Meet me in the middle – litigation mediation

In a certain sense, the practice of mediation to resolve business disputes was born of the notion that “there has to be a better way” – a better way than going to court to settle a business dispute. Litigation is expensive, time-consuming and probably the most surefire way to sever a business relationship. Mediation, on the other hand, proponents say, is cheaper and quicker than litigation and allows disputing parties to talk through their problems in an environment which ideally would foster a “we can work it out” mentality rather than the “winner take all” sentiment fostered by the litigation process.
“Mediation essentially is a method of negotiation,” says Joanne Sznaider, owner of Eastside Collaborative Solutions, a Shorewood-based mediation firm. “The point of mediation is to facilitate conversation between disputing parties with the goal of getting those parties to come together to a solution that will be good for both parties while avoiding a costly legal battle in the process.”
Mediation has been a popular method of dispute resolution on the coasts for quite a while, said Sznaider, and recently has begun to catch on in the Midwest and here in Wisconsin. Bill Jennaro, a retired Milwaukee Circuit Court judge who currently is an attorney with the Milwaukee law firm of Cook & Franke, and also a practicing mediator, says that mediation has been a viable alternative to litigation in Wisconsin for about five years now, but of the more than 500 mediations he has been involved with in the past five years, only a handful took place the first couple years. “Mediation is catching on like prairie fire here,” Jennaro said.
Mediation: how it works
Mediation may be self-prescribed by the disputing parties or can be court-ordered if a dispute already has entered litigation – mediation can take place at anytime during the litigation process. In either case, the disputing parties choose a mediator who meets with the parties together and individually so the mediator can learn the facts of the issue. Then the mediation sessions begin, which typically involve members of the disputing parties and their attorneys if the parties so choose to include them in the process.
If the sessions lead to a solution, the mediator writes up a contract that becomes legally binding only after both parties and their attorneys have signed it. If a solution is not reached, the dispute then can continue on to trial. Even if mediation is court-ordered, the parties do not have to come to a solution via mediation. If mediation is unsuccessful, the case may go back to the court system, or remain unresolved.
“There really is no risk involved in mediation,” says Roy Nelson, an attorney with Petrie & Stocking in Milwaukee, a director at Conflict Resolution Services, a member of the Alternative Dispute Resolution arm of the State Bar and a practicing mediator and arbitrator. “You never are required to settle and you always have the option of entering into litigation if you think that is the best way to resolve the dispute.”
Though it is difficult to place price tags on mediation and litigation for comparison’s sake – costs vary greatly on a case-by-case basis – Sznaider maintains that a typical mediation costs about 50% less than what it would cost to take a case through trial.
To mediate a dispute that has not yet entered into litigation, the disputing parties would incur mediator fees and possibly attorney fees if the parties choose to have their attorneys present at the sessions or receive counsel regarding the mediation. If a dispute already is in litigation, the parties would have to pay mediator fees in addition to attorney and court proceedings fees. But even with the added fees, local mediators and attorneys argue that mediation still is cheaper than litigation because the mediation process takes less time than the litigation process.
Jennaro uses this example to put the mediation versus litigation cost comparison in this perspective.
Say there is a case in which Company A has a contract with Company B to market Company A’s product. Company A does not get the response it desires from the market and blames Company B for not doing a good job of marketing the product. Company B counters by accusing Company A of not manufacturing a product of the quality promised in the contract.
Both companies accuse each other of causing them to lose money, and they sue each other. The case enters into litigation, but the judge orders the parties to try mediatation. The case is settled after only two days of mediation, while a trial would have lasted at least 10 days and would have cost the disputing parties – each of which already had spent $50,000 to get the case to court – an additional $50,000 to $75,000 each, Jennaro says.
“The business of business is business,” Jennaro said. “It’s not about spending time in court.”
Nelson claims that while disputing parties may spend several thousands of dollars to mediate a dispute to resolution, to get a case through trial will cost at the very least $50,000. A patent infringement case, for example, can cost a half-million dollars per side to get through trial, he says.
Saving a business relationship
Perhaps even more important than the price difference between mediation and litigation is the belief that mediation provides an opportunity to save a business relationship. Because mediation in theory is a way for both disputing parties to meet, get to the heart of the issues, share their points of view and agree to a solution that in some way benefits everyone, the disputing parties could come out on terms civil enough to allow a business relationship to continue.
“The conversations that take place in mediation sessions often get to the root of the problem which may stem from personal or emotional issues that wouldn’t come up in court,” Nelson says. “The court hears the case, applies the law and makes a decision. Mediation is broader in scope. It can consider other issues at play than just the legal ones. In mediation, business owners have the opportunity to come up with business solutions rather than being handed a legal solution by the courts, a third party.
“The litigation process is ugly,” Nelson continues. “It brings out the worst in people. Mediation provides the opportunity to come to a collaborative business solution rather than nuking someone you will probably see again in the marketplace.”
Sznaider notes also that, in mediation, business owners keep control of the situation. The mediator, Sznaider says, basically is a facilitator. While the mediator can suggest solutions or offer advice, typically the mediator encourages conversation with the goal of steering that conversation toward a solution upon which both parties can agree.
