Mediation has gained increasing popularity as a preferred method of resolving disputes in various fields, including legal, business, and personal matters. Unlike traditional litigation or arbitration, mediation offers parties an opportunity to find mutually agreeable solutions with the assistance of a neutral third party. If you are considering participating in a mediation, it is helpful to understand what to expect during the process. In this article, we will guide you through the key steps involved in a mediation and shed light on what you can anticipate.
Step 1: Mediation Orientation and Preparation
Before the mediation session begins, participants usually attend an orientation where the mediator explains the process, establishes ground rules, and ensures everyone understands their roles. The mediator will also emphasize the voluntary and confidential nature of mediation, creating an environment conducive to open dialogue and negotiation.
Step 2: Opening Statements
Once the orientation is complete, the mediation formally begins. Each party involved in the dispute is given the opportunity to make an opening statement. This is an opportunity to share their perspective on the matter, express their concerns, and outline their desired outcomes. While emotions may run high, it is crucial to maintain a respectful and constructive tone throughout the process.
Step 3: Facilitated Communication
The mediator will then facilitate communication between the parties. This typically involves a structured discussion where each party has a chance to express their viewpoints, concerns, and interests. The mediator may ask clarifying questions, encourage active listening, and help identify common ground or areas of potential compromise. The goal is to foster productive dialogue, encourage empathy, and promote understanding between the parties.
Step 4: Issue Identification and Exploration of Interests
During the mediation, the parties work together, with the assistance of the mediator, to identify the key issues underlying the dispute. This process often involves exploring the interests and needs of each party involved. By understanding the underlying motivations and concerns, the mediator can help generate creative solutions that address the core interests of all parties.
Step 5: Generation and Evaluation of Options
Once the issues and interests have been identified, the parties engage in brainstorming sessions to generate possible solutions. The mediator encourages an open and collaborative atmosphere, where all ideas are considered without judgment. The focus is on creating a range of options that could potentially meet the needs of everyone involved.
After generating a list of potential solutions, the mediator assists the parties in evaluating the pros and cons of each option. This step involves analyzing the feasibility, practicality, and potential outcomes of the proposed solutions. The goal is to narrow down the options to those that are most likely to result in a mutually acceptable resolution.
Step 6: Negotiation and Agreement
With a refined set of options, the parties enter the negotiation phase, where they strive to reach a mutually satisfactory agreement. The mediator guides the negotiation process, helping to manage any conflicts that may arise and ensuring that discussions remain focused on finding common ground. The mediator may propose compromises or suggest alternative solutions to facilitate progress.
Once the parties reach an agreement, the mediator assists in drafting a written agreement that outlines the terms and conditions of the resolution. It is essential for all parties involved to review the agreement thoroughly, seeking legal advice if necessary, before signing it.
Conclusion
Mediation provides an effective and collaborative approach to resolving disputes, allowing parties to maintain control over the outcome while minimizing the costs, time, and emotional toll associated with traditional litigation. By understanding the steps involved in mediation, you can better prepare yourself for the process and make the most of this opportunity to find a mutually agreeable solution. Remember, the success of mediation depends on open communication, willingness to explore various options, and a genuine commitment to finding common ground.
Video Transcript
If you are a business owner and you have a legal dispute, you often go through mediation. And if you are wondering about what to expect there, that is what we are going to talk about today, along with some tips on how to be successful in mediation, how to effectively advocate for the best deal for you, and just some basic questions that my clients often have as they are preparing for mediation.
What Is Mediation?
Mediation is where two parties in a dispute, this might be a lawsuit, or it might be prior to a lawsuit, but these two parties want to give an effort at trying to settle their differences, and usually, they have been unsuccessful on their own, even with their attorneys, and so they decide to go to mediation.
At mediation is a person designated as a mediator. This is usually a judge, an attorney, or an expert in the particular area that you are trying to resolve through mediation. The mediator’s job is not to advocate for either side. The mediator doesn’t make a decision like a judge in a court or an arbitrator. The mediator’s job is to help the parties get to some resolution, and usually, the mediator does this by helping the other side understand each other and helping each side think through logically the real costs of moving forward in a dispute.
For example, you might have mediation in a divorce where the parents might be trying to avoid legal fees. They might be trying to avoid harm to their children. The husband and wife are divorcing, and they want to figure out how to get what they want accomplished in a settlement. And so, the mediator might spend some time talking with them about what are their goals. And often, that means an effective mediator will help them identify goals they maybe hadn’t identified prior. Obviously, they want some sort of financial arrangement that is beneficial to them. They may want some sort of custody, and they may want some rules in place that are advantageous to them, but what else do they want?
Usually, couples going through a divorce want some peace of mind. They want to stop fighting. They want less negative energy and toxicity. They want peace for their children. They want their children to grow up in a loving home without fighting and arguing. And so these are the things that an effective mediator will help the parties focus on. Because often in litigation or prior to litigation and disputes, parties, especially in a divorce, are focused on retaliation and resentment and bitterness and betrayal and all the hurts. But to get a deal done takes focusing on what is best for that deal. All right, so that is an example of mediation in a divorce case with children.
