by

© Hamilton & Hartsfield, P.C. 1997

In mediation, an impartial individual - the mediator - seeks to facilitate communications between the parties to promote a settlement. Usually, the mediation begins with a joint session with the mediator and all of the parties. In this joint session, the parties present to each other and the mediator their evaluations of the dispute--at least the evaluation they are then willing to disclose. The parties are not required to disclose privileged information or procedural errors waiting to trap their opponent if they do not settle the case.

It is key that a decision maker for each party be present--a decision maker who has the facts and the discretion to settle. Generally, the decision maker has the authority to accept the last demand of the other side if convinced by the other side to settle. Further, trial counsel needs to attend. Usually, that is the attorney most likely to be entrusted with the confidence of the client to properly advise about the risk of litigation, but also as the advocate may learn much about the other side's leverage. For example, a party may showcase an excellent witness in the joint session by having that individual present the story for that party to the mediator. Further, everyone involved must be focused on the mediation, attentive and willing to spend the time required to exhaust the potential for resolution of the case.

Following a joint session, the mediator will meet separately with each party to learn the settlement range, to raise risks for each party, to raise doubts for each party, to foster clear communication, to suggest potential solutions, to observe remedies available to the parties through negotiation (but not available at the courthouse) and to encourage movement that will generate movement from the other side.

The mediator does not act as a legal advisor, judge, jury, arbitrator or any type of decision maker. The parties and their counsel are ultimately responsible for any negotiated resolution. The mediator does not impose any decision.

The underlying theme to mediation is that the parties are in the best position to make a determination of how to resolve the case. They are the individuals with the best understanding of the facts, they are the individuals with the best understanding of their needs and their risks. They are also the individuals who will have to live with the decision.

In some jurisdictions, there are different "mediation" models. For example, in Michigan, a panel of neutral lawyers listens to an abbreviated presentation of the case and then they provide a non-binding decision. Often this procedure is described as a mini-trial or moderated settlement conference.

Criteria for Selecting a Pending Case for Mediation

Mediation is a vehicle for raising the topic of settlement discussions. Often, the litigator, by raising the topic of when it will be appropriate to mediate, can initiate settlement discussions. In other words, mediation can provide the excuse to open the door for direct settlement discussions.

The following checklist is useful for identifying which case is suitable for mediation and the timing for mediation:

• Will the person who has the discretion and information to resolve the matter be present for the entire mediation (i.e. the Plaintiff has the discretion to accept the highest offer of the Defendant and the Defendant has the discretion to accept the lowest demand of the Plaintiff)? Keep in mind that mid-level managers may have a bonus to protect and may be less willing to make a mistake.
• Will the person who is the voice of reason for the other side attend?
• Will the person who is the voice of reason for your side attend?
• Will trial counsel attend?
• Will the client devote sufficient time to the mediation? (i.e. does the client have the patience to allow the other side to vent, consider offers, develop its negotiation process and all the other elements that take place in a mediation?)
• Is there a pending motion for summary judgment that will prevent either side from settling until it is ruled on?
• Is there a pending motion for summary judgment that will encourage settlement?
• Are all the needed parties in the litigation?
• Is there sufficient knowledge to properly evaluate the claims?
• When will there be the greatest economic or other pressure favoring resolution of the dispute?
• Have clients gotten the "need to fight" out of their systems?
• Will further discovery, motions or the like worsen or improve the opportunities to settle?
• Will legal and other costs for both sides exceed the amount in controversy?
• Are the parties realistic about the facts, liabilities and damages in the case?
• Can the judge or jury give the party the best remedy or does the party want a remedy (e.g., an apology, a positive recommendation, future business) that cannot be obtained through litigation?
• Is there a public policy issue which can only be resolved in the courtroom?
• Is there a need for privacy which will be lost in the courtroom?
• Is there a need to help opposing counsel control his/her client?
• Is there a need to use a mediator to control opposing counsel?
• Do you need mediation to cause the parties and/or counsel to be realistic?
• Do you need any discovery in order to establish "facts" so that you can reveal those "facts" at mediation and not be concerned that the other side will have a chance to recast those "facts" in a better light (i.e. half full/half empty glasses)?
• Is this a fight over "principal" or "principle"?
• Is the demand too high (is the offer too low) and you need a mediator so that your response does not shut off discussions?
• Does the other side need a place to vent?
• If a suit is filed, is it likely that more suits will follow if the case is not settled?
• Can the case be settled on a more reasonable financial basis prior to filing a suit?
• Are there time constraints? (e.g. a reduction of force will soon occur and key witnesses will be laid off. There is money to settle now but later there may not be. There is not money in the budget to settle now but later there will be.)