“Never in the mediation process do the disputing parties give up control,” Sznaider said. “Even down to the very end, if the parties cannot agree on a solution, they are not forced into anything. The dispute simply goes on to court.”
Furthermore, all mediation proceedings are confidential, whereas cases that go to trial become matters of public record. Even if mediation is unsuccessful, all information released during the mediation sessions remains confidential. The attorneys for the disputing parties simply submit to the court that mediation was unsuccessful and that the case should proceed to litigation.
Should you mediate?
As with any new method of doing something, mediation has its skeptics. Critics point to the fact that when mediation is court-ordered, the disputing parties have already spent money on attorney fees and court proceedings and now will be forced to incur the additional cost of mediator fees. But often the judicial discovery process uncovers facts needed for a successful mediation to occur. The court proceeding of discovery involves obtaining sworn testimony and requesting documents that the courts can compel the parties to present. The mediation process itself cannot demand anything of either party. Nelson admits that one of mediation’s weaknesses is that it is premised on full disclosure by both parties, and that without all the facts, mediation will not work.
Bill Katt, a principal in the Milwaukee law firm of Leib & Katt, refers to a case between a construction company and a business that housed its products in a warehouse built by the construction firm. Defects in the construction of the warehouse led to high humidity inside the structure, and the business using the warehouse believed that humidity damaged the products kept in the facility. The parties submitted the case to mediation, which was a complete failure, Katt said. Without enough information about all the parties involved and any underlying issues, mediation was ineffective.
But once discovery took place, the parties were able to settle before trial.
“The idea of mediation is good but it doesn’t work in all cases,” Katt said. “It depends heavily on the specific case whether mediation should be attempted. If you don’t have all the information needed, you could be wasting your time.”
Katt also argues that there are instances in which one side might want its case to be heard by a jury. He uses the example of a small company in suit against a large corporation – the small business might get sympathy from the jury and either be awarded a handsome settlement or not be required to pay what the large corporation demands.
“If you want to take a principled stand and feel a jury should hear your case, then I would advise litigation,” Katt said. “If you want to prove your innocence in court as an indication that you clearly were right in the situation, then you should go to court.”
Cost vs. benefit analysis
The flip side to that argument, Nelson says, is that the jury may not agree with you. “It’s a matter of cost-benefit analysis,” he says. “Is it worth what you will spend in court costs to try and prove you’re right when the judge or jury might not find you to be right?”
Ed Harness, director of the Better Business Bureau of Wisconsin’s Dispute Resolution Center and owner of E-Mediate, a Milwaukee-based dispute resolution firm, says one of the reasons business owners may be reluctant to mediate rather than litigate is they perceive mediation as a compromise in which they will have to give something up.
“Mediation is not a compromise at all,” Harness said. “It actually gives you a chance to tell your side of the story, speak up about what you deserve, and do all of this without being cross-examined as you would in court. Your side of the story won’t be stomped on by any evidentiary standard.”
There also is the fear that because mediation is not bound by the law, rights may be forfeited during the process. To that, Harness reminds that no party to a mediation can be coerced into agreeing to a settlement, attorneys can be present at all times during the mediation process and a dispute can always return to trial if mediation is not successful.
The Better Business Bureau offers mediation services to both members and non-members. Any business wanting to use the service is charged a $100 administrative fee, and members are charged an additional $50 per hour for mediation, while non-members are charged $75 per hour.
“Dispute resolution is at the core of better business,” said Randall Hoth, president of the Wisconsin Better Business Bureau. “It’s only natural that we’d offer these services.”
Harness, a former officer with the Milwaukee Police Department, compares taking a dispute straight to court rather than trying mediation to an incident he experienced during his law enforcement career. A mother called the police to come to her house and make her son apologize to her. Harness was the officer sent to scene, which the mother had deemed a “domestic dispute.” In most legal disputes, Harness says, one side really just wants an apology.
“Many times you can resolve a dispute simply by apologizing,” Harness said. “It’s absurd to jump into litigation without trying to solve the problem through mediation, just like it was absurd for a mother to call the police to come over and make her son apologize to her.”
Arbitration:
A final decision
Another form of dispute resolution, arbitration is more similar to litigation in that the process calls for each side to tell its story, then the arbitrator – chosen by the disputing parties – returns a decision that is legally binding. Unlike a trial decision, however, there virtually is no chance for appeal. But like court decisions, arbitration judgments, once signed by both parties, become court documents and thus a matter of public record. Although the courts cannot demand arbitration, today many businesses write arbitration clauses in their contracts which state that any contractual disputes will be resolved via arbitration.
Katt believes arbitration is a compromise process. “If a case is brought against my client, even if it is frivolous, the arbitrator in almost all cases will award something to the plaintiff,” he says. “You have no real chance to appeal the arbitrator’s decision.”
Nelson said he would only advise a client to arbitrate if the client does not have the time to go through a lengthy court trial or simply wants closure to a dispute. Arbitration is not much cheaper than litigation, he says, because the discovery process also is part of arbitration. The way in which arbitration might cost a bit less is in that the process typically is faster than the litigation process, Nelson says.
“In all cases I would advise my client to try mediation first,” Nelson said. “If that doesn’t work, then we would proceed based on the circumstances.”sbt