David K. Taylor | Bradley Arant Boult Cummings
Let’s assume the mediator sticks his head into your room with a grin at 8pm after an exhaustive day when your client is still upset he made the 8th counteroffer and the Mediator says: “Great news! Counter-offer accepted! We have a deal!” Wonderful, right? Even though your client was pushed way past what he came ready to do that day, you have a deal. So what mistakes are made when it comes to confirming the long sought, hard fought deal?
Number 1: Not Nailing Down the Deal at the Mediation
I have had parties pack up and walk out with this comment: “We will take a shot at a draft settlement agreement and send it to the other side this week.” NO! Most mediators will not allow the parties to get away without in some way reducing the deal to writing and having the representatives sign off. Especially in emotionally charged mediations where both sides are very unhappy, clients can change their minds. Second guessing is even more likely after reporting back to their bosses (“You agreed to what?”). If nothing was written down to commemorate the deal, then there is no deal. The failure to write down even the basic terms can also increase the likelihood of later disputes (whether in good faith or not) about key clauses (e.g., indemnification, scope of the release, who is released, confidentiality, non-disparagement).
So, should you take the time and start working on a fully executed settlement agreement while everyone is still at the mediation? If that is not possible should you at least draft a limited “Term Sheet” that lays out the basic parameters of the deal and is conditioned on counsel working together in good faith to get to a more formal settlement agreement? Most of the time, the best answer is “yes.” If it is very simple deal (money is paid and full and complete releases) there is no reason (with laptops/printers) that a full settlement agreement cannot be drafted and signed at the mediation. To make it even easier, always come to the mediation with a draft settlement agreement with blank terms. If that is simply not possible, Term Sheets can work, especially with complicated multi-party deals, but there is still the issue of later disagreements about clauses. If there are key clauses that are important to the deal, the hope is that counsel have informed the mediator and that there is general agreement on those specific clauses. No matter how tired everyone is, it is normally worth every dollar to keep everyone in the rooms working to…get…it…done.
This post is a continuation of the 10 most horrible, terrible, no good, “bang your head against the door” mistakes that I have seen lawyers make before, during and after mediations in which I was the mediator. As stated in previous posts, it takes more than throwing together a mediation statement at the last second and showing up at the mediation. Doing it right requires the same kind of due diligence and work that goes into preparing for a key deposition or even trial. Great “mediation” lawyering is essential and is the best way to get to an acceptable deal.
Number 3: Not Identifying Key Issues in Advance
A long day of mediation can be scuttled with last minute issues which should have been identified early in the day. If money will change hands, when and how? What about that non-disparagement or confidentiality clause? Many times, parties have agonized over the amounts to be paid, only to have the paying party say, “By the way, I don’t have that money now. I have to pay it over time.” The other side then explodes and cries “bad faith.” Emotions then get into the way of a deal that appeared to be done. To increase the likelihood of a successful mediation, payment timing issues, tax returns, financial statements, collateral, covenants not to execute, and the like, simply cannot magically appear at 7 pm after a long day of mediation. How important is a non-disparagement clause or a limitation on social media (or withdrawal of a social media post)? What about indemnification? Exactly what claims are going to be released? Who will be released (which can be a real issue especially in commercial disputes like construction cases)? Allowing such seminal issues to fester until late in the mediation can be a real deal breaker, and it also really upsets the mediator who has worked hard to get the parties to agree to the basic deal terms. A good mediator and counsel will have thought through these issues well before the day of mediation or brought those issues to the forefront early in the day.
This post is a continuation of the 10 most horrible, terrible, no good, “bang your head against the door” mistakes that I have seen lawyers make before, during and after mediations in which I was the mediator. As stated in previous posts, it takes more than throwing together a mediation statement at the last second and showing up at the mediation. Doing it right requires the same kind of due diligence and work that goes into preparing for a key deposition or even trial. Great “mediation” lawyering is essential and is the best way to get to an acceptable deal.
Number 5: Not Letting the Client and Mediator Talk
Most mediators want to hear and talk directly with the client – not the attorney – since she is ultimately going to make the decision at the end of day. Counsel, you have to jettison your ego. Do not try to cut off this vital communication. Your client may need to get something off his chest, and he finally has someone other than his lawyer at whom to vent. Mediators are paid to take it, and these direct conversations with the client are is immensely helpful for the mediator to determine the key factors to getting to a deal. Remember these are settlement discussions, and “what happens in mediation…stays in mediation.” The mediator needs to know the temperatures in all caucus rooms and many times “non-legal” factors that are not available in court determine if a deal can be done.
Many years ago, I resolved an age discrimination claim by talking directly to the client. She just wanted to move to another city to be near her grandchildren but had no money to do so. The final deal included a year’s prepaid rent and a used car. The lawyers were not happy, but they are not a mediator’s client: the client is the Deal.