Preparing for Mediation

An advocate and a client can significantly improve the opportunities for a successful mediation by preparing for it. The following checklist will aid in that endeavor.

• Expect to be frustrated, irritated, offended, angered by the other side but do not show your emotions without a good reason and do not let your emotions override your goals;
• Identify your goals and interests;
• Obtain the facts to evaluate the case:
• Facts that support liability;
• Facts that refute liability;
• Facts that support damages;
• Facts that refute damages;
• Facts that create leverage (e.g. if you claim you cannot pay [i.e. insolvent] or that you need a certain amount and anything less is worthless [the psychiatric care will cost $1000] be prepared to prove your claim);
• Develop legal theories that fit the facts;
• Identify the goals and interests of the opposing party and counsel;
• Meet to evaluate the case;
• Identify interest-based negotiation tactics instead of positional-based ones;
• Prepare a negotiation plan:
• Identify the time needed for the other side to vent, tell its story, complain, rant, rave, etc.;
• Develop interest-based trade-offs;
• Develop reasons (e.g., offers) why the other side should meet your interests;
• Identify remedies (or a release) only you and not a jury can give to the other side;
• If the opposing side has communicated that the dispute is a matter of principal and you believe the real issue is principle, identify proposals which can strip away "principal" (i.e. an offer of a training program so that what occurred to this employee won't occur again, an offer of confidentiality so that others won't find out about the settlement);
• Identify similar cases and the results (i.e. summary judgment, large plaintiff's verdict, zero verdict);
• Identify the best negotiation style for this case (i.e. individual harm, career ruined, bad cop/good cop approach, conciliatory, an initial apology, an initial expression of sympathy or empathy, millions for defense but not two cents for tribute);
• Identify your opening number and the rationale behind it (this should fit the negotiation style you are using);
• Decide what information (i.e. facts, damage calculations, legal theories) should be given to the other side before the mediation and what should be saved for the mediation.
• Decide what is the likely starting point of the other side, and where you should start. If the other side expects the case to settle for $75,000.00 (and if its expectation is a solid valuation), a $10 million demand is too high and a $1,000.00 offer is too low.
• Decide how you will change the opposing party's expectation if the valuation is wrong. Court opinions? Jury verdicts? Mediator? Risks? "New" facts?
• Decide what is the accepted negotiation style in your community and what is the accepted negotiation style by your opponent. (For example, the defendant expects the plaintiff to start with a demand of 2 to 3 times the goal and the plaintiff expects the defendant to make an initial offer of 10% to 20% of its goal).
• Decide how to avoid cutting to the "bottom line" too fast so you do not deprive your opponent of the satisfaction of negotiating (Identify opportunities to allow the other side to "save face").
• Identify facts and legal theories to present in the opening session:
• Facts the other side cannot change;
• Facts needed by the other side to evaluate the case the way you do; and
• Risks of the other side;
• Identify facts and legal theories to present in later sessions (i.e. when disclosure will generate more movement);
• Identify emotions of the other side which need to be dealt with in the opening session (e.g., regret for humiliation) or at some time in the mediation;
• Identify the persons to present the facts (e.g., showcase the person who will make a good witness);
• Identify the persons to whom the other party wants to talk;
• Identify the persons to whom you wish to talk (i.e. the voice of reason from the other side, the person most likely to agree with your position, the person with the authority and willingness to make a proposal that you will consider);
• Identify the persons who can meet privately with the other party without lawyers being present and without being at a disadvantage (e.g. who can "bond" or "empathize" with the other side and still preserve your negotiation posture?);
• Identify any persons whose presence will aggravate the opposing party and consider omitting them from the general session;
• Decide whether any insurance representatives or experts attend only the private session and not the general session to avoid communicating information unnecessarily to the other side?
• Bring key documents to the mediation;
• Bring your settlement form to the mediation ideally on a diskette in a word processing format that is available at the mediation; and
• Prepare a position paper for the mediator. (Tell the mediator of any concerns you have such as you do not want the employee's spouse present, you do want the employee's spouse to be present, you want your insurance adjuster to be anonymous. In general, identify for the mediator any of the barriers to resolution. Consider splitting your premediation statement into two parts, one that you will share with opposing counsel and one that you will share only with the mediator).

Review Negotiation 101

Truisms

• Extreme positions provoke extreme reactions.
• Moving too much or too little will usually provoke the wrong reaction.
• All lawyers think they are excellent negotiators.
• Increasing a demand or decreasing an offer usually does not work. Always have a very good reason for doing so.
• Stating you recognize a "tactic" may prompt the other side not to use it.
• Accusations of "bad faith" usually cause a negative response, even if the accusation is true.
• Patience is a virtue.

