How Does the Guided Choice Dispute Resolution System Work?

How the Guided Choice Process Works

Unresolved disputes are unresolved for different reasons.  Each one has unique factors creating impasse.  And these factors must be recognized before the parties can overcome impasse and settle.  In fact, most commercial disputes eventually do settle.  That means that at some point the parties change their positions. The Guided Choice process identifies the factors leading to impasse as early as possible and leads to better and earlier settlements.  Earlier settlements save legal and expert fees and put business objectives first.  Guided Choice relies on the unique power of mediators to identify these factors through their informal discussions with parties, lawyers, and consultants.   Mediators can preserve a congenial negotiation atmosphere by getting involved early, and they can alleviate the parties’ concerns about confidentiality by using the mediation privilege.

The Guided Choice Dispute Resolution system is a multi-phase process.  It is not a one-day meeting to negotiate.  It is inherently flexible and not governed by any formbook rules.  Guided Choice is based on seven core principles:

1.  An Obligation to Mediate
2.  Retaining a Mediator as Early as Possible 
3.  A Mediator’s Investigation and Diagnosis
4.   Information Exchange
5.   Anticipating and Overcoming Impasse
6.   Continued Use of the Mediator after Negotiations Are Suspended
7.   Customizing Arbitration for Disputes That Do Not Settle

 

1. An Obligation to Mediate

To initiate Guided Choice Dispute Resolution, the parties must be required to mediate.  That obligation can be created by agreement or by operation of law. Simple mediation clauses are contained in many standard form commercial agreements. For example, the AAA provides the following:

“If a dispute arises out of or relates to this contract, or the breach thereof, [and if the dispute cannot be settled through negotiation,] the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures [before resorting to arbitration, litigation, or some other dispute resolution procedure.]”  *Note: You may or may not want to include the bracketed terms.

This type of clause intentionally does not spell out the details of the Guided Choice process. Instead, it relies on the training of a mediator who knows when and how to apply the various Guided Choice tools. It is not a “one size fits all” process but anticipates that the settlement process will be customized based on the mediator’s confidential pre-negotiation investigation.

Guided Choice contemplates that the parties and an experienced Guided Choice mediator together will develop the specific settlement process.  Using a simple form agreement to mediate avoids the potentially contentious negotiations involved in trying to customize dispute resolution before there is any dispute.

Any pre-dispute mediation clause should also allow an agency to appoint a qualified mediator if the parties cannot agree on one.  This agency service is not costly. Because the rules of most agencies give them that power, an agency like the AAA should be mentioned in the pre-dispute clause.

2. Retaining a Mediator as Early as Possible

When a mediator becomes involved early, the case will likely settle earlier than it would without assistance.  Early settlements benefit everyone. But even when the parties have a pre-dispute mediation clause, lawyers often delay retaining a mediator until “they are ready to negotiate.”  This view is based on the misconception that hiring a mediator is tantamount to agreeing to negotiate and is somehow a sign of weakness.

Under the principles of Guided Choice, however, the mediator’s pre-negotiation phase determines when and how the parties will negotiate.  During this phase, the mediator determines what information the parties need before they are ready to negotiate, who must participate in any negotiations, and how the settlement process should be designed. The mediator does not set a negotiation date until the parties are ready. In fact, the mediator may determine that the parties are not ready to negotiate until after they have commenced arbitration or litigation.

What if one party is willing to retain a mediator for a pre-negotiation phase, but others are unwilling? In these situations, mediators, using Guided Choice tools, can help reluctant parties understand why using a mediator in the pre-negotiation phase is in their best interest. These discussions should remain confidential by agreement.

A mediator can also help when a pre-dispute agreement provides for dispute resolution procedures like Step Negotiation, and contemplates opinions from Dispute Review Boards, British style adjudications, and arbitration. These procedures may or may not require mediation as a pre-condition. But in these situations, the mediator can advise the parties on the best way to use those procedures for both settlement and perhaps eventually for a binding resolution. In Section 7, we discuss the new AAA Commercial and Construction Rules, which require mediation when a party files a demand for arbitration, whether mediation is required by agreement or not.

3. Mediator’s Privileged Investigation and Diagnosis

Two things are critical to settling a case early:  choosing the right type of mediator and choosing the right settlement process.  The right mediator is someone who knows how to interview the parties and others, keep information confidential, and diagnose the reasons why the dispute remains unresolved.  The mediator and the parties should then design the process based on an understanding of the causes of the stalemate.   The reasons for stalemates may be complex.  It is easier to understand reasons based on law, fact, and expert opinion but it takes a higher level of skill to understand the human behavioral factors that may prevent decision-makers from changing their positions.

