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Litigation

Mediation: What is It and When Should it be Utilized?

conference room95% of cases settle before trial. Within the past couple of decades, there has been a huge push within the legal profession to facilitate settlement through Alternative Dispute Resolution (ADR). Mediation or facilitation (used interchangeably here) is a non-binding form of ADR as opposed to arbitration, which is fully binding and case evaluation, which is quasi-binding.

The legal profession’s push to facilitate (nearly every case filed in Michigan’s state circuit court is not only assigned to case evaluation under Michigan Court Rules 2.403, but frequently ordered to facilitation) has had some negative consequences. These have included:

  • Additional fees and costs associated with facilitation if the case is not appropriate for facilitation.
  • Loss of trial skills among young lawyers.
  • An abridged timeline for preparation. The business court docket now requires early facilitation for all cases within 90 days of the first court conference (local administrative orders). This means that as soon as you file your lawsuit, the Court calls the parties in for a scheduling conference and orders the case to facilitation before any significant discovery has been taken place.

Mediation and facilitation should be distinguished from case evaluation and arbitration. Case evaluation is mandatory for all lawsuits other than those that are only equitable in nature. Case evaluation is governed by the Michigan Court Rules and is only binding when all parties to the evaluation process “accept” the evaluation award. If any party “rejects” the award, the case proceeds to trial as normal.

There is a risk of sanctions in rejecting an award in the form of attorney fees and costs from the date of rejection through verdict. Conversely, arbitration is a binding ADR proceeding conducted like a bench trial, but not governed by evidentiary rules. Rather, either a single arbitrator or panel of arbitrators presides over the proceedings and makes decisions concerning admissibility of evidence, usually under the American Arbitration Association rules. The arbitration award is then entered as a judgment following the proceedings.

Why Choose Mediation?

Each case is different; not every case is appropriate for mediation. Timing is also important to consider. The business docket for example orders every case to early facilitation, which means that the parties are engaged in ADR before significant discovery has been conducted. This can be very ineffective because parties tend to be entrenched in their positions early on in cases, because discovery has not yet revealed weaknesses in their case.

Nevertheless, small business disputes, such as commercial collection actions, can benefit greatly from early facilitation.  This is is because small disputes typically involve parties that are reasonably concerned about excessive attorney fees, the bulk of which are incurred during the discovery period.  Additionally, in small disputes, the economic damages are more easily measurable without extensive discovery.

On the other hand, I do not recommend submitting a case to early facilitation where the parties lack the details necessary to make a reasonable settlement offer or demand. In other words, if you require discovery to understand the range of economic damages or validity of the opposing parties’ defenses, it makes no sense to submit the case to facilitation early on in the lawsuit. Since facilitation is much more time consuming than case evaluation, an ineffective mediation session can anger a client since he is not only spending his time away from work and paying your fees, but he is also paying for the facilitator.

When called into the judge’s chambers and asked whether early facilitation is appropriate, do not hesitate to say no if the case requires discovery before facilitation can be effective. In my experience, facilitation after discovery is much more effective in nearly every case, since by that time the parties possess sufficient information to evaluate the strengths and weaknesses of their cases.

Another benefit of facilitation is that you can use it to avoid case evaluation. Case evaluation can be frustrating, requiring the attorney to summarize a complex dispute in five minutes for three mediators who have a large docket to get through on that day.  So, usually when the judge asks whether facilitation is warranted, I will ask that as part of the order to facilitate, he remove the case from case evaluation.

In future posts, I will discuss choosing the right mediator, preparing your client for mediation and drafting a mediation summary.

By Adam Kutinsky, Member, Dawda, Mann, Mulcahy & Sadler, PLC