Most corporate counsel do not like litigation. For many, it is a distraction from the main task of keeping the company moving forward and can expose the company to reputational damage and financial loss, even if successful. Conversely, when seeking recovery for the injury suffered, corporate counsel has the unenviable task of having to explain internally that full recovery is seldom achieved even for the most egregious breach because of trial risk, legal fees, and the vicissitudes of the legal process.
Corporations like certainty, which enables them to plan, but litigation involves too many variables making it something to be avoided if possible; however, for many companies, that is simply not possible. For commercial litigation claims, the in-house counsel will typically turn to the litigation departments of their external corporate legal advisors who understand the business imperatives of the litigation from the company’s perspective.
Many cases are filed at, or near, the expiration of the limitation period. Many companies try to resolve disputes before they go into litigation, and some even manage to do so. Despite this, a significant number of cases filed against companies appear, from the companies` perspective, to have arisen with little or no prior indication that the parties were about to become embroiled in a litigated dispute. This may be strategic on the part of the party bringing the suit, or expediency to prevent further damage occurring, or simply the need to preserve causes of action before they become extinguished by the application of the limitation period. Whatever the reason, they are an unwelcome intrusion on the business of managing the legal affairs of the company and rarely arise at a convenient time.
The most often adopted solution is to hand over much of the responsibility for investigating the claims to external counsel who can protect the investigation through legal privilege and buy sufficient time for a considered response. By asking external counsel to undertake this initial step in the litigation, in-house counsel will be able to continue to address their current workload and ensure that they are not pressured into making unsupported claims about the likely course of the dispute. However, the downside of this approach is that many cases take on a life of their own after an answer is filed, and early resolution is usually the first casualty in this process. In part, early resolution is challenging because in those early stages of the litigation, the external legal advisors have, in their view, insufficient information to properly assess legal liability, let alone the potential financial exposure. As a result of this, many commercial cases move inexorably through discovery, and only when sufficient information has been gathered is the case considered ripe for resolution. While this is approach can have merit from the perspective of establishing the facts, and even a better understanding of the legal exposure, it can entrench the parties, cost significant sums in external fees and internal resource and generally interfere with the company’s day to day activities, or at least those of the company’s internal counsel.
While many proponents of early mediation extol its virtues in terms of cost-saving and the ability to put disputes behind the affected company, this potential solution is often overlooked as internally (as well as externally) the decision to settle early is likely to be based upon a smaller set of known facts, deciding to resolve the case subject to scrutiny. Therefore, the advantages of early mediation are often minimized and dismissed in favor of the need for certainty. Too often, the full cost of obtaining that apparent certainty through litigation is ignored, and, ironically, only a trial (which itself is uncertain) will provide certainty- however it may not be the certainty that either party foresaw.
Litigators tend to concentrate on the issue of liability early on in the litigation process, however, most cases settle on the issue of “how much”. Too often the different legal basis for damage calculations and financial losses are addressed later in the litigation cycle which drives litigation over settlement in the early phases of the dispute. For companies, and their external advisors, greater emphasis on the “how much “of the dispute, at the earliest opportunity, is likely to provide a better perspective of the nature of the dispute compared with any amount of liability assessment. “How much” may not just be the dollar amount but may include business critical issues such as reputation, Intellectual Property ownership, and even the business` viability. An early assessment of the cost of the exposure facing the companies involved has the added advantage of positioning the matter for earlier resolution.
For corporate counsel, early mediation when properly handled and undertaken with a solid understanding of the litigation’s true cost to both/all parties can result in settlement. However, even if settlement cannot be reached, early mediation will likely significantly reduce the ambit of the dispute and can shed light on the issues that are central to the case and provide insight into the likely trajectory of the litigation. It also has the added advantage in that it will likely reduce the overall cost of the litigation and reduce the amount of acrimony that may be in issue if the matter continues through discovery, as many of the tangential issues may fall away following a constructive meeting between the parties and a skilled mediator. The apparent barriers to seeking early mediation are often emphasized as the parties, trained and rewarded for their ability to provide certainty, are hesitant to mediate early in the case for fear of giving away arguments or being unable to advise definitively on facts or the law. The irony of this is apparent to those that regularly litigate, as typically it is the uncertainty of trial that is most cited as a key reason to settle.
Mediation, which is controlled by the parties, and can only lead to settlement if the parties agree all terms, seems an obvious solution for corporate counsel, especially for those cases where the costs of proceeding through discovery is likely to cost both sides a disproportionate percentage of the amount in dispute. However, it is equally beneficial in narrowing the issues so that a rational decision can be taken as to whether to continue litigation rather than seek comprise. While not every dispute can, or even should, be settled early or even at all, as business necessities may dictate otherwise, for corporate counsel they should consider the benefits of early mediation.
A failed mediation is not a mediation without a settlement but rather a mediation that doesn’t settle where the parties learn nothing about their case’s strengths or weaknesses. For in-house counsel, a mediation often provides the best and most accurate insight into their company’s position and an opportunity to discuss the matter with their adversary. For those that embrace early mediation and prepare properly, those rewards come earlier.