“I was never ruined but twice: once when I lost a lawsuit, and once when I won one.”
Picture two business partners, Susan and Dale, who have worked together for fifteen years, developing a wholesale business. They find it increasingly hard to work together, and decide to split up. Susan offers to sell Dale her half interest in the business for $1 million. The offer is much higher than Dale thinks is fair. Susan and Dale talk to each other and exchange appraisals, information, and arguments from their attorneys and accountants. Nothing works. What to do? File a suit?
Many businesspeople consider being sued one of the low points of their lives. Win or lose, litigation is stressful and expensive. There is, however, an alternative for solving business disputes. Increasingly, mediation is used instead of, or together with, litigation.
Mediation is a voluntary process in which disputing parties choose their own mediator, or neutral party, to help them solve their problem. A mediator would help Susan and Dale consider various buy/sell or continue-to-work-together approaches. It is a flexible process, with the parties setting their own timetable and being as creative as they choose in the solutions to their problem. As Steve Gordon, Salt Lake City attorney and mediator points out, mediation can last from two hours to two years. In complex cases, the parties can get one issue of the case solved through mediation and come back later to work on another one.
Some contracts require mediation of disputes. Some judges order parties to mediate before proceeding with the lawsuit, or strongly recommend it. Some parties decide themselves to try solving problems through mediation, either before a lawsuit is filed or while it continues.
Mediation can be a more efficient way to solve problems than litigation. As Gordon explains, courts can decide who gets money, but a lot of times what clients really want isn’t just money. They may want vindication or a sincere apology, in addition to money. They may want to tell their story and have the other side really listen. In our hypothetical, Susan and Dale may want a buy-out of their business by one partner or shared ownership by both, remedies a court may not be able to offer.
To get started, the parties provide information about their case to a mediator, and then schedule a meeting. The parties spend the mediation meeting together and apart, with the mediator guiding the discussion between them and caucusing separately with each party to explore whether settlement is possible.
As Karin Hobbs, Salt Lake City mediator and attorney, points out, mediators run the range from facilitative (the messenger) to analytical (discussing the legal issues) to evaluative (emphasizing the weaknesses to both parties and, if necessary, evaluating the viability of the claims). Most attorneys choosing mediators avoid ones who are “just messengers” and hire “closers,” or mediators who proactively work on both sides to reach a settlement. The mediator may also be skilled in dealing with emotional, recalcitrant or entrenched clients. For instance, the mediator handling the Susan and Dale mediation might have Susan and Dale take a break and walk around the block when the mediation sessions get too stressful.
The voluntary nature of mediation is what makes it work. Parties should come to the mediation highly motivated to compromise and work their problems out. Flexibility and creativity are really important, too. Gordon remembers one mediation between partners who needed to work together to market a product, but they couldn’t stand each other. Through mediation, they agreed to appoint an “umpire” to solve the ongoing daily fights between them until they could get their product sold. That was a creative solution which a court could not have imposed.
Hobbs emphasizes the importance of preparation in mediation, and realizing that resolution of problems involves not just objective factors. She recommends that attorneys provide a mediation statement to the mediator which summarizes legal issues, but which also points out “the rest of the story,” including clients’ underlying interests, goals and objectives. For Susan and Dale reaching a settlement might not be their agreement on the objective value of the business, but the mediator helping them to analyze their goals and create a win/win solution.
What about the details?
A recent Utah case confirms that mediation settlements may not be valid unless they’re reduced to writing. A written settlement agreement is necessary to preserve the agreements made in mediation.
Utah mediators typically charge between $250 and $400 per hour, including both the mediation meetings and time spent in preparation.
Regardless, mediation offers warring parties like Dale and Susan a chance to emerge from their disputes whole.
Gretta Spendlove is a shareholder with the law firm Durham Jones & Pinegar. She can be reached at gspendlove@djplaw.