The Elements of Disputes

by Timothy J. Langella
MDRS Neutral and Guest Blogger

Business disputes come in all shapes and sizes, and often have both monetary and emotional elements.  Take this case, for example:

Two brothers-in-law go into business together and form a partnership or closely held corporation, after marrying their respective wives (who are sisters).  After a rocky start, the business is soon notably successful.  The two couples are close:  they work, vacation, and even socialize together.  They each start a family and the cousins seem like siblings for many years. But as the cousins age, they grow apart, causing tension among the four parents.  Small issues become large ones, tensions escalate, and the previously-strong partnership is in peril.  The men begin to bicker and argue at work, one claims the other is not as dedicated to the business, and claims of unreasonably-inflated business expenses are made – and categorically challenged.  Eventually, the two sides don’t even speak to each other, the sisters are alienated, and a lawsuit claiming breach of contract, fraud, and breach of fiduciary duty is filed.

Litigation may be able to resolve the financial aspects of this dispute – after months, if not years, of paying lawyers and experts to sort through the relevant information – but it willnever resolve the family dynamic issue.  Mediation is the very best option to not only contend with the dispute, but to deal with the factors that have also arisen beyond the business issues.  Mediating such a matter not only keeps decision-making in the hands of the partners, but also offers perhaps the best chances at preserving (hopefully improving) these complicated relationships.

An experienced mediator, skilled in partnership disputes, can help the parties air and resolve all aspects of their grievances.  Quickly, efficiently, and less costly than protracted litigation, mediation offers unequalled ROI.

The Attorney, the Client, and the Mediator

by Brian R. Jerome, Esq.

What makes mediation successful?  To answer this, it is important to consider the roles and relationships between a lawyer, their client, and the mediator throughout the mediation process.  

Many of us who are attorneys can recall our law school years being focused primarily on developing strong advocacy and trial skills, with little to no emphasis placed on developing negotiation skills to reach settlement.  Litigators still rightly pride themselves on their trial and advocacy skills; it is this ability and willingness of an attorney to effectively try their case that creates the opportunity to reach more favorable pre-trial settlements.  However, the primary focus of law practice is not trial but rather the preparation, negotiation, and settlement of cases, as less than 3% of cases actually go to trial.

Mediators are experts in the complex process of negotiation and settlement of disputes, skilled facilitators who orchestrate mediations like efficient business meetings.  They create dynamic, structured, and respectful climates, and encourage all parties – as well as their counsel and/or insurers – to express themselves as needed so as to completely grasp all aspects of the conflict, material and human.  S/he helps the parties focus on fundamental needs and priorities, seeking out and encouraging common ground toward the achievement of satisfactory settlement.

Effective mediators go beyond simple facilitation of the process, exploring the parties’ positions, raising questions regarding these positions, conducting reality testing, and focusing the participants on the potential strengths and weaknesses of their case, preferably in a non-threatening and confidential manner.  Capable mediators give honest feedback, cutting through posturing and argumentativeness to help parties get down to the business of resolution.  Mediators help the parties develop an agenda, identify key interests, and create a realistic action plan.

An attorney’s role in the mediation process is both as advocate and advisor to their client.  It is the attorney who has prepared, investigated, discovered, and presented the case for the client.  S/he advises the client when and if mediation is appropriate – whether at the beginning, before suit is filed – or during (or after) the discovery process is completed.  In most, but not all cases, the attorney has engaged in a negotiation process to attempt settlement before formal mediation is commenced.  It is the lawyer’s role to explain to their client the nature of the process and what to expect during mediation.  Further, the lawyer assists the client in making an informed choice of the mediator based upon the type of case, as well as the background and experience of the mediator.  

Attorneys convey the benefits of mediation to their clients and prepare them so as to take full advantage of what mediation offers.  In that regard, attorneys should determine directly from the mediator the process they employ, and should describe this process to the client.  For example, counsel should review the expected initial joint session and the likely private caucuses thereafter.  It is also important to review who will talk and when,
who will take the lead role (if applicable), and how that may change as the mediation progresses.

