Since building new courthouses and hiring more judges to reduce a pandemic-induced judicial backlog is not a viable or realistic solution, early mediation initiatives have become an easier and less costly way to work through the glut. Although mediation has proven to be very successful in a variety of jurisdictions, one trend is constant: Mediation typically occurs too late in the life of most disputes. Reduce the time the case remains pending, and we can reduce the judicial labor and private and public costs. Here’s how to do it.
Finding Data to Drive Decisions
Mediators in more evolved jurisdictions report settlement rates ranging from 60% to 80% of filed cases. However, capturing data is hard, and government studies regarding settlement rates at mediation are problematic and may minimize the impact of mediation for several reasons.
The first is that mediation that is not court-ordered likely flies under the radar. Also, some cases do not settle during the formal mediation session, but the mediation reveals new information that leads to settlement a few days or weeks later, which means it’s unlikely to be counted as a mediation “win.”
Additionally, there are host of factors making data capture elusive. Insurance carriers should know what percentage of their claims settle through mediation, but none of them publish studies detailing their success in mediation across lines of business. Thus, one is hard pressed to find available studies discussing the optimal timing for mediation.
Judicial implementation of early mediation initiatives will reduce the pandemic-induced backlog. Even in the absence of judicial intervention, liability insurers, in-house counsel, and litigation managers should consider adopting internal policies that require trial counsel to schedule early mediation. Most routine disputes and even multi-party claims may be competently mediated within 60-120 days after all parties are joined in a suit but, routinely, no one tries.
Identifying the Impediments to Change
Historically, law schools do not devote much, if any, time to dispute resolution, which means lawyers are not well schooled or trained in the science and psychology of it. Mediation does not require lawyering in the traditional sense, so some lawyers may feel outside their comfort zone.
For younger trial lawyers, becoming a skilled mediation advocate is not viewed as lucrative or career enhancing. In truth, no one plans to grow a litigation firm by becoming a great mediation advocate. It is not unreasonable for lawyers to see mediation as secondary to their primary role. If you are not trained to mediate, participation in mediation does not increase profits, and settling cases does not enhance a trial lawyer’s reputation, why would you expect trial lawyers to champion the process?
On the other hand, with a rate of trial at 1% of filed cases, characterizing mediation as “alternative dispute resolution” is laughable. Resolution by mediation occurs at an exponentially higher rate than resolution by trial. Moreover, there are no appeals from mediation.
With that said, changing normative lawyer behavior toward mediation is hard. Few people outside the legal or insurance community understand the important role mediation plays, and because of confidentiality rules underlying the mediation process, the lessons from mediation cannot be exported. That means, for many, mediation remains a dark art lurking in the shadows of trial practice.
Why Mediation Is Delayed
Because of skepticism surrounding mediation when it emerged in the 1980s, courts did several things to appease lawyers when they implemented court-ordered mandatory mediation. Virtually all courts then and now enter orders requiring attendance of “lead trial counsel.” This was understandable in the 1980s, when we were hoping and expecting the bar to take mediation seriously. But now we recognize the client should choose their mediation advocates, and they may not be lead trial counsel. Trial skills are of no use in mediation. You need someone with emotional intelligence and deal-making capabilities.
Additionally, in the 1980s, judges unilaterally set the mediation deadline at the end of the discovery period. Why? A later deadline satisfies counsel’s perceived need to file summary judgment and to “know everything” before mediating. Unwittingly, the judiciary created a custom and practice that has never changed. By implementing unnecessarily late mediation deadlines that are now anachronistic but still the norm, courts have contributed to the long lifecycle of a filed case and crowded dockets, now aggravated by a pandemic-caused backlog.
With few exceptions, state and federal courts routinely set late mediation deadlines in case management orders. Psychologically, this anchors the timing to the back end of litigation. Because of the demands on their practice, trial lawyers will meet court deadlines, but as any legal assistant knows, it is usually not by much, which means the belated deadline set by the court acts as a backstop, not an accelerant. Judges do not have the time or the capacity to consider optimal mediation timing for each case—it is not their job. Delays in scheduling mediation persist, in part, because lead attorneys are not incentivized or well-positioned to unilaterally advance the judicially imposed mediation deadline. For many reasons, we aimlessly default to a “later than sooner” mediation model, and this sub-optimal feature has remained immune from evolutionary forces for decades.
