Late-Stage Mediation Works; Early-Stage Mediation May Work Better

By Zena D. Zumeta, J.D.

Late-stage mediation has been a familiar process for attorneys for almost a decade in Michigan. While this method of dealing with impasses tends to avoid trials, clients in today's stressed economy are also interested in reducing expenses and animosity. Discovery is expensive. Additionally, mediating late in the litigation process tends to produce a narrow result that may leave the parties bitter and polarized. It is now time for judges and attorneys to examine early-stage mediation, and consider using it to attract clients and better serve their needs.

The Evolution of Late-stage Mediation

Mediation in Michigan has primarily been late-stage directive mediation. Historically mediation was not differentiated from "Case Evaluation." Lawyers presented their case to a panel of three attorneys who set an amount the panel thought it was worth.

After mediation court rules 2.410, 2.411, and 3.216 were passed in 2000, facilitative mediation became the default approach for court-ordered mediation. Facilitative mediation uses a neutral third party who facilitates a voluntary negotiation process, without recommendations to the parties. Case Evaluation was properly renamed to reflect the actual process with the 2000 court rules changes.

Late-Stage Mediation

After the court rule changes, mediation in Michigan began to resemble a judicial settlement conference more than a motion hearing. Since this process is generally used just prior to trial, it is termed "late- stage mediation." In cases that cannot reach agreement quickly, the third-party neutral mediator gives both parties an opinion on the outcome of the case. This is often framed as a prediction about the outcome. Because the mediator tells clients how the court is likely to act in their particular situation, it is termed "directive mediation."

Late-stage mediation generally follows a "shuttle diplomacy" format. To avoid an escalation of conflict between the parties, the mediator splits the opposing parties and their attorneys into separate rooms shortly after the start of the mediation. After shuttling back and forth to hold deep discussions with each side, the mediator uses reality testing and arm twisting to urge the parties toward compromise. The parties either compromise and settle, or leave without agreement.

Strengths and Problems of Late-stage mediation

Late-stage mediation is a very useful process, since most cases settle using this method. Even when a resolution is not produced at the table, the issues are narrowed. Simultaneously, the parties learn enough about the other side's case to put them in frame of mind to settle. This allows the lawyers to move the parties toward settlement more easily. It spares the expense of a trial, and may allow the attorneys to save clients the cost of full preparation for trial. Additionally, the witnesses and exhibits required at trial are not used in late-stage mediation. All told, it does a very good job.

Still, going this far down the road before settlement makes late-stage mediation costly at several levels. First, the discovery process is expensive. Second, using mediation late in the litigation process carries an important risk. The parties may become so polarized that settlement becomes much harder, and the parties much more embittered. Third, results are often less creative, less satisfying, and less encompassing had the parties been brought together earlier. Particularly in this economy, late-stage mediation risks leaving clients frustrated and unhappy with both the process and their attorneys.

Early-stage Mediation

Lawyers are less familiar with early-stage mediation. "Early-stage" means before full discovery is done, and, in some cases, even before litigation is commenced. The parties and their attorneys usually stay in the same room with the mediator. They may have separate conferences and meetings to discuss strategy or proposals, but then come back together to explore the issues.

Strengths and Problems of Early-stage Mediation

Why is early-stage mediation worth considering? Advantages cited by parties and attorneys, including company attorneys, include the following:

• For parties that have to keep working together, contract together, or otherwise stay in a relationship, early-stage mediation produces results before the parties are so polarized that settlement becomes grudging and tension-filled. The purpose here is to promote the relationship, rather than just settle the case.
• The tone of early-stage mediation is very different. Parties are focusing on working together, not just settling. Early in the process, we find that parties can listen to each other better, and can more easily understand each other's point of view. This allows for real, transformative change in the relationship, and deeper understandings between the parties. A transformation in the relationship may lead to an even better working relationship in the future.
• Early settlement allows for a wider range of outcomes, including creative ways to work out their issues. Later on, tension impedes these kinds of solutions.
• Early-stage mediation can be a cost savings to the parties and their companies. If discovery is foreshortened or minimized, the cost savings can be immense. If motions in court are not needed, this also saves money. And even if the parties don't settle in an early-stage approach, the issues can be clarified, the future legal work focused, and the possibility of the parties returning to mediation at a later time enhanced.

One disadvantage to early-stage mediation is the possibility that a resolution process commences before the parties have an adequate understanding of their respective legal cases. If this happens, and the parties have truly come to mediation too early, they can adjourn the mediation and come back after discovery.

However, parties in an ongoing relationship usually have some basic understanding of their positions, even if they don't fully understand the legal consequences of those positions. Therefore, there is worth in having the parties sit down fairly early with a trained mediator to discuss the parameters of the dispute. They may well find shortcuts to settlement by talking early.

If discovery is needed, the mediator can become a case manager, helping the parties agree on a productive discovery process. For example, they may decide upon a joint discovery procedure to cut down costs, or they may agree on time limits to move the case forward.

Late-stage mediation works; Early-stage may work better.

Richard Hurford, Director of Litigation at MASCO Corporation says, "Companies have to look at the return on investment for both litigation and mediation. Lawyers and mediators need to think like a business person. From a business standpoint, early resolution of disputes is the answer."

Late-stage mediation settles cases, but at a high cost to the parties both financially and to their relationships. For these reasons, at the beginning stages of conflict resolution it is fruitful to test whether talking out the issues together will lead to a greater understanding between the parties, and a less expensive, foreshortened, productive, and less embittered result. Parties and companies engaging in early-stage mediation not only appreciate the opposing party's position, but better appreciate their attorneys. In these lean economic times, that is worth a lot.