The attorney advises the client on the substantive law relevant to the case and to the greatest extent possible, anticipates the arguments that the other side is likely to make at the session.  A client’s level of trust in their lawyer can be badly damaged if the client learns of potential risks for the first time at a mediation, such as that there is substantial risk of summary judgment before trial, or that the forecasted legal fees will be more than previously anticipated.  The mediator will likely be discussing these issues and relevant risks in private caucuses, and the client is likely to hear similar points from the opponent during the course of the mediation.  An attorney and well-prepared client are more likely to be convincing that their position is serious and reasoned, as opposed to mere posturing.  These perceptions are often translated back to the opposing party through the mediator.

The client should also have the benefit of their lawyer’s opinion of likely outcomes at trial and/or valuation of the case prior to the mediation.  This enables the client to begin considering a range of acceptable outcomes as part of the process.  For example, in a personal injury case the lawyer may advise the party of possible outcomes regarding the issue of liability, as well as reasonable and realistic ranges of a monetary judgment. The client should be strongly encouraged to come to the mediation with an open mind, avoiding bottom line positions. 

It is important that clients understand the confidentiality of the mediation process, both under the terms of the written mediation agreement in effect, and by applicable statutes or laws, such as in Massachusetts, MGL c. 233, s.23c.  The client should be informed how this confidentiality applies to both the initial joint session and, importantly, how the private discussions or caucuses with the mediator are themselves confidential. 

Confidentiality creates the foundation of the mediation process and allows parties and their counsel to speak openly at the session about their case and legitimate needs. Confidentiality allows the parties to make reasonable demands and offers with communications being protected from disclosure at trial should the matter not resolve. The more that a mediator can learn – in confidence – about the fundamental needs of the parties, the better they are able to foster a resolution that best satisfies everyone involved. Principally, a mediation is for and about the parties.  It is the client’s case and they ultimately decide whether to accept settlement or not, after considering the advice of their counsel.  Most parties who proceed to mediation seek to resolve their case at that session so as to avoid the continued anxiety, time, and expense of further litigation and the uncertainty involved in going to trial.  Many parties feel that mediation is equivalent to their day in court, an opportunity at long last to express their arguments, perspectives, and feelings to both the opponent and their expert and impartial mediator. 

Parties come to mediation with differing levels of experience, both as to litigation in general and the mediation process specifically.  Some clients have never participated in a mediation.  Others, such as insurers, may have significant experience in both litigation and the mediation process.  Mediators assess these varying levels of experience and ensure that all parties equally understand the neutral’s role and the mediation
procedures to be employed.  At the opening session the mediator should clearly set forth the procedures and background rules, explain the mediator’s role and impartiality, and review mediation process confidentiality.

It is not uncommon for parties to come to mediation with intense emotions, anger dating back to the underlying event giving rise to the claim, or with frustration emerging from the claims and litigation process.  These emotions need to be expressed before an aggrieved party can consider resolution.

Some attorneys limit their client’s active engagement during the course of the mediation session.  While in some cases this may be advisable (i.e. where the client has a tendency to speak about their case in a damaging manner, has excessive anger, and/or otherwise would disrupt the mediation process), counsel should nevertheless expect that a mediator will seek to engage the client in discussion, at least in private caucuses, to assess their views, emotions, needs, and priorities.  It is important to afford a mediator this opportunity with the client to directly establish confidence, impartiality, and trust.  A lawyer should consider advising the mediator in advance of the session of any client issues, such as intense emotions or unrealistic expectations; most mediators are happy to speak with counsel prior to the mediation session in this regard.  Attorneys should consider the advantages of direct client participation as they advise as to their clients’ level of involvement.

Attorneys understandably tend to make strong opening statements at mediation. Persuasive opening statements have the advantage of impressing the strength of their arguments, belief in their case, and preparedness to proceed to trial if mediation is not successful.  Many clients expect strong advocacy from their attorney at mediation, however should be educated that resolution is more often achieved when adopting a more collaborative approach.  Mediation is not a trial, and remarks made in joint session should not be inflammatory, belligerent, or personally offensive to the opponents or their representatives.  Such statements often widen the rifts that exist between disputants.  In such instances conciliators expend precious time during the session, in effect rehabilitating the offended party to a point where compromise and collaboration on their part is possible.  At the very least, counsel should consider expressing good faith intentions during the joint session, and that it is their desire to avoid, if possible, further litigation and trial.  Such representation often enhances negotiation outcomes.   

