When Mediations Fail, It’s Not Always About the Facts

Civil litigators are acutely aware of the benefits of mediation in resolving their clients’ disputes. Typically, prior to the filing of a lawsuit, the would-be plaintiff and defendant have been exposed to the dark side of human nature: lying, bullying, sarcasm, betrayal, etc. Now, with the filing of the complaint, the parties can look forward to all of the above plus having to respond to written discovery, being grilled in depositions and writing monthly checks to their attorneys—not to mention the anxiety of not knowing how the case will turn out.

Mediation offers the opportunity to resolve conflicts quickly and allow the parties a chance to get back to normalcy (or at least some measure of normalcy). Why, then, do mediations occasionally fail? Having mediated numerous cases in my 13 years on the Orange County Superior Court’s unlimited civil panel and more than three years at JAMS, I offer the following reasons: 

Suboptimal timing:

Timing is crucial in deciding when to engage in mediation. If the mediation takes place too early, as is sometimes required by arbitration agreements or by law, the parties may lack a sufficient understanding of the other side’s strengths and weaknesses to make realistic demands and offers. If mediation occurs after the parties have completed most of the discovery, their economic and emotional investment may harden their positions and make a reasonable settlement difficult to reach. This is especially true when an attorneys’ fees provision is applicable and becomes the proverbial tail wagging the damages dog. If a mediation was unsuccessful because it took place too early, I strongly urge the parties to consider a second session before it’s too late.

Setting unreasonable client expectations:

Sometimes, in order to persuade a potential client to retain the attorney, the latter oversells the case, even to the point of painting a wildly optimistic picture of its strength. Fast forward several months, and at the pre-mediation conference with counsel, the mediator administers “reality therapy.” As difficult as that may be, it is even more challenging to bring the client down to earth without driving a wedge between client and attorney, to convince the client that the million-dollar payday is only a pipe dream. It is essential that the attorney prepare the client for that discussion with the mediator. That’s not an easy task, but if counsel doesn’t at least commence a realistic dialogue with the client, the mediator can appear to the client to be the “bad guy” in the room, and the mediation may fail as a result.

Not agreeing on the issues to be addressed at the mediation:

If the parties have different views of the significant issues to be discussed at the mediation, the result is like ships that pass in the night, and settlement is liable to be elusive. Preventing this occurrence requires a pre-mediation discussion with counsel to ascertain if the parties can agree on the issues to be addressed. If there is no such agreement, it may make sense to postpone the mediation.

Treating a mediation as simply another stage in litigation:

Some attorneys approach a mediation as just another phase of the litigation process: something to get past in order to continue the battle. The confidential pre-mediation briefs that they submit to the mediator read like arbitration briefs, with nary a mention of any proof problems or other challenges they face. Along with such a one-sided and unrealistic portrait of the case come unreasonable demands, which of course impede settlement efforts. Attorneys should rest assured that the mediator, whom they have selected, will not disclose confidential information to the opposing side. More importantly, counsel must be frank and open in their ex parte discussions with the mediator. Unless the mediator understands the problems counsel face at the upcoming trial or arbitration, the mediator will not be in a position to provide a fair evaluation of the case and propose a reasonable settlement.

Not trusting the mediator:

In most mediations, the parties’ demands and offers are not in the ballpark where the mediator’s evaluation lands, at least not initially. After all, if the parties are in the ballpark before engaging a mediator’s services, they may likely settle the dispute themselves. To accept a mediator’s recommendation to reduce a demand or increase an offer, the parties must have confidence in this person, who is usually a stranger to them. In my initial meeting with parties, I tell them about my experience on the bench to assure them that I’m in a good position to evaluate the strengths and weaknesses of their case. It also helps resolve a dispute if counsel can honestly inform their clients that they too have confidence in the mediator they have selected.

Using an inexperienced mediator:

Mediators are not a one-size-fits-all. There are certain areas of litigation, often in technical fields, where some mediators lack knowledge or experience. Counsel need to select a mediator knowledgeable in the relevant field, and their clients need to have trust in that person. When it’s obvious that a mediator lacks these qualifications, the parties are likely to discount settlement proposals they hear.

Not appreciating what the parties really want:

Not having an understanding of what the clients—and opposing parties—actually want is a significant impediment to settlement. As mediators know, it’s not always about the money. In fact, rare is the case where the only obstruction to a settlement is money. Even in a lawsuit between strangers who are never going to see each other again, pride, anger, revenge and other emotions often hinder settlement. I once conducted a settlement conference in which what sealed the deal was not the dollar amount, but rather a sincere apology from the defendant. Awareness of the non-monetary components driving the parties’ demands and offers is crucial in reaching a resolution of the conflict.

Not recognizing the wide range of solutions mediation offers:

As counsel know, in court, in all but rare cases, the trier of fact can award only money. And in certain cases, the judge can grant equitable relief. In mediations, on the other hand, the resourceful mediator has an almost unlimited supply of creative ideas to settle a case. In discussing with their clients what it is they seek in mediation, counsel should keep an open mind and think outside the box to assist the mediator in crafting a resolution to the dispute.

