Mediating Business Disputes Effectively

By Guest Blogger Tim Langella

Business disputes come in all shapes and sizes, and often have both monetary and non-monetary elements. Here’s an interesting mediation case study:

A successful, public company is looking for a consultant to assist with a 5 year project that will be undertaken through several, ongoing work orders. The founder of a local consulting company pitches the work along with one of the consultant’s three key employees, and lands the job. The parties enter into a detailed, written agreement that specifies, among other things, how the scope of the work for a particular aspect of the project will be defined, payment terms, and what happens if the consultant breaches the contract.

The relationship is rewarding for both parties for the first two years — three separate projects are defined and completed, the consultant has hired numerous extra people to work on the various projects, and the public company is happy with both the personnel assigned to the projects, as well as the results.

During the third year, however, just a few months into the next 18-month project, the key person assigned to the account leaves the employment of the consultant. The public company, concerned about the loss of that key consultant, reluctantly decides that it no longer wishes to pursue the project without that key person assisting, and unilaterally terminates the relationship – with less than complete attention paid to the terms of the contract and the legal implications of doing so.

Instead, the public company offers to pay the consultant for all work performed up to the date of termination, plus two weeks salary for the consultant’s employees assigned to the existing project. The consultant is concerned about the loss of work/revenue, angry (and bit embarrassed) about how the termination was effected, and worried about having to lay-off several employees who have become part of the business family. The consultant counter-demands damages equal to the revenue it would have earned for the remaining 15 months of the project, thinking that will provide enough time to keep the employees on the payroll and find substitute work for them.

The parties stop talking, lawsuits are threatened and then filed, and both sides are faced with the prospect of years of expensive and consuming litigation.

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 will never resolve the personnel issues the consultant faces as the owner of a small business, or the reputational concerns the consultant has from being suddenly terminated from what it thought was a successful relationship. Nor will it allow the public company to address in a private and confidential setting a messy contractual dispute which resulted from its failure to follow agreed upon contractual terms.

Mediation is the best option to contend not only with the monetary dispute, but also with the other factors that have arisen. Mediating such a matter not only keeps decision-making in the hands of the parties, but also offers the best chance at salvaging at least some of the work on the disputed project, preserving the parties’ relationship for future work together, and negotiating important issues such as recommendations that the consultant can reasonably expect from the company for the work it successfully completed over the years.

An experienced mediator, skilled in business disputes, can help the parties air and resolve all aspects of their grievances in a controlled and confidential setting. Quickly, efficiently, and less costly than protracted litigation, mediation offers unparalleled creative problem-solving opportunities.