by Peter Shenas

Mediation has become a very serious and powerful tool for the resolution of business conflicts.  It should be understood and considered by any business person when resolution of a dispute is no longer possible by one-on-one negotiations.

It is important to understand the difference between mediation and arbitration, which are often confused.  The end result of arbitration is a final decision on the merits by an impartial arbitrator or arbitrators.  Arbitration hearings generally take the form of mini-trials, including the presentation of evidence, opening statements and closing arguments.  Arbitration is often required as part of an agreement between the parties prior to the dispute.  In many cases the parties voluntarily agree to arbitration after the dispute has arisen.

Arbitration is far less expensive than litigation and a sensible alternative in many cases.  The popularity of arbitration has been driven largely by the high cost of litigation.

Mediation, on the other hand, does not result in a decision as to the merits of the disputed claim or claims. There is no evidence presented, nor is there a hearing.  A mediation is simply a voluntary attempt by the parties to resolve the dispute with the assistance and guidance of a mediator. Most mediators have legal backgrounds, and many are retired judges.  Most mediators serve on an hourly basis with hourly rates generally in the range of prevailing attorney’s fees.  Mediation hearings are generally initially scheduled for either a half day or a full day. Most disputes can be resolved within one day.  Complex or difficult matters will sometimes require additional conferences.

The result of a mediation is either a settlement of the dispute or a decision by the mediator that the dispute is incapable of settlement at that time. If the mediator concludes that a settlement is not possible, he or she will inform the participants.  They are then free to resolve their dispute in any manner they desire; generally, either by arbitration or litigation.

Mediators measure their success by the percentage of cases they are able to resolve.  The entire process is geared to reaching a voluntary settlement accepted by all parties to the dispute.  The mediator does not take sides, nor does he or she generally attempt to evaluate the dispute on its merits.

At first glance, a business person unfamiliar with the process and with its historical results might think it unlikely that a third party unfamiliar with a dispute would be able to resolve a dispute in a few hours which the parties were unable to resolve by negotiations between themselves. However, the skill of a good mediator should not be underestimated.

Although mediators do not all work exactly the same way, generally the mediation process commences with a request by the mediator that each of the parties or their attorneys, in the presence of the opposition party, or parties, explain their position to the mediator. This provides an opportunity for the parties to explain their positions in their own words in a neutral setting directly to the disputing party.

After the initial group session, the mediator meets separately with each party as many times as is necessary to find the common ground.  By meeting privately with one side then the other, the mediator acts as a "broker" of each side's position to the other.  The elimination of direct confrontations between the parties tends to decrease the intensity of the participants emotions and thereby facilitates settlement.

It is important to understand that all parties to a mediation are, interested in settling the dispute or they presumably would not have agreed to the mediation conference in the first place.  This constitutes a giant step toward ultimate settlement.  While it is true that before entering into the mediation process each side has its own, sometimes unrealistic, vision of what a fair settlement should be, the successful mediator recognizes that agreement to the mediation is a strong signal that everyone is working toward the same goal.

Mediation may be commenced at any time the parties agree to submit to the process.  From an economic point of view, it is obviously better to resolve the dispute before litigation commences. However, for a variety of reasons, that does not always occur.  Often litigation is commenced first with the belief that the opponent needs to be “softened up" before he will be amenable to a reasonable settlement.

Sometimes the relationship between the parties has become so strained as a result of the dispute that they are unable to agree to anything, including an agreement to mediate.  Also, simply the request by one party to the other to enter into a mediation is viewed by some as an act indicating weakness on the part of the offering party.

For those reasons, and others, mediation often is not agreed upon until litigation or arbitration commences, and often not until prolonged litigation.

Experience has shown that after parties to a dispute have been exposed to the expense and frustration of litigation, they become more receptive to the mediation alternative.

It must be understood that there are no winners or losers in the traditional sense in a mediation.  In the mediation context, a win should be defined as a mutually agreeable settlement.  Mediation very seldom results in a "chest-thumping victory" for anyone.  But it is an attractive alternative to costly and prolonged litigation, and will more often than not result in a sensible businesslike resolution of a dispute.

It should be kept in mind that the mediator's fees and the attorneys fees in a mediation will in most cases be insignificant when compared to the expense of litigation.  For a bottom line oriented business person mediation is an alternative which should in all cases be considered.

Published in the San Diego Business Journalon May 27, 1996

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