (2) American Express had no way of knowing that Greg believed that the charges would be used for a horse stable venture. (3) American Express had no way of knowing that Greg had a child’s intelligence. (4) Greg made payments on the accounts.

Greg’s lawyers argued that it should have been apparent to American Express that something wasn’t right. They further alleged that American Express “ruined Greg’s credit.”

Pre-trial mediation was ordered by the Los Angeles County Superior Court. I was the court appointed mediator. Mediation ended with American Express feeling its legal position was justified. Nonetheless, wanting to do “the right thing,” it dismissed its suit. If American Express hadn’t made an “emotional decision,” what would you as a mediator have done?

Integrative mediation: Increasing the size of the pie

An integrative approach is to expand the pie so both parties can “win,” It’s sometimes called win-win mediation. How do you expand the pie? By not having a tug-of-war. Instead, focus on developing mutual gain options. I call these options “pie expanders.”

Put on your creative hat. Develop options. Brainstorm. Be inventive. Tailor options to make them fit. If they don’t fit, scrap them and try new options. A waste of time? No. Unworkable options reveal impediments to settlement. Unworkable options keep the dialogue going.

Consider these pie-expander trade-offs. The magic word is if. “I’ll concede doing _____ if you’re willing to ______.

Finance: Cash or credit. Interest rates, terms, discounts for early payment. Quantity discounts. Prices of extras and addons. Collateral or security.

Risks: Warranties. Guarantees. Repair obligations.

Delivery: When, where, and how will deliveries be made? Who pays the carrier? Who is responsible for damage? Late penalties. Packaging.

Relationship: Exclusive selling rights. Advertising allowances. Sole supplier rights. Guaranteed minimum purchases. Training. Ongoing support. Duration of contract.

Specifications: Allowable variations. Quality tolerances.

Evaluative mediation: Summoning “the Agent of Reality”

Some mediators have a more “facilitative style” and seek “win-win” results. Others an “evaluative style.” In private caucus, they evaluate and disclose their opinion as to whether a party’s arguments are meritorious. Wearing an evaluative hat, the mediation takes on an adjudicative tone as the mediator becomes The Agent of Reality focusing on the legal issues. Causation. Experts’ opinions. Damages. Predicting trial outcomes. Quantifying potential damages. Estimating going-forward trial costs. Discussing the likelihood of expensive appeals.

Evaluative mediation is only effective if it is credible. An evaluative mediator needs to be someone whose judgment the parties respect. Subject matter expertise is important. For example, in a workplace dispute, a labor lawyer may be the best horse for the course. Tip: The later evaluative statements are made, the more effective they’ll be.

Doing what it takes to get the dispute settled, skilled mediators deftly blend facilitative and evaluative styles.

STEP 5: Closing

It’s not over until it’s over

A mediator should never quit when there is an agreement in principle. Agreements should be in writing before the mediation concludes. Critical terms to be included in the mediated agreement include: Specific actions that need to be taken. By whom and when. Penalties for not taking timely action. Procedures for resolving issues that may come up. Dispute resolution procedures for alleged violations.

Arbitration

Truce or friction?

Binding arbitration is an adversarial process. A private trial. Unlike court litigation, arbitration usually takes place in an office setting. Unless the parties agree, arbitration doesn’t require adherence to strict, court-mandated, procedural rules.

The arbitrator is an impartial person chosen and hired by the parties. A written arbitration agreement empowers him to make binding decisions just as if he were a judge in a court trial. In fact, many arbitrators are retired judges. The arbitration agreement defines the arbitration’s scope: Who will be witnesses? Which experts will testify and for whom?

The right of appeal from binding arbitration is very limited. If the arbitration award doesn’t need to be court-enforced, then by agreement of the parties, the arbitration proceedings are confidential.

Arbitration Hybrids

Final offer arbitration (sometimes called “baseball arbitration”): Each side agrees to settle for a predetermined amount. The arbitrator, after hearing the case, chooses which of those two amounts will be his award.

“Night baseball” arbitration: Each party sets its demand amount. The amounts aren’t revealed to the other party or to the arbitrator, who holds them in a sealed envelope. The demand amount that is closest to the arbitrator’s award will be the binding arbitration award.

High-low arbitration: Before the arbitration, the parties jointly set award high and low amounts. It is agreed that the arbitrator’s only job is to determine liability. If the defendant is found liable, the predetermined high amount will be paid to the plaintiff. If no liability is found, the defendant shall pay the predetermined lesser amount to the plaintiff.

Incentive arbitration: The parties elect to have non-binding arbitration. However, they have a binding agreement setting the amount of a penalty that will be imposed if a party rejects the arbitrator’s non-binding monetary award and takes the case to court trial. If the rejecting party’s position is not improved in trial, the penalty is imposed.

Bracketed arbitration: Limits risk by the parties jointly placing upper and lower limits on the arbitrator’s award discretion.

Neutral expert: Retained jointly by the parties, the expert gives his opinion on limited factual or legal issues. The parties agree in advance whether that opinion will be binding or just advisory. For example, the expert may determine motor vehicle accident fault by analyzing skid marks, ascertaining collision damage, measuring braking distances, and determining speeds. Those findings may be binding on the parties, or just advisory to the arbitrator who may agree or disagree with the expert’s conclusions as to was at fault. If binding, then the arbitrator has to abide by the expert’s conclusions. The arbitrator can still make awards on related issues such as the compensation for an injured party’s pain and suffering.

