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LITIGATION Verses MEDIATION

The concept of ‘shareholder value’ takes on many forms, including measuring return on financial investment; managing the conflicting interests of stakeholders as employees, shareholders, communities, regulators; setting and enforcing ethical business practices; setting and enforcing sustainable business practices; and ensuring the continued value of the brand by protection of the company’s reputation and goodwill.

Research demonstrates that over 80% disputes have the potential of an early resolution, if the resolution is handled by adequately skilled and committed third party neutrals. 

More and more lawyers need to look at disputes as problems to be solved, but not a legal battle to be won.

Dispute resolution needs a dispute resolution expert, may it be a lawyer or a non-lawyer – disputes need a hybrid approach to find early and cost effective solutions.

93 percent of cases filed with the courts are settled at some time, either through direct negotiation, mediation or arbitration.

“Dispute resolution is typically much quicker and cheaper than the traditional litigation process, and [it] keeps the results confidential, which can protect you from escalation and additional lawsuits.”

The study and practice of dispute resolution without or least use of litigation is becoming popular, since it is the next generation of law practice. The new generation of lawyers, who practice dispute resolution, need to incorporate the learning and practice of integrated and hybrid approach. Litigation is an instrument that will be required in rare situations and the practice of using litigation as a default mechanism is gradually weaning.

Determining whether to mediate requires identifying and assessing whether significant actual or potential commercial relationships or other business interests exist. Doing this encourages evaluating the importance of curtailing negative publicity, confidentiality, and obtaining relief that adjudication cannot provide such as apologies, modified relations, expedited compliance, licensing agreements, equipment sharing arrangements, barter arrangements, bid invitations, and future references. Mediation combats fixed pie and zero sum biases by expanding resolution agendas to include these and other types of business and non-monetary interests.

Mediation process helps to shift focus from the parties and their inclinations to maximize gain against each other to solving together the commercial problems disputes present.

Mediation also provides opportunities to broaden understandings of how both parties view disputes, business interests, potential trades, and the impacts that these perspectives have on monetary gains that are or might be asserted in adjudication. Many commercial disputes present situations where considerations external to the monetary claims framed by adjudication primarily drive decisions. Even when assessing just win-lose outcomes on legal claims involving money damages, however, mediating helps lawyers and their commercial clients realize that they lack perfect information upon which to base their case analyses and outcome forecasts.

Effective lawyers understand that they do not know or understand everything relevant to analyzing and forecasting adjudication outcomes. They also know that selective and partisan perception lessens their analytic objectivity and increases risks of biased predictions.

The enhanced communication channels that are possible in mediation but not in adjudication help commercial decision makers move their understanding beyond selective perception by becoming more familiar with and realistic regarding dispute facts, case analyses, and outcome forecasts. They help commercial disputants avoid negotiation errors stemming from missing or misunderstanding important facts, legal rules, possible agreement terms, and adjudicatory outcome components.

Mediation creates balanced opportunities for commercial disputants and their lawyers to speak to and learn from each other privately about factors on which case analyses and outcome forecasts are based with assurance that what they say and do will not appear in court testimony or the media. An additional layer of confidential caucusing allows private meetings with mediators and frequently generates information that would never appear in adjudication but which often proves crucial to resolutions. Confidential caucuses overcome major resolution barriers that ow from strategic approaches to communication generated by adjudicating.

Negative, hostile emotions influence behaviors, divert attention from resolution, and damage relationships. Positive emotions promote satisfying substantive interests, enhance relationships, and reduce exploitation fears. Mediating often defuses hostility between disputants and combats the distortions caused by partisan perception and biased attribution.

Effective mediators seek to establish and maintain positive emotional climates conducive to constructive communication. They frequently respond to core emotional concerns by expressing appreciation, building affiliation, respecting autonomy, and acknowledging status. They strive to introduce “light where before there was only heat” by acknowledging strong emotions that disputants often express. This permits participants to express negative emotions, usually in caucus away from counterparts. Discussing topics triggering strong emotions in private sessions allow full expression without alienating counterparts. These conversations counter biased attribution by disentangling impact from intent. They also often generate useful information that clarifies interests and aids careful analysis of the costs and benefits of mediation alternatives.

Mediating commercial cases combats optimistic overconfidence because it typically encompasses frank, mutual analysis of alternatives to agreeing consensually. Comparing what emerges as the best terms achievable during mediating with these alternatives supplies a core component of commercial dispute mediation. Effective mediators promote the development of greater information regarding mediation alternatives by discussing, usually in caucuses, strengths, weaknesses, gaps, inconsistencies, and vulnerabilities concerning specific dimensions of anticipated mediation options.

