I. GENERAL

While an acceptable settlement can often be reached via direct dealings between the respective parties, there are many occasions when the intervention of an independent third party can greatly facilitate the successful settlement of a dispute. Settlement negotiations can often be frustrated by unrealistic expectations of the parties or counsel, the inexperience of the parties or counsel, harsh feelings between the parties or counsel, and an array of other factors. In many of these situations, the intervention of a neutral third party (who has no interest in the dispute and who is not predisposed to advocate the position of either side) can overcome obstacles to settlement and can facilitate each party’s appreciation of the other party’s position. Similarly, the intervention of a neutral third party brings an independent perspective of the case to the negotiating table and can often assist in developing creative approaches to settlement which are beneficial to all parties. Two types of third party intervention that are becoming increasingly prevalent are mediation and early neutral evaluation.

II. MEDIATION

Mediation offers parties a voluntary, non-adversarial, and informal process that can result in a relatively quick resolution of a dispute with a minimal expenditure of time and money.

A. The Difference Between Mediation and Arbitration

Mediation, as defined in Webster’s dictionary, is the intervention between conflicting parties to promote reconciliation, settlement, or compromise. It is a voluntary process in which the parties present their dispute to an impartial third party — a mediator — to attempt to reach a mutually acceptable resolution of their dispute. Mediation is voluntary, and thus the parties may withdraw from mediation at any time prior to reaching a final resolution.

Mediation differs from arbitration in several ways. Unlike arbitration, mediation usually is non-binding. A mediator cannot force parties to settle their dispute. If the parties cannot reach a final resolution of their dispute through mediation, they may proceed with further litigation either in arbitration or in court. Mediation is also less formal than arbitration. The mediator’s function is to assist the parties in reaching an acceptable resolution of their dispute.

Historically, mediation has been a successful route for the resolution of business disputes. Professional mediation services have reported that 80% of business disputes submitted to such services have been settled by the parties.

B. How Mediators Help Settle Disputes

A mediator can help parties settle their disputes by serving several functions. A mediator can help parties focus on their dispute and better define the issues that need to be resolved. When parties attempt to settle disputes on their own, sometimes they can lose focus of the real issues in dispute as personal feelings, hostile attitudes, and misunderstandings get in the way. A good mediator can work through these problems and help the parties focus on the real issues at hand. A mediator also assists the parties in carefully articulating their respective positions. A mediator can also help the parties by giving an unbiased view of the case and by discussing with each party the merits of his or her position. Lastly, a mediator can be a source of creative resolutions to the problem that the parties may never have thought of on their own.

C. How Mediation Works

The National Association of Securities Dealers, Inc. (“NASD”) has already begun a mediation program in securities arbitrations. Once the parties agree to mediate their securities dispute, they will sign a submission agreement in which they agree to abide by the NASD’s mediation rules. The submission agreement will also identify the parties and summarize the major issues in dispute.

Once the submission agreement is provided by the parties to the NASD, a search will begin by the NASD to find a mediator. Both parties must agree upon whom their mediator will be. The NASD will also work with the parties to schedule mediation hearings at a time and place acceptable to all parties and the mediator.

An important and effective technique used by mediators in the NASD program is the private “caucus.” The private caucus is a procedure by which the mediator talks with each party separately about the dispute. Everything that is said between a party and the mediator in a caucus is completely confidential to encourage each party to be very candid and forthright about his or her case. Nothing that is said to the mediator in a private caucus will be revealed unless the party disclosing the information gives the mediator permission to disclose it. According to the NASD’s mediation rules, and by legislation in several states, any information disclosed to the mediator in confidence is not admissible in any related court or arbitration proceeding.

A private caucus gives the mediator a chance to assist the parties in looking at the strengths and weaknesses of their case. It also affords each party an opportunity to discuss privately with the mediator what they feel is necessary to resolve the dispute. A mediator is usually able to work with the parties through several private caucuses to reach a mutually acceptable resolution of the dispute.

D. Benefits of Mediation

According to the NASD, there are several benefits to a successful mediation of a dispute between parties. These benefits include:

E. Qualities of a Good Mediator

When parties are locked in a dispute and are genuinely interested in resolving the matter, but find themselves unable to do so, it is time to consider bringing in a mediator. Ultimately, however, the success of the mediation will depend upon the personality, integrity, and knowledge that the mediator brings to the table. Some of these desirable qualities are obvious, while others are more subtle.