Attorneys can face challenging clients with unrealistic expectations regarding their likelihood of success at trial and/or expected verdict ranges, even when duly counseled.  In such cases, the mediation process allows clients a first-hand glimpse into the strengths of the opponent’s case and gives a preview of how the evidence could play out at trial.  The mediator guides parties through reality testing and risk analysis, with settlement often presenting more attractively than other alternatives.  Mediators ask hard questions to all sides in the dispute.  A practiced mediator, after having established rapport and having demonstrated themselves as being both impartial and equitable, can speak in private caucuses about the strengths and potential weaknesses of the case. Mediators must understand the thoughts and expectations of all parties, and rationally discuss the risks involved in proceeding to trial, existing judge or jury trends, the time and expense of further litigation, and the anxiety and frustration which too often accompany that path.  

At times, the attorney has unrealistic expectations for their client’s case.  Being sure to respect and foster the important attorney/client relationship, a mediator may need to engage counsel similarly about their thoughts and expectations, providing them with a different perspective on potential risks and nuances of a given case. 

Some attorneys are uncomfortable continuing to stress weaknesses in their case to the client or insurer, anticipating a negative response.  In such cases it can be very powerful for the parties to hear directly from an unbiased mediator the shortcomings of the case so they can consider a more realistic evaluation.

This is why it is critical for all parties, as well as insurers with needed settlement authority, to attend the mediation.  Even insurer participation by telephone is a poor second to actual mediation attendance.  In such circumstances, the mediator’s ability to speak to the insurer is limited and, too often, entirely restricted; to make the most of the process, the attorney should have his insurance client attend the session and work with the mediator directly.

Finally, participants are often anxious to depart the session when settlement is reached.  They do not wish to remain for the processing of a signed settlement agreement, preferring to prepare and sign such an agreement in the following days. However, most mediators know of cases where the agreed upon settlement falls though, whether a party changes their mind or a misunderstanding arises as to previously agreed-upon terms.  At the very least, there is the need for a minimal, written, signed, and legally binding settlement document at the end of every successful mediation.  The attorney, the client, and the mediator have all worked hard and must ensure that the settlement is binding.  It is critical to thoroughly sculpt the terms of the mediation settlement agreement and/or further releases while all parties are immediately available.

We hope all parties better understand the multifaceted roles and relationships that come into play during the mediation process.  Dispute Resolution methods provide effective alternatives to the time, expense, frustration, and uncertainty of ongoing litigation.

Avoiding Pitfalls During Mediation Settlement

It’s 6 PM after a long mediation and all the participants are cranky and tired…but an agreement on a monetary amount has been reached! The moment the parties heard “yes”, they began packing up their files, but the mediator insists that they stay long enough for him or her to prepare a mediation settlement agreement. The responses are varied but sound like this: “Jim and I can work out the release details later this week”, or, “A handshake has always been good enough for me”. A good mediator, however, wears suspenders and a belt for the parties and does not want their hard work (or his or hers) to be lost because fifteen more minutes of attention are needed. Don’t leave now, because all of your efforts could unravel unless a written mediation settlement agreement, containing all the necessary terms of the agreement, is signed by all needed parties. This agreement need not be long and most often, the settlement agreement contemplates that a further more detailed release will be signed by theparties. I can’t stress enough that it is the best practice – and in the best interests of you and your client – to contemplate and deal with all potential issues that may arise in agreeing on the terms and specific wording of this more formal release, since the devil, as they say, is in the details. Remember: a mediation settlement agreement in and of itself is a binding, enforceable contract as long as it contains all the material terms of the agreement, even without a later, more detailed release being executed.

Here are some examples, based upon my experiences, of what may come up (too) late in the mediation process that can jeopardize the finalizing of agreements reached at a mediation session:

Let’s take, for example, a personal injury case where Bill Smith, now 68 years old, was injured four years ago while working in the course of his employment, suffering serious and allegedly permanent injuries at on off-site location. There is an issue as to whether all of his injuries were causally related to this accident as opposed to pre-existing conditions he suffered from. His workers compensation case was lump-summed, and reflected contested issues of medical causation. Some of Bill’s initial medical bills were paid by workers’ compensation, while other contested medical bills were paid by his personal health insurer. He turned 65 after the injury and now qualifies for Medicare, who has paid some of his more recent bills. The case is in suit against multiple high profile defendants who don’t want furtherpublicity, and multiple insurers are involved. Though none of the insurers had been named as defendants, Bill’s lawyer had sent MGL c. 93A and 176D demand letters to some of the insurers. Bill will need future medical care or perhaps rehab or nursing home care that may well involve further Medicare and/or Medicaid payments.

