Nearly all construction industry standard form contracts require mediation as part of their dispute resolution provisions. Often confused with arbitration, mediation is a negotiation facilitated by a neutral third party. Unlike arbitration — a proceeding like a trial — mediation does not result in a final binding decision. And the mediator typically does not have any decision-making authority in the context of the mediation.
Instead, like any negotiation, the outcome of mediation is entirely in the hands of the parties. The mediator helps the parties by managing the exchange of information and other aspects of the negotiation process, like finding common ground and dispelling unrealistic expectations. Although much of the work preparing for mediation will be done by the parties’ lawyers, clients should keep in mind the following considerations to maximize the possibility of a successful outcome.
- Consider the potential costs of not settling. Most importantly, consider the potential cost of a loss at trial or arbitration and the attorneys’ fees that will be incurred. Also, consider the cost associated with the significant time and effort that will be expended preparing for and being present at trial. There is an opportunity cost associated with not settling — time spent preparing for trial is time that could be spent running one’s business, spending time with family and friends, etc.
- Understand that the mediation may continue. While the parties and mediator will try to reach a resolution during in-person (or virtual) mediation, it is not uncommon for mediation to continue for days or weeks (or longer) by phone and email. In some cases, additional mediation sessions may take place months after the initial mediation.
- Don’t expect to “win.” It is rare for a party to “win” at mediation. Rather than viewing a final offer/demand as a win or loss, consider whether you will be content to have settled the following week when the dispute is no longer on your agenda.
- Mediation is voluntary. Understand that mediation is a voluntary process and that the mediator has no authority. The mediator can help facilitate a settlement, but cannot force someone to settle who doesn’t want to.
- Arrive prepared. Do homework ahead of time. Think about what your bottom line will be, while staying open-minded that it might change during mediation. Be prepared to exchange several rounds of offers and counteroffers.
- Be patient. Expect to negotiate all day and (perhaps) into the night. Avoid the temptation to become frustrated with the slow pace of negotiations and blurt out your bottom line prematurely.
- Keep an open mind. Be flexible and open to settlement approaches that are “outside the box.” Someone with a preconceived notion of settlement may find that the mediator suggests alternatives that provide a better deal.
- Be prepared to negotiate with the mediator. Understand that although you want to be friendly with the mediator, he or she is focused on achieving settlement. As a neutral third party, the mediator is not an advocate for one party or the other. Recognize that a “win” for the mediator is settling the case — the terms of that settlement are largely irrelevant to the mediator. The mediator’s interest (a settlement) is not fully aligned with your interest (a settlement favorable to you).
- Don’t think that the mediator is advocating for the other party. It is the mediator’s job to challenge the parties’ legal and factual positions, which may come off as taking the other side’s position. Rest assured that the mediator is taking a similar approach when talking to the opposing party.
- Feel free to talk directly to the mediator. Mediation is informal, and clients can (and should) engage with the mediator. Try to demonstrate to the mediator your passion and conviction for your case.
- Don’t show fear of depositions or trial (or anything else). Fear is a strong emotion that can and will be used by the mediator. Even if you have concerns about the legal process, keep emotions in check while talking with the mediator.
- Don’t indicate a strong desire to settle. Seek to appear rational and reasonable but otherwise able to “take it or leave it” when it comes to settlement.
- Don’t feel the need to agree with the mediator. The mediator will be using information provided by your opponent without knowing how truthful it may be. It is frequently inaccurate. While admitting truthful facts can build trust with the mediator and facilitate settlement, accepting inaccurate statements just to appease the mediator will hurt your case and likely your chances at a successful settlement. Hold your ground when justified and accept negative information when there is no escaping it.
Although this list is by no means comprehensive, it does include many items that we as lawyers want our clients to keep in mind leading up to and during a mediation. The key point is that you, as the client, have an important role to play in the mediation process. The better prepared you are, the more likely it is that you will have a successful mediation.
Originally published as an Op-Ed by the Oregon Daily Journal of Commerce on February 18, 2021.