To begin with an obviously desirable quality, a good mediator must be genuinely neutral. A mediator must be capable of hearing both sides of a dispute without promoting the interest of either side above the other. Thus, an ideal mediator must be neutral with regard to the parties, the dispute itself, the issues involved, and the ultimate outcome. Certainly, the personal relationship of the mediator to the parties or their counsel must be scrutinized carefully. Likewise, parties should be wary of selecting mediators who have clearly expressed their views on legal, factual, economic, or even social issues involved in the dispute.

A good mediator could best be described as a principled pragmatist. A mediator should be pragmatic, because his ultimate goal is, after all, to help parties settle their dispute, rather than to affix blame or to establish points of law or policy. A mediator must be principled, because if parties who have previously been unable to resolve their differences are to do so, they may need to be convinced on the basis of cogent reasons with some grounding in law and fact. If this were not required, cases would be resolved by mediation by simply splitting the damages in half and trading dollars for liability.

A good mediator needs a particular kind of demeanor. For much of the mediation session, the mediator needs to engage the skill of “active listening.” The mediator ought to encourage the parties to state their positions as fully as possible, at times even letting the parties vent their frustrations. However, there must come a point where the mediator utilizes his own personality to nudge the parties beyond their impasse and into the arena of compromise. If the mediator is too forceful, he will antagonize the parties. If too little force is applied, the parties will simply argue their positions. Patience, tact, diplomacy, and tenacity are required to break impasses.

A good mediator must also command the respect of the parties. If a party believes that the mediator does not understand the issues, it is easy to reject his recommendations. In particularly large and contingent disputes, it may be important to have a sufficiently prominent mediator that both sides will be aware of the mediator’s reputation. In some situations, a party which has previously been unwilling to concede any weakness in its own position, may make the necessary concessions if a mediator of unassailable knowledge and integrity points out the problems with that party’s view of the merits.

F. Choosing the Best Mediator

Generally mediators are selected by the parties to a dispute in one of two ways depending upon the forum. If a mediation service is being used, the service often provides each side with a list of candidates and may ask the parties to mark off those mediators on the list that they find unacceptable. Upon request, the service may be able to provide a list of candidates with special expertise in the subject at hand (e.g. construction, securities, product liability, etc.). Once both sides turn in their list of acceptable candidates, the service selects a mediator agreeable to both sides. In other instances, the parties simply discuss creating their own list of possible mediators, often selecting an authority in the area of their dispute to act as the mediator. Because mediation is usually voluntary and both sides must consent to the mediator, usually finding an agreeable candidate is possible.

Depending on the case, it may be wise to pick a mediator based on his prior experience in a particular area of dispute. For example, if the dispute involves highly technical knowledge or special training, you may want the mediator to be familiar enough with the area of dispute to be able to ask questions to facilitate discussion among the parties. With a dispute involving securities related issues, you would probably want to find a mediator with past experience mediating securities disputes or with experience in and/or knowledge about the industry.

If a complex legal issue is involved in the dispute, you may prefer that an attorney act as the mediator. However, you may not want an attorney who is a litigator because it can be difficult to separate advocacy skills from mediation skills.

In selecting a mediator you should consider who the parties are and who their attorneys are. If a party is being represented by an attorney who is a novice in the area of the dispute, it may become more important, especially to that party, to select a mediator with experience in that field to guide them through issues they may not have considered.

Many court systems use retired judges to act as mediators. This can be a disadvantage if the judge is too controlling and judgmental. A good mediator should be a person capable of seeing both sides in a dispute without taking either side and of getting the two parties to reach a resolution without deciding what the resolution should be himself. Judges can and do coerce decisions; mediators must facilitate voluntary settlements.

When selecting a mediator, you should find out as much about the mediator as possible. If the mediator is an attorney, check Martindale Hubbell or other legal directories to find out the mediator’s background. For any mediator, check to see if the mediator has published any articles or been quoted in articles. Perhaps the most efficient way to search for these items is to do a search on a computerized database such as Lexis or Westlaw. It is also often helpful to ask other persons who have appeared before the mediator about their experiences. You should find out what the mediator’s reputation is and ask about his mediation style. Check with your colleagues and learn as much as possible to aid you in your selection. Feel free to ask the mediation service for references.