Mediation as Business Partners
Let’s talk about business owners. Let’s say you have two business owners who have found that they cannot get along. They are partners together; they have been working together for a while. They stop trusting each other. There has been a sense of betrayal. Maybe they are not even talking. The mediator will help them focus on what they want. Well, one might say, Hey, I want a lot of money, and I want to be out of here. I want to never deal with that person again. And by the way, most of the time I hear from clients, they will say, Aaron, I would rather pay you the money than let that scoundrel or that jerk or some other word get any of the of the money. Unfortunately, some lawyers will take advantage of that vulnerable, emotional state, but good lawyers will not. And a mediator will help the business owner focus on what do they really want to achieve here.
Well, one thing is, if you are running a business and the two owners are fighting, that business is often distracted by that fighting, and maybe distracted is putting it lightly. Maybe there is chaos. Maybe it is affecting profitability. Maybe great employees are leaving or about to leave. So often, a mediator will focus on business owners. What do you want to accomplish here? And if you want the most money, that means let’s take care of the business, which is generating the money. We’ve talked about how mediators will help the parties think through what truly matters to them, and often that is below the surface concerns for some of those fundamental concerns and values.
The Cost of Moving Forward & Odds of Winning
The next thing a mediator will do is help business owners or parties in a mediation understand what are the costs of moving forward and what are the odds of winning. I was recently in a mediation where it probably would’ve cost $200,000 for each side to fight out this intense legal battle in the courts. And let’s just hypothetically say they were fighting over $3,000. Okay, so in total, even if the winner won and got the full $300,000, they’d still be out $200,000 in legal fees, which means their net benefit of litigation is $100,000, but they could lose, and in that case, they’d be out the $200,000 or maybe even more. So as you can see, sometimes thinking through the odds of winning and the cost of actually getting a decision at trial may not make it a whole lot of sense to actually go to trial.
Where to Put Your Focus?
The other thing that the mediator will help the business owners focus on is the distraction of depositions and discovery and all the negative energy associated with going to trial. It is a long process, and you, as a business owner, if you are in a dispute, if you resolve that dispute and you settle, you can go back to focusing on what makes the business successful, the thing that you love to do, rather than being distracted by the negative energy, the bitterness, the anger and frustration related to a lawsuit. So there is an intangible emotional energy level benefit, which I believe results in a very tangible monetary benefit if you can settle a case. So a good mediator will help you think through all of that.
Why the Routine?
All right, so next question you might have in mediation is, Hey, can we just dispense with all the games and the dance where both parties make a little offer, make a little move, make a little move, make a little move, and eventually end up in the middle? Can we dispense with that and just jump to the middle and say, “Hey, this is our one and only offer. Take it or leave it.” Well, when I started a practice, I thought, you know what? Why go through the whole dance? Why go through the whole game? What I have learned, though, is the best practice is to go through that process because often parties in a mediation are, and I am talking about, let’s say the other party they are not ready to set down their ego and to focus on what matters most until they have gone through the process that a good mediator goes through. It is kind of like marital counseling. Think about it. The first time you sit down, if the counselor just said, “Hey, husband, why don’t you do this? And wife, why don’t you do this? And all your problems are solved?” No. Nobody is going to make changes overnight. There needs to become an awareness of what is important to each individual, and they have to have a confidence in the process. They have to figure out what steps they are willing to take and then talk through what does it look like when taking those steps. In other words, there is a process in mediation that you need to go through, and that means not necessarily compromising too much at first. You want to start out with an exchange of information. There is also the old saying whoever offers the first number loses. I don’t think that is entirely true, but it is a fair point that whatever your first offer is, you are never going to get a better deal than that, and you are probably going to be asked to compromise from there down.
So if you are going into a mediation, I would recommend you work with your attorney and the mediator to gradually move towards where the deal may end up at the end of the day or at the end of the mediation period. By the way, it is my experience that rarely do parties settle a case in the morning of an all-day mediation.
Usually, they start getting close to final offers, like 1:00 PM to 2:00 PM. Sometimes, if we are planning to end at 5:00 PM, the real bottom line numbers offered by people are coming at five or 5:30 or 6:00, and that can be kind of frustrating. I had one mediation go until almost midnight because we were so close, but then we had to draft up the settlement agreement, and we can’t let anybody go home. Because if they go home, they may not come back and have the same willingness to settle. So once the parties have come to a common agreement, you need to get it written up and signed. So I often encourage the mediator to talk with all of the parties about coming to a settlement or coming to real numbers early afternoon. Yep. Let’s go ahead and exchange some information. Let’s start with some lowball or highball offers, but let’s start getting to brass tax sometime early afternoon so that ideally, by three, we know if we have an agreement which we can write up or not. Admittedly, sometimes it just isn’t possible, and mediations can go quite late.
