Mediation in Business Litigation

Business litigation lawyers (and their clients) should always explore the idea of mediation during litigation. Regardless of the type of business lawsuit—corporate litigation, breach of contract, unfair competition, employment, partnership disputes—litigation can be time consuming and expensive. Mediation gives both sides the chance to look at the strengths and weaknesses of the case and determine if there is a chance to resolve it before engaging in depositions, motions and trials.

What is mediation?

Mediation is a form of alternative dispute resolution. In mediation the parties to the lawsuit meet with a third party neutral mediator in an effort to come to a mutually agreeable resolution.

Who is the mediator?

The mediator is often an attorney or even a retired judge. But there is no requirement that the mediator be either one. It is usually most effective to have a mediator with a background in the type of dispute you are involved in. For example, for a real estate dispute in Los Angeles, local real estate attorneys who have a knowledge of real estate concepts and the local courts would be a better fit than an out-of-town lawyer who handles a different type of law practice. Certain business litigation disputes are better handled by litigation attorneys who specialize in that type of business dispute. For example, corporate litigation often involves specific California Corporations Code statutes. Rather than trying to educate a mediator on corporate law, a party is better of hiring an experienced corporate litigation attorney in the first place.

How will the process work?

In an arbitration, an arbitrator listens to evidence and then makes a ruling, much like a judge in a court trial. However, a mediation is not a trial or an arbitration. The parties will each talk to the mediator and present their case in the best light, but there are usually no witnesses, no testimony, and no cross-examination. A mediation is an attempt by the parties to settle the case. The mediator will not make a ruling. In fact the mediator has no power to make any party do anything that he, she or it does not want to do. A settlement is only reached by mutual agreement among the parties.

The process is usually akin to shuttle diplomacy. The mediatory may gather both or all of the parties together in one room for an introductory session. The mediator will spend some time explaining the process. Each side may be asked to give an introductory statement of each party’s position in the litigation. In most cases the parties will then split up and go into separate rooms.

Each side will talk to the mediator about the case. The mediator will want to know what each party thinks of as the strengths and weaknesses of the case. A good mediator will also examine the economics of the case—how much will it cost to fight the case? How much will the party spend on attorneys fees? Will it be more expensive to go to trial than it would be to settle right now? Like any good negotiator, the mediator will try to structure a settlement where both sides have come out ahead.

What is important to understand about mediation?

First and foremost, a mediation is an attempt to reach an agreeable resolution to the litigation. No one is forced to do anything against his or her will. No rulings are handed down and no one “wins” or “loses” in the traditional sense of litigation. Secondly, figure out the cost/benefit analysis. If you successfully defend a $100,000 lawsuit but your law firm charges you $150,000 in attorneys’ fees, your ‘victory’ may leave a bitter taste in your mouth. Sometimes cases can be settled up front for less than they can be after the other party has spent time and money litigating the case. Thirdly, mediation is a good opportunity to hear what an experienced attorney or judge with no bias thinks about your case. Keep an open mind and listen. You do not necessarily have to settle the case that day, but listen to what they are saying about the risks of the case.

Los Angeles business litigation attorney Laine T. Wagenseller handles a variety of business lawsuits. He is the founder of Wagenseller Law Firm, which specializes in real estate and business litigation. For more articles on corporate and business litigation issues, please visit www.wagensellerlaw.com. You can contact Mr. Wagenseller at (213) 286-0371 or ltw@wagensellerlaw.com.