Unlike court or arbitration, you can generally contact the mediator directly to discuss the dispute. You can discuss directly with the mediator how he conducts the sessions, how much he participates, what his prior experience has been, and how familiar he is with one’s particular area of dispute. If you are not comfortable with the mediator’s responses, you should perhaps select another person to mediate your dispute.

G. Professional Mediation Companies

Several organizations provide professional mediation services. For example, the American Arbitration Association provides mediation services. There are advantages to using a professional mediation service. First, a professional mediation service will usually have mediators who have been trained to intervene and help resolve disputes without taking one side or the other in the dispute. These persons will usually have prior experience. In addition, the professional mediation service often will have mediators who have experience in a particular area and thus, they may have the necessary expertise to hear more complex cases in those areas. Second, the professional mediation service will usually have ongoing training sessions to keep their mediators abreast of current trends in mediation and changes in policies. These training programs also help mediators further develop and improve their mediation skills. Third, the professional mediation service will usually have facilities at which the parties can meet to conduct the mediation. These facilities provide a neutral meeting place at which all the parties can convene and work out their dispute.

H. Mediation by Telephone

Where it is impractical for the parties to meet with the mediator in person, consideration should be given to holding a teleconference mediation. One advantage to having a mediation session by telephone is that there will be relatively easy access for all of the parties. Mediation over the telephone also can cut down on the travel expenses that would otherwise be incurred by the parties.

There are significant disadvantages to conducting a mediation where one or more party appears only by telephone. First, the mediator and the parties lose the face to face contact which can be important in resolving a dispute. In addition, the mediator can often garner much information from the physical appearance and gestures of the parties. For example, the mediator may be able to sense through body language or appearance that one of the parties is getting angry and can attempt to work through that anger to reach a resolution.

Similarly, a mediation via telephone generally is more difficult to coordinate between the parties because the mediator will want to talk privately to both parties and collectively with them as well. When arranging a mediation by telephone, one should make sure to provide rooms away from the speaker phone for the parties to privately discuss matters. In addition, if the parties are spread out around the country, time differences may make coordination of a lengthy sessions difficult.

If only one party is appearing at the mediation by phone, the mediator may need to spend extra time with the person appearing via telephone to reassure that person that the mediation is being conducted in a neutral manner. The separation of one party may create an appearance of bias or unfairness to the party on the phone.

III. EARLY NEUTRAL EVALUATION

A. What is Early Neutral Evaluation?

Early neutral evaluation (ENE) is a variant of the settlement conference which was pioneered in the Northern District of California in 1985. On the alternative dispute resolution spectrum, ENE can be placed between mediation and binding arbitration. ENE differs from more traditional settlement programs in several important aspects:

1. The ENE session is targeted to take place much earlier in the process than either arbitration or mediation, usually before discovery has begun or after limited discovery has been exchanged.
2. The neutral evaluators are chosen based on their expertise in the subject area of the dispute.
3. The parties themselves are required to attend the evaluation session.
4. The evaluator’s assessment of the case is confidential and it may not become a part of the record.

In ENE, the evaluator’s role is to assist the parties to help structure the litigation/arbitration process by means of identifying issues that are not actually in dispute and by offering suggestions that will expedite an efficient resolution. The purpose of ENE is for the parties to hear a neutral third party expert’s assessment of the case and not to necessarily have that third party expert fashion a resolution. Usually, regardless of whether or not a settlement is reached, the parties have a clearer understanding of the facts and law relative to their case thereby making settlement more likely.

B. How Does Early Neutral Evaluation Work?

The typical ENE session, which lasts for more than two hours, opens with the evaluator making a short opening statement which explains the purposes of the program, the procedure to be followed and generally sets the tone of the session. After the evaluator has completed his or her opening statement, the plaintiff presents a 15-30 minute summary of his or her case which may include documents and a statement regarding the legal theories giving evidence to his or her case. After the plaintiff has finished his or her presentation, the defense makes a similar presentation. During the presentations, the evaluator may ask questions; however, the presentations may not be interrupted by the other side.

