Jury trials are expensive, time consuming, stressful, and risky. Many litigants prefer Alternative Dispute Resolution (ADR). The principal forms of ADR are mediation and binding arbitration. ADR can take place in virtually any setting, utilizing virtually any procedure, provided everyone agrees. There are many companies that offer arbitration/mediation services for legal disputes, such as FINRA—www.finra.org. I serve on FINRA panels and am the principal of Legal Aidman Dispute Resolution (LADR). Feel free to reach out if you need help resolving a difficult situation. You can reach me at 610 642 7676 or evan@legalaidman.com.
Mediation
Mediation brings the parties together before a (hopefully) neutral mediator. This can be a judge, an ex-judge, a practicing attorney, a professional mediator, or anyone else both sides agree on. By bringing everyone together, the mediator hopes to expedite settlement of the case or, at least, resolve some of the issues that divide them. The mediator’s neutral perspective may provide both sides the first truly independent evaluation of the case. Mediators promote settlements by pointing out vulnerabilities the parties may not be aware of. This usually greatly influences the way the parties view settlement value. During the course of the mediation, both sides will learn a great deal about the case and its merit. Often, settlement takes place either at the mediation, or shortly thereafter.
There are no binding rulings. Everything is advisory. If you don’t want to settle, you just walk away from the mediation. Mediation is most appropriate when both sides see a possibility for settlement. When one or both sides are firmly entrenched in their position, it is unlikely mediation will be useful, and binding arbitration is a better option. See my article about binding arbitration.
In every mediation, the attorneys submit memoranda setting forth their positions on both liability and damages. The attorneys attach their expert reports, photographs and other evidence to the memo. Some mediators ask that the memoranda be shared with the other side. Others prefer that they not be shared. My preference is to share the memos so that everyone is aware of the other side’s position. That way, all the information is available so that reality stands the best chance of shining its light. Each mediator uses his or her own process for mediating disputes.
Mediation is facilitated when the parties recognize their vulnerabilities. They need to know the potential risk and reward for proceeding to trial. Since the mediation may be the first time a neutral third-party has taken an objective look at the case, it may be the first time the parties fully appreciate the weaknesses of their case. It also provides cover for the attorneys and the claim adjuster, that is, it may provide the justification the insurance company needs to settle the case. Insurance companies operate with several layers of authority. The claim adjuster may have minimal settlement authority. The next level up may involve an employee with greater responsibility and authority. And finally, there will be a claims supervisor or manager who has the largest authority of all. Each needs to be able to justify their recommendations. The mediator’s analysis of the case provides that. That is a big part of why the mediation process is so popular.
Most insurance claim representatives are looking to do their job as best they can. It’s not their money and that takes some of the emotion out of the process for them. As long as they have the mediator's opinion of value, they have something to rely on in making a recommendation to their superior. CYA. On the other hand, the plaintiff and counsel have a direct financial stake in the process. That adds an important component to the process. The plaintiff’s attorney will advise the client of the mediator’s opinion on liability and damages, and this may help the attorney motivate the client to accept the offer. The mediator’s opinion of the case can and usually does carry great weight.
You should always approach mediation as a marathon rather than a sprint. Don’t jump at the first offer. The offer will only go up, never down. So it’s best to “play hard ball” initially and see how things go. You may decide even at the end of the mediation to continue to hold out for a better offer. The mediator may then reach out to you the next day and at that time there may be more flexibility from the other side. Once they see that you are holding out, the offer may come closer to your last demand.
Mediations begin with the mediator making introductory remarks. Then the mediation itself begins. Most of the work of the mediation is done without the presence of the other side. If it’s a remote mediation, you’ll go into a “private room”. This gives lawyer, client and mediator a chance to speak frankly. You should be prepared to address any possible weaknesses in your case. After that, the mediator meets with the claims representative and his/her lawyer. You can expect a low first settlement offer. The mediator goes back and forth between the parties, hopefully making progress toward settlement. If it’s an in-person mediation, the process is similar, except that private meetings are held in a conference room, and the other side steps out to ensure privacy. Often, cases settle within a couple of hours, rarely earlier than that. Or the negotiations may break down.
One technique some mediators use to get negotiations unstuck is bracketing. Bracketing involves setting settlement ranges. For example, if the plaintiff’s last demand is $250,000 and the defendant’s last offer is $50,000, the sides are very far apart. The mediator may suggest to the plaintiff to drop the demand to $200,000 provided thaty the defendant increases the offer to $100,000. Although this doesn’t settle the case, it brings the parties closer together and that may provide the momentum to move it to settlement.
It is not essential in mediations that the attorney have positive previous experience with the mediator. One reason for this is that mediations are non-binding. If you don’t like the mediator’s view of the case, you can decline to settle. The other reason is that the crucial factor in resolving a case through mediation is the insurer’s trust in that mediator. If the insurer believes the mediator will give its side a fair shake (and it wouldn’t agree to that mediator if it thought otherwise), it will be inclined to take that mediator’s recommendations. I sometimes agree to mediators I have no experience with for these reasons, though I would never do so with binding arbitrations.
The cost of mediation and arbitration can be substantial. Typically the cost is split evenly by the parties. You should get an idea in advance what it will cost, and get your client’s approval. With binding arbitration, the cost may be a secondary concern since the dispute will end there and then and the savings in future court costs should more than offset the cost of arbitration. But with mediation, if the case is not resolved at its conclusion, you may have added a large expense to the litigation. This still may be worth it if the proceeding helped to narrow important issues and brought the parties closer to settlement. For example, you may learn at the mediation that the insurance company is not disputing liability. That will save you from bringing in eyewitnesses and an accident reconstruction expert.
Watch out for sham mediations. This is the type of mediation where the insurance company is not genuinely interested in settlement. It is simply fishing for information about the attorney, the client and the case. This is especially frustrating if you agreed to split the cost of the mediation. I sometimes ask for a commitment from the other lawyer, in advance, that they are truly interested in settlement.
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