Now it’s the end of a long day of negotiation, and a final joint settlement offer made on behalf of all of the defendants has been found acceptable by Bill and his lawyer. The mediator insists upon drafting a mediation settlement agreement to be signed by all involved parties. The mediator sharpens his pencil and consults with the parties as to the terms of this mediation settlement agreement, which is to be followed by a more detailed release to be prepared by the defendants within a scheduled period of days. Here we highlight a selection of issues which may or may not have been dealt with by the parties earlier during the session…which could potentially torpedo the hard fought agreements reached:

* The mediator may be told that the defendants need a strict confidentiality clause and a non disparagement clause in the release applying to Bill, his wife, and his attorney, and to the benefit of all defendants and their insurers, and a liquidated damages clause in the event of breach. Bill’s attorney may say, “I don’t agree to confidentiality clauses, period…”, “This issue was never raised or negotiated”, “If you need that clause, you’ll need to pay us $50,000 more”, ” I intended to put this case in Lawyer’s Weekly or the Boston Globe”, “What specific language are you looking for?”, or, “I can’t agree to that, haven’t you read the Dennis Rodman case?” (Amos v. Commissioner, T.C. Memo. Docket No. 13391-01, 2003-329, December 1, 2003 Tax Court rules that portion of personal injury settlement attributable to secure a confidentiality clause is taxable).

* The mediator may be told that the defendants need a defense and hold harmless agreement as to any and all claims brought by anyone arising out of this litigation. The plaintiff may be unwilling to agree, defend, or indemnify the defendants against claims brought by others outside of their control.

* The mediator may be told that the defendants, in addition to agreeing to defending and holding harmless the defendants and insurers as to any and all liens, also need lien discharge letters from all lien holders in hand before making any payment. Plaintiff’s counsel may say, “Bill or I will hold you harmless personally, but it takes too long to get lien discharge letters and Bill needs the money now.”

* The mediator may be told that the workers compensation lien holder won’t agree to a reasonable compromise, and Bill’s lawyer needs to file a Curry motion with the Court to have a judge decide the lien amount.

* The mediator may be told that the defendants need extensive and detailed Medicare language included in the release. Because Bill will need long term medical care and perhaps nursing home care involving Medicare and/or Medicaid, the defendants may respond, “We also need to set up a Medicare Trust and set aside, to protect the defendants and their insurers from potential further Medicare/Medicaid claims.” Bill’s lawyer may demand the defendant’s counsel to “Show me the specific language you need in the release”, or ask, “Why is this being brought up now?”, or indicate that they
“don’t agree that a Medicare set aside is needed in these circumstances.”

* Some of the defendants may insist on adding Medicare or Medicaid or other large lien holders on the settlement check and not allow Bill’s attorney time to negotiate these liens and provide discharge letters after which separate checks can be issued. Bill’s attorney may say, “If you put the lien holders on the settlement check I lose all leverage and will never be able to negotiate a fair compromise of these liens”, or, “It will take forever to get endorsements from the lien holders and Bill needs his money now.”

* The defendants may say, “We want Bill and his wife, individually, to sign the release, and because Bill’s late-in-life son is a minor, we need a minor’s settlement approval by the Court.” Bill’s lawyer may respond that, “These requests were never raised during our mediation”, “They are not parties to this lawsuit”, “If you want these other releases you need to increase the settlement”, or, “I’m not going to court for approval of a $1.00 payment to Bill’s son”.

* The defendant may say, “Our release must include all potential claims from the beginning of time until the date the release is signed”. Bill lawyer may respond, “No way. Our claim is confined to a specific date of injury.”

* Defense counsel may say, “The release must discharge all claims against all insurers for claims of violation of MGL. 93A or 176D claims”. Bill’s attorney may respond, “No suit was brought on these claims”, “Defense counsel does not represent these insurers”, or, “We never negotiated settlement of these claims, so you need to increase the settlement amount to discharge these claims”.

