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July 09, 2019 Articles

Can You Turn a Failed Mediation into a Trial Asset?

Learn how to treat mediation as a mini mock trial, streamline the case, and use the mediator as a neutral expert.

By Anne E. McClellan

Failure is simply the opportunity to begin again, this time more intelligently.
—Henry Ford

The vast majority of civil cases never make it to trial. The phenomenon of the “vanishing trial” has been attributed to many causes, including the prevalence of mediation and other forms of alternative dispute resolution (ADR). In fact, some judges view trials as failures—failures caused by attorneys not doing their job to obtain a negotiated resolution. Almost all federal district courts require parties to participate in or at least consider the use of ADR, and there are about 250,000 civil case mediations per year. Despite best efforts, many of those mediations do not resolve the case. Attorneys owe it to their clients not only to be skilled at handling mediations but also to know how to turn a failed mediation into an asset for trial.

Mediation Can and Does Fail

It is commonly reported that 90–98 percent of cases settle before trial, but the accuracy of that statistic has been questioned. Statistics for pretrial settlement rates often include case dispositions that are not traditionally viewed as “settlements,” such as voluntary dismissals, dismissals for lack of prosecution, or other dispositions that do not involve monetary payment. Settlement rates also vary between federal and state courts, among different states, and based on the type of case. According to a study by the National Center for State Courts, about 16 percent (490,000) of civil cases in 22 states went to trial in 2002. The Department of Justice reports that in 2017, voluntary ADR resolved cases only about 75 percent of the time, and court-ordered settlement proceedings resolved cases only about 55 percent of the time.

When cases are narrowed to those involving a monetary settlement, settlement rates range from 45 to 88 percent depending on the type of case. Studies of tort litigation report settlement rates of 70–80 percent in filed cases. Contract cases were less likely to settle than tort cases, with only about 45 percent resolving through settlement. Employment cases had a settlement rate of less than 60 percent. Based on these studies, depending on the type of case and the jurisdiction involved, the likelihood of trial—and the likelihood of mediation failing—may be higher than generally believed.

How to Use a Failed Mediation to Your Benefit

  1. Treat mediation as a mini mock trial. There are numerous articles detailing how to effectively prepare for mediation. At a basic level, mediation preparation requires knowing the facts, the procedural history, and the upcoming deadlines. To take full advantage of mediation, attorneys should dig deeper into the case. Mediation experts recommend that attorneys know their best alternative to a negotiated agreement (BATNA) before going into mediation. In litigation, the BATNA is often trial, so attorneys should evaluate what will happen at trial before going into a mediation, including creating case themes, developing potential trial strategy, and assessing the evidence and witnesses. Attorneys should analyze liability but also fully vet the claimed damages, including a cost-benefit analysis regarding the strength and recoverability of the damages. It is also important to identify the weaknesses in the case and deal with them head-on in the mediation. Mediation is an opportunity to test the potential impact of those weaknesses at trial based on feedback from the mediator.

    Mediations often begin with a joint session, with both sides in the same room. If attorneys want their cases to be taken seriously, they need to show during the joint session that they are prepared to competently try the case. It is not unusual for mediators to ask the attorneys to give an opening statement during the joint session. This is an opportunity to test the impact of arguments and themes on the opposing party, the mediator, and even the attorney’s own client.

    In most civil cases, information must be freely disclosed, preventing trial by ambush. Thus, there is little downside in using mediation to test trial themes and general strategy, especially in light of its benefit for settlement negotiations and, if those fail, for purposes of refining trial preparation.
  2. Pay attention to the information disclosed by the opposing party. The timing of mediation depends on the case. Mediation should not be used in place of formal discovery because the parties are not under oath, but early mediation gives attorneys an opportunity to conduct informal discovery regarding the facts of the case and the opposing party’s position. That information is useful in shaping case strategy moving forward if mediation fails.

