Mediation offers a less formal and more efficient process for resolving business disputes than conventional litigation. With the efforts of counsel and the mediator, the parties may be able to achieve more creative outcomes than those available in the binary win/lose bottom line of court cases, while potentially salvaging important business relationships. In a straightforward controversy involving just two parties, mediation may proceed either because the parties made a pre-dispute agreement to mediate any issues or because the parties and counsel have agreed to enter the mediation process. Once the process has begun, discussions ensue, suggestions for resolution are made, proposals are exchanged, and, hopefully, an agreement is reached and reduced to a binding writing. This straight-forward process becomes more intricate when there are multiple parties to the dispute.
Multi-party disputes – interlock, converge and diverge
In a multi-party matter, the facts may be more complicated and the legal issues more involved than where there are only two parties to the dispute. The interest of multiple parties may simultaneously interlock, converge, and diverge. Where several parties have claims against the same respondent, the claimants may be aligned in finding fault with the respondent's conduct but may also be competing against one another for a recovery, a competition that becomes acute as the funds available for payment become limited. In other cases, a single claimant, or even multiple claimants, may be seeking to hold several respondents liable; the respondents may be united in opposition to the claims but divergent as to both defenses and relative responsibility for any potential liability. Examples of these complicated multi-party situations abound; the most encountered in the commercial context are construction cases and insurance coverage disputes. Because mediation is flexible and informal, the mediation process is well-suited to grapple with the complications.
The starting point – a good faith commitment
The starting point is getting the right parties to mediate. The process will not be as effective as it can be if some of the major players are not willing to participate. While obtaining buy-in from the parties is usually readily accomplished in situations where the underlying contract provides that mediation must be attempted prior to the initiation of litigation, it is nonetheless important to encourage the parties to approach the process with a good faith commitment to seek a resolution, as opposed to a grudging sense of merely going through the motions to satisfy the contractual condition precedent to suit. Even where there is a contractual requirement for pre-suit mediation, some parties may not be signatories to that same contract such that, while some may be obligated to mediate, others may not be. The prospect of obtaining an early and efficient resolution should help obtain voluntary participation and, indeed, parties may opt-in to avoid being left on the sidelines.
Last year, I mediated a construction dispute involving the project's owner, its designer and the general contractor. While the designer was obligated by its contract to mediate disputes with the owner prior to suit, the general contractor was not required to do so by its separate contract with the owner, but nevertheless agreed to participate. The mediation resulted in a settlement of the claims of the general contractor against the owner, though the designer's claim against the owner could not be resolved at the same time. The general contractor obtained a successful resolution at an early stage by dint of its opting in. The owner was able to settle one of the two claims against it, narrowing the issues remaining for litigation. The designer indirectly benefited since its claims were the sole focus of the remaining resolution efforts, with the potential distraction of the general contractor's claims having been avoided.
Once the relevant parties are committed to participating, it is useful for the mediator to conduct a pre-mediation conference with counsel to discuss and agree upon how the mediation should proceed. Pre-mediation conferences are generally done these days by videoconference. While in years past, conferences were held by telephone, video technology enables counsel and the mediator to see, and hear, one another. Even without the complications raised by COVID-19, busy attorneys can usually find a mutually convenient time in their schedules more readily than they can for an in-person meeting. In some instances, it may be helpful to have clients participate from the outset; in others, it may be better to have discussions strictly between counsel. Since counsel know their clients and the sensitivities of their clients' personalities and interactions, their input on when to engage with clients is vital. The discussions serve to familiarize the mediator with the identities of the client representatives, alert the mediator to interpersonal conflicts, and begin to identify areas where the positions of the parties both converge and diverge. During this pre-mediation process, the mediator gains important insights into the dynamics of the relationships between the parties and develops a sense of where the fault lines may be.
I have found it useful to request that counsel for each party submit a position statement in which each describes the nature of the dispute, the issues involved, and their arguments and positions. These submissions should include the basic documents relied upon, such as the contracts, change orders, meeting minutes, correspondence and other materials cited in the position statements. The position statements serve to educate the mediator but, equally important, they also inform the other parties so that each can evaluate the strengths and weaknesses of their colleagues' positions, as well as their own. These statements are particularly important in multi-party cases since they aid in identifying where parties, who are seemingly aligned, have divergent points of view. In some cases, it is appropriate to ask the parties to make an additional “blind” submission, for the mediator's use only, on the topic of settlement, which may outline the history of any prior negotiations and set forth any past and present proposals for resolution. Counsel would be familiar with these previous discussions. Having the parties' perspectives on settlement enables the mediator to assess the breadth of the divide that must be narrowed to achieve a resolution and to begin to develop a dialogue for bridging the gap. The mediator must maintain the confidentiality of these statements and not disclose their contents to the adverse parties.
At the pre-mediation conference, another important item to consider is the way the mediation will be conducted. While courts are making every effort to conduct their proceedings in person, mediation affords the parties the choice as to whether appearances should be in person or by videoconference. Video technology makes it very easy for the mediator to meet with everyone in a single video “room” and thereafter place each party in its own breakout room. It is seamless for the mediator to move from virtual room to virtual room to engage separately with each party in virtual shuttle diplomacy. Further, it is possible to have some parties and counsel present at the mediation site and to have others attend virtually. This enables the mediation process to respect the health concerns and viewpoints of the various participants while avoiding delays.
Introductory remarks and private caucusing
The mediation session usually begins with introductory remarks from the mediator as it is important for the mediator to explain the process, the role of the mediator, and the confidential nature of the sessions. Counsel for each party then gives a presentation addressing the highlights of their positions for the benefit of both the mediator and the other parties. It is useful to have the clients present, as they will appreciate observing the presentation of their own counsel and, even more importantly, will benefit from hearing the arguments from the other side. If nothing else, it will be a foretaste of what may be encountered at trial should a resolution not be reached.
The mediation then moves into private caucusing, with separate sessions for each of the parties during which the mediator endeavors to identify the critical needs and interests of the plaintiff and defendant. During these sessions, the mediator may point out strengths and weaknesses of the parties' position and seek to develop settlement proposals that may be conveyed to the other parties. Sometimes, it is possible to obtain an offer from the claimant to which all respondents would contribute, even if the amount of their respective contributions will be determined in further negotiations. Other times, the respondents may collectively authorize an offer to the claimant. And there are times when offers to and from individual parties are sought first or as a fallback in the event a collective arrangement cannot be facilitated. This process requires persistence and dedication to maintaining an atmosphere of collegiality and respect that is conducive to breaking down barriers that help lead to a resolution. As the process proceeds, it is important to make sure that all parties remain engaged and that no one feels slighted or excluded, even though confidential consultations with one party may become prolonged.
The advantage of mediation
A definite advantage of mediation is the ability of the mediator to devote as much time to the matter as is needed, in contrast to a judge with a busy calendar. Not surprisingly, multi-party cases typically require more time and attention than cases with only two parties, making mediation an even more attractive option.
Reprinted with permission from the January 28, 2022 issue of The New York Law Journal © 2022 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.