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December 11, 2020 Article

Using Zoom for Pre-Mediation Activities to Achieve Earlier Settlements

Paul M. Lurie and Robyn L. Miller

Most construction disputes settle and are not adjudicated by courts or arbitrators. Settlement is often at an impasse, however, until the parties realize a settlement is in their best interest compared to the uncertainty of outcome in arbitration/adjudication or court and the expense of using lawyers and experts.  Depending on the process used, disputes settle at different points in the resolution timeline, with greater or lesser costs and business disruptions.  A major factor influencing earlier dispute resolution is hiring a mediator early in the dispute process and selecting a mediator who will use diagnostic and remedial processes to help the parties move beyond the impasse of their settlement positions. As we discuss, the social distancing caused by the virus pandemic has caused lawyers to learn to use Zoom. When used for mediation, Zoom has been shown to be a good tool for early hire of mediators who can engage in pre-mediation activities before starting settlement negotiations.

The current best practice to accomplish this form of early dispute resolution, and one that is endorsed by major companies and lawyers in the construction industry, is to engage in pre-mediation prior to formal settlement negotiations at a traditional scheduled mediation.  Pre-mediation's success in reducing time and expense depends on having the mediator on board as early as possible. No settlement negotiations take place during pre-mediation, and no outcomes are predicted by the mediator.  The purpose of pre-mediation is for the mediator to (A) conduct a diagnosis of factors causing impasse; and (B) recommend methods to satisfy party needs which allow them to overcome entrenched positions before the commencement of settlement negotiations.

Importance of Early Hire of Mediator

To have an effective pre-mediation phase requires the early hire of a mediator. However, it is common for litigators to postpone the hiring of mediators until after the completion of discovery and motion practice. Lawyers are trained to rely on expensive and time-consuming discovery and motion practice to convince their opponents to change settlement positions. If forced to mediate because of a contract clause or court order, many litigators will often not seriously negotiate. Also, if the mediation is court ordered, an appointed mediator may come from a court list where the mediator does not have the process skills of Guiding Mediators. 

What Happens in Pre-Mediation?

Pre-mediation has two phases. In Phase A, the mediator conducts confidential diagnosis of all the causes of the impasse. In Phase B, the mediator nudges the parties to cooperate in processes which fulfill their needs to change position, overcome impasse, and reduce their differences before the start of settlement negotiations in the scheduled mediation event.   Pre-mediation may be done live, by telephone, or by videoconferencing, e.g. Zoom. These sessions are held privately for each party. There is seldom a need for separate virtual rooms.  The advantage of videoconferencing is that it is relatively easy to include lawyers, clients and interested entities who may not have formally agreed to mediate.   Clients attending these pre-mediation meetings can develop trust in the mediator and the process, especially because the mediator is not expected to opine on outcomes during pre-mediation and is not pushing for anyone to put money on the table.

Common reasons for impasse in commercial construction disputes include differences in expert and legal opinions concerning contract language, projected adjudicated outcomes and their cost, causation, damages, or applicable legal principles. They can involve the emotional needs of decision makers, including anger and fear, and the groupthink of the company team promoting or managing the claims.

Mediators diagnose by knowing what questions to ask--just like a doctor or a therapist.  Mediators trained in pre-mediation are often described as Guiding Mediators.  Effective questioning compels parties to listen and think, enabling both the de-escalation of emotions and un-anchoring from positions, allowing parties more room to explore and find options that may lead to settlement.

In pre-mediation Phase B, the parties consider "nudges" from the mediator based on the mediator's diagnosis of the needs of the parties' decision makers.   The process of "nudging" was popularized by Sunstein & Thaler. The subject of using nudges includes how to fulfill the needs of the parties before they are willing to consider change of settlement positions and before beginning settlement negotiations. Collaborative processes to fill needs nudged by the mediator are alternatives to the adversarial processes of discovery and motion practice.

This is different from mediator suggestions based on what the mediator may have used in other disputes. We see this frequently in CLE programs, where mediator presentations are based on anecdotes rather than decision science-based analysis. 

These collaborative methods include exchange of documents and electronic information, apologies, meetings among experts to reduce differences, limited discovery and third-party opinions on a non-binding or binding basis. It may also include changing negotiators because of negotiation styles, power differences or previous relationships, either bad or good. The parties may choose to litigate/arbitrate impasse issues on a limited basis and then resume settlement negotiations. Often what they learn in preparing for such litigation/arbitration causes the parties to change their settlement position.

Unfortunately, many lawyers and mediators do not use a pre-mediation phase prior to starting settlement negotiation. Many lawyers' view of mediation preparation is solely to submit legal briefs to the mediator and not even always to the adversaries. Perhaps there are phone calls with the mediator to discuss who will be attending the mediation event.  Lawyers and their clients may avoid pre-mediation believing that starting negotiations as soon as possible is more important than the delay and expense of preparing for negotiations. As a result, the causes of impasse are not identified sufficiently in advance of the negotiations to meet the parties' needs.

When negotiations fail to settle the dispute, lawyers often think the best way to get opponents to change their position is by aggressively using discovery and motion practice. If the dispute is later settled, the cost of the resolution process will have been dramatically increased due to such adversarial tactics.  In contrast, where pre-mediation is used, in the unlikely event that the dispute is tried, pre-mediation activity will provide much of the information needed for litigation preparation but at much lower cost. 

Just because a suit or arbitration was filed does not mean that these collaborative processes cannot be run in parallel with a litigation timeline where adjudication is considered as part of a broader strategy. See American Arbitration Association Construction Rule R-10. Also, if there is a step negotiation clause in a pre-dispute contract, party meetings can be arranged by the mediator to avoid the anger or disappointment when the parties are not ready to change position necessary for a settlement. 

After completion of the pre-mediation, the parties engage in the traditional mediation event organized by the mediator to negotiate a settlement. Because of what they learned during pre-mediation, the parties are well prepared to determine whether it is in their best interest to move from their impasse position or continue to litigate or arbitrate.

Using Zoom for Pre-Mediation

Because of the closure caused by the Covid-19 pandemic lockdowns, most commercial mediations are using virtual sessions conducted by videoconference using programs such as Zoom.  A pre-mediation Zoom- based meeting can give all parties the ability to increase their comfort with the mediator and the processes used.

The use of Zoom is effective whether the actual mediated settlement negotiations take place virtually or live. What we are learning from mediations using Zoom is that video conferences may be an excellent way to improve communications necessary for pre-mediation activities even if the ultimate settlement negotiations are resumed in a live session.  With Zoom it is easier to get client representatives to meet virtually with the mediator along with the attorneys. The mediator's ability to see faces and vice versa helps build trust in what the participants are saying.  It also helps build parties' trust for the mediator whom they only may have known through their resume. Virtual Zoom mediations may not be the norm post Covid-19. However, the use of virtual mediations has forged a new set of tools that can be deployed in pre-mediation and can allow lawyers and mediators to provide value to clients earlier and more economically. 

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Paul M. Lurie

Schiff Hardin LLP, Chicago, IL

Robyn L. Miller

Callison RTKL Inc., Los Angeles, CA, Division 11 (In-House Counsel)