The Guided Choice mediator must do more than read the traditional legal briefs submitted by the parties’ lawyers.  The meditator must also 1) identify the parties’ needs for information; and 2) understand financial and insurance issues and the existence of other potentially responsible parties who may not have previously agreed to participate in the mediation process.  The meditator should also understand the decision-making processes used by the parties and any organizations that are parties and identify any human behavioral factors that have led to impasse. The mediator might think about the following questions, among others:  how have the parties framed the impasse? What are the alternatives to a settlement? Are there possible win/win scenarios based on business considerations?

4. Information Exchange

When a lawyer says that her client is not ready to mediate, the lawyer frequently means that the client does not have enough information to make a business decision about whether to accept a specific settlement offer. Traditionally, this lack of information results in expensive and time-consuming discovery conducted by the lawyers on an adversarial basis.  That doesn’t need to be the case in Guided Choice.  A mediator can help the parties understand why it is in everyone’s best interest to agree to quickly exchange the important information that is necessary for clients to make their business decisions for settlement. Clients often need far less information to make a business decision than their lawyers think is necessary to “try the case.”

Agreeing to exchange information necessary for settlement discussions does not limit a party’s right to obtain further information if the case eventually goes to trial.  For example, the parties could agree to postpone expensive e-discovery while they negotiate.

5. Choosing the Right Settlement Process

The parties should adopt a settlement process that focuses on avoiding and overcoming impasse.  The mediator, based on what he has learned pre-negotiation, is in the best positon to recommend a possible settlement process. Too often the settlement process is determined only by the attorneys who mistakenly think they understand what is needed to overcome the existing stalemate; or by mediators who assume mediation is the same as a judicial settlement conference.  The mediator and parties should consider the following issues when they’re designing a settlement process:

1. Do the parties have equal access to critical outcome relevant information without further discovery?
2. Who needs to participate and will they participate in-person or by phone or video? Also, will the parties’ experts participate and if so, how?
3. Should there be open joint sessions or just caucuses?
4. Should potential areas of impasse be discussed before any impasse occurs? The mediator here may use, “What If Scenario Planning.” This tool can help the parties avoid any feelings of failure or friction that may result from an impasse. Discussing the likelihood of impasse before it occurs lets the parties focus on overcoming it and continuing the mediation process.
5. Should there be a meeting with all the experts before the negotiations begin? Under the mediation privilege, these discussions would normally not be admissible in court or in an arbitration. The purpose of the meeting would be to see whether the experts can explain their opinion protocols, narrow their differences, and perhaps suggest creative solutions.
6. How should impasse be overcome? Parties encounter negotiation impasse, sometimes anticipated and sometimes not, even on the road to a successful settlement. And parties may be more likely to have an information deficit that leads to an impasse when the parties haven’t gone through formal discovery.  The mediator should encourage the attorneys to prepare their clients for these situations. It should never be a basis for ending the mediation. However, it may require adjournment of negotiations while the issues causing impasse are addressed.

 

Using Guided Choice, the mediator has many impasse-breaking tools, including the following:

(1) Referral of legal or fact issues to a Dispute Review Board, Adjudicator, Neutral Evaluator, Mini-trial process, Initial Decision Maker, arbitrator, or even a judge for ruling on a “certified question.” Any referral would be for an interim and limited decision. The parties can agree on whether any information exchanged in that process would be admissible in a subsequent trial or arbitration hearing; (2) referral to an expert for a non-binding ruling on an issue of law or fact; and (3) further use of discovery, including depositions limited to outcome-determinative issues identified by the meditator and limited in length.

 

7. Customizing Arbitration for Disputes That Appear Likely to Not Settle

A frequent criticism of arbitration is that it is “one-size does not fit all.” For arbitration to be successful, the process must be customized to meet the parties’ needs. Those needs include choosing the best arbitrator(s), minimizing expenses, especially discovery costs, and reducing the length of the hearing time.

Because of these concerns, some businesses will not agree to pre-dispute arbitration, which leaves the dispute to be resolved in a court system. And when standard form arbitration clauses are included in commercial contracts, it is often difficult for the disputants to agree on how those standard procedures should be customized. The Guided Choice process suggests that the best way to customize arbitration is by using the mediator, who initially managed any mediation impasse, to facilitate an efficient arbitration process.  That will more likely produce a result acceptable to both the winning and the losing parties.

The parties and the meditator can discuss customizing arbitration either before or after an impasse has occurred. They may also discuss it even if there not is a pre-dispute obligation to arbitrate. If the parties cannot agree about how to customize the arbitration, they should be comfortable that the default process set out in the contract will be used.

The new American Arbitration Association Commercial (R9) and Construction (R10) Rules now require parties to consider hiring a mediator when they file a demand for arbitration.  This rule provides parties with the opportunity to retain a mediator to perform the pre-negotiation analysis and settlement process recommendations that are embodied in the Guided Choice process.  As mentioned earlier, the mediator may recommend that a customized arbitration occur in parallel with any settlement negotiations.

