Save Your Business: Mediate, Don’t Litigate.

01/01/2019 / Chuck Modell

APART FROM A PUBLIC relations nightmare, the single biggest obstacle in the path of a growing company, particularly a small one, is the prospect of a lawsuit

This is particularly true if the lawsuit is brought against you, because you have no ability to simply make it go away. Never underestimate the cost of a lawsuit. It is not unusual for a company to spend $50,000 or more defending a relatively routine lawsuit, and much more for a large one.

Add to that the time you will spend away from your business dealing with the lawsuit, from the distractions, to having depositions taken, to having to prepare to go to trial. Win or lose, litigation can derail and even destroy a growing company.

Avoiding a fight to the death

So, how can you avoid a lawsuit? Doing the right thing and trying to avoid disputes is a start. However, sometimes disputes are inevitable, and the ugliest ones arise when both sides feel they are right. When that happens, many clients tell us they do not care what it costs — they simply want justice.

That sounds good, but unlike in television, where lawsuits are filed and resolved in an hour, justice moves at a snail’s pace in real life. After about six months, the bills mount, no end is in sight and the distractions take a toll.

Fortunately, or unfortunately, depending on your viewpoint, duels became unlawful a few hundred years ago. Our system of justice resolves disputes in the courts. However, if you find yourself headed in that direction, there is an alternative — mediation.

Mediation is a process whereby people take a dispute to an independent third party to whom the issues are described. That third party helps the parties reach a resolution. Mediation is a way for someone to have his or her story heard, which sometimes is as important as the resolution. It is a way to better understand both your and your adversary’s position.

In addition, it is a way, through an independent negotiator, for each party to offer concessions only if they know those concessions will resolve the matter, rather than finding their position compromised with no resolution.

When a dispute arises, either party can suggest mediation. Even after a lawsuit has started, and at any time before trial, you can agree to submit the case to mediation.

It does not show weakness to suggest mediation, but rather the understanding that in most lawsuits, the only winners are the lawyers. I have been a mediator, I have represented clients in mediation and I have gone to mediation on behalf of my own law firm. In each situation, I have usually found it more beneficial than the alternative.

The mechanics and benefits of mediation

In a typical mediation, the parties to a dispute will agree on a mediator. Either they or their lawyers may know someone who is experienced or is well known in the area of the dispute — preferably both — who can serve as the mediator. Both sides will present their positions to that person in writing.

The mediator does not make a decision or decide who is right or wrong.

Rather, after considering both positions, the mediator will schedule a meeting with all the parties and conduct “shuttle diplomacy,” going from one room to another, talking to each party about the weaknesses of their positions (you will already know your strengths) and trying to find a common resolution.

Often, a creative mediator who has heard and understands everyone’s position, will suggest his or her own proposal to the parties, with the understanding that if it is not acceptable to both, then neither will have to acknowledge they would have accepted it, thus not compromising their position.

Mediation is common in many fields.

In Minnesota, most divorce and child custody cases are required to go through mediation. Mediation is very common in the construction industry, where small disputes get resolved before they become big disputes.

When I prepare franchise agreements for clients, I routinely include a mediation clause, knowing that the parties will have an ongoing relationship and it is better to resolve disputes through mediation than in a hotly contested court case in which things often will be said that keep the parties from ever working together in the future.

However, most commercial disputes are not submitted to mediation.

Why?

One answer is that in most situations, mediation is voluntary and the parties may not even consider the question until they are well down the path of litigation and the judge suggests or requires they submit to mediation. You should consider it sooner.

Go with the odds

Mediation is not a perfect solution. The concept of mediation involves compromise, something that will initially be of little interest to either party, but something both parties will ultimately wish they had considered. Mediation does come at a cost. Because you will likely have a lawyer representing you in the mediation and you will share with the other party the cost of the mediator.

However, most studies show, and my experience as a mediator confirms, that the majority of disputes submitted to mediation are settled there.

Think about that for a moment. Imagine you are faced with the prospect of having your business destroyed in litigation. You are offered a chance, for let’s say $10,000 in legal and mediation costs, to save your business, with the odds being better than 50/50 you will succeed.

That is $10,000 against potentially more than $100,000 of expenses you’d likely rack up in a lawsuit — potentially even as much as the value of your entire business. That’s at least a 50/50 chance of a reasonably successful outcome. I wish I could get those odds the next time I go to Las Vegas!

Published in the January, Februaury edition of Upsizemag.com http://www.upsizemag.com/business-builders/law-2