Mediation is a form of alternate dispute resolution that allows businesses and individuals to resolve disputes outside of the courtroom. With settlement as the ultimate goal, the parties negotiate in front of a neutral third party, known as a mediator. Mediators are trained professionals with substantial experience in dispute resolution. Mediators lack the power to compel a resolution of the dispute. Instead, they facilitate negotiations and exchange settlement proposals between the parties. The Commercial Division of the Supreme Court of New York now operates an Alternative Dispute Resolution Program providing free four-hour mediation sessions for commercial cases. Mediators are also frequently appointed by the American Arbitration Association pursuant to contract clauses requiring mediation as a condition precedent to commencing litigation.
I. The Mediation Process
Mediation typically begins with an introductory call between the parties’ attorneys and the mediator. Preliminary issues are addressed relating to the scheduling, location and format of the mediation. In most cases, the mediator will request that each side prepare a concise pre-mediation statement setting forth their version of the facts and their legal position. This may include citations to legal authorities and key items of evidence, together with legal argument supporting the claims and defenses of each party.
Most mediations are completed in a single day before a private mediator or judge. Larger and more complex cases may require multiple days of mediation. Mediation is more likely to be effective if is conducted in person, though it is sometimes conducted virtually or in a hybrid format when necessary to accommodate all the parties. It typically begins with the mediator extolling the benefits of mediation and explaining that, while no party is ever fully satisfied with the outcome of a negotiated settlement, it typically results in a fair outcome while minimizing cost and risk for the parties. That is often followed with the attorneys for each party summarizing the strengths of their cases while also expressing a desire for settlement. If the issues are particularly technical, expert witnesses may also be allowed an opportunity to present their assessments of the technical issues in dispute.
After this initial conclave, the parties typically go to separate rooms. The mediator then shuttles back and forth between the two rooms to caucus with each party, gain a better understanding of their arguments, relate the arguments of the opposing party, and deliver offers and counteroffers back and forth. The parties typically begin far apart, but gradually move toward more realistic settlement proposals. At times, the mediator may encourage additional meetings of all the parties to overcome sticking points on key issues. If the mediation is successful, it results in a signed settlement agreement. If not, the communications that took place remain confidential, and the parties proceed to the longer and more expensive process of binding dispute resolution through a court or arbitrator. In our experience, slightly more than half of mediations result in a settlement, which results in significant cost savings compared to litigation or arbitration.
II. Benefits of Mediation
Mediation has become more ubiquitous in recent years and is strongly favored by courts. It is not uncommon for courts to encourage parties, or even compel them, to participate in non-binding mediation. So why submit your claim to a neutral third party? The short answer is that the process involves many of the benefits of litigation while avoiding many of the detriments. Notable benefits include:
Cost Reduction
Litigation is expensive. It requires document exchange, depositions, motions, and ultimately a trial if the issues are too complex for resolution by motion. Parties often wait years for the court to resolve its docket before they get their day in court, incurring substantial attorneys’ fees before their cases are trial-ready.
Mediation can often short circuit this expensive and inefficient process. If mediation results in a settlement, substantial litigation costs are avoided. It is a common for parties to mediation to split the costs of the mediator. The length of the mediation will depend on several factors such as the complexity of the case and the experience of the mediator, but a successful mediation usually produces a settlement within one day.
Furthermore, mediation and settlement avoid the difficulty and cost of judgment enforcement. It is a common misconception that obtaining a judgment is the end of litigation. The reality is that enforcement of a judgment can sometimes be more onerous than obtaining it, particularly if the defendant lacks substantial liquid assets. Mediation, in contrast, is a less adversarial process whereby an agreement is reached through cooperation. An agreement catered to both parties’ needs is often easier to enforce than a judgment.
Control
A party has extremely limited control over judicial proceedings — one’s fate is at the mercy of the judge or jury. Mediation allows for parties to tailor the process to their needs. If the amount in dispute is significant, both parties are typically represented by counsel. There will also flexibility in the selection of the mediator. For example, parties often selected mediators with specialized knowledge of their industries
Confidentiality
There are plenty of legitimate reasons why a business or individual may want to keep their legal disputes confidential. Mediation differs from litigation in that the nature of the dispute and the negotiations are not public. This can be a great benefit for those who wish to keep their disputes out of the public eye. Parties are often required to sign confidentiality agreement prior to mediation, ensuring that any statements made during mediation cannot be used against them.
Parties must be aware of the distinction between confidentiality and privilege. CPLR 4547 provides that offers of compromise are privileged and cannot subsequently be used by opposing counsel to prove liability. It may come as a surprise that documents and/or testimony exchanged during mediation are not automatically shielded from discovery during litigation. See Hauzinger v. Hauzinger, 43 A.D.3d 1289 (4th Dept. 2007) aff’d 10 N.Y.2d 923. While such information may be considered confidential settlement communications (see PRC Brokerage Inc. v. Aramarine Brokerage Inc., 2012 NY Slip Op 30816 (N.Y. Sup. Ct. 2012), the same documents may subsequently be demanded in litigation through written discovery demands.
III. Difference Between Arbitration and Mediation
Arbitration differs from mediation from mediation in that arbitrators have the power to compel resolution of a dispute. Arbitrators act as private judges, whereas mediators assist the parties in reaching a voluntary settlement. While arbitration can also provide for the efficient resolution of certain disputes, it involves many of the courtroom formalities that mediation avoids. Arbitration can involve discovery, depositions, and motion practice, though the scope of the proceedings can be limited by contract. See Rockland County Chapter, Civil Service Emp. Ass’n, Inc. v. Rockland County, 67 A.D.2d 684 (2d Dept. 1979). Parties to arbitration must also cede decision making authority to the arbitrator(s). An arbitrator’s decision, known as an “arbitration award,” can be confirmed by the court through a CPLR Art. 75 special proceeding, at which point it can be enforced like any other judgment.
Parties to arbitration should be aware of the “hands off” approach courts take with respect to vacating arbitration awards. See Azrielant v. Azrielant, 301 A.D.2d 269, 275 (1st Dept. 2002) (“The court has limited power to overturn an arbitration award”). Courts are less likely to reverse or modify arbitration awards than judicial decisions. An arbitration award can be set aside if an arbitrator exceeds his authority or has a conflict of interest, but even clear errors of law or fact will generally not support vacating an arbitration award under CPLR 7511.
IV. The Mediation-Arbitration Overlap
An increasingly popular procedure, colloquially referred to as “Med-Arb”, provides a hybrid solution. The Med-Arb process begins with parties attempting to reach settlement through mediation. Only when mediation proves futile is the more formal arbitration procedure triggered. Med-Arb allows parties to use the same neutral third party to oversee both proceedings, saving time and money. Parties should be familiar with the procedure and its implications, as it has gained prevalence in employment and commercial disputes in recent years.
V. Conclusion
There is good reason why mediation is the fastest growing form of alternate dispute resolution. Its cost-efficacy is unparalleled due to the simplicity of the process. It is not always successful, especially for contentious disputes. It also does not afford one their “day in court.” Nevertheless, if the counterparty appears serious about settlement, it can save both parties from substantial expenditures on litigation.
About Author
Garrett Cusack graduated from the University of Maryland School of Law in 2019, where he served as an Editor of the Journal of Business & Technology Law. Read more.
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