February 2002

A Mediator's Observations

by Louis D. Peterson

It has now become commonplace for litigating parties and their counsel to engage in mediation. However, many of these participants do not have a realistic understanding of the mediation process and the role of the mediator. With a little advance education, they would be more likely to reach a successful result. Based upon my experiences in mediating disputes over the past decade or so, I offer these observations to assist lawyers and their clients as they embark on the mediation road.

The parties should exchange their mediation submittals. Prior to the mediation, counsel for each party will prepare a mediation submittal, in the form of a letter, memorandum or brief. This submittal should contain a thorough description of the factual background underlying the dispute, and a thoughtful analysis of the critical legal issues. In almost all cases, the parties should exchange their mediation submittals with one another because this is an important opportunity to speak directly to the other side before the day of the mediation. When each party has time to reflect upon the opposing party's perspective in advance, it is more likely that there will be meaningful settlement dialogue at the mediation. If it is necessary to provide any information for the mediator's eyes only, counsel may submit a separate short confidential memorandum.

The joint session should ordinarily not include opening statements. It is helpful for the parties and their counsel to begin the mediation day in a joint session with the mediator in order for him or her to share some preliminary thoughts at the same time with all participants. Unless there are unusual circumstances, the parties should not make opening statements, which at best simply repeat what everyone already knows, and at worst polarize the parties even more, reducing the prospects for healthy negotiations. The mediator will already have an excellent grasp of the basic issues in the case from the parties' written submittals. Additional information can be provided to the mediator by each party in the separate caucus sessions that follow the joint session.

The mediator's private caucus sessions with each party should be confidential. The mediator should clarify with the parties at the outset that no information or opinion expressed during the separate caucus sessions will be shared with another party, unless the party has authorized the mediator to communicate it. The mediator should be free, however, to use all information — and inferences and arguments — that can be drawn from the written submittals exchanged between the parties. In the event settlement is not reached, nothing that is said or done at the mediation can be used in any way by any party in connection with the lawsuit.

Each side must recognize that the other side has sincerely held and valid arguments. During the course of a lawsuit, both of the parties are so immersed in the righteousness of their cause that it is difficult for them to appreciate that there might be another side to the story. Yet it is rare for either the claims or defenses to be entirely frivolous. It is important for litigants — and their lawyers — to acknowledge that each side is advancing factual and legal positions about which they feel strongly, and that both parties are subject to the risk of an adverse result at trial.

A mediation is not a trial or an arbitration. Although a party ordinarily has ample opportunity during the mediation to describe the facts and underscore the strength of her position and the weakness of her opponent's stance, she should not lose sight of the fact that this is not a trial. The mediator is not there to decide the case, but to assist the parties in reaching a compromise. There ordinarily are no winners and losers in mediation. If the paramount goal is to achieve a victory, the parties should go to trial (where it is also possible, of course, to suffer abject defeat).

This case, like all cases, will be resolved at some point. Too often, a lawsuit takes on a life of its own, and the parties lose sight of the fact that the dispute will end some day. That day could be next month, following summary judgment motions; or next year, at the conclusion of trial; or three years from now, upon the receipt of the appellate opinion; or a year later, after the retrial. On the day of the mediation, the parties have an unusual opportunity to affect the timing and the terms of the resolution of their dispute. They can put an emotionally draining matter to rest and move on to more productive endeavors.

Both sides will have to compromise substantially. Before the day of the mediation, each party normally has considered his bottom-line settlement number, above or below which he will not go. And most likely he has also considered that if he must move just a bit more to reach a settlement, he would be willing to go to another line — his bottom, bottom line — beyond which there is no possibility that he will move. Due to the peculiarities of human nature, usually even the bottom, bottom line represents a victory of sorts for that party. And almost never do the bottom, bottom lines of the two parties overlap. Nevertheless, most mediations end in settlement, but only because the parties learn during the course of the day that settlements necessarily require substantial compromise by both parties, painful though it may be.

A bell-curve analysis can be a helpful tool in settlement negotiations. In any given trial, one party may obtain a decisive win, but the results would usually be different if averaged over countless trials of the same case. It is often instructive to analyze the settlement value of a case by breaking the case down into its component parts, assessing the maximum exposure on each claim, and assigning a percentage probability to an award on each theory. Even though the trial result of the case is not predictable with certainty, a seasoned, impartial observer of the case in mediation can often determine a hypothetical range within which the case would generally fall. A reasonable settlement is never just one number, but a reasonable settlement almost always falls within the middle portion of the bell curve of results forecast by this method.

The mediator is the only person involved in the mediation who is neutral and objective about the factual and legal issues in the case. Whether or not you agree with the mediator's views, you should take into account that they do represent the perspective of a neutral observer with substantial trial and mediation experience. Although each party expects the mediator to pound some sense into the other side during the course of the day, the reality is that the mediator will actually be working hard to ensure that both sides reach a better understanding of the risks of their positions.

Only the mediator can determine that settlement is not possible at the mediation. It is not productive for a party or his counsel to announce unilaterally that the negotiations are over. The histrionics of packing up briefcases and putting on jackets are not effective negotiating tools — in fact, they are signs of immature and discourteous behavior. The parties and their counsel should feel free to suggest to the mediator at any time that they believe further negotiations are unlikely to be fruitful. But only the mediator is spending time in separate caucuses with each party, and he is in the unique position to know when productive negotiations are at an end. If it becomes apparent during the mediation that the case cannot be settled that day, the mediator will inform all parties of that fact.

All participants should think creatively about potential solutions to the dispute. The mediator is not the exclusive repository of wisdom in the mediation process. There may be an untraditional approach that assists the parties in reaching a resolution. Innovative ideas can emanate from anyone present. Therefore, lawyers and their clients should not be reluctant to raise their ideas in brainstorming sessions with the mediator. Furthermore, the participants should be thinking thoughtfully about any unusual terms that they will require in any settlement — late in the process, it can be difficult to add new concepts for the first time.

All participants must remain present throughout the mediation. If any participant has a scheduling problem, for example, a telephone conference or an airplane departure, it is important that the mediator know well in advance, so this does not interfere with the course of the mediation. The mediator is usually prepared to stay as long as necessary in order to assist in the resolution of this matter, and it is important that those with authority to settle the dispute remain present. If it is necessary that any party consult during the course of the mediation with someone available only by telephone, it is crucial that that person remain available throughout the day (and night, if necessary).

The settlement terms should be put in writing and signed by the parties. Once the parties have reached a settlement, all of the principal terms of the settlement should be written on a settlement term sheet, which the parties should sign. The lawyers should not rely on the mediator to do this work for them, but instead they should anticipate the structure of the settlement in advance, and come prepared with an outline of the important settlement terms. In order to ensure that the settlement is binding, it is a good idea to provide, as one of the settlement terms, that the mediator is appointed by the parties as an arbitrator with binding authority to resolve any disputes regarding the form of the final settlement documents.

If the parties and their counsel enter into mediation with the intention of negotiating in good faith — and with a good understanding of the nature of the mediation process — the prospects for a successful resolution of the dispute are substantially enhanced. And if all efforts to settle a case fail, perhaps the judicial resolution of the dispute will add some valuable precedent to the common law, and make it more likely that future disputants in similar circumstances will compromise their dispute.