Do’s

• Identify how to influence the expectations of the other side.
• Identify an outside accepted source to substantiate your evaluation of the value of the claim.
• Allow the other side to save face.

Don’ts

• Do not skip any of the phases of a negotiation.
• Do not use emotionally charged statements.
• Do not protest too much ("We, of course, are negotiating in good faith").
• Do not make an offer of a range such as $5000 to $6000 as the other side will only "hear" and respond to the number they like.
• Do not become greedy.

During the Private Sessions
While the Mediator Is with the Other Side

Do’s

• Refine your negotiation strategy;
• Analyze information provided to you;
• Identify any information you need from the other side to help you resolve the dispute;
• Identify any facts you want to disclose in the next round of negotiation;
• Identify information that will persuade the other side you are telling the truth (e.g. news articles you are insolvent, most recent jury verdict for you or against opponent);
• Identify the stage of the mediation (i.e. venting, bargaining, closing);
• Identify what the potential goal is of the opposing party;
• Consider what analysis the opposing party is using (i.e. how the other side evaluates the claim and its value);
• Call personnel to identify facts needed (i.e. benefit levels, pension rights, health care rights, other potential claimants and the like);
• Have someone available at your office to do any necessary research;
• If you are taking an advocate's position with the mediator (e.g. understating the cost of litigation, overstating the facts or law in your favor) then during the time you are alone with your client, review with the client your candid, frank evaluation and distinguish that reality from the posturing you are taking with the mediator as well as the other side.

Ask

• Is the current offer worse or better than a trial?
• How can we obtain movement to an offer that is better than trial?
• What movement will generate movement from the other side?

Private Sessions with the Mediator

Do’s

• If your client has unrealistic expectations, use the mediator to help obtain realistic expectations.
• When appropriate, privately request the mediator to play a strong devil's advocate with your client. (When you do this, then do not posture in front of the client that the mediator is overstating the risk as you will undercut the mediator's credibility with your client).

Ask

• What does the other side really want?
• What can persuade the other side?
• Who is the voice of reason?
• What message should be sent?
• How is that message best sent?
• What is the negotiation style of the other side?
• How can we adapt to the negotiation style of the other side to enhance our position?
• Are there additional facts to disclose to cause the other side to reevaluate its position?
• What movement will generate movement from the other side?
• What signal will be sent by our movement?
• What movement is too much?
• What movement is too little?
• Should just the attorneys meet?
• Should just the clients meet?
• Are there non-monetary issues to address?

In general, both the advocate and the client can develop an attitude of "how can we meet the needs of the other side and encourage them to meet our needs?"

Confidentiality

Often of prime importance to the parties is the confidentiality of the mediation. For example, litigants may want to avoid the public disclosure of embarrassing personal facts, trade secrets, profit margins, net worth, tax returns, marketing plans, wages, personnel evaluations, relocation plans and the like. Even in the absence of statutory authority that ADR procedures are confidential (e.g., Tex. Civ. Prac. & Rem. Code §154.073), courts have upheld the concept.

For example, in Cincinnati Gas and Electric Company v. General Electric Company, 854 F.2d 900 (6th Cir. 1988), the court held that the First Amendment right of access did not attach to a summary jury trial proceeding and held that newspapers could not attend what was essentially a procedure intended to facilitate settlement. Similarly, in Russell v. PPG Industries, Inc., 953 F.2d 326 (7th Cir. 1992), the court concluded that it was inappropriate for the plaintiff's counsel to attempt to bring to the court's attention information intended to remain within the confidentiality confines of a summary jury trial. Much earlier, the Ninth Circuit held that a federal mediator should not testify regarding events in a labor negotiation. N.L.R.B. v. Joseph Macaluso, Inc., 618 F.2d 51 (9th Cir. 1980).

In Ryan v. Garcia, No. CO16773 (Cal. App. 3rd Dist. August 22, 1994), the court held that statements made during mediation regarding the terms of settlement may not be admitted in court to prove that the parties had settled. The court noted that parties could stipulate that the settlement agreement reached could be admissible.

In Smith v. Smith, 154 FRD 661, 1994 US Dist LEXIS 6339, (N.D. Tex. 1994), the court quashed a subpoena directed to a mediator. The defendants sought the testimony of the mediator because they claimed that the plaintiffs defrauded them into signing a settlement agreement that resulted from the mediation process. The defendants maintained that the mediator was the only impartial witness who could provide information regarding the fraudulent conduct during the mediation.

Please note that under Federal Rule of Evidence 408 settlement offers cannot be offered into evidence and thus it protects disclosure at trial but it does not guarantee confidentiality. However, if no claim has been made or if the settlement proposal is offered for another purpose (proving bias), it may be admitted.

