Key Considerations Before Mediation of a Business Dispute
- posted: May 03, 2016
Today most courts require that litigants attempt to mediate a resolution to their dispute before the court will set the matter for trial. For this reason, it is critical that the parties evaluate a number of key variables before they go to mediation. Here is starting point for the process.
- What is the relationship between the two businesses? Is there the potential to preserve the existing business relationship so that the parties can continue to do business with each other after the dispute is resolved? Or, is this a one-time deal after which the parties will likely have no future business relationship? If there is a possibility that the parties might have a future business relationship, this potential opens up new opportunities to find a business solution to the dispute. Perhaps, as a portion of a settlement, one party can offer a discount on future business? If a future business relationship is unlikely, the negotiation will more likely focus on a financial solution.
- What is the relationship between the principals? Do they get along? Has the situation become emotional in any way? Does the person participating in the mediation have knowledge of the events? Oftentimes, the principals have a long history. Sometimes, they are friends and would prefer to maintain that relationship. The opposite can also be true. No matter, in many situations, the principals will be living in the same industry for years to come.
- What is the best outcome? Is it just about money? Sometimes a successful mediation requires an affirmative act by one of the parties. For example, if one construction company has multiple ongoing projects with one general contractor, the solution to the current problem may involve modifications to all of the existing business. Does a subcontract need to be revised? Does a particular project manager need to be removed? It is always important to discuss potential outcomes with your client before start of mediation. Both of you need to have established parameters to define what is an acceptable outcome.
- When is the time right? Too often, mediation comes too early or too late. If it’s too early the parties may still be ready to fight. All lawyers know that litigation is hard on the client. But, if mediation comes too early, the client may not have experienced some of the negative reinforcement (legal fees and aggravation) that would encourage a resolution. Instead, the client may still have visions of a smashing victory in court. On the opposite end, if the client has already invested a significant sum in the litigation process, it may be forced to go to trial to have any hope of breaking even. So, think carefully about when you should suggest mediation.
- Who is opposing counsel? As we all know, some attorneys just can’t help themselves. A win-win settlement is just not part of their vocabulary. When an attorney like this is on the other side, you should advise your client that mediation may not be productive.
It is always a good idea to reflect carefully on the questions presented in this this blog and those developed from your own experiences before deciding if and when to mediate. Once you make that decision, discuss these issues with your client to improve your chances for successful outcome.
Todd V. McMurtry is a Member at Hemmer DeFrank Wessels, PLLC. He is a commercial trial attorney and Harvard trained mediator. Todd has been married to his wife, Maria C. Garriga, for 28 years. They have three adult children. If you have questions or comments, contact me at [email protected].