That is another tip I would encourage you if you are going to a mediation not to have a flight going out that evening because many times you are so close to a deal, you just have to stay a little bit longer. So I always tell my clients keep your schedule open for the evening because although you are welcome to leave at 5:00 PM, you might decide, we are so close. Let’s just try to figure this out.
Are Mediations All About the Money?
Sometimes mediations are all about the money. But they don’t have to be. Often the best or are the most likely ways to get a settlement in a mediation is by getting creative. For example, let’s say one party wants a hundred thousand dollars, and the other party says, I am only going to pay zero. And you might think, okay, well, they can negotiate and try to agree to some dollar amount, but sometimes they just get too far apart, let’s say the first party says, all right, I want $70,000, and that is my lowest offer. That is my best offer. And the other party says we will pay $30,000. That is our best offer. How do we get creative with that? I mean, as you can see, it can end at a stalemate. Great attorneys in mediation and great mediators will explore creative options.
Such as maybe instead of a fixed dollar amount, it can be a payment plan over time, perhaps a monthly payment with an interest rate. A business owner might say, I can’t pay $30,000 now, but I am willing to pay $50,000 if I can spread it out over a couple of years.
What Are Some Other Options?
I have actually seen two parties who were in a mediation, and they don’t hate each other necessarily, but they had some sort of business disagreement. I have actually seen where they were able to not only work out the money piece, but it was because they were able to work out some other business deal together that, ultimately, it was a win-win for both of them.
I will give you an example, and this is a hypothetical. Let’s imagine that you have a manufacturer of a custom product for a customer. The customer said they would pay a hundred thousand dollars. The manufacturer prepared this product, and it cost the manufacturer $30,000. The manufacturer may say, I want a hundred thousand. The customer may say, I can only afford $10,000. But here is a creative option. The manufacturer has virtually no use for these products, these custom products. Maybe they can sell it to the customer at some sort of a discount. So, for example, if the customer will pay $50,000, the manufacturer will release the product.
As a result, the manufacturer gets $50,000 more than they would have if they are just stuck with these products and had nothing. And the customer is able to get a deal on the products. There are other scenarios, but getting creative and really thinking about what other business possibilities might we do.
Sometimes, a party wants an apology, and they will allocate a dollar amount to that. Like, “Hey, if we get an apology, we will accept $20,000 less.” Maybe they want an apology in writing. Maybe it is an apology in writing that is not confidential but instead can be used to repair some reputational problems with employees or with customers of the company.
Other terms that are negotiable might be a confidentiality agreement. It might be a noncompete. I once saw where two parties said, all right, we are going to agree to a settlement here, and if one of the parties agrees to a noncompete, we will have a hundred thousand dollars value associated with that. So, the settlement amount moved by $100,000 if one party would sign a noncompete for certain particular clients or prospective clients.
Confession of Judgment
Another feature that we often see as part of a mediation is a confession of judgment. I will explain what that is. If one party says they will make payments over time, and they don’t, what is the other party going to do? Well, now I have to sue again for breach of contract. They don’t want to have to do that. So when the parties put together a confession of judgment, it is a document that says if the party who is supposed to make payments doesn’t pay, the other party doesn’t have to sue. All they have to do is go file that confession of judgment with the court, and that is like winning at trial. You get an entire judgment. So a confession of judgment is a way to show one party is really committed to making those payments, and if they don’t, it is like they lose at trial. It really gives some teeth to a promissory note or a settlement agreement where one party is agreeing to make payments over time.
That confession of judgment might also have attorney’s fees in there, so if the party doesn’t pay as they said, they would, the other party can recover attorney’s fees for having to file that in court and maybe even for the entire process.
Hopefully, this gives you some tips and understanding of the process of mediation and what to expect before you go through a mediation yourself. This, of course, is to raise topics to discuss with your attorney. Don’t necessarily rely on this. This is general internet educational information. Obviously, every scenario is different, and I encourage you to rely on the professional judgment of the mediator and attorney that you use as you are going through mediation.
Conclusion
You might wonder, why do I do these videos? Well, I am a business attorney in Minnesota. I work for business owners and entrepreneurial companies, but as I learned throughout the years a lot of tips, I realize that it can provide a lot of value to people to just put these out on the internet and pass them along. A lot of times, I will send these videos to my clients to help educate them on what to expect, which avoids having to spend time with my clients for which they are paying my attorney’s fees. So it is a great way for my clients to get information. It is also a great way for the public to benefit from what I have learned through the many years of being a business attorney, working in the legal process, and working with a lot of business owners.
If you are interested in avoiding some of the problems that are common with new businesses, feel free to go get my free handout. It is available at aaronhall.com/free, and you will also get a few exclusive videos that are not available anywhere else online so you can learn more about how to avoid some of the common legal problems in your company, avoiding legal trouble, avoiding the expense of attorneys and hopefully, achieving more success in your company and your life.
