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Play for a win-win: making a case for early principled mediation in business disputes.

One of the great costs to businesses everywhere--including in Utah--is the increasing cost of litigation. Changing the approach to resolving business disputes by taking the finger off the litigation trigger could make a huge difference for Utah businesses. When a commercial business dispute arises, it makes good business sense to begin a resolution with principled mediation at the beginning of the dispute, rather than mediating the case after the close of discovery and before the trial begins.

WHAT IS PRINCIPLED MEDIATION?

Principled mediation is a mediation philosophy that uses the services of a facilitative mediator to help parties identify their common interests in finding a solution to their dispute. It focuses the discussion on finding a rational business solution to the problem by looking for common ground or mutual gain. The mediator engages the parties in a realistic assessment of the merits of the facts and the law as applied to the situation. Both parties work with the mediator to find a rational solution that is likely to last, as well as to preserve the existing, valued business relationship.

Principled mediation is an alternative to the more typical "positional" method of mediation, where the parties use the mediator to move the parties from two extreme positions toward a compromise in the middle, sometimes called the "mediation dance." Each side makes a series of small compromises that inevitably ends in a middle position in which both parties typically feel unhappy because they gave or lost too much. Invariably, the business relationship between the two parties becomes a casualty of the process.

ATYPICAL SCENARIO

The current traditional litigation paradigm begins when Party A receives a letter from Party B threatening litigation. Rather than meeting with Party B to try to solve the problem, Party A hires a litigation lawyer--usually the biggest, baddest junkyard dog available. In-house counsel immediately writes preservation/hold letters to all conceivable custodians of documents who might have "relevant" information. Litigation counsel and in-house counsel draft a nasty response letter that escalates the animosity and ramps up the lawsuit, which is then filed. The complaint contains hyperbolic accusations, further escalating the tension. When the respondents draft a "hard-hitting" response, the litigation takes on a life of its own.

That is only the beginning. Initial disclosures are drafted, both sides exchange onerous requests for documents, teams of lawyers and electronic discovery (ESI) vendors image "responsive" documents, including emails from the computers of all possible custodians. Those custodians are interviewed; the parties fight over the scope of the document requests; motions to compel are filed; judges order "all responsive and relevant" documents to be produced (often millions of pages of material); documents are gathered and reviewed for privilege; weeks are spent preparing witnesses and taking depositions; experts are hired and deposed; motions for summary judgment are filed, argued and usually denied; and ultimately, a trial date is set.

At that point the fear-of-failure axis usually crosses the arrogance axis of both trial counsels and only then do the parties agree to mediation--typically a positional mediation where there seldom is a clear winner and often everyone feels like a loser. In working with a mediator, each side tries to "win" the mediation through shuttle diplomacy, with offers and counteroffers carried back and forth until the midpoint is reached and the case settles.

In the process, fees can climb into the millions of dollars, an enormous amount of time as well as emotional and intellectual energy is spent on both sides, and valuable business relationships are usually destroyed. In the end, the resolution is often not particularly advantageous to either party compared with what might have been possible using principled mediation at the beginning of the dispute.

WHY NEGOTIATION MATTERS

Much has been written on the psychology of negotiation, touching on ego, conflict, personality and the need to save face or be validated. Negotiation is as much an art as a science, and admittedly, the principled mediation approach is not for every case. There are situations where the animosity is so great that a rational discussion is not possible. However, those cases are by far the exception rather than the rule. The greatest animosity usually arises from the positions taken during litigation itself.

In the lion's share of situations, principled mediation is preferable to either litigation or positional mediation. Dispute matters where principled mediation would be most appropriate might involve professional partnerships, oil and gas companies with joint operating agreements, limited partners and a general partner in private equity or venture capital firms, coal or gas supply contracts, patent holder and a manufacturer royalties, franchisor and franchisee, closely held corporations, family businesses or multilevel marketing companies.

The wisest approach a Utah business can take when faced with a commercial dispute is to consider engaging in an early principled mediation process. Integrity becomes central to the resolution process when bruised egos and flaring tempers are set aside. Instead of playing disputes as a zero-sum game, look for a win-win.

George M. Haley is a partner in the Salt Lake City office of Holland & Hart and is also a mediator with Utah ADR Services. For more information, visit www.hollandhart.com.
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Title Annotation:MEDIATION
Comment:Play for a win-win: making a case for early principled mediation in business disputes.(MEDIATION)
Author:Haley, George M.
Publication:Utah Business
Geographic Code:1U8UT
Date:Mar 1, 2015
Words:856
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