One might ask what studies were cited in the 1980s to then justify the custom of setting mediation deadlines months down the road at the end of the discovery period? There were none then and are none now. What is now a mediation norm was only a clever trick; a psychological ploy by the judiciary to deflect knee-jerk objections to court-ordered mediation. There is no compelling reason for a court to fail to adopt an early mediation initiative for a large percentage of routine disputes.
Changing Custom and Habit
The case by lawyers against early mediation fails as did objections to mediation in the 1980s. Lawyers critical of early mediation typically say they need extensive discovery because they “don’t know what they don’t know.” This argument, however, ignores the considerable direct and indirect, economic and non-economic, costs and burdens suffered while acquiring more information and foregoing potential voluntary resolution. As litigation continues, the parties are likely to become more polarized. Increased animosity coupled with large sunk costs is hardly a recipe for deal-making.
In fairness, trial lawyers do not want to handicap the case for the client based on what they believe is incomplete information. This is a problematic issue for lawyers, and often decisions are made with imperfect information. Claims resolution is no different. The aggregate legal spend by all parties in acquiring “more perfect information” through discovery is often disproportionate to the settlement value of that information. The information needed to mediate is at best a subset of that needed for trial, and includes non-evidentiary considerations outside discovery. It may well be that mediating early and spending less makes it easier for all sides to settle.
There is a rather telling mantra from lawyers who say, “I prepare every case like it is going to trial,” as if to impress upon clients the seriousness with which they treat a case. However, clients should ask their counsel this question: “What is the least amount of information we need to mediate?”
To answer that question, lead counsel will need to focus on the material information needed to quickly assess exposure and settlement options; not motion practice, electronic discovery, and high-end trial strategy. In the investment portfolio of dispute resolution, trial is a high-priced mutual fund with lousy returns held by 1% of investors. Mediation has a proven track record and is a position everyone should want to hold. Your lawyer, like your financial advisor, needs to work in a manner consistent with your stated objectives.
We know that early mediation works because many large institutional clients already employ early mediation initiatives to resolve things like employee-labor claims. Some insurance carriers use early mediation initiatives with their panel counsel to resolve a myriad of liability claims. One does not read about companies walking away from early mediation initiatives because they are horribly expensive and routinely fail.
Some might contend that an early mediation is more likely to lead to an impasse and, thus, is a waste of time. This argument fails under scrutiny. As to the anticipated rate of impasse, part of the problem is circular. You must know how to mediate early for the process to achieve maximum effectiveness. Second, the cost of early mediation is outweighed by the benefits. The cost matters very little because mediation is likely to occur at some time in the life of the case anyway. The question is one of optimal timing. Even if you mediate twice (which should be the norm), mediation expense is a small fraction of any six- or seven-figure litigation budget, and the potential upside is huge. Who has not attended a mediation where you unexpectedly reached a deal you did not think was possible?
Further, some avenues for settlement disappear over time. Mediators see entrenched positions moderate over the course of several hours as clients or carriers stew on the reality of going forward if an impasse is declared. The argument that you might need a second mediation hardly justifies foregoing an early attempt at settling, where the failure to give the process a chance means subjecting the client to protracted, painful litigation.
An Impasse Is Not a Failure
Even if the early mediation does not produce a complete settlement, the process is still extremely valuable. Smart clients know mediation invariably reveals new information or necessary parties, crystalizes legal issues, and helps the lawyer, client, or claims professional better understand the dispute and work to be done. Many times, parties learn information in mediation that could not have been obtained through formal discovery. At a minimum, saying, “no” to the other side helps manage expectations. Early mediation also allows for a customizable, party-centric settlement that frequently contains deal terms no arbitrator or judge can provide. An impasse does not mean mediation was a failure because mediation is not a pass/fail exam.
Early mediation initiatives cost little or nothing for courts to implement, but they fail to do so. Institutional purchasers of legal services should adopt case-handling guidelines that stress early mediation must be held within a defined period after joinder of all parties. Early private mediation has the potential to save litigation expense, better the lives of all litigants involved, and is a publicly positive vehicle for resolving the backlog of cases due to the pandemic.