A mediator must establish a position of trust and confidence (and frankly likability) with the key client decision makers so that, when it is time to “fish or cut bait,” the clients will listen to what the Mediator has to say. That cannot happen when the lawyer does all of the talking, and the client just sits there mute like a house plant. Good mediators will not let that happen, even if that means hauling the lawyer out of the caucus room and having a stern discussion.
This post is a continuation of the 10 most horrible, terrible, no good, “bang your head against the door” mistakes that I have seen lawyers make before, during and after mediations in which I was the mediator. As stated in previous posts, it takes more than throwing together a mediation statement at the last second and showing up at the mediation. Doing it right requires the same kind of due diligence and work that goes into preparing for a key deposition or even trial. Great “mediation” lawyering is essential and is the best way to get to an acceptable deal.
Number 7: Not Doing Your Homework
You have to know your case in and out to represent a client properly in a mediation. How else can you effectively manage your client and also discuss the issues with the mediator? You are counting on the mediator to make sure the other side understands and appreciates your positions. You may not be able to look under every single rock that can derail a mediation (or even know how many rocks are out there), but you better have identified in advance the key factors that will impact settlement. This homework must include a frank evaluation of future legal fees and costs. I have on more than one occasion as a mediator angered lawyers by challenging their low ball evaluation of legal costs and expenses in front of their client.
The mediator will also expect that you have done your homework. If you have not, you (and your client) will lose credibility with the mediator if she brings up those rocks in front of you and your client for the very first time. You will also lose face with your client if he turns to you and says “what was that all about” when the mediator leaves your room. When it comes time to close the deal, it is vital that the client still has full faith and confidence in your advice.
To help you think through those rocks, use your draft mediation statement as a guide, even if you carve off some parts before you send it to the mediator. It is also very important to send any draft and final statement to your client. This also helps prepare the client. If you get something from the other side, send that to your client (you may need to send it to your client Team, even those who are not coming to the mediation). Having the client read the other side’s arguments in black and white always helps prepare the client to make the difficult business decisions about settlement. The client’s homework should include an evaluation of not just legal fees and costs, but the time and effort from key employees that will be necessary if the dispute is not settled. This is especially vital if the client has never been through a complicated commercial dispute before. Does the client really want its key employees spending hundreds of hours with the lawyers, or trying to sort through project documents (and deal with e-discovery production)?
That homework should also include calling the mediator in advance of the mediation. Recall this is not binding arbitration, but structured settlement discussions. Let the mediator know confidentially about the rocks on both sides. That can include your candid assessment of the other side’s lawyers, and even issues with your own client representative. Every mediator appreciates and covets that type of advance information which can help him hit the ground running when the mediation begins.
This post is a continuation of the 10 most horrible, terrible, no good, “bang your head against the door” mistakes that I have seen lawyers make before, during and after mediations in which I was the mediator. As stated in previous posts, it takes more than throwing together a mediation statement at the last second and showing up at the mediation. Doing it right requires the same kind of due diligence and work that goes into preparing for a key deposition or even trial. Great “mediation” lawyering is essential and is the best way to get to an acceptable deal.
No. 9: Not Having a Pre-mediation Call With the Other Lawyer and the Mediator
So, you have done your research and feel comfortable about the jointly selected mediator. You have an agreed date for mediation. Do you then just send in the confidential mediation statement and show up on the date? No.
Set up a call with the mediator (many good mediators insist) and opposing counsel and talk through the many issues that can derail a mediation. Consider the following, all of which you could address in a pre-mediation counsel conference call with the mediator.
Do you need information or documents from the other side? It can infuriate mediators when, in the middle of a mediation, they hear one side use an excuse that it does not have some information (or a document) necessary to make a decision and the other side does not have immediate access to such documents.
Do you agree to exchange all or some parts of the mediation statement? Discuss with opposing counsel what you plan to do and what you expect from the opposition.
It is also crucial to know who will attend. If the party representatives hate each other or you know that the other representative is not the decision-maker and may be covering himself because he screwed up the deal, a pre-mediation call can be essential. If insurance is involved, will the insurance adjuster (where the money will be coming from) be present? It is a bad way to start off a mediation when the lawyer shows up without the insured (who may not care because he’s not paying for the defense) or without the adjuster (who has 235 other cases) but whom the lawyer promises will be “available by phone” on the West Coast (but then disappears late in the afternoon when that side needs some additional authority to get the deal done).
The lesson is that the more you learn from a pre-mediation call with the mediator and counsel, the more time and attention you can devote to the real factual and legal issues in dispute during the actual mediation.
To be clear, great mediation advocacy is not the most important element in getting a deal done, but it can be a major factor.