Discussing the merits of the issues raised above, or methods by which these issues can be resolved, is beyond the scope of this article. The good news is that with time, all of these issues can usually be negotiated and resolved with the help of an experienced mediator. My purpose in this article is to highlight the problems that can occur if these issues are not raised earlier in the mediation session, but rather, are left to the end. To avoid this problem, may I suggest these thoughts for your consideration:

– Parties and their counsel should understand and appreciate the importance of embodying agreements reached at a mediation session into a detailed and signed Mediation Settlement Agreement;

– All material terms of the agreement should be included in the Mediation Settlement Agreement so as to make it an enforceable contract;

– Parties and their counsel should anticipate any and all potential issues that may arise when formalizing and embodying the material terms of the agreement in a Mediation Settlement Agreement and/or, should it be followed by a further release, all anticipated and needed terms of the release, including, but not limited to, such issues as discussed above;

– Parties and their counsel should not wait until the end of a mediation session to raise and discuss all material terms required in both a Mediation Settlement Agreement and the specific terms of any further release required;

– Anticipating that specific terms and language will be needed in a release, parties and/or their counsel may wish to bring a release with them that could be executed at the end of the mediation session and/or at least shown to the other parties when discussing specific terms required in the final release.

A skilled and experienced mediator will likely anticipate the issues that will need to be agreed upon before final settlement can be reached, and will raise these issues during the mediation at an earlier time and in an appropriate manner, such as in private caucuses first, to help you avoid pitfalls at the end of the session that could jeopardize the overall settlement.

What Happens in the (Mediation) Room Stays…

MDRS’ Brian Jerome was recently quoted in the Boston Herald in regards to the now-resolved Market Basket situation.  During a phone interview with the Herald, Brian expressed the importance of confidentiality while in the mediation room.  While his quote was referenced out of context in the published article, the interview brought up an important component of mediation, which is critical to highlight, and is always in the ADR spotlight – confidentiality.

Confidentiality in mediation is essential to the successful resolution of a case. It serves to preserve the sense that a mediation room is a sanctuary for those hoping to resolve a legal matter without trial.  This is especially important to emphasize given that if the case is not settled in mediation and finds its way in front of a judge that the information brought up in the mediation room will not impact the case.  It is the goal of the mediator to promote a comfortable environment where all parties feel safe to discuss a number of scenarios in order to reach a settlement.  Without the promise of confidentiality, some may not feel as secure in this process.  It’s also important to know that confidentiality doesn’t just start in the mediation session…it actually begins when the parties initially agree to mediation and submit their case.  This confidentiality is guaranteed until the mediation ends – and even then, if parties do not reach a settlement in mediation, the happenings of the mediation cannot be disclosed at any judicial proceeding or trial.

All parties involved in mediation have to trust in this confidentiality, and the mediator plays a significant role in maintaining this security.  A mediator’s role is to facilitate a settlement between multiple parties, and this can only be done if they are comfortable and willing to be open with their conversations and end-result considerations, which is a feat accomplished primarily through confidentiality and trust.  The mediator will also have private one on one caucuses with each party, and their counsel if represented, and these private caucuses are themselves confidential, which allows the parties to discuss their fundamental needs and interest in confidence with the mediator, based upon which a skillful mediator will work to sculpt a beneficial settlement to all parties.

Mediation is a timely, cost-effective alternative to trial and offers an opportunity to reach a settlement that is more agreeable to all parties.  If you agree to mediation, you should know that the information you share will be protected, and confidentiality will be upheld throughout the process.

 

 

ADR: Business Disputes Benefit from Mediation and Arbitration

ADR is often utilized in business disputes because it offers more than a cold-hard decision. Alternative Dispute Resolution services shine in the business industry because, more often than not, the underlying cause of a dispute is rooted in economic issues, not necessarily legal issues.

ADR has been integrated into business disputes in various forms, including formal settlement conferences, mediation, and arbitration. Formal settlement conferences, when presided over by a lawyer, give the parties a valuable and neutral case evaluation. Sometimes formal settlement conferences aren’t always long enough for parties in a business dispute to come to a resolution, and a mediation or arbitration is necessary.

Mediation and arbitration are important assets in business disputes because they can be broken into sessions in which information that wasn’t available at the start may become known as it progresses.

The full article can be viewed here.