Because commercial dispute resolution usually occurs in the shadow of adjudicatory alternatives, much of this conversation concerns specific information regarding case analyses and outcome forecasts. Typically occurring after disputants have presented their views, concerns, and opinions fully, these conversations often begin with discussions of analytic strengths and bases of favorable predictions. Listening carefully, mediators can convert this information to questions to ask counterparts regarding potential vulnerabilities and weaknesses in their legal positions and outcome forecasts.

Mediators then tactfully phrase and respectfully ask these questions. Responding to these inquiries permits counterparts to learn and assess these contrasting perspectives. Using questions rather than statements allows mediators to encourage lawyers to articulate responses to inquiries about potential gaps, inconsistencies, and problems. This dialogue allows commercial clients to hear pros and cons of adjudicatory analyses and predictions discussed in non-adversarial, information-oriented rather than persuasion-focused, settings. These discussions often help clients understand why and how they need to adjust their views of adjudicatory outcomes and form more realistic expectations regarding settlement possibilities and proposals.

Mediating dampens the use and effects of ineffective but common negotiating tactics like unwarranted threats, dangerous bluffs, and premature “final offers. ”Money-based negotiating typically involves multiple rounds of offers and responses as participants move through their negotiation ranges. Attempts to maximize gain and avoid loss influence tendencies to start negotiating with extreme demands reflected in high or low ball offers, often considerably above or below adjudication forecasts, and to stop bargaining before reaching their best numbers. Using skilled listening, questioning, and confidential caucusing, mediators help everyone deal with negative emotions generated by biased attributions that perceive evaluation differences as criticism and strategic negotiating actions as disrespect.

They also help participants deal with the escalating impatience and frustration that accompanies grudging efforts to move to midpoints between opening proposals. Analyzing and evaluating claims is not easy, and mediating helps lawyers avoid false negotiation failures during this process resulting from guessing incorrectly about what they can achieve, posturing too long, hiding real top or bottom limits too tenaciously, and concluding further movement cannot be made without unacceptable face loss.

Although disputants’ best numbers usually do not overlap, mediating helps many commercial disputants find ways to bridge the smaller gaps that usually appear once extensive negotiating identifies viable ranges. Carefully examining estimates regarding all transactional costs of pursuing adjudicatory alternatives, including attorneys’ fees, court costs, business disruption expenses, lost commercial opportunities, time estimates, collection probabilities, and appellate risks, often helps bridge these gaps. So does analysing shared interests in ending disputes, avoiding loss risks, and maximizing independent business interests. Mediating helps commercial clients assess carefully whether adjudicating is really necessary and cost beneficial to achieve vindication, secure company reputations, reduce the incidence of future similar or related claims, or obtain decisive legal precedent. Even if agreement does not result, mediating often increases mutual understanding, resolves many issues, and narrows the focus for going forward with either adjudication or later mediation reconvened with different participants.

Globalization, regional economic integration, and increased business activity amplify needs to resolve commercial disputes with greater efficiency. Lawyers need to develop heightened awareness of adjudication alternatives and the promise they hold to create mutually satisfactory, business interest based resolutions. Pre- or early-adjudication mediation, while not a panacea, supplies a valuable tool that enhances efficient commercial dispute resolution when used more often by lawyers and their business clients.

Mediating builds on to rather than ignores existing lawyer skills needed to analyse fact situations, discern applicable law, and estimate adjudicatory outcomes. Mediating gives lawyers important roles in helping their commercial clients develop, compare, and then choose between accepting the best settlement option obtainable or initiating or continuing adjudication. Mediating also lets lawyers satisfy human impulses for resolution, healing individuals and organizations, and enabling commerce to function more harmoniously and productively.

Finally, mediating counters the perceptual and legal cultural, win-lose biases that influence the strategic ways lawyers typically negotiate money-based issues. Most commercial disputes involve at least some negotiating over money and mediators add considerable value by helping participants deal with optimistically overconfident case analyses and the negative emotions that positional bargaining between differing perspectives frequently generates.

Humans are profoundly social beings constantly influencing and being influenced by each other. Small scale activities by a few individuals can generate contagious behavior that cross a tipping point and produce dramatic, immediate changes in social practices. The tipping point for commercial dispute mediation probably occurs when mediating happens so commonly that it becomes the regular option, the default preference unless particular circumstances suggest otherwise. As this analysis demonstrates, lawyers’ resistance to mediating commercial disputes has not approached such a tipping point. But if more lawyers identified and surmounted the barriers generating their resistance to mediate, use of this beneficial adjudicatory alternative might approach or even cross this tipping point.

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