Unresolved disputes may be unresolved for different reasons. Each one has unique factors creating impasse. And the parties must recognize these before they 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 and skills 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 Mediation 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:
- An Obligation to Mediate
- Retaining a Mediator as Early as Possible
- A Mediator’s Confidential Investigation and Diagnosis
- Information Exchange
- Anticipating and Overcoming Impasse
- Continued Use of the Mediator after Negotiations Are Suspended
- Customizing Arbitration for Disputes That Do Not Settle
A. 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, t 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.
B. Retaining a Mediator as Early as Possible
When a mediator becomes involved early, a 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 such as 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 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.
C. Mediator’s Confidential 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 mediator 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 mediator 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?
D. Information Exchange
When lawyers say that their clients are 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. With 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.
The need for a collaborative method of information exchange has become even more important now that the Amended Rules 16 and 26 of the amended Federal Rules of Civil Procedure concerning e-discovery are in effect. The mediator is the ideal person to help narrow and expedite dispute resolution in this pre-settlement negotiation area.
E. Choosing the Right Settlement Process
The parties should adopt a settlement process that focuses on avoiding and overcoming impasse. The mediator, based on what They information that was shared with him in pre-negotiation, is in the best position 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 the parties should consider the following issues when they’re designing a settlement process:
- Do the parties have equal access to critical outcome relevant information without further discovery?
- Who needs to participate and how will they participate – in person or by phone or video? Also, will the parties’ experts participate, and if so, how?
- Should there be open joint sessions or just caucuses?
- 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.
- Should there be a meeting with all the experts before the negotiations begin? Under the mediation privilege, these discussions would not typically 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.
- How should stalemate 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 such 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 short -term 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;
(3) further use of discovery, including depositions limited to outcome-determinative issues identified by the meditator and limited in length.
F. Customizing Arbitration for Disputes That Appear Likely Not To 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 manages any mediation impasse, in order to facilitate an efficient arbitration process. That will more likely produce a result acceptable to all parties.
The parties and the mediator can discuss customizing arbitration, either before or after an impasse has occurred. They may also discuss it even if there is not 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 occurs 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 therefore may not arise as frequently as they do in court.