Lacking settlement authority:

A seasoned mediator knows that people with settlement authority should be in the room. That means the parties, decision-makers for business entities, insurance adjusters, etc., should be present—at least virtually—and have sufficient authority to approve reasonable settlements. The absence of decision-makers means that often, the mediation will need to be recessed in order for counsel to obtain approval of the settlement terms, and valuable momentum is lost—perhaps for so long that a settlement becomes unlikely. (See first point.)

Treating the insurance adjuster as a mere checkbook:

Counsel need to realize that adjusters play an important role in mediation not only because of their settlement authority, but also because they are often more knowledgeable in the area in dispute than the attorneys and have a better idea of the reasonable range of settlement amounts. Counsel should consider the adjusters’ viewpoints in recommending to their clients what the next negotiating move should be.

Making demands or offers without a rational explanation:

If counsel is unable to provide a factual/legal rationale when stating a dollar amount, the demand/offer lacks credibility, which in turn may lead to an equally unsubstantiated number from the opposing side. That, in turn, can take the mediation in the wrong direction.

Withholding information that can settle the case:

One of the most satisfying moments in a trial lawyer’s career is the Perry Mason-like extraction of a devastating admission by a witness, or the playing to the jury a sub rosa video showing the plaintiff, who claims the defendant physician botched his back operation, doing backflips at the local gym. Satisfying, yes, but withholding that information at a mediation may be the reason the mediation fails. If counsel has such evidence, they should weigh the satisfaction of a possible future triumph at trial against an immediate resolution at mediation. Consider what your clients would prefer.

Harboring ill will toward the other side:

We are all familiar with lawsuits that were filed after months or even years of festering contempt or hatred for others; e.g., in business relationships gone wrong or among feuding relatives. Persuading these litigants to settle their dispute in a single mediation session is, of course, quite challenging; there is no magic phrase that can convince them that they need to set aside their feelings and make a “business decision.” Faced with such hostility by the parties, the mediator should strive to understand what drove the parties apart and then explain to each party how the opposing party’s hostility may have had a rational origin. Another important tool mediators use is to introduce the idea of “what if” What if the case doesn’t settle today? See immediately below.

Refusing to look beyond today:

Some parties don’t accept that a failure of mediation means going to trial, with its attendant costs and risks. I spend time telling them what could go wrong if mediation doesn’t succeed and the case proceeds to trial—such as their friendly witness may disappear or their testimony may go sideways, their attorney may become unavailable, they may prevail at trial but thereafter lose a motion for JNOV, they may lose at trial and have to pay the opposing party’s reasonable attorneys’ fees or they may prevail at trial but the defendant is judgment-proof and/or declares bankruptcy. I also emphasize one indisputable fact: They will face a steep increase in litigation costs. That discussion with the parties may not convince them to settle the dispute at the mediation, but it often cracks open the door to resolving the dispute. I have had counsel contact me shortly after a mediation has concluded and tell me that my discussion with their clients bore fruit: The parties decided it was better to resolve the case and move on with their lives.

Throwing in the towel too early:

Often, part of the mediation process involves storming off and yelling, “We’re done!” When that occurs, experienced counsel and mediators know it’s almost always a tactic in an attorney’s toolbox and not a statement to be taken at face value. A short break often restores calm to the room, and the mediation can continue.

Not dealing with liens before the mediation:

Mediation is not the time to start making inquiries to lienholders. Counsel should be armed with the answers so the parties know what the bottom line is. If the amounts of liens are substantial, counsel should consider inviting the lienholders to participate in the mediation.

Engaging in ad hominem attacks on parties and counsel:

Having been a judge for more than 28 years, I can state with the utmost certainty that it is never a good idea to engage in personal attacks in a courtroom or at a deposition. It is an especially bad idea to do so at a mediation, where part of selling your case is building trust with the opposing side. What seems like a ballpark offer may be rejected solely because the offering side has treated the recipient with contempt.

Allowing disputes to arise post-mediation as to settlement terms:

After a long day of negotiations, a deal is finally struck. The parties sign a short-form settlement agreement consisting primarily of deal points, and everyone goes home after breathing a sigh of relief. The next day, as counsel exchange drafts of the formal settlement agreement, disputes surface that threaten to kill the deal. What went wrong is usually counsel’s failure to anticipate potential disputes over aspects of the settlement and the need to negotiate and resolve them before they arise. In my mediations, I am fully engaged in the process of drafting the short-form agreement in order to prevent the settlement from falling apart. Further, I review all the terms of the settlement with the parties to prevent a case of “buyer’s remorse.” Counsel should likewise seek the mediator’s input in order to tie together all possible loose ends before they go home. Doing so will help preserve the settlement they labored so hard to achieve.

A final word – 

Mediation requires not only knowledge of the facts and the law underlying the parties’ dispute, but also the skills to overcome impediments that often arise as it takes place. Understanding why mediations fail will help to bring the parties to a position where they decide it’s better to settle their dispute than proceed to trial. When the parties reach that understanding and enter into a settlement, I congratulate them and tell them that although neither side obtained all that they sought, they can be sure of one thing: They will sleep better tonight than they have in months!