Because a central pillar of mediation is self-determination—the parties themselves decide, not a court or an arbitrator or anyone except the parties—the parties must be in the right mindset for the process to work and have a reasonable prospect for success. In this respect, it is somewhat like marriage or perhaps an offer of employment: Both parties must be in the right frame of mind, at the same time, for it to work. Ideally, the parties to a mediation are willing to agree to something, perhaps not outwardly or vocally, but certainly deep down, they are agreeable to seeking a resolution.
There are, of course, instances when parties are contractually obligated to mediate, or a court has ordered them to mediate, or there is judicial pressure—real or perceived—to mediate. Those can be thought of as “check the box” mediations, because the parties are going through mediation solely because they are actually required to do so or believe the court wants them to do so. Indeed, many courts have forms asking counsel whether their case is suitable for mediation. Based on experience, many lawyers seem to think they need to “check the box” for mediation because they believe that is what the court wants them to do. The timing of such mediations is usually determined by the courts.
There is, generally, something of a continuum of money and knowledge that determines the ideal timing for mediation. At the beginning of a dispute, the parties will likely have paid little, if any, in legal fees. Thus, early mediation can effectively minimize the costs, financial and otherwise, of litigation. However, at that early point, the parties may lack sufficient information that they believe would help them in deciding about settlement: They may not have had an opportunity to fully investigate their own sources; they almost certainly have not conducted discovery of one another; and they surely do not know how a court will rule on any dispositive issues. And it is not at all unreasonable for a party to want to have as much knowledge as possible before giving up a claim or making a payment to the adversary. In other contexts, it is usually thought to be good decision-making to wait until the last possible moment to decide, in hopes that some late-arriving additional data will reveal the right answer.
Moreover, early on, the parties have not yet experienced the exquisite pain of litigation as a stick to settle, and the risks that a trial presents may still seem very distant.
By contrast, waiting to mediate until after discovery is concluded or, later still, on the eve of trial, means that the parties (unless a government agency is involved, or there is a contingent fee or pro bono arrangement) have spent a lot in legal fees and have also suffered the burdens and inconvenience of document production, depositions, and the many other distractions that litigation brings. However, by that point, they probably have acquired—purchased, one might say—as much knowledge about the case as they will ever have, short of knowing how a jury or judge would decide the dispute, of course. And now, too, they are finally about to face the reckoning of an imminent trial (depending, naturally, on the backlog of the court’s docket), with all the risks of handing over their legal fates to a judge or a jury. That realization often triggers a settlement.
It should also be acknowledged that the decision of when to mediate is not always determined by noble motives. One side may seek mediation in order to delay the litigation. Or, as I observed in a case that, pursuant to a contractual provision, was mediated shortly after the complaint was filed, one lawyer was especially obdurate—it turned out that the lawyer always liked to work cases for a while to generate legal fees, and he had not yet met his target on that case. And sometimes parties may wish to put off mediation because they do not have sufficient liquid assets to pay if they were able to reach a settlement.
There are numerous factors that counsel may wish to consider to help them determine when mediation would be most auspicious. In addition to the universal and understandable desire to minimize the cost and burdens of litigation, several other factors favor early mediation, including the following:
- a desire to keep the dispute confidential, for any number of reasons, such as avoiding embarrassment or otherwise damaging the party’s reputation; deterring similar lawsuits; or avoiding governmental, media, or public scrutiny
- a desire to preserve a business relationship that would be imperiled by the war that is litigation
- a desire to avoid having to disclose damaging or confidential information that may come to light if the case moves into discovery
- a desire to avoid an adverse decision or precedent that could affect an important business practice
Conversely, there are also factors that militate toward putting off mediation until a later stage, such as the following:
- the desire to know more, to know key facts, that are not available at the early stages of a litigation
- the desire to have an adjudication of a significant legal issue
- the desire to not suggest weakness to the other side. It is the rare attorney who has not encountered a client (or two) wholly unwilling to raise mediation early, for fear of appearing weak or desperate to settle. And, occasionally, it is the lawyer who feels that way.
Let’s drill down on a few of these factors that play into determining when to mediate. First, costs: What are the anticipated litigation costs—how much remains to be spent, recognizing full well the difficulties in accurately budgeting litigation? Generally, the more that remains to be spent, the easier it may be to settle, on the theory (not espoused by all clients or lawyers) that it is better to pay the money to settle the case and eliminate the risks and inconvenience than it is to keep litigating. The corollary, of course: Will it be harder to settle the case after the parties have incurred substantial legal fees? At that juncture, the parties may figure that they have already spent a lot of money, so why not roll the dice? But the fact is that many, if not most, cases do settle after the parties have paid a fortune in fees—probably because they’re not willing to gamble on a jury or judge.
In some cases, there is a wrinkle in this calculus about costs: fee-shifting provisions. While we do not operate under the English rule that awards attorney fees to the prevailing party, there are statutes—for example, the Fair Credit Reporting Act, Title VII, and state laws aimed at preventing strategic lawsuits against public participation, or anti-SLAPP laws—that provide for the award of reasonable attorney fees and costs to the victor. And sometimes, in an apparent effort to deter litigation, parties to a contract choose to enter into a stipulation whereby the prevailing party receives fees and costs. In these circumstances, as the case grinds on, the adversary’s legal fees grow daily and may become a real obstacle to settlement.
Another significant issue is the parties’ knowledge of the case. It can be quite challenging, at an early stage, for client and counsel to assess, accurately and fully, the value and risks of the case. The more the parties know, the more likely that they will be comfortable making decisions about mediation and settlement. Several questions for consideration:
- Are you aware of a “smoking gun” witness or document, either one you are certain that the other side possesses or, perhaps more importantly, a harmful “smoking gun” in your possession that will be revealed in discovery?
- If the dispute is pre-discovery, would the parties be willing to share limited informal discovery geared toward topics that each sees as material?
- By contrast, if discovery is already under way, how much has taken place, what is the discovery schedule, and what critical discovery remains?
- Would the parties (and the court) be willing to limit discovery initially to certain material issues, in order to minimize cost while securing key pieces of knowledge?
- If expert testimony will potentially determine the outcome, would the parties agree to an early informal exchange of expert reports? Clients are often reluctant to mediate they are concerned they may be handing over “free discovery” to the other side. This could well be one of the few situations where that concern may be valid: Once an opposing expert sees the counterpart’s report, the expert may well change his or her own report to meet the other side’s points and improve it.
Lastly, there may be a threshold issue that one or both parties think can have a major impact on the dispute. Examples of such issues are the statute of limitations, notice in an insurance coverage case, and Eleventh Amendment immunity in cases against governmental bodies. Should mediation be deferred until a ruling is rendered on the issue? Is it better to have the certainty of a ruling, or is the uncertainty, perhaps while motions are pending, more conducive to getting the parties to settle? Will the winner feel emboldened, or would the winner prefer negotiating from a position of strength after securing a favorable ruling?
In sum, there are a number of factors for counsel to consider in deciding when to mediate. The decision can be further complicated when litigating in courts with expedited case schedules, like the Eastern District of Virginia’s Rocket Docket, where the accelerated pace can make it dicey to fit a mediation in as the parties zoom toward trial. In certain situations, it might be worthwhile for counsel to explore the timing issue with opposing counsel. Or maybe it even makes sense to talk through the timing issues with a mediator. Above all, however, a lawyer facing this decision should not succumb to paralysis by analysis—with apologies to Tennyson, it may well be better to mediate and fail than never to have mediated at all.