After the parties have completed their respective presentations, the evaluator identifies the issues on which the parties agree and, where appropriate, encourages them to enter stipulations as to those points of agreement. Next, the evaluator assists the parties in identifying the specific areas of dispute.

The evaluator then adjourns to another room to prepare a case evaluation which briefly outlines his or her assessment of the strengths and weaknesses of each party’s case and the facts supporting his or her assessment. The assessment also sets forth the evaluator’s opinion as to which party will prevail on the merits and why.

After the evaluator’s written assessment is complete, he or she returns to the ENE conference room and announces that he or she has completed an informal evaluation of the case. He or she then asks the parties if they are amenable to discussing settlement. If the both parties agree to discuss settlement, then settlement discussions begin. If either party rejects settlement discussions, however, the evaluator then discloses his or her evaluation of the case to the parties. It should be remembered that the evaluator’s report is not submitted to the judge and remains confidential between the parties.

If, after disclosure of the evaluator’s written assessment, the parties cannot reach a settlement, the evaluator will assist the parties in developing a plan for efficient case management. This assistance usually includes suggestions on discovery and motion practice.

Sometimes, the parties may want to have a second ENE session in the hope that the differences between them can be bridged.

C. The Benefits of Early Neutral Evaluation

The benefits of ENE are many. Among the more important benefits are the following:

1. It provides the parties with an early opportunity to hear the other side’s presentation of the case;
2. It identifies areas of agreement and disagreement among the parties;
3. It offers the parties a frank assessment of the strengths and weaknesses of their case by a neutral evaluator;
4. It is non-binding;
5. It offers the parties an opportunity to settle their dispute early on in the process at a fraction of what it will cost the parties to try the case to adjudication; and
6. It provides the parties a much less adversarial venue to resolve their dispute than a typical securities arbitration.

D. Choosing An Evaluator For An ENE Session

The appointment of an evaluator in the ENE session differs depending upon the forum from which the parties come. For example, when an ENE session comes out of a litigation environment, the evaluator is appointed by the Court and usually has extensive litigation experience as well as expertise in the area of dispute. The parties have little if any input as to the selection of the evaluator in this context. If, however, the ENE session comes from a securities arbitration context, the parties may choose an evaluator for their session. In this context, the parties may also request that the NASD or other self-regulatory organization recommend or appoint an evaluator for them. If the parties choose an evaluator for themselves, they must take into consideration the extent of expertise on the part of the evaluator with regard to the subject matter that is the basis of the dispute between the parties and the credibility which each side will attribute to the evaluator’s opinion.

IV. CONCLUSION

Settling a case can be a tricky endeavor in the best of circumstances. Many times disagreements as to fact and law, as well as personal temperament and attitude, can prevent effective settlement discussions from taking place. In order to settle a case, all parties need to be familiar with the facts and law of their case, as well as with the relative strengths and weaknesses thereof. In addition, each party in a dispute must be willing to come to a settlement table with an open and informed mind. Both mediation and early neutral evaluation offer useful opportunities for parties to achieve settlement in an atmosphere of candor and mutual respect that can be beneficial to all sides of a dispute. As such, mediation and early neutral evaluation can provide a meaningful and productive forum within which parties can approach settlement and achieve a satisfactory result for everyone involved.

Recommended Reading List & Sources:

Dispute Resolution Alternatives Supercourse, Practising Law Institute 1993, Ellis R. Mirsky, Chairman.

“Settling the Entrenched Case Through The Mediation Process”, Dispute Resolution Journal, James D. Knotter, March 1994.

“Checklist for Successful Mediation”, Dispute Resolution Journal, Jerry Spolter, March 1994.

“Dial M for Mediation”, Dispute Resolution Journal, Daniel Yamshon, March 1994.

Alternative Dispute Resolution, Vol. 10, Trial Lawyer’s Series, James L. Branton & Jim D. Lovett, 1993.

Mediation Law Policy & Practice, Nancy H. Rogers & Craig A. McEwen, Lawyer’s Cooperative Publishing Co., 1989 & Supp. 1993.

Click here to view this article in PDF