    Commonly, mediation occurs near or after the close of discovery when the attorneys have access to all or most of the facts, evidence, and witnesses, and after they have had an opportunity to investigate claims, conduct depositions and other formal discovery, and engage in motion practice. That does not mean there is nothing left to learn at mediation. Mediation presents a unique opportunity to understand the opposing party’s primary motivation, the facts they consider most pertinent, how they intend to handle damaging facts or weak evidence, the evidence they rely on most heavily, and even their intended trial strategy and theme. This is information that may be gleaned from the opposing party’s mediation statements and positions or extrapolated by the mediator sua sponte or at the request of an attorney.

    Information obtained at mediation can help focus trial preparation, allowing attorneys to prioritize the facts, witnesses, and evidence that need the most focus and develop a counter to the opposing party’s intended trial theme and strategy. It can also alert attorneys to potential motion in limine issues.
  3. Use the mediator as a neutral expert. When used to their full potential, mediators serve as a “neutral expert” with respect to the strengths, weaknesses, and realistic value of the case. The mediator assumes the role of a fictitious courtroom and will take into consideration all the evidence and facts presented. He or she will then attempt to predict the outcome if the matter were to proceed to trial. Therefore, it is important to select a trained mediator with experience in the type of case at issue. Mediators familiar with trial outcomes in the jurisdiction for the case type can provide invaluable insight as to the potential reaction of jurors or the judge to claims, defenses, arguments, and the type and amount of damages sought.
  4. Reevaluate the case. A failed mediation may indicate that the case was not properly evaluated. Settlement outcomes are associated with case quality; the more apparent the liability and the higher the degree of economic loss, the more likely it is for the case to settle. A recent study showed that parties and attorneys frequently misevaluate their case quality for settlement purposes. Plaintiffs do so more often than defendants. About 61 percent of the time, the result obtained by the plaintiff at trial was not as good as what was offered during settlement negotiations. The same study found that the defense made the wrong decision about proceeding to trial less often. In 24 percent of the cases, the defense did worse at trial than the last settlement offer. However, when the defense was wrong, the cost was much higher. Getting it wrong cost defendants an average of $1.1 million, while it cost plaintiffs an average of $43,000. Both sides made the right decision to proceed to trial only 15 percent of the time, meaning the defendant paid less than the plaintiff demanded, but the plaintiff got more than the defendant offered.

    Based on the foregoing statistics, if the case does not settle at mediation, attorneys should give serious consideration to whether they have miscalculated the quality of the case and amount of damages. Before heading into trial, attorneys should reexamine the facts, evidence, and claimed damages, as well as their case themes and strategy.
  5. Streamline the trial. Trials are not only vanishing; they are also shrinking by virtue of “managerial judging” whereby judges more liberally grant dispositive motions to weed out weak claims and through the increased use of bifurcated trials. Judges are also taking a more active role during trials to speed up the trial process, leading to shorter trials that are more regimented and controlled more by judges than the parties or attorneys. Therefore, if attorneys do not take charge of streamlining the trial, the judge will.

    The parties may not be able to reach a resolution on the full case at mediation, but they may be able to resolve smaller or weaker claims, leaving them with fewer claims to handle at trial. When it becomes clear that the matter is not going to settle, the attorneys can ask the mediator to switch focus, allowing the attorneys to get together in a room to hammer out details for trial, such as determining trial length, agreeing on jury instructions, and attempting to resolve disputes about witnesses or evidence. This can cut down on costs associated with motions in limine, disputes over jury instructions, and the drafting of the joint pretrial statement. It is always preferable for attorneys to have control over the presentation of the case than to gamble on the judge’s view of the dispute.

There is no denying that the number of trials has been decreasing, and there is also no denying that settlement is part of the reason for that phenomenon. However, not all cases settle. Attorneys must be prepared to effectively and competently represent their clients at trial, and that includes the ability to turn a failed mediation into an asset for purposes of trial.

Anne E. McClellan is a member of Jennings, Strouss & Salmon, P.L.C., in Phoenix, Arizona.

Copyright © 2019, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).