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Timing of Mediation Is Just as Important as Picking of Neutral

Source: Daily Journal
Date: June 11, 2004
The notion that timing is a large part of success or failure in life is not a new one. It just seems to surface in ever-broadening contexts. Mediation is one such context.

Over the last decade or so, a sea change has swept through the legal and judicial landscape. No longer do we assume that a lawsuit once filed will be resolved by trial. Far greater is the likelihood that its resolution will be reached through mediation. Given the current California budget crisis, it is almost a foregone conclusion that this phenomenon will escalate dramatically.

While it is axiomatic that mediated settlements benefit clients through savings in litigation costs, time and aggravation, lawyers moving toward mediation need to carefully select the point in the life of the dispute at which mediation is most likely to succeed.

Simply stated, the timing of the mediation is as important a consideration as the selection of the mediator, and skillful counsel can take steps in advance of the mediation to enhance the likelihood of its success. In addition to formulating a trial strategy, counsel interested in obtaining the benefits of mediation for their clients must formulate a mediation strategy, the first component of which is its timing.

Any analysis of mediation timing must focus initially on why cases settle. They do so largely because the parties conclude, based on the information before them, that a settlement available to them at mediation better serves their business and personal needs than does the prospect of what they may gain at trial. The two critical components of that concept are information and needs.

A predominant, but not the sole, determinant of whether or not cases settle is information. A plaintiff needs information such as availability of witnesses and their likely testimony, and specific damage numbers, in order to formulate a demand that is reasonable and invites settlement.

A defendant needs information such as availability of witnesses, their likely testimony, and facts supporting potential affirmative defenses in order to evaluate the plaintiff's demand and his or her own exposure. Over and above the intrinsic value of the information, however, the information fills a critical psychological need.

People in business need an analytical framework within which to make business decisions, and settling a case is a business decision. Information such as that described above provides that analytical framework. Without it, a businessperson will not be sufficiently comfortable to make a decision of consequence. The decision maker will not be comfortable with the decision or be comfortable justifying the decision to those higher in the organization. Effective indecision is the likely result, and such indecision can be fatal to the mediation.

So when is the opportune time to mediate a case?

No hard and fast rule applies. It will be determined by the type of dispute, how many parties are involved and other unique characteristics of the people and businesses involved in the dispute. Three hypothetical cases illustrate this point.

For instance, in a breach of contract case involving only two parties who are present in the litigation at its outset, most if not all necessary information is known pre-filing. The need for discovery is unlikely. Last, no expert evaluation or testimony will be required. This case is a prime candidate for almost immediate, if not pre-filing, mediation.

A second hypothetical case illustrates how in employment or sexual-harassment cases, timing can be a bit more complicated. While we again have all parties present from the outset of the litigation, the information-gathering need is different in this case. Both sides may insist they have all the information they need.

However, assuming the facts are hotly disputed, the testimony of witnesses will be vitally important for both sides. Until discovery of these witnesses is completed, mediation bears little likelihood of success.

At the far end of the spectrum from the breach-of-contract case is a construction-defect case. Here we have numerous parties, many of which will enter the litigation by cross-complaints as the case moves forward.

Much of the needed information is unknown until well after the initial filing and will come from a host of experts whose identity is unlikely to be known until much later. Apart from mediation involving admittedly peripheral parties, mediation of the main case, to be successful, must wait for a later day. Another possibility here might be mediation of parts of the overall dispute as the case progresses.

One size clearly doesn't fit all. The key is to find a cost-effective time to mediate the case. The longer the case goes before mediation, the more information the parties have that is useful in settlement discussions. However, the longer the case goes before mediation, the higher the cost, which in turn affects the settlement numbers.

Additional aspects of a case affect mediation timing. The quantitative focus of how many parties are involved is important. Equally important is the qualitative focus, which involves identifying the real decision makers on all sides, in addition to when they are able and willing to devote their time and attention to the mediation. A mediation conducted with only people with nominal authority present is almost certain to be an exercise in frustration and futility.

Motions present another issue. Mediators commonly face either a pending dispositive motion or threat of the imminent filing of one. What impact do these have on the mediation? Obviously, if the merits of the motion are not strong, the impact is minimal. If, on the other hand, the motion is one that may have merit, the impact can be substantial.

An initial issue here for counsel is whether to file the motion before the mediation or simply use the threat of its filing as a tool in the mediation.

Better practice is to file the motion, await the filing of opposition, and then mediate the case before the court ruling on the motion. This conclusion is based on the fact that an oral threat of a filing is far less meaningful than the filed motion and supporting pleadings. They add a healthy reality to the situation. Awaiting the filing of opposition extends this reality to both sides and facilitates a meaningful discourse on the issues.

The existence of a supposed smoking gun also raises timing issues. Is a case not ready to mediate because one party has a smoking gun that greatly affects the settlement value of the case?

Not necessarily. The real issue here is how best to use the smoking gun.

The experience of the vast majority of mediators is that smoking guns tend to be fallible in either or both of two respects. The first is that the gun often turns out to be a popgun: It makes a little noise but proves to be far less harmful than the wielder of the gun imagined.

Second, mediators frequently have the experience that a smoking-gun piece of evidence is revealed to them in confidence only to be casually referred to later in the mediation by the opposing party. Its existence turns out to be no secret at all, and if it is also a popgun, its impact on the mediation (and litigation) is marginal.

Those observations aside, assume a party has a real smoking gun of which the other side is unaware. That fact does not detract from a meaningful mediation, if the smoking gun is noncurable.

Take the statute of limitations as an example. If the statute on a claim has run, its disclosure at mediation does not revive the claim, and its disclosure provides a powerful tool at mediation. If, on the other hand, the statute of limitations on a claim has not run but is about to, its disclosure likely would be fatal (and malpractice), and the only sensible conclusion is that the case is not ready to be mediated, given that a mediation conducted without disclosure and discussion of this defense would skew the settlement numbers dramatically and prevent a settlement.

So how does one strike the balance between the need for information and controlling cost? Begin with two fundamental principles: eighty percent of discovery information is usually obtained for 20 percent of cost, with the remaining 20 percent of information being obtained for 80 percent of the cost; and parties need only to know the approximate value of the case, not its exact value.

With those thoughts in mind, reach agreement with opposing counsel as to what information is really necessary, and tailor discovery to gather just that information. Just as you tailor the timing of the mediation to fit the case, so should you tailor the information-gathering process.

Finally, don't overlook using the mediator to help you tailor the information-gathering plan. With a correctly designed plan, the mediator can help structure the pre-mediation discovery, without affecting the ability to use court process to enforce that plan.

John Seitman is a mediator and arbitrator with JAMS based in Southern California and a former president of the State Bar.

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