01 Apr Try Mediation-the Cost-Effective Alternative to Litigation

In our previous blogs we discussed the steps your business would take both prior to and in preparation for litigation to protect its proprietary information from being improperly exposed and used by its former employees and their new employers.  But what if you determine that litigation is just too big of an expense for your business to carry right now?  Your company should consider mediation as a cost-effective alternative to litigation.

What Is Mediation?

Mediation is a form of dispute resolution in which a neutral third party, trained to listen and learn about the dispute, facilitates negotiations among the parties, and seeks—but does not impose—a settlement of the dispute, based on his or her objective input about the strengths and weaknesses of each party’s case.

Mediation can not only provide a cost-effective way to resolve and settle the matter, it presents a learning opportunity for you and your counsel to use in future litigation, should mediation efforts fail.  It is key for counsel to understand and critically analyze the interplay between complex mediation and litigation, and the effect the interplay has on the strategy counsel applies to your case.

Your counsel must help you to analyze the opportunities and risks associated with mediation, and give careful consideration to key issues such as the timing of mediation, overriding confidentiality concerns, selecting the right mediator based on the issues in your case and the character traits of your opponent, and the pro and cons of disclosing your legal strategy prior to litigating the issues in court.

Can You Force Your Opponent to Mediate Prior to Litigation?

Just because your business is trying to avoid the costs of litigation does not mean that your opponent has the same financial concerns.  Besides a court order, neither you nor your business can force an opponent to litigate, unless you have a contract with your former employee requiring him or her to mediate a contract dispute.  However, even this is not fool-proof.  Although mediation might be compelled by contract, an opponent’s decision to mediate is still voluntary in nature if the obligation arises from a prior agreement.

You and your counsel may want to consider other ways to encourage a mediation.  For example, you and your attorney may want to contemplate whether your opponent has or may have concerns about negative publicity associated with the dispute, which would encourage a mediation among the parties.

Your business’s best bet is to encourage a voluntary mediation with your opponent.  If all parties agree to mediate after a dispute arises, everyone is likely to have at least some interest in settlement, and settlement may be more likely because the parties may approach mediation in a more cooperative and constructive manner.

When Should You Seek to Mediate?

If mediation is voluntary among the parties, the parties can agree to mediate at any time.  Such timing could be driven by any one of the following factors:

• The increasing costs of litigation
• Discovery of unfavorable facts
• A desire to avoid public exposure
• The parties’ need for closure

What If We Don’t Settle—Can Mediation Disclosures Be Used Against Your Company in Litigation?

Your company may be concerned if mediation is not successful, especially if it disclosed information in mediation about its key evidence or legal strategy.  The good news is that mediation is typically a confidential proceeding, based on mediation rules and guidelines set forth by the American Bar Association, the Association for Conflict Resolution and the American Arbitration Association.  There are also state statutes and court rules that expressly hold that mediation communications are privileged, confidential or otherwise inadmissible in a subsequent legal proceeding.  In addition, your contract with your opponent should include a confidentiality provision, preventing your opponent from using any information he or she obtained in mediation against you.

However, not all communications are privileged and protected in mediation.  Under the Uniform Mediation Act, evidence that is “otherwise admissible or subject to discovery does not become inadmissible or protected from discovery solely by reason of its disclosure or use in mediation.”  These communications for example may be held admissible where offered for a purpose other than settlement.  See Fed. R. Evid. 408(b).  Also, if your counsel includes argument in your mediation statement about the existence of certain documents or witnesses that support your case, your opponent can safely seek discovery on those documents or witnesses outside of the mediation privilege.  In addition, preexisting and otherwise non-confidential documents shared during mediation do not become confidential merely because they were shared in mediation.

Moreover, even if your opponent does not share or seek discovery on confidential information you disclose in discovery, it could very well use that information to influence decisions it makes outside of mediation.  For example, if your opponent learns which issues are sensitive to you and your business, it could use this information to obtain a tactical advantage in future business decisions and in litigation against your company.

Call Edwards Law today if your business needs help deciding whether mediation is appropriate to resolve its business disputes.  The first consultation is free.