Mediation/Arbitration Hybrids

There are several variations of or combinations of mediation and arbitration:

Separate Med-Arb: If mediation has failed, the mediator changes hats and becomes an arbitrator who makes a binding decision on all unresolved issues. The mediator’s power to change hats encourages the parties to reach their own settlement on impasse issues.

Integrated Med-Arb: As the mediation progresses, the mediator becomes an arbitrator, making binding decisions on stalemated issues. This “on an as-needed basis” ability makes it possible for the mediation to continue on issues that aren’t stalemated.

Opt-Out Med-Arb: Parties agree that if resolution isn’t reached in mediation, an arbitrator, but not the person who was the mediator, takes over and makes binding arbitration awards. Tip: Consider having the potential opt-in neutral attend the mediation joint sessions so she’ll be prepared to arbitrate.

Final Offer Med-Arb: Following an unsuccessful mediation, the mediator, now acting as an arbitrator, makes a binding award decision by selecting one of the party’s final mediation offer. The mediator/arbitrator must choose one of the two competing offers, but nothing in between. To avoid this risk, the parties will make a reasonable final offer in mediation.

Tip: If there are multi-issues (single party with many issues) or multi-party (single issue with many parties) disputes, consider mediating part of the dispute while using other approaches for the balance of issues.

Arb-Med: The arbitrator acts as a mediator only after first having heard the case in arbitration. The arbitrator reveals his binding decision only if there was no agreement in mediation.

Collaborative Law

Because an ex-spouse is forever

Some folks think that agreeing to mediation is a sign of weakness, a sign that one is prepared to make even more concessions and compromises.

Some folks believe that in private caucus meetings, an adversary will lie and unfairly influence the mediator.

Some folks believe that a mediator will play mind games to lower their reasonable settlement expectations.

The collaborative way is free of a mediator’s arm-twisting. Free of an arbitrator’s focus on absolute rights and wrongs. Free of lawyers saying what clients expect to hear from their hired guns. Free of behind-closed-doors caucus meetings. Free of disagreeing and battling experts. Free of a party holding back the disclosure of critical data and information.

To best assure a level playing field, a written Participation Agreement obligates the parties to be fair, reasonable, and respectful to each other and to the collaborative process.

The parties hire attorneys (Collaborative Attorneys) to assist them throughout the dispute resolution process. The energy that drives home settlements is a hard to swallow Participation Agreement’s Disqualification Clause: If there is no settlement, your attorney is contractually obligated to disengage and not take the case to trial. Ouch!

A Collaborative Coach, who is often a licensed mental health professional, is sometimes hired in emotionally charged cases to coach one or both parties. It’s the collaborative coach’s task to keep emotions and retaliatory behavior in check.

A collaborative team includes jointly sponsored retained experts such as appraisers, tax experts, and accountants. Their task is to openly provide impartial advice and opinions.

If circumstances warrant, a Case Manager functions as a facilitator. Unlike a mediator, the Case Manager can’t caucus or be evaluative. Their task is to preserve the collaborative process aura by prioritizing issues, keeping discussion balanced and flowing, and strategically calling upon the skills of the impartial retained experts.

Collaborative sessions take place in a meeting room. An underwhelming place where adversaries don’t pitch their case to a “for-hire stranger”—a mediator or arbitrator.

A place where there is a feeling of safety because a Collaborative Attorney can’t threaten litigation, having signed a Disqualification Clause.

When collaborative is the chosen alternative, it sends a positive message: Let’s resolve our issues side-by-side in the spirit of good faith, fair dealing, openness, and transparency.

Collaborative seeks change—change in the way the other party sees things. More importantly, change in how they feel. How the other person feels flows from how you are. Not from how things are. You’re always both: The messenger and the message. In mediation, the mediator is the messenger. In collaborative, you’re the messenger—front and center.

Because of the Disqualification Clause, Collaborative Attorneys are at risk of losing long-term, or potentially long-term, clients to another attorney. The New Normal’s super competitive market makes that possibility a sleep-wrenching reality. Not so gutsy if you’re a divorce lawyer. Unless your client is a serial spouse, the client relationship is usually over when it’s over except for the ritual of exchanging holiday greeting cards.

Clients also have good reason to be concerned about changing horses midstream. After all there’s home team rapport in place. Feelings of confidence and comfort made possible by a client’s investment of time, money, and energy.

Changing attorneys means starting anew, looping a new player into an expensive and time-consuming learning curve. And if that isn’t enough to be concerned about, there’s the possibility that a wily opponent will purposely block settlement for no reason other than to cause a highly capable adversary to bow out.

Is potential disqualification of your attorney worth the risk? The collaborative way is a different way of managing conflict. It emphasizes the restructuring of personal and business relationships. It works by collectively considering each person’s needs—openly and completely. Sharing information. And most importantly building an aura that better keeps relationships cordial, if not intact.

If MediCollab (mediation/collaborative) is provided in the participation agreement (or later agreed upon), the Case Manager changes hats and mediates the impasse issue. Or, at the request of the parties, an impartial mediator is hired to help resolve any issues still in contention.

Chapter Summary

ADR is about you having choices.

You have the choice to participate or not participate in one of the ADR processes. You have the choice of who will serve as mediator, arbitrator, or case manager. You have the choice to set outcome parameters (for example, in arbitration high-low limits, binding or nonbinding outcome). You have the choice of cost control limitations (for example, the number of witnesses or depositions).

Unlike court litigation, nothing happens unless you choose for it to happen.