Even if the parties decide to proceed to a full arbitration or to resume litigation in a court, the Guided Choice mediator can maintain a role as settlement facilitator. This role is particularly important in arbitration. Unlike judges, arbitrators are often reluctant to become involved in the settlement process. The opportunities for settlement discussions may not arise as they frequently do in court.

 

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Summary

All unresolved disputes have unique impasse creating factors  that must be recognized before the parties can overcome impasse and settle.  Since almost all commercial disputes are settled and not tried, at some point the parties do change their positions based on these factors. The Guided Choice process identifies these factors as early as possible. The earlier the dispute settles the less expense is incurred in legal process and the best business objectives can be obtained.  Guided Choice relies on the unique power of the mediator with the confidentiality privilege, to  identify these factors through informal discussions with parties, lawyers and consultants.

The Guided Choice Dispute Resolution system is a mulri-phase process and not just the  traditional mediation event of a meeting to negotiate.  It is  inherently flexible and is not tied to form-book rules.  By early involvement the mediator  also preserves a more congenial negotiation atmosphere than one the hostile one that can exist after long periods of litigation.  Guided Choice  is based on six core principles:

1.  An Obligation to Mediate

2.  Retaining a Mediator as Early as Possible. 

3.  Diagnostics by the Mediator

4.   Information Exchange

5.   Anticipation of and Overcoming of Impasse

6.   Continued Use of the Facilitator after Suspension of Negotiations

7.    Customization of Arbitration for Disputes That Do Not Settle

 

1. An Obligation to Mediate

Initiating Guided Choice Dispute Resolution  requires only an obligation to mediate created by agreement or by operation of law. Simple clauses are contained in many standard form commercial agreements. For example, the  AAA provides:

“If a dispute arises out of or relates to this contract, or the breach thereof, [and if the dispute cannot be settled through negotiation,] the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures [before resorting to arbitration, litigation, or some other dispute resolution procedure.]”  *Note: You may or may not want to include the bracketed terms.

Note that this type of clause intentionally does not spell out the details of the Guided Choice process. Instead, it relies on the training of a mediator who knows when and how to apply the various tools of the Guided Choice process. It is not a “one size fits all” process. Guided Choice is inherently a customization of the settlement process based on the mediators confidential pre-negotiation investigation.

The parties and an experienced  Guided Choice mediator together develop the details of the a settlement  process. A simple form agreement to mediate avoids the negotiations involved in trying to customize dispute resolution clauses in pre-dispute agreements.

Any pre-dispute mediation clause should allow an agency to appoint a qualified mediator if the parties cannot agree on one.  Since the rules of most agencies contain such a power, the rules of such agencies should be part of the pre-dispute clause: This is an inexpensive agency service, and the agency forms provide for confidentiality of the process.

2. Retaining a Mediator as Early as Possible

The earlier a mediator become involves the more likely there will be an earlier settlement with the related benefits of reduced legal expense and achieving business goals. However, even with a pre-dispute mediation clause it is common for lawyers to delay retaining a mediator until “they are ready to negotiate.”  This view is premised on a presumption that hiring a mediator is tantamount to agreeing to negotiate. However, under the principles of
Guided Choice, the mediator’s pre-negotiation phase determines the information needs of the parties before they are ready to negotiate, who needs to participate in negotiation and how the settlement process should be designed. The mediator does not set dates for a mediated negotiation until the parties are ready. In fact, the mediator may determine that the parties are not ready for negotiations until they have actually commenced arbitration or litigation.

What if one party is willing to retain the mediator for a pre-negotiation phase, but other parties are unwilling? In such situations, Mediators, using Guided Choice tools  are willing to discuss with the reluctant parties why using the mediator in the pre-negotiation phase is in their best interest regardless of when, if ever, the mediator is authorized  to schedule negotiations. These discussions are confidential by agreement.

Some pre-dispute agreements have dispute resolution procedures such as using Step Negotiation, opinions from Dispute Review Boards, British style adjudications and arbitration. These procedures may have or not a pre-condition of mediation. Before invoking the use of these procedures, it is better to use a  retained mediator to advise on the best way to use those procedures for both settlement and perhaps eventually for a binding resolution. Later in this section is discussed the use of the new AAA Commercial and Construction Rules to require mediation upon filing a demand for arbitration, whether required by agreement or not.

 

3.Diagnosis of the Impasse by the Facilitator

Choosing the right settlement process is as important as using the right mediator for settling as soon as possible. The right process depends on an understanding of all the causes of the stalemate.  The right mediator is someone  who knows how to conduct interviews to confidentially   diagnose all  the reasons why the dispute remains unresolved. It is easier to understand reasons based on law, fact and expert opinion. It takes a higher level of skills to understand the human behavioral factors that have prevented decision makers from changing their positions.

