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MEDIATION PITFALLS AND OBSTACLES

A. Introduction

There are times when mediation does not work. Many times, such cases are suitable for referral to arbitration. Other times it is just a matter of picking the right time to implement the process and the failure to work is a matter of timing or preparation rather than a matter of mediation being inappropriate. Finally, there are times when mediation will not work. This column was written to identify the areas where ADR in a matter will be frustrating and to help appreciate the areas in which ADR can still work as expected. B. Mediation Problems

1. Procedural Problems.

There are three extremely common procedural reasons reported by attorneys as reasons that mediations deadlocked.

a. 24% of the failed mediations result from a lack of settlement authority. In a survey involving over 150 mediators and a substantial number of sessions, almost one quarter of the failures were the result of a necessary party not attending. Those with authority must attend in order for the process to work.

b. 21% of the failed mediations result from a lack of preparation. Often referred to as a "inadequate discovery," the problems quite commonly reflect a party or an attorney who does not know enough about their own case to be able to settle the case.

c. A substantial number of mediations fail because of hostile and incompatible attorneys. A mediation session is not the place for an aggressive, hostile and emotional attack on the other party or their attorney. Such attacks cause a substantial number of failed mediations.

2. Special Problems.

a. Where one side is engaged in litigation with the primary intention of bleeding the other side with litigation expenses mediation is not fruitful. In this situation, a mediation session will generally be seen as one more opportunity to impose costs on the opposing party rather than a chance to cut costs and find a better resolution.

It is a primary tenant of mediation that the parties enter it in good faith. Malicious, bad faith litigation is a good example of the kind of bad faith that poisons the chances for success of mediation. Intellectual property conflicts are the same as any other in this regards, except that "bleeding" suits are more common.

b. Where an uninsured defendant faces catastrophic liquidity problems mediation will often be fruitless. E.g. the Defendant has $50,000,000 per year in sales of which $15,000,000.00 are from the sale of unlicensed properties. Assume that $5,000,000.00 per year would be the amount of royalties/etc. due (and not paid). Now assume the company has only $10,000,000.00 total in assets. (This is a situation that comes up commonly in print and art sales where a substantial portion of "public domain" prints in a catalog turn out to have current copyrights. Similar to this situation would be an uninsured motorist being sued under a subrogation claim after a serious accident.).

A mediation session after three years of infringement (and $15,000,000.00, plus interest, in past due royalties) is unlikely to cause the Defendant to bite the bullet. When the result of mediation requires the dissolution, reorganization or bankruptcy of a party, mediation usually does not generate the imminent pressure necessary to resolve the problem.

Note that in the same situation, mediation brought before a catastrophic loss looms can some times resolve some problems as will mediation brought after a judgment is entered in the case. In both cases, mediation serves as a supervised negotiation session where both parties can benefit. Mediation does not fail in such a situation, however it must be timed properly.

C. Most frustrating, is the situation where one side is mentally unable to appreciate the legitimacy or the limits of property rights. Thieves will rarely change their stripes and become trustworthy or legitimate just because they have entered a mediation session.

Individuals will differ, but a substantial portion of all intellectual property law litigation is against persons whose infringement is knowing and willful and who refuse to acknowledge property rights. Mediation with many of them is as fruitful as mediating with a burglar on the issue of his or her profession. (Note however that there are successful mediation programs dealing with sentencing in criminal cases just as there is often successful mediation after judgment in intellectual property cases.)

C. Arbitration

Arbitration often is faster than trial. However, arbitrators in many areas are rumored to be prone to "split the baby." If a party is entitled to harsh legal remedies and is willing to wait (and take some risk) in order to obtain them, then arbitration thought to probably be dissatisfying. Many intellectual property law plaintiffs have basically written arbitration off because of the natural level of compromise that is perceived as to accompanying it. Note that this is an issue of perception.

Statistical studies do not bear this belief out -- arbitrators are not likely to "split the baby". However, in seeking redress the choice of the arbitrator(s) is crucial, as is a review of the arbitrator(s)'s record and prior decisions.

Situations where one side is completely in the wrong, but is pushing arbitration or trial to obtain the benefit of natural compromise often do not result in fruitful mediation. If one side is unwilling to give an inch, and has no legal reason to compromise, non-binding arbitration or mediation have only about a break-even chance of persuading the other side to throw in the towel purely to save legal costs.

D. Counterpoint

There are times where mediation will work. After all, an 85% overall success rate reflects that there are many, many times are times that mediation will and does work.

In specific situations, the success rate is even higher than 85%.

Often, mediation also provides "one last chance" before major expenses are incurred. The general rule is that if negotiation can work, then mediation can make the negotiating process work better. If you are in a situation where negotiation won't work, mediation sometimes provides more of the "won't work" situation. However, mediation often finds creative alternatives that resolve the problems where negotiations have failed.

Even if you are unprepared, lack authority or are unreasonable in the extreme, mediation may help. However, it is best to increase your chances of success by not entering into mediation sessions with these problems.

E. Final Word

ADR is an alternative. It remains an alternative because while it works most of the time, it cannot work all of the time.

However, unless your case fits into one of the special areas detailed above, negotiation, mediation and ADR ought to work for your conflicts just as well as they work for conflicts in every other realm of the law. ADR may be an alternative, but it is a generally good alternative.

Even in areas where most parties would not expect mediation to help, with proper evaluation (which mediation helps to create and improve), mediation often educates the parties and helps them to move forward. Thus mediation has been surprisingly successful in federal criminal prosecution and defense, in resolving federal business TRO requests (92% of the time), and has created a speciality in family law matters.

Being aware of the pitfalls and the opportunities, counsel can prepare to use this procedure, like any other tool available to counsel, to build a better case and to find a better resolution.
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Copyright 2000 Stephen R. Marsh

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