mediation is often touted for its flexibility, it has become
increasingly common to apply a set of standardized mediation practices
to a broad range of civil disputes. The tendency to do so frequently
shortchanges the large complex case that is sent to early mediation, or
that arrives at mediation because a contract provision requires that
mediation occurs before litigation or arbitration can proceed.
This article addresses
why mediation often fails in such circumstances and offers an approach
that is tailored to the specific needs of commercial parties involved in
complex litigation or arbitration.
mediation template begins with choosing a mediation service or an
individual mediator. Early on, once payment arrangements have been
finalized, the mediator’s assistant sends out a procedural letter.
That letter usually
prescribes as the first step confidential written submissions by each
side, which go to the mediator and may or may not ultimately be shared
with the other side. These submissions are typically advocacy pieces,
which present an overview of the facts in the best possible light to the
submitting party and then outline legal arguments as to why that party
should prevail. There may be a section that addresses the party’s
settlement stance. If so, there is ordinarily some posturing involved.
It would be quite
unusual for such a submission to discuss the vulnerabilities of the
submitting party’s case candidly or to provide a true sense of the
submitting party’s actual settlement range.
The written submissions
are normally due several days before the mediation. In the interim, the
mediator may have a telephone conference with each side, to ask a few
questions about the submission and to inquire whether there is anything
else that counsel would like to share in advance of the in-person
When such questions are
broached, the lawyers ordinarily respond in a somewhat anecdotal way,
often to raise personality issues that they view as possible impediments
to settlement. Again, it would be extremely uncommon, in fact, almost
unheard of, to share concerns about the strength or weaknesses of one’s
Next comes the in-person
mediation session. The standard formula is that each party must have a
decision maker present along with counsel.
After the mediator’s
introductory remarks to explain the process, it is commonplace to have
each lawyer give an opening statement. This frequently echoes what you
would expect to hear in opening argument in a courtroom. In part because
the client is sitting right there, each advocate puts only his or her
best foot forward.
After all parties or
both sides (depending which makes sense in the particular situation)
have made such presentations, the mediator may ask some questions
designed to expose vulnerabilities. But because the mediator has
typically not been provided with adequate ammunition to do anything
else, these are generally not genuinely probing questions that make
either the lawyers or their clients uncomfortable.
Following the question
and answer phase, the parties are separated into various private rooms,
and the mediator’s shuttle diplomacy begins.
This format was
developed to force each side to listen to how the other side perceives
its case, with the twin goals of (a) making sure that the lawyers have
not somehow insulated their clients from understanding how the matter is
developing, and (b) giving each side a chance to vent and to feel
“heard” about the injury inflicted and the anger that it caused.
What the process was
most definitely not designed to do is to identify and assess the
strengths and vulnerabilities of each side’s case and to help the
parties recognize the import of that analysis. That is because mediation
is generally presented as a non-evaluative process that does not
address the merits but rather tries to find “win-win” solutions that
minimize risk and maximize rewards for all involved. In the garden
variety mediation scenario, the merits of the matter are frequently
Different Needs in Complex Commercial Litigation
This process and
these goals make sense when the litigants are individuals embroiled in a
personal dispute. But in complex commercial disputes, the parties have
little if any need to feel that they have undergone an emotional
catharsis or extracted some sort of emotional vindication from their
Rather, what they need
is assistance in arriving at an impartial assessment of how they will
fare if the matter goes to trial, so that they have a rational basis for
reasonable settlement estimates. Mediation can play an important role
in this evaluative process, because no court will provide an assessment
prior to a preliminary injunction or summary judgment decision, and
perhaps not even then. And by that time, litigation costs can be
Some commentators have
suggested that creating specialized commercial courts will provide the
solution. In reality, however, dedicated commercial sessions do not have
budgets that permit the maintenance of high caliber built-in mediation
non-jury cases, the parties will never want the assigned judge to
oversee their mediation, and the presiding judge would refuse that dual
role. So even in the business court setting, litigants who want to
mediate but prefer not to use volunteer retired judges are largely left
to their own devices.
The problem that
sophisticated business litigants face is that the standard mediation
format is by definition non-evaluative, which makes it inherently
ill-suited to the needs of commercial litigants seeking impartial issue
analysis. This leads squarely to the question of how to structure a
mediation that makes sense for complex commercial disputes.
No mediation can work
without participant buy-in to the process. A successful complex business
mediation has to involve a process that sophisticated business people
regard as reasonable and meaningful. The process cannot be something
that they view as a waste of time or, worse still, with contempt.
At the same time, that
process has to have elements that will serve as catalysts to settlement.
Realistically, that means that the process has to be designed to expose
and explore risks and that the litigants have to be ready to engage in
But a mediator’s
involvement may be limited to a week or a month. The only way that
adequate risk assessment can happen in the brief mediation context is by
choosing a mediator who is prepared to grapple with the merits and by
providing that mediator at the outset with sufficient information as to
both (i) the key issues in the case−the ones on that are truly outcome
determinative−and (ii) each party’s frank assessment of its own
vulnerabilities in the matter.
A More Appropriate framework
A mediation that
unfolds in this fashion will necessarily involve a fundamental
rejiggering of the standard mediation framework. This is something that
should be explicitly discussed with the mediator (and/or the
administrator) at the outset, so that the entire process rests on the
right footing. From the business litigation perspective, a more
appropriate process would include the following:
What happens next would
depend on the mediator. If the process is proceeding well, a numbers
dialogue can now usefully begin. If the parties appear to remain wedded
to their own intractable views, it may make sense to bring them back
together for a whole group discussion of the issues.
It may then also make
sense to take a break of a day or several days, to allow digestion of
what has transpired so far. Shuttle diplomacy can perhaps be handled by
telephone rather than through another in-person session. At some point,
the mediator may want to sit down in person separately with each side to
go through a somewhat formalized, arithmetic risk assessment exercise.
The mediator may ask each party (or group) to provide him with a short
risk assessment write-up.
Obviously, there are no
hard-and-fast rules as to how the process must occur. The mediator must
be sufficiently flexible to accommodate the process to how the mediation
By contrast, the
mediator’s overall goal is not flexible. It is to assist the parties in
coming to grips with a realistic case assessment on the basis of what is
then known as to the key facts, the evidence, and the law. When the
mediator and the parties work together in this manner, mediation of
complex business disputes is more likely to have a successful outcome.
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Laura Steinberg is a partner in the litigation
department in the Boston office of Sullivan & Worcester. She has
regularly arbitrated in many different forums, including the American
Arbitration Association and various securities venues. Internationally,
she has arbitrated under the auspices of the International Chamber of
Commerce, the LCIA, the International Centre for Settlement of
Investment Disputes, and other venues, and has handled numerous
self-administered arbitrations. Her practice consists of federal and
state civil (commercial) litigation and arbitrations throughout the
United States, with an emphasis on complex regulatory and fiduciary
issues. She has experience in disputes involving shareholder and
investor rights and relationships; application of the business judgment
rule; and fiduciary disclosures, compliance and enforcement issues
(often in a securities law setting). Her practice includes counseling
clients on how to minimize or avoid litigation exposure, both
contractually and through proactive conduct. As part of that process,
she frequently conducts internal investigations for non-management
directors. For more information, visit www.sandw.com.
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