To Mediate or Not to Mediate: That is the Question

On November 30, 2012, I spoke at the National Business Institute (NBI) Business Contracts A to Z live seminar on breach of contract issues, including shareholder and LLC operating agreement cases and restrictive covenants. Mediation was a topic that prompted some discussion with the audience and among the speakers. It is important to know when to mediate or not to mediate.

Alternative dispute resolution is popular among those who draft contracts and mediation is one alternative way to resolve disputes.

Advantages Specific to Mediation Include:

  1. You have a neutral non-party who can hear each of the parties out;
  2. There is not the stress of an actual trial because either party can decline to reach an agreement;
  3. Compromises can include non-case related principles (what some theorists call a win/win situation);
  4. A mediator’s opinion on one or more of the issues under discussion might prevent a breakdown of the process or jump-start stalled negotiations;
  5. The proceedings are or can be confidential.

There are a whole host of negotiation principles and techniques that can make a settlement more likely in a mediation. However, there are two main disadvantages to mediation:

  1. It is not usually free. You have to pay a mediator, whereas taxpayers pay a judge (although there are small filing fees).
  2. It is difficult to gauge the sincerity of your opponent before you decide to participate. Does he or she want to settle or are they trying to drag out the proceedings and increase the cost? They may intend to force you to file a lawsuit eventually anyway. Related to this is whether your opponent wants an advance look at your evidence, so he or she can then scurry about developing contrary evidence or securing other witness testimony before you file the case.

Nothing prevents two parties in a contract from selecting in advance some person or organization to mediate a dispute. You might find someone you both trust who would not charge as much to mediate.  Otherwise, whether to agree to mediate in the event of a dispute over a written contract depends on whether you: could survive the delay (caused by mediator selection, scheduling, etc.), can afford the expense of a mediator and if are willing to go to court to present your case.

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