The Pandemic Shows Why Mandatory Mediation May Be the Future for Business Disputes

The coronavirus pandemic has been a stress test on the American legal system, shutting down courthouses, forcing judges to postpone long-standing trials and pushing lawyer-client meetings onto Zoom calls.

The results have been clear: traditional legal routes of resolving business partnership disputes are simply too difficult and costly to continue during the pandemic.

Fortunately, going to court is not the only option. During the pandemic, many business owners have taken advantage of alternative dispute resolution methods such as mediation, and now that they’ve seen it in action, that growth will likely continue in the future.

Traditionally mediation has been a voluntary process involving a third-party neutral who helps the parties analyze the strengths and weaknesses of their case and facilitate discussion in an attempt to resolve their dispute. 

Judges have long promoted mediation as an efficient and effective way to resolve business disputes. Unlike a typical court case, mediation allows for complex civil disputes to be streamlined, as the mediator zeroes in on key factual and legal issues and steers the parties away from potential trouble spots that may be hindering a resolution.

In many courts, some type of mediation of business disputes is offered for parties to consider while they await trial, and it’s long been used by those who grew impatient. As cases have dragged on during the pandemic, it’s become a lot more popular.

But in those cases mediation was voluntary. With the court system still facing restrictions and a growing backlog, it’s possible that mandatory mediation will become the norm in many areas and require parties to participate in an alternative dispute resolution process just before or after filing a lawsuit.

Mediation is Mandatory in Other Cases

Mandatory mediation is not a new idea in other areas of the law.

In fact, it is commonly used in divorce cases, especially those involving child custody, because these types of disputes can be traumatic for young children, and parents are considered a better judge of the best interests of their children than courts.

It is also becoming more common in landlord-tenant disputes. For example, the Landlord Tenant Division of the D.C. Superior Court now requires mediation for all landlord-tenant cases which are set to be heard by a jury. 

However, the trend towards mandatory mediation, as opposed to optional mediation, has yet to be universally adopted in business litigation cases. And there are some factors to consider that could make a difference in whether it proves successful.

Good Faith Participation

One of the main factors in the success of a mediation process is the investment of the parties. Are all of the parties ready and willing to engage in good faith negotiations and try to settle the dispute? 

In voluntary mediations, all parties willingly decide to participate in the mediation process, while mandatory mediation forces parties to the table unwillingly. This is a key distinguishing factor. 

Prior to mediation, the parties’ attorneys are routinely required to submit position statements to bring the mediator up to speed before the official mediation date. Then on the day of the mediation, the mediator can spend several hours meeting with the parties jointly and individually to better understand the facts and legal arguments at play in the case and the mediation can be spread over out over a number of days depending on the complexity of the dispute. 

Even if the mediator is free of charge, mandatory mediation can unwittingly result in significant attorney’s fees for all parties involved.

Pre-Covid, lawyers could rely on the age-old adage “See you in court.” Now with the Court system being less accessible and litigants facing the reality that their breach of contract case may not go to trial in the foreseeable future, parties may view it as a more viable alternative to court. 

Power Imbalances

Business litigation cases can be very document intensive – meaning they involve exponentially more documents than other types of litigation such as custody or landlord tenant cases. 

Indeed, the strengths and weaknesses of a parties’ position in business litigation cases are routinely brought to light during the discovery process where parties are required to exchange relevant documents such as contracts, correspondence, and financial information. 

Therefore, if the parties are required to attend mandatory mediation at the outset of the case and before discovery has commenced, before documents are exchanged or depositions occur, certain parties may be at a significant disadvantage. 

Even assuming that the parties do settle their dispute in mediation, and thus, decrease the backlog of cases in the court system, this expedited process may not promote the most equitable outcomes.

The Skills of the Mediator

The success of a mediation often depends on the skills of the mediator.

Because business disputes often involve complex issues the mediator must be adequately trained and have expertise in the business law field in order for the mediation to have any chance of success. A good mediator will have solid training and expertise in business and relevant case law but also first-rate analytic skills.

Mandatory mediation of business law cases would increase the number of mediators needed and finding mediators who have the requisite experience and who are not troubled by the complexity of issues may prove difficult. 

Currently, in many of the federal court’s magistrate judges serve as mediators trying to assist the parties in reaching an amicable solution. Before taking the bench, these magistrate judges were well-renowned lawyers, and even if they didn’t practice business litigation prior to taking the bench, they are required to become knowledgeable about numerous different practices areas in order serve as a judicial officer. 

They also have an advantage of seeing first-hand the outcome of numerous business law cases that come before the court. Magistrate judges also have access to resources such as law clerks and judicial assistants that can help them get up to speed in a case in preparation for the mediation.  

If mediation is made mandatory it would likely overload the mediation process thus requiring additional funding and training of qualified mediators which could prove difficult.

Conclusion

It well known that mediation is a proven way to resolve disputes between parties much quicker than the adversarial litigation process, however, mandatory mediation may not be appropriate for all types of cases. 

Although courts may be inclined to introduce more mandatory mediation protocols as a way to decrease backlogs spawned by Covid-19, it is important to consider that this likely is not a one-size-fits-all solution. 

Business litigation cases in particular have unique areas of concern that must be specifically evaluated by the judiciary in order to determine whether a move towards more mandatory mediation will result in the most efficient, economical, and just results. 

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