Mediation...It Makes Business Sense

Mediation (not to be confused with arbitration) is becoming one of the most effective methods of conflict resolution available today. This is particularly true in the construction industry, where conflicts typically arise between parties involved in interdependent business relationships. A sign that the use of mediation is increasing in the construction industry is the AIA's recent adoption of mediation clauses in their model contracts.

What is mediation?

Mediation essentially is a negotiation process. In the mediation process, the parties meet with one another and the mediator, often accompanied by counsel, at a mutually agreed upon location. The mediator sets the stage and asks each party to explain his/her perception of the problem that exists. After the parties give these initial statements, the mediator guides them through a facilitated brainstorming session. During the mediation process, the mediator meets with the parties together and separately. The tone is conciliatory rather than adversarial, and rules of evidence do not apply. The end result is an agreement, similar to a settlement agreement, signed by all parties. Often, through the mediation process, parties agree to terms they had never before considered. In this way, many people perceive mediation as a win-win alternative.

Commonly, parties confuse mediation with arbitration. The processes are quite distinct. In arbitration, unlike in mediation, the neutral is the decision-maker. In arbitration, unlike in mediation, rules of evidence apply. In arbitration, unlike in mediation, a party wins and a party loses. In these ways, the arbitration process parallels our legal process much more so than the mediation process.

Why Mediate?

Parties choose to mediate for numerous reasons. Mediation, because it does not involve rules of evidence, enables parties to discuss the matters that mean the most to them directly and immediately. It is not uncommon for this approach to save parties thousands of dollars and months entangled in court proceedings. Further, parties can schedule their own mediations, avoiding lost business opportunities.

Mediation is a confidential process as well. Currently, there is pending a Uniform Mediation Law, which will more formally protect the confidentiality of mediation. The confidentiality of mediation, much like the confidentiality of settlement discussions, allows parties to clarify misunderstandings and learn from their experiences. Another benefit of the confidentiality of mediation is the opportunity parties have to preserve business relationships or, at a minimum, to avoid unnecessarily acrimonious endings to their relationships.

Applications of Mediation

There are a variety of ways businesses can use mediation. For instance, some businesses use mediation training to incorporate mediation skills on an organizational level. Other businesses use mediation clauses, either in addition to or in place of, arbitration clauses. Mediation clauses obligate parties to attempt to work things out amongst themselves before proceeding to arbitration or filing a lawsuit. Mediation also can be used in place of litigation or after a lawsuit has been filed. Mechanics' lien cases, for instance, because of their complexity and size, are particularly appropriate for the mediation process.

The following situations illustrate several ways in which mediation has been applied:

1. ) The Employment situation. Consider an employer/employee dispute over an employee's termination. In that situation, the business owner may be more concerned with confidentiality, legal costs, and lost time away from his/her business. The employee may be more concerned with compensation and the specific terms of the "termination." Through mediation, the parties might agree to enter into a confidentiality agreement, with the employee agreeing not to file a lawsuit and the employer agreeing to the "resignation," rather than the termination, of the employee with some form of compensation and a letter of reference.

2. ) The Family Owned Business. Imagine a roofing business, started by the grandfather of a family. The grandfather has three children, two sons and a daughter. One son is a recent college graduate and wants to enter the family business. The daughter, who is the business' human resources person, is the middle child, is married, and has a son of her own, whom she hopes also will enter the family business. The third son, the oldest child, has been in the family business for 10 years, is thinking about leaving it, but is his father's right-hand person. The daughter resents the older brother and feels that he is ungrateful and should not be an equal owner and/or should not inherit an equal share in the business should he decide to leave it.

   In this situation, there are several overall concerns: ownership and succession of the business; management of the business; and family/personal conflict. All of these concerns could be, and would be, addressed through mediation. One solution this family might reach is for oldest son to stay in the business long enough to train the youngest son. Another solution this family might reach is for the oldest son to maintain an equal number of shares in the company until a future date, at which time he would transfer some shares to nephew. Alternatively, the oldest son might name his nephew as the beneficiary of some of his shares. The grandfather might also designate mediation as a means of resolving conflicts over his will. The important thing is that, through mediation, all members of the family would have a voice and would be able to customize their solutions to their particular situation.

3. ) Breach of Contract/Mechanics' Lien. Envision a construction project of a commercial building. The owner hires a general contractor, who in turn hires numerous subcontractors. The architect oversees much of the work. The owner becomes dissatisfied with the architect's work and fires him. The architect sues the owner and names all other businesses who worked on the site as defendants in a mechanics' lien suit. Subcontractors begin to file counterclaims. Before you know it, service of process alone becomes a daunting task. Cases like these go to mediation and are resolved much more inexpensively and swiftly than they otherwise would be if they proceeded to trial.

Conclusion

In short, MEDIATION makes BUSINESS SENSE because you:
• save money;
• protect your business' reputation;
• tailor solutions to YOUR particular situation;
• avoid miscommunications;
• choose your own schedule and meeting place; and
• avoid spending time away from your business, embroiled in protracted legal proceedings.

Robin Hoberman, attorney at law, is the founder of Solutions First Mediation Services, Inc. To learn more about how mediation can benefit you and/or your company or to schedule a presentation on mediation, call 312-386-1467 or e-mail at robin@solfirst.com.