“People began to feel that they could consult with me with some safety and without the danger of being involved needlessly in long and costly litigation in court….I suppose that they were more reasonable than other clients, for they usually settled their differences out of court.” – Calvin Coolidge
Business disputes are common. Merchants and customers, employers and employees, business partners, and tenants and landlords disagree about many things. Whether they maintain a productive business relationship going forward depends on how they resolve those disputes.
In the United States, most parties and attorneys tend to resolve and exacerbate disputes through litigation. This is an adversarial process that often ends relationships——usually after significant investments of time, expense, and energy. Negotiations may be successful, but sometimes, parties reach an impasse. Mediation is assisted negotiation. Parties engage a mediator——a professional trained in conflict resolution. He facilitates discussion, attempts to defuse hostility, and empowers the parties to reach their own solution.
Mediation has several advantages over litigation. Mediations are private and confidential. In contrast, litigation is part of the public record. The media and competitors can attend court hearings and research documents filed at the court. Thus, parties seeking to avoid publicity would probably favor mediation.
Litigation is an adversarial process. Mediation is collaborative. Mediation’s purpose is to reach a binding, workable agreement. Participation in mediation is voluntary, and dissatisfied parties can walk out of the proceedings. If one party sues the other, the defendant must participate or lose by default. In mediation, the parties can draft an agreement tailored to their specific needs, whereas a court issues an order that may frustrate both parties.
Mediation is less formal than litigation is. The rules of civil procedure and evidence do not apply. Thus, in comparison with litigation, mediation can be scheduled quickly, handled more efficiently, and settled at lower cost. A preexisting contract or court rule may require parties to mediate in good faith before litigating. Also, a party may voluntarily initiate a proceeding at a mediation center. The party submits a form that briefly describes the claim, remedy sought, and amount at issue. The mediation organization contacts the other party and attempts to arrange a proceeding.
Requesting mediation does not guarantee that the other disputant will participate. Also, it is possible that mediations will not end with an agreement. Nevertheless, by participating in good faith, one has little to lose. If a party rejects mediation, it will almost assuredly result in a lawsuit or arbitration. (In arbitration, an arbitrator will decide the dispute, and the result is binding.) Some disputes are settled before mediation, and many mediated disputes end successfully.
While mediation is informal, it follows a basic structure. The mediator and parties make opening statements. Then, the mediator asks questions and facilitates a discussion to narrow or expand the issues. Later, the mediator will likely separate the parties and speak with them privately in caucuses. In these private sessions, the mediator attempts to ascertain each party’s bottom line and bring its respective expectations into line with reality. He will try to educate the parties about the consequences of not reaching an agreement. By helping the parties understand the interests that underlie their positions, the mediator prompts the parties to negotiate, collaborate, and suggest solutions. He may suggest his own terms too.
If the parties agree, they draft a written contract. Parties can bring legal counsel to the mediation to help them articulate their interests and draft the contract. If counsel is not present, the parties can condition their approval of the contract upon their lawyers’ review. In order for the contract to bind the parties, they must have the capacity to contract. The terms must be sufficiently definite. Also, each party must provide consideration, or something of value (e.g., an act, forbearance, or promise). A workable contract should be detailed and explain who must do what, where, when, and how it should be done.
Neither the mediator nor the contract assigns blame, fault, liability, or guilt. Reputation and integrity are not at stake. Thus, parties save face. If either party fails to perform its respective contractual obligations, the other can sue in court for breach of contract and seek damages, performance, or other appropriate remedies.
About the Author: Bryan L. Berson, Esq. is an attorney and mediator at The Berson Firm, P.C., a commercial and civil law firm that handles estate administration and planning, real estate, commercial transactions, mediation, and commercial litigation. His e-mail is bberson@bersonfirm.com. His phone number is (631) 517-1055. Connect with The Berson Firm on Facebook and Bryan L. Berson on LinkedIn. The firm’s website is www.bersonfirm.com.
Disclaimer: Constructive Knowledge is published by The Berson Firm, P.C. (the “Firm”). The information contained in this column is provided for informational purposes only. It is not tax or legal advice on any subject matter. No readers, clients or otherwise, should act or refrain from acting on the basis of any content without seeking appropriate legal or other professional advice with respect to one’s particular circumstances. This column reflects a general discussion of the law in New York. It may not accurately reflect the law of other states. The content is general information and may not reflect current legal developments, verdicts, or settlements. The Firm expressly disclaims all liability with respect to acts taken or not taken based on any or all content of this column. This column is Attorney Advertising. IRS Circular 230 Legend: Nothing in this column is intended to be used and cannot be used to avoid U.S. federal, state, or local taxes. It was not written to promote, market, or recommend any tax planning strategy or action. Copyright: All rights reserved. No part of this publication may be reproduced without prior written consent. Readers may share this column through, but not limited to, social networks.
Berson Firm's Constructive Knowledge 
[…] competent organizations address conflicts at an early stage. Mediation is a form of alternative dispute resolution (ADR). When parties reach an impasse and negotiation […]