Proper diagnostic analysis includes much more than reading the traditional legal briefs submitted by the parties’ lawyers.  The facilitator must be able  1) identify the parties’ needs for information; and 2) understand financial, and insurance issues and the existence of other potentially responsible parties who may not have previously agreed to participate in the mediation process.  The facilitator should also understand the decision-making process used by the parties and any organizations that are parties and identify any biases, hostilities, risk aversion and other psychological factors that have led to impasse. For example, how have the parties framed the impasses? What are the alternatives the parties have to a settlement? Are there possible win/win scenarios based on business considerations?

 4. Information Exchange

When a lawyer says that a client is not ready to mediate, the lawyer probably means that the client does not have enough information to make a business decision about whether to accept a settlement offer arising during negotiations. Traditionally, this results in expensive and time-consuming “discovery” conducted by the lawyers on an adversarial basis. However, under the guidance of a mediator, the parties can be made to understand why it is in everyone’s best interest to agree  to quickly exchange the important information that is necessary for the client to make its business decision for settlement. Clients often need far less information to make a business decision  than their lawyers think is necessary to “try the case.”

Agreeing to exchange information necessary for settlement decisions is never a limit on the right to obtain further information if case will be tried.   The parties could agree to postpone expensive e-discovery while negotiations are in process. Experts could meet with the parties and explain their protocols and opinions before preparing expensive written reports that make it difficult to for experts to change opinions.  Sessions with experts, working on a collaborative basis, can reduce damage claims and help identify issues needing further investigation. Generally, expert sessions should precede settlement negotiations.

5.Anticipation and Overcoming of Impasse

Using Guided Choice tools, the facilitator advises the parties of the potential areas of impasse before any impasse occurs during negotiations. This helps the parties avoid any feelings of failure that may develop when impasse is reached. Discussing the likelihood of impasse before it occurs lets the parties focus on overcoming it and not on terminating the mediation. Many mediators find it appropriate to use the  Guided Choice tool of “What If Scenario Planning.”  That process involves the parties collectively or individually discuss what are the likely areas of impasse that may develop during negotiations. The parties then discuss what impasse breaking techniques should  be considered if that impasse develops. This tool reduces the friction that can develop when an impasse occurs during negotiations

The Guided Choice facilitator, acting as a mediator, has many tools to help break impasse. These include the following:

1. Referral of legal or fact issues to a Dispute Review Board, Adjudicator, Neutral Evaluator, Mini-trial process, Initial Decision Maker, arbitrator or even a judge for ruling on a “certified question.” Any referral would be for an interim and limited decision. The parties can agree about whether any information exchanged in that process would be admissible in a subsequent trial or arbitration hearing. There are cases where mediators have found that having the parties engage in such discussions helps reduce the tensions that have contributed to the impasse.

2. Referral to an expert for a non-binding ruling on an issue of law or fact.

2. Discovery, including depositions that would be limited to outcome-determinative issues identified by the facilitator. These preliminary depositions can be limited in length.

6. Continued Use of the Mediator  after Suspension of Negotiations 

Even if the parties decide to proceed to a full arbitration or to resume litigation in a court, the Guided Choice mediator can maintain a role as settlement facilitator. This role is particularly important in arbitration. Unlike in court, arbitrators are normally reluctant to become involved in the settlement process. The opportunities for settlement discussions may not arise as they often do when the parties are in court for preliminary matters.

7. Customization of Arbitration for Disputes That Do Not Settle

A frequent criticism of arbitration is that “one-size does not fit all.” For it to be successful, the process needs to be customized to meet the parties’ needs. Those needs include minimizing expenses, especially the management of discovery, reducing the length of the hearing time, and finding ways to preserve business relationships. .

As a result of these concerns, some businesses will not agree to pre-dispute arbitration, which leaves the dispute to be resolved in a court system. When standard form arbitration clauses are in the commercial contract, it is often difficult for the disputants to agree on how those standard procedures should be customized. The Guided Choice process suggests that the best way to achieve customization is by using the mediator, originally chosen for the deadlock investigation phase of a mediation, as a facilitator for an efficient arbitration process.

The parties and facilitator can discuss the subject of arbitration customization either before or after an impasse has occurred. They may also discuss it, regardless of whether or not there is a pre-dispute obligation to arbitrate. If the parties cannot agree about how to customize the arbitration, they should be comfortable that the default process will be used.

The new American Arbitration Association Commercial (R9) and Construction (R10) now require consideration of hiring a mediator when filing a demand for arbitration. This provides an excellent way to implement the retaining of a mediator to review the reasons for deadlock and identify those issues which need to be arbitrated before the parties are willing to discuss settlement. There are AAA cases where deadlocked parties overcame impasse by reason of their collaborative effort of preparing for a customized arbitration.