Use Mediation for Your Business Dispute

Mediation is a type of alternative dispute resolution (ADR) that provides a relatively simple and straightforward process for resolving business disputes. In many business disputes, mediation is the best option by being faster, more cost-effective, and enabling creative solutions.

For legal advice about using mediation to resolve disputes and avoid business litigation, talk to a mediation and ADR attorney.

How Mediation Works

The disputing parties and their attorneys agree on a neutral third party to be a facilitator, then take a seat at the negotiation table in good faith.

“The mediator does not have any authority to impose any decision on the parties, nor is it the mediator’s job to decide who’s right or who’s wrong,” says Loretta Attardo, a Boston-area mediator who primarily handles employment and labor disputes.

“Both sides have to accept that they must negotiate and compromise, and agree to a settlement,” adds Jerome F. Rock, a mediator and arbitrator in Grosse Pointe Park, Michigan. “Since the early 2000s, mediation has really become high on the radar of both attorneys but businesspeople. Certainly, anyone who has been in litigation is anxious to pursue alternatives.”

Gene Esshaki, an ADR attorney at Merry, Farnen & Ryan in Saint Clair Shores, Michigan, recalls doing mediation before it was cool — or formally recognized. “A judge would call me up and say, ‘Look, this case has got a real problem. You know the two lawyers. Would you sit down and talk to them to see if you can’t help me out on this, get it resolved?’ That’s how we used to do mediations. Now it’s formally certified by the courts.”

What Makes Business Mediation Successful

“A successful mediation process is one where the parties select a mediator, the parties follow the mediation rules, the counsels show up and do their part, and the representatives of the disputing parties show up and do what they’re supposed to do,” says Mary Patricia Benz, a Chicago-based attorney who has done business mediation since 2011.

“Everyone participates, and at the end of the day or two days or whatever they’ve scheduled, they reach an agreement in principle. Then they write it down and do a term sheet. They may not like all the terms that are part of the agreement, but they are happy because there’s a finality to it. It’s a win-win.”

Why Mediation Is Well-Suited To Resolve Business Disputes

Esshaki says business conflicts are especially well-suited for mediation. Commercial contracts commonly call for binding arbitration, Rock adds. But the American Arbitration Association has a provision to divert cases to mediation. Businesses are increasingly calling for mediation in their contracts.

“People want to create their own terms of settlement. They don’t like having the terms imposed on them by a third party, which is, of course, what happens in the court,” says Jerald A. Kessler, an attorney in Libertyville, Illinois, who has mediated more than 2,500 disputes.

“There has been research done that says people care as much about the process as the outcome of a conflict. So if they perceive the process was fair and reasonable, they’re willing to accept an outcome they might not have otherwise been all that enthused about.”

Types of Business Disputes in Mediation

Mediation is favorable in many types of business disputes:

• Disputes with suppliers over timeliness, quantity, quality, and price
• Family-owned business disputes over work responsibilities, compensation, and succession
• Disputes regarding shareholder derivatives

“Sometimes the parties just need a neutral third party to facilitate a conversation rather than a back-and-forth of, ‘Yes, we will,’ ‘No, we won’t,'” Kessler says. “Mediation keeps it at a conversation level rather than an argument.”

The process allows business partners to drive the decision-making and reach an agreeable resolution.

The Benefits of Mediation in Resolving Legal Disputes

In addition to being less adversarial, there are several other advantages of mediation over litigation:

Mediation Is Relatively Quick

Mediation often takes no more than a day or two. Litigation, in contrast, is time-consuming, lasting months or even years. “In litigation, people wear each other down financially until they throw in the towel,” Kessler says.

“Even if you go to court and win, people are still unhappy because they had to go through so much to get there. And if they don’t prevail, they’re even more upset.”

Mediation Is Cost-Effective

The biggest advantage, Esshaki notes, is “tremendous cost savings.” Time is money, and mediation commonly saves both — although it can vary. This makes the mediation process especially appealing to business owners. This type of conflict resolution and problem-solving often ends in a win-win.

“When I start a case, I never know how long it may take. Is it going to take three hours? Is it going to take eight hours? Will we have to come back another time? I simply do not know,” he says.

How it shakes out often depends on the type of case, Rock says. “Business cases tend to be more specialized,” he says. Both Rock and Esshaki say the majority of cases can be resolved in one mediation session.

Mediation Is Educational

Mediation sessions provide information that might show a party why avoiding litigation is the smart play. “It’s often the only opportunity to meet face-to-face with the decision-makers on the other side,” Benz says.

“They see how the decision-maker is talking and thinking. Do they know what they’re talking about? Are they prepared? Are they taking a hard line? Do they have some obvious places where they’re not taking a hard line? All that information is very available, sometimes for the only time in the dispute process.”

Mediation Is Individualized

“The parties decide the terms, not the mediator,” Kessler says. “Often the parties are seeking specific solutions [that might not be possible in litigation].”

“If you’ve been sued for a million dollars and you’re going to take it to court and there’s a jury, the jury is going to make the determination that you owe $1 million, or zero, or anything in between,” says Esshaki. “These are strangers to your business. Once you turn it over to a jury, you have no impact whatsoever on the results.”

Mediation Is a Better Approach to Conflict Resolution

Mediation helps maintain business relationships because it’s confidential and because of the lower-key format.

Additionally, says Kessler, mediation “preserves reputations and business-to-business relationships because some companies don’t want to go on record as being an entity that will go to court if there’s a problem.”

Potential Downsides to Mediation

There are, however, instances where mediation isn’t ideal. Unlike litigation and even arbitration, mediation isn’t legally binding. Consequently, if there isn’t trust and commitment among both parties — say, one side is negotiating in bad faith — a lasting mediation agreement can be in doubt.

But Kessler notes that parties typically “abide by the terms they’ve reached in mediation because they created the terms themselves.”

What To Look for in a Mediator

Not all mediators are created equal. The best ones have a gift for being unobtrusive and subtle in guiding the parties to an amicable solution.

“They’re good listeners and very creative and quick,” Benz says. “A good mediator will keep the process going. Sometimes, if you’ve planned out a path and it goes a different way, you have to be able to switch and see another path.”

Often, though, the mediator helps just by listening. “I’ve seen it again and again,” says Laurence Johnson, an attorney in Castine, Maine. “Sometimes the parties themselves don’t consciously appreciate what the real barrier is. They just want somebody to hear their side of the story.”

Adds Kessler, “You have to be able to figure out what is motivating the different parties and help them identify what their interests really are. Parties often come into a dispute with a big demand, but it might not be what their interest really is. There might be other options that they’re overlooking.”

“People are looking for mediators with subject matter qualifications,” says Rock. “In the IT field, in construction, and in different industries like automotive, for example.”

In the end, the concept sells itself. “Litigation is likely to end in dissatisfaction and disappointment by both sides,” says Rock. “A lot of times, businesses are looking to minimize the total cost, so they don’t have to win on every issue. It’s often more important to have a quick resolution, and mediation is just that.”

Find a Mediator for Your Legal Issue

If you want to use mediation to resolve your commercial dispute, reach out to an attorney with experience in mediation services for legal advice. Search the Super Lawyers directory for an experienced ADR attorney in your area.