Also please note that the confidentiality of mediation, especially if there is an applicable statute, can be invoked prior to the filing of a suit.

Counsel shall also keep in mind Federal Rule of Civil Procedure 68 which provides that unaccepted offers made under that rule are not admissible except in a proceeding for cost.

However, the fact that information is disclosed in a mediation does not protect it from discovery in litigation. For example, a letter containing the terms of employment can be obtained in discovery for use at a trial over a discharge, even though the letter had been used in the mediation.

A Virginia lawsuit involving a malpractice claim against an attorney should be carefully examined. Ms. Snyder-Falkingham sued her former lawyer, Bruce C. Stockburger for malpractice. Both sides agree a tentative resolution was reached at a mediation. Ms. Snyder-Falkingham denies she later approved the final settlement. Further, she never signed a written settlement agreement. However, the court dismissed her case based on her lawyer's statement that she had approved a settlement. At the hearing to determine if the judge's order of dismissal was proper, Ms. Snyder-Falkingham's lawyers offered as evidence of their authority to settle on her behalf her statement at the mediation that the lawyers would be speaking for her. Ms. Snyder-Falkingham asserts that the statement was protected by confidentiality. The lawyers argue that the confidentiality statute does not apply because the statement does not relate to the underlying dispute.

Equally troubling is a Texas Court of Appeals decision, Hur v. City of Mesquite, 893 S.W.2d 227, 234 (Tex. App.--Amarillo 1995, writ denied). In this case, the plaintiff alleged that the defendant, through its representative at a mediation, misrepresented that he had actual authority to contractually bind the defendant city to a settlement. At the mediation there was, according to the plaintiff, a verbal offer to settle the case for $129,000.00 which was accepted. After the mediation, the city's agent stated that the verbal settlement had to be approved by the city council. The agreement was not approved. The trial court dismissed the claim arising from the mediation concluding that the plaintiff failed to state a cause of action as a matter of law. The Court of Appeals reversed. Apparently, the Court and the parties focused on Tex. Civ. Prac. and Rem. Code Ann. §154.053(c) which requires the mediator to maintain information in confidence. The confidentiality of communications by participants in mediation provided for in §154.073 was not addressed. The latter section states: "a communication relating to the subject matter of any civil or criminal dispute made by a participant in an alternative dispute resolution procedure, whether before or after the institution of formal judicial proceedings, is confidential, is not subject to disclosure, and may not be used in evidence against the participant in any traditional or administrative proceeding." Further, the provisions of §154.071 which require the parties to reach a settlement and execute a written agreement in order for the settlement to be enforceable was not addressed.

In Zidell v Zidell, 1997 Tex . App. LEXIS 3952 (Tex. App. Dallas 1997) (unpublished) a spouse sought to testify regarding a purported agreement reached in mediation. In an offer of proof, the spouse was allowed to described the agreement, but the trial court excluded the testimony. On appeal, the court wrote:

Even if Zidell's testimony accurately reflected an agreement he reached with Feldman, Zidell could not have enforced that agreement because it was not reduced to writing or repeated in open court on the record. [footnote omitted]. Therefore, we conclude that any communications, including this purported agreement, remain confidential pursuant to section 154.073.

Zidell at *27

The Zidell court also considered the application of 154.073(d) which provides:

(d) If this section conflicts with other legal requirements for disclosure of communications or materials, the issue of confidentiality may be presented to the court having jurisdiction of the proceedings to determine, in camera, whether the facts, circumstances, and context of the communications or materials sought to be disclosed warrant a protective order of the court or whether the communications or materials are subject to disclosure.

and concluded that it did not apply.

It should be noted that the disputes which have arisen concerning confidentiality of mediation focus on agreements which were originally reached in mediation but ultimately not consummated.

It should also be noted that there may exist circumstances that require disclosure of facts revealed in an ADR procedure. For example, in one unpublished ruling, an Alaskan state court judge ruled that confidential negotiations in a mediation over child custody should be disclosed. In this case, it was disclosed in the mediation, that one spouse had formed a relationship with an individual charged with assault with respect to that individual's children and was under court order not to be in the company of any child under 16. The court concluded that the public interest and the children's interest required disclosure. Similar situations can be imagined. To illustrate, the disclosure of an intent to kill others, which the neutral believes to be credible, may justify disclosure and in some cases may be required by state law. See, Perris Rynders, Confidentiality in Mediation: A Conflict Between Two Value Systems, 72 Mich. B.J. 1016, 1017 (1993) (Michigan "Child Protection Law unambiguously requires at least some mediators to disclose confidences regarding child abuse"); Michael D. Young & David S. Ross, Confidentiality of Mediation Procedures, C879 